Dismissed

Mr Mohammed Sajid and Ors. v. Kotak Mahindra Bank Limited

DRT31 Jul 2024SA/372/2023

Case brief

AI extract

What is this about?

The Tribunal heard an appeal against notices under Sections 13(2) and 13(4) and an order granting possession under Section 14 of the SARFAESI Act. The court upheld the bank's actions, finding the accounts validly classified as NPA, the notices served in accordance with law, and the magistrate's order legally sustainable.

What did the court decide?

SARFAESI application dismissed on merits; interim order of the Tribunal vacated.

Mr Mohammed Sajid and Ors. versus Kotak Mahindra… — Contract and Commercial Disputes | DRT (2024)

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BEFORE THE DEBTS RECOVERY^{TRIBUNAL-IIIKOLKATA}

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PRESENT:^-sRI KAMAL OE.

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PRESIOING OFFICER.

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S.A. No. 372 OF 2023

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DATE OF DELIVERY OF ORDER : 37.07,2024

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Mr. Mohammed sajid^(Prop. Of M/s MS Enterprise),^{residlng at flat} No.202,2"d Floor, "Saila Residency", 196A/6,^picnic Garden^Road, Kolkata-700039.

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Mr. Tanvir Iqbal, residing at flat No.2O2, 2nd Floor,^{"SailaResidency",} 196A/6, picnic Garden Road, Kolkata-700039.

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Mr. Mohammed Saleheen, residing at flat No.2O2, 2nd Floor, "Saila Residency", 196A,/6,^picnic Garden Road, Kolkata-700039

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... Applicants

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-Versus-

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Kotak Mahindra Bank Limited, having its office at "Apeejay House", 5th Floor, Block-B, 15, Park Street, Kolkata-700016.

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The Authorized Officer of Kotak Mahindra Bank Limited, having its office at "Apeejay House", Sth Floor, Block-8, 15, Park Street, Kolkata700015.

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... Defendants.

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Counsel for the Applicants:^- Mr. Gourav Singh

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Mr. P. Modak

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Counsel for respondent F.I.:Mr. Prosenjit Pal Mr. Rajeev Maity Ms. Kuheli Deb

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JUDGEMENT

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The Sarfaesi Applicant Bank filed the present SA being No. S.A./372/2023 on 06.05.2023 being aggrieved by and dissatisfied with the impugned notice under section 13(2) of the SARFAESI Act, 2002 dated 25.10.2019; 02.07.2O2O and 26.07.2020 and possession notice under Section 13(4) of the SARFAESI Act, 2002 dated 18.09.2020 and 11.10.2022 and the impugned order dated 31.03.2023 passed by the Ld Chief Judicial Magistrate, Alipore under Section 14 of the SARFAESI Act, 2002.

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S.A. 314 of 2021 is taken up for hearing.

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Heard ld counsel for both parties. Considered.

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SA applicants'case in short is that the applicant No.1 is the borrower and the applicant Nos. 2 and 3 are guarantors and the instant applicant is represented by the applicant No.1.

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Applicant had availed cash credit facility to the tune of Rs.85,00,000/from the respondent F.I. The applicant No.1 was carrying on Poultry business but suddenly and unfortunately during the COVID period in the

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yeat 2O2O-2! his business has been closed and he could not pay the amount properly. The applicant made repayment of loan amount on different dates as stated in the S.A. in respect of loan account being No.2612560095. The respondent F.I. classified the loan account of the applicant as NPA on 16.11.2018 without any justification.

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It is alleged that the respondent F.I. arbitrarily classifled the account of the application as NPA and there was no overdue for more than a period of 90 days in respect of the loan account.

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It is alleged that the respondent F.I. issued 13(2) notice on different dates i.e. on 25.10.2019; 02.07.2O2O and 26.O7.2020.

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It is alleged that the respondent F.l. served 3 several 13(2) notices in respect of loan account which is totally barred under SARFAESI Act, 2002.

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Respondent F.I. affixed the possession dated 18.09.2020 on the property but did not publish the notice in any news paper. Respondent F.l. suddenly affixed one intimation of physical possession notice dated 3.5.2023 along with an order passed in Misc. Case No.226 of 2022 on the conspicuous^part of the property for vacating the^premises on the basis of Section 13(2) notices and symbolic^possession notices on the basis of the impugned order dated 31.03.2023 passed by the Ld CJM, Alipore.

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It is stated that in the said order the date of NPA is 16.11.2018 but the applicant made^{payment properly} before and after 90 days from the date of NPA^properly.

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It is also stated that the^possession notice was issued on 77.7O.2022 and served upon the SA applicants on 18.09.2020 and the^possession notice dated 11.10.2022 was issued on the basis of Section 13(2) notice dated 26.07.2022.

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It is alleged that the^possession notice was issued before^reply as^against 13(2) notice dated 2.7.2O2O by the respondent F.L

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It is also alleged that respondent F.l. has furnished false affidavit^before the Ld CIM for obtaining the impugned order dated 31.03.2023 from^the Ld CJIY, Alipore.

