Dismissed

Abdul Khader Mohammed v. South Indian Bank

DRT14 Aug 2024SA/389/2023

Case brief

AI extract

What is this about?

The Tribunal dismissed an application seeking to set aside a bank's possession and sale of a secured asset. The court held that the bank complied with SARFAESI requirements, including notices, valuations, and auction procedures, rejecting allegations of collusion and irregularities.

What the court decided

AI extract

Abdul Khader Mohammed versus South Indian Bank — Banking and Recovery | DRT (2024)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 14^th DAY OF AUGUST, 2024

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PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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S.A No. 389 of 2023

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Between

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Abdul Khader Mohammed, S/o. Mohammed, Bakkar Villa, Kappil Beach Road, Near Taj Vivanta, Uduma P.O, Kasaragod -671319, Now residing at : Shareef Mansion, Kottikulam, Bekal P.O., Kasaragod.

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--- Applicant

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And

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The Authorized Officer, The South Indian Bank Ltd. Regional Office, Kannur at KVT Tower, Pamban Madhavan Road, Talap, Kannur-670 002.

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Yoseph K.B., S/o. Abdul Rahiman K.B., Araz Manzil, Kappil, Uduma P.O., Kasaragod – 671 319.

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--- Defendants

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SA No.389 of 2023

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This Securitization Application coming on 29.02.2924 for final hearing before me in the presence of Mr. P.R. Milton, Advocate for the Applicant and Mr. Jojo George Advocate for the 1^st defendant and Ms.Ruby Poulose Advocate for 2^nd Defendant and upon hearing arguments of learned Counsels for all the parties and upon perusing the material on records, this Tribunal delivered the following:

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O R D E R

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This Securitisation Application was filed on 25.07.2023 seeking to set aside Annexure-A1 Demand Notice issued by the defendant bank and Annexure-A6 order of Chief Judicial Magistrate Court, Kasaragod and to declare that in view of the non-compliance of statutory requirements for sale, Annexure-A8 and A9 sale notices are illegal and set aside the sale conducted by the defendant bank on 04.11.2023.

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The applicant has admitted in the SA with regard to granting of credit facility by the 1^st defendant bank to his daughter Smt.Shamna Mol. He has also admitted that he stood guarantor to the aforesaid credit facility by offering his immovable property situated in Sy. No.210/9 in Uduma village, Hosdurg Taluk, Kasaragod District as the collateral security by deposit of his title deed for the aforesaid credit facility. In Annexure-B1 loan agreement, the borrower and the guarantors including the applicant have signed for sanctioning of term loan. Hence the contention of the applicant in the SA that the 1^st defendant fraudulently obtained the loan documents and granted the mortgaged loan instead of housing loan is absolutely incorrect.

¶18

The applicant has himself admitted in para 2 of the S.A that since the applicant and his children lost their jobs, the repayment became irregular. Hence the loan account of the applicant came to be classified as NPA on 01.05.2021 resulting in issuance of the Demand Notice dated 01.09.2021, Annexure-A1 to the applicant and the borrower. It is not in dispute that the applicant neither sent any objection/representation to the Demand Notice nor did he and the principle borrower clear off their liability to the defendant bank.

¶19

Therefore, Possession Notice dated 22.06.2022 was issued for symbolically taking physical possession of the secured asset. According to the 1^st defendant, though Possession Notice was served to the applicant and the borrower it was not acted upon further in view of error crept in the Possession Notice.

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Page 2 of 10

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SA No.389 of 2023

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Subsequently, the 1^st defendant filed application and affidavit Annexure-A5 in Crl. MP No.2609/2022 under Section 14 of the SARFAESI Act, 2002 before the Chief Judicial Magistrate Court, Kasaragod. Order dated 25.01.2023, Annexure-A6 came to be passed appointing Advocate Commissioner to take physical possession of the secured asset. Pursuant to the direction given in Crl. MP No.2609/2022, the Advocate Commissioner took physical possession of the secured asset on 23.06.2023 and handed over the same to the secured creditor after having prepared Annexure-A7 mahazar.

