Dismissed

Sunulal Mohanlal v. State Bank of India

DRT3 Oct 2024SA/377/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed an application seeking to set aside securitization proceedings under SARFAESI Act. The tribunal held that applicants failed to object to the claimed amount in the demand notice, did not comply with the High Court's instalment order, and are thus estopped from technical challenges, finding no illegality in the bank's actions.

What did the court decide?

Securitization application dismissed with costs of Rs.10,000/- to be paid by applicants to the defendant.

Sunulal Mohanlal versus State Bank of India — Contract and Commercial Disputes | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH

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PRESIDING OFFICER

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Dated this the 3^rd day of October, 2024

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SECURITIZATION APPLICATION No.377/2024

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Between

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M/s.Akshara Hardware, Proprietor, Sunulal Mohanlal, VGP/XII/849, 850, M/s.Akshara Hardware, Karingannur, Kollam – 691 516.

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Sunulal Mohanlal, Proprietor, M/s.Akshara Hardware, Akshara, Karingannur, Kollam – 691 516.

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Muraleedharan Madhavan, S/o.Madhavan, Akshara, Karingannur, Kollam – 691 516. …Applicants And

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State Bank of India, Represented by the Authorised Officer/ Chief Manager, SARB, LMS Compound, Opp. Museum West Gate, Vikas Bhavan P.O., Trivandrum – 695 033. …Defendant

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This Securitization Application having been heard on 25.09.2024

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in the presence of Advocate Sri.Radhakrishna Pillai G. for the applicants and Advocate Sri.Tom K.Thomas for the defendant, and stood over to this day for consideration, the Tribunal delivered the following:

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F I N A L O R D E R

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This SA is filed by the applicants under S.17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement

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SA 377/2024

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of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) challenging the securitization measures initiated by the defendant under the provision of SARFAESI Act and notice issued by the Advocate Commissioner for taking physical possession of the secured asset.

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Brief facts of the case :

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In the SA the applicants admitted about availing of five loans from the defendant bank during the period from 16.03.2019 to 24.11.2022 by mortgaging the subject matter property. It is further averred in the application that due to some delay in repayment, the defendant initiated securitization proceedings and issued demand notice under S.13(2) of the SARFAESI Act to the applicants on 01.02.2023 calling upon them to repay an amount of Rs.1,26,12,106/It is also averred in the SA that classification of the loan as NPA is illegal and in violation of RBI guidelines and hence the securitization proceedings is not sustainable. Due to non-repayment of the amount, the defendant instituted OA No.522/2023 for realisation of the outstanding dues. The defendant has also filed MC No.176/2024 before the CJM, Kollam and the Advocate Commissioner issued notice marked Annexure-A3 to take physical possession of the secured asset.

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The applicants previously filed W.P.(C) No.11451/2024 seeking regularization of repayment. The Hon'ble High Court of Kerala permitted the applicants to deposit Rs.30 lakhs on or before 27.03.2024 and the balance amount in eight equal monthly instalments. But the applicants could not comply the said direction due to financial stringency. It is also stated in the SA that the claim advanced by the defendant is excessive which they are not entitled to

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SA 377/2024

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recover from the applicants. Hence the SA may be allowed by setting aside the entire securitization proceedings initiated by the defendant.

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Per contra , the defendant contested the claim by filing written statement denying the averments in the SA and claimed inter alia that after availing the loans, the applicants did not take any initiative to redeem the outstanding loan amount. Consequently, OA No.522/2023 was filed for realisation of the outstanding dues. After classifying the loans as NPA on 05.03.2023, the defendant initiated securitization proceedings by following all the statutory procedures. The Hon'ble High Court of Kerala permitted the applicants to redeem the loans by making payments in instalments but they did not avail the opportunity and deliberately evaded to pay the outstanding by filing various litigations. Since all the measures are taken as per statutory requirements, applicants are not entitled to get any relief and the SA may be dismissed.

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From the respective case of the applicants and defendant,

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the following points are emerged for adjudication in this case:

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(i) Whether there is any illegality or defect or irregularity in the securitization proceedings to intervene with the same?

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(ii) Whether the applicants are entitled to get any relief in this case?

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FINDINGS:

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Point Nos.(i) & (ii):

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For better appreciation of the case, both the points being interlinked with each other are taken up together for adjudication. During the hearing, learned counsel for the applicants strenuously

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SA 377/2024

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contended that all the statutory measures are not duly followed in this case and there was some material defect in the measure taken under S.14 of the SARFAESI Act. The application was not filed by the secured creditor and the person who issued notice is not the Authorised Officer and hence S.14 measure is defective and the defendant cannot proceed with the securitization measure.

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On the other hand, learned counsel for the defendant contended that on mere technicality which does not cause any prejudice to the applicants, the securitization proceedings cannot be set aside. Further, the applicants, having admitted the availing of loans and sought time to redeem the same before the Hon'ble High Court of Kerala as well as in the SA, now they cannot turn around in challenging the securitization proceedings. In such premises, the applicants having no case, the SA may be dismissed.

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On careful consideration of the submissions of both sides, it is discernible from the materials on record that applicants have not disputed the loans availed by them from the defendant bank and due to default in repayment, securitization proceedings were initiated. After getting the demand notice issued under S.13(2) of the SARFAESI Act, the applicants did not raise any objection about the claim amount as required under S.13(3-A) of the SARFAESI Act and they remained silent over the matter. The applicants filed W.P.(C) No.11451/2024 before the Hon'ble High Court of Kerala wherein the Hon'ble Court permitted them to deposit Rs.30 lakhs on or before 27.03.2024 and the balance outstanding amount in eight equal monthly instalments. Admittedly, the applicants did not comply the said order. In this SA also the applicants claimed that they are ready to clear the

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SA 377/2024

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outstanding amount in 20 equal monthly instalments but no step was taken by them to repay the public money.