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It is also alleged that the Ld CJM has not recorded the amount of outstanding as on the date of filing of the application before him and^has violated the statutory^provisions under Section i4(1)(b) of SARFAESI Act. It is also alleged that there is no compliance of 9-clauses.

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It is also alleged that the respondent F.l. may be restrained from taking physical possession of the secured property in terms of the impugned notices dated 25.10.2019; 02.O7.2020 and 26.07.2O2O issued under Section 13(2) and possession notice under Section 13(4) of the SARFAESI Act, 2002 dated 18.09.2020 and the impugned order dated 31.03.2023 passed by the Ld CJM, Alipore under Section 14 of the SARFAESI Act. And the vacating notice dated 03.05.2023 passed by the Ld CJM, Alipore.

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Ld counsel for respondent F.l. files affidavit tn opposition to SA contending inter alia that there is no merit in the SA and has^prayed for

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dismissal of SA. All the material allegations made in the SA are also denied.

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It is also stated that there is no error in the impugned order dated 37.03.2023 passed by the Ld CJM, Alipore. It is also stated that there is no error with the classification of the account of the applicants as NPA on 16. 1 1 .2018.

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It is denied that notice under Section 13(2) is bad.

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It is stated that the guidelines as postulated by the RBI have been followed.

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It is also denied that the provisions of Rule 8(1) and Rule 8(2) have not been followed.

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It is stated that the applicants are not entitled to get any of the reliefs mentioned in S.A.

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Decision with reasons:-

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I have gone through the materials on record including the impugned order dated 31.03.2023 passed by the Ld CJM, Alipore. It appears that the applicant No.1 had approached the respondent F.I. for availing cash credit facilities to the tune of Rs.85,00,000/- at the rate of interest of 10.5olo per annum.

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The applicants also mortgaged two immoveable properties, apart from stocks and receivables, book debts, engagement and securities and other movable assets. The account of the applicants was declared as NpA on 16.11.2018. So it appears that NpA classification of the loan account took place much prior to the interim order of the Hon,ble Supreme Court restraining the NPA classification in view of the COVID-19 pandemic. The restraint order was in force from August 3f,2O2O to March 23,2021.

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The Hon'ble Supreme Court in the case of Gajendra Sharma Vs. Union of India & Anr. has passed an interim order dated September 3, 2020 directing the bank not to classify any account as NpA which was not declared as NPA as on August 3t, ZO2O as NpA till further order. The said order dated September 3, 2020 stood vacated only upon the pronouncement of judgment dated lvlarch 23, ZO2l.

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So the petitioner's account has been declared as NpA prior to the order of the Hon'ble Supreme Court dated September 23,2020,

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It appears from the statement, the applicant did not maintain the loan account properly and after 90 days default, the loan account was declared as NPA on 16.11.2018 in accordance to the directives and guidelines issued by the RBI.

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The applicants did not take steps or regularize the loan account which led to issuance of the demand notice under Section 13(2) of SARFAESI Act by way of notice dated 26.07.2O2O.

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It appears that the first 13(2) notice dated 25.10.2019 was withdrawn by 2"d 8(2) notice dated O2.O7.2020 and the 2nd 13(2) was withdrawn by 3d 13(2) notice dated 26.O7.2O2O.

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sA applicants repried to such 13(2) notice dated 26.07.2020 vide retter dated 11.10.2022 and such reply was beyond the statutory period of 60 days. However, the respondent F.I. replied to it by way of letter dated 77.10.2023.

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It appears that the amount demanded in 13(2) notice was not paid and there was arso no cogent reason in the representation under section 13(34) of the borrower as to why the demanded amount will not be paid by the applicants within 60 days from the date of receipt of 13(2) notice. The respondent F.I. thereafter issued possession notice on lt.LO.2022 and symbolic possession was taken in respect of the mortgaged property. It appears that the said notice was published in daily news paper and was also affixed at the conspicuous part of the secured property and was also sent by speed post to the applicants.

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It also appears that the respondent F.I. approached the Ld CJM, Alipore who appointed seal bailiff of the court to act as court commissioner and to take physical possession of the secured property and in terms of the order of the Ld CJM, seal bailiff took physical possession of the secured property and handed over to the same to the Authorized Officer of the respondent F.I.

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It is alleged that the Ld CJM has not recorded in the impugned order dated 31.03.2023 the claim amount of the respondent F.L It appears that the Ld CJM in the impugned order has stated about the financial assistance granted by the secured creditor to the borrower against the property to the tune of Rs.85,OO,O00/_.

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He has also recorded that the account of the borrower became NpA on 16.11.2018 vide demand notice dated 26.07.2022 under Section 13(2) Of thE SARFAESI ACt.

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He has also recorded that representauon dated 11.10.2022 was received from the borrowers on 17.!O.2O2Z which was also disposed of by the secured creditor within the stipulated time.

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It is worthy to point out ihat SA applicant gave representation beyond the statutory period of 60 days as it appears from the date of demand notice dated 26.07.2022 and the date of representation made on 77.I0.2022.

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It appears that the authorized officer of the secured creditor has furnished affidavit coverlng all 9-clauses as enunciated under Section 1a(1)(b) of the SARFAESI Act and the Ld cJM on perusal of the affidavit and being satisfied with the same passed the impugned order dated 31.03.2023.

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At one place in the impugned order the Ld CIM has stated that no objection against 13(2) notice was received from the borrower and at another place while dealing with the issue in question, he has written

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a representation dated 11.10.2022 was received from the borrower on t7.10.2022 which was disposed of by the Secured Creditor within the stipulated time.

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It is also recorded in the impugned order dated 31.03.2023 that the borrower has failed to make payment within the stipulated period. So reading as a whole it appears that the Ld CJM has recorded regarding representation dated 11.10.2022 which was received from the borrower on !7.t0.2022 and was replied by the secured creditor within the stiputated period.

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The Ld CJM is not required to put verbatim copy of all g-points. It is not necessary that all the ingredients of Section 14 should have been copied in verbatim by the DM/CJM.

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In the present case the magistrate has recorded about his satisfaction regarding 9 points andwhich shows that he has applied his mind to the materials placed before him and it is not necessary that all the ingredients of section 14 of the Act should be copied in verbatim by the DM/CJM.

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Section 14 is in the nature of executing order and it does not contemplate adjudicatory process by the DM/CJM.

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No element of quasi-judicial function is to be performed by the magistrate while exercising power under section 14 of the Act.

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The Hon'ble Supreme Court in an earlier judgment in the mafter of Standard Chartered Bank Vs. V Noble Kumar, (2013) 9 SCC 620 has been pleased to hold the following points as observed in para 24 of the judgment -

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24.1(i) there was a loan transaction under which a borrower is liable to repay the loan amount with interest,

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24.2(ii) there is a security interest created in a secured asset belonging to the borrower,

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24.3(iii) that the borrower committed default in the repayment,

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24.4(iv) that a notice contemptated under Section 13(2) was in fact issued,

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24.5(v) in spite oF such a notice, the borrower did not make the repayment,

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24.6(vi) the objections of the borrower had in fact been considered and rejected,

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24.7(vii)the reasons for such rejection had been communicated to the borrower, etc.

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I find that the Ld CIM white passing the impugned order dated 31.03.2023 was satisfied about the correctness of the information as mentioned in connection with g-clauses in Section 14(1)(b) of the SARFAESI Act.

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It is also apparent that there is no format or mandate envisaged under SARFAESI Act or its Rules which the DM/CJM has to follow and in the

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absence of any format it is not required by the Ld CJM to record paragraph-wise before passing order. Magistrate is required to satisfy about the correctness of information as contained in the affidavit. Bank is not supposed to regularize the account after classiflcation of any loan account as NPA. As per Section 13(4), if any borrower fails to discharge liability in full within the period specified in the demand notice, Bank can take possession of the property. It is obligatory on the part of the borrower to pay the entire amount specified in demand notice for regularizing the loan account.

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It appears that the SA applicant did not make payment of entire amount after receiving 13(2) notice. Repayment means payment of the entire defaulted amount after receiving the 13(2) notie. Piecemeal or abrupt deposit of money cannot be construed as repayment of outstanding, as understood, from a plain reading of Section 13(4) which speciflcally says "liability in full."

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It appears that the respondent F.I. has complied with all necessary formalities as per Section 13 of the SARFAESI Act and the rules framed thereu nder.

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It also appears that the Sarfaesi measures taken by the bank were withdrawn by the last demand notice dated 26.07.20?0. Default on the^part of the borrower in repaying the cash credit facilities availed by the applicant is also glaring.

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Default on the part of the applicant in repaying its dues is also an admitted^position and all the measures taken by the respondent F.I. under SARFAESI Act as I Find are in accordance to law as no contrary are established by the SA applicant. Hence,

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Ordered

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Sarfaesi application being S.A. 372 of 2023 is dismissed on contest, pending I.As, if any are also dismissed. Interim order dated 16.05.2023 passed by this Tribunal stands vacated.

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Copy of the Judgement/Final Order be upload in the Tribunal's^website. File is consigned to the Record Room after observing all formalities.

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(Dictated to steno, transcribed by him, corrected, signed and pronounced by me in the open Court on this 31"t Day of July, 2024)

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( KAMAL DE ) PRESIDING OFFICE R.

Mr Mohammed Sajid and Ors. v. Kotak Mahindra Bank Limited

Case brief

What is this about?

What did the court decide?

Mr Mohammed Sajid and Ors. v. Kotak Mahindra Bank Limited

Case brief

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What did the court decide?

What the court decided

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