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The question arises whether in such circumstance, the applicants can challenge the validity and correctness of the entire securitization proceedings. The Hon'ble High Court of Kerala in the judgment reported in 2022 (3) KLT 645 in the case titled AGP City

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Gas Private Limited v. M/s.Lynx Properties & Developers &

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others had held as follows:-

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“21. Once the notice of demand is served, the mandate of the Act, as evident from section 13(3)-A, is the availability of an opportunity to the borrower to raise any objection against the notice issued. This statutory notice enables the borrower to raise an objection on any of the grounds available to him, including the objection regarding the quantum specified in the demand notice.

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22. In the instant case, admittedly no objection was raised by the borrower or guarantor on the quantum specified in the demand notice issued under section 13(2) of the Act. Therefore, the opportunity available to the borrower as well as the guarantor, to object to the quantum mentioned in the demand notice was not availed by them. Hence, they cannot thereafter, turn around and question the quantum mentioned in the demand notice to contend that the notice is bad in law. ……”

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Further, the Hon'ble Apex Court in the judgment reported in (2022) 2 SCC 221 in the case titled Arce Polymers Private

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Limited v. Alphine Pharmaceuticals Private Limited and others,

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had held at paragraph 18 as follows:-

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“18. ……….. Taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on part of the Borrower to gain indulgence, unfulfilled assurances and promises, their unwillingness to pay, and in light of the law laid down by this Court, we are of the view that the Borrower has waived and is estopped from challenging violation of Section 13(3A) of the SARFAESI Act and hence, the first issue is decided in favour of the Bank………”

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In view of the ratio, the applicants having not challenged the demand notice, now they cannot dispute the claim amount. So also they, having admitted to redeem the loans in instalments, now they are estopped from challenging the proceedings on various flimsy technical

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SA 377/2024

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grounds, which are not permissible in view of the ratio decided by the Hon'ble Apex Court in Arce Polymers Private Limited (supra).

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Further, no material is found that the proceedings initiated by the defendant suffer from any illegality to intervene with the same. The defendant produced all the relevant documents viz., demand notice issued to the applicants, postal acknowledgement cards and measure taken under S.14 of the SARFAESI Act, which indicates that application was filed by Chief Manager and Authorised Officer, who has sworn the affidavit in support of the declaration. R.2(a) of the Security Interest (Enforcement) Rules, 2002 prescribes that ‘authorised officer’ means an officer not less than a chief manager of a public sector bank or equivalent. Hence challenging the authority of the Authorised Officer by the applicants is not at all acceptable. There is no illegality or irregularity or defect in the securitization proceedings and no interference is required in the present case. The applicants are not entitled to get any relief in this case and hence both the points are answered against them.

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Hence it is ordered:-

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ORDER

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In view of the foregoing reasons, this SA, being devoid of any merit, is hereby dismissed with costs of Rs.10,000/- (Rupees ten thousand only), payable by the applicants to the defendant.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 3^rd day of October, 2024)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 377/2024

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Documents on the part of the applicants

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Annexures	Date	Particulars of documents
Annexure-A1	01.02.2023	Copy of notice issued to the applicants by the defendant.
Annexure-A2	13.02.2024	Copy of order in MC No.176/2024 of the CJM, Kollam.
Annexure-A3	02.03.2024	Copy of notice issued by the Advocate Commissioner in MC No.176/2024.
Annexure-A4	20.03.2024	Copy of judgment in W.P.(C) No.11451/2024 of the Hon'ble High Court of Kerala.
Annexure-A5	10.05.2024	Copy of receipt for Rs.1 lakh issued by the Federal Bank Ltd.
Annexure-A6	17.04.2024	Copy of notice issued by the Advocate Commissioner in MC No.176/2024.
D	ocuments on	the part of the defendant
Annexure-B1	07.03.2023	Copy of demand notice issued to the applicants.
Annexure-B2	08.03.2023	Copy of acknowledgement card evidencing receipt of demand notice by the 2^nd applicant.
Annexure-B3	08.03.2023	Copy of acknowledgement card evidencing receipt of demand notice by the 1^st applicant.
Annexure-B4	08.03.2023	Copy of acknowledgement card evidencing receipt of demand notice by the 3^rd applicant.
Annexure-B5	08.11.2023	Copy of petition filed before the CJM, Kollam.
Annexure-B6	08.11.2023	Copy of affidavit filed before the CJM, Kollam.
Annexure-B7	19.03.2019	Copy of CERSAI registration certificate issued by Central Registry.

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PRESIDING OFFICER

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated the 3^rd October, 2024

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SA No.377/2024

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Between M/s.Akshara Hardware, Proprietor, Sunulal Mohanlal, VGP/XII/849, 850, M/s.Akshara Hardware, Karingannur, Kollam – 691 516 & 2 others. …Applicants

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And

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State Bank of India, Represented by the Authorised Officer/ Chief Manager, SARB, LMS Compound, Opp. Museum West Gate, Vikas Bhavan P.O., Trivandrum – 695 033. …Defendant

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F I N A L O R D E R

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SA No.377/2024 03.10.2024

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……………….. In view of the foregoing reasons, this SA, being devoid of any merit, is hereby dismissed (vide separate final order) with costs of Rs.10,000/- (Rupees ten thousand only), payable by the applicants to the defendant.

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Presiding Officer

Sunulal Mohanlal v. State Bank of India

Case brief

What is this about?

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Sunulal Mohanlal v. State Bank of India

Case brief

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