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The 1^st defendant issued Possession Notice dated 23.06.2023, Annexure-B2 stating that physical possession of the secured asset was taken. A perusal of Annexure-B3 returned postal article produced by the 1^st defendant shows that the Possession Notice sent to the address of the borrowers/guarantors was returned with endorsement “addressee left”. The 1^st defendant has also produced Annexure-B4 and B5, copies of paper publications and Annexure-B6 copy of photograph in order to prove his contention that Possession Notice was published in ‘Madhyamam’ edition dated 28.06.2023 and ‘The New Indian Express’ edition dated 28.06.2023 and that Possession Notice affixed on the conspicuous part of the secured asset.

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The 1^st defendant has produced Annexure- B7, copy of the Asset ID based report to prove his contention that secured asset has been registered with Central Registry.

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During the pendency of the SA before this Tribunal, the 1^st defendant issued sale notice dated 01.08.2023, Annexure-A8. Both the applicant and the 1^st defendant have not averred in their respective pleadings, as to whether sale of the property was held pursuant to Annexure-A8. However, the Counsel appearing for the applicant has mentioned in his written argument notes that sale was not fructified for want of bidders. Though the applicant has produced copy of sale notice dated 11.10.2023, Annexure-A9, there is no averment in the SA as to whether sale was held or not. The 1^st defendant has also omitted to mention the above factum in the written statement as well as in the additional written statement. However, it is seen from the perusal of both the SA and written statement and additional written statement that secured asset was sold pursuant to the sale notice dated 11.10.2023, Annexure-A9, on 04.11.2023 to the highest bidder namely, Sri.Youseph K.B., who is the 2^nd defendant herein, for a total sale consideration of Rs.80,60,000/-.

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Page 3 of 10

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SA No.389 of 2023

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The 1^st defendant has produced copy of postal Acknowledgment card Annexure-B8 to prove his contention that Annexure-A9 sale notice was served on the applicant. The applicant has also produced Annexure-A9 copy of the sale notice served to him. According to the defendant, the sale notice dated 11.10.2023 sent to the other borrowers/guarantors was returned with endorsement “addressee left”. The 1^st defendant has produced copy of returned postal article Annexure-B9 and B10 to prove his above contention. The 1^st defendant has also produced copies of paper publication AnnexureB11 and B12 and copy of photograph, Annexure-B13 in order to show that sale notice dated 11.10.2023 was published in two leading newspapers, one in vernacular language of ‘Malayala Manorama’ daily dated 15.10.2023 and English edition of ‘The New Indian Express’ dated 15.10.2023 and sale notice was affixed on the conspicuous part of the secured asset.

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The learned Counsel appearing for the applicant submitted that the 1^st defendant failed to serve the Demand Notice on Shamna Mol, the borrower and Mohammed Sheriff the other guarantor and that Demand Notice was not affixed on the outer door of the house in which the borrower and guarantor were residing and that Demand Notice was also not published in the newspapers as mandated under Section 13 (3) of the SARFAESI Act, 2002, though the 1^st defendant was aware of the employment of the above said persons abroad and that hence the Demand Notice is liable to be set aside and that Demand Notice does not contain the details of the amount payable by the borrower and also the details of the figure of the total outstanding amount and the interest payable for different periods and that since the aforesaid details were not furnished in the Demand Notice, the applicant could not send valid objection to the Demand Notice and that the description of the immovable property in Annexure-A2 notice is not pertaining to the applicant’s property and that it is pertaining to one Mr. Anurag Arol and that suppressing the above illegality, the defendant filed application under Section 14(1) of the SARFAESI Act, 2002 in Crl. MP No.2609/2022 before the Chief Judicial Magistrate Court, Kasaragod and that nine points covered under clause (i) to (ix) to the provisions under Section 14 (1) of the SARFAESI Act, 2002 were not furnished in Annexure-A5 affidavit and that the learned Chief Judicial Magistrate Court, Kasaragod without applying his mind, passed order mechanically, appointing Advocate commissioner to take physical possession of the secured asset and that in Annexure-A6 order no direction was given to give notice for vacating the premises and that since no direction was also given to serve the notice to the

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Page 4 of 10

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SA No.389 of 2023

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applicant and the borrower, the Advocate Commissioner took possession of the secured asset without serving notice to them.

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It is further submitted by the counsel for the applicant that, the reserve price of the property was fixed at Rs.89,38,000/- in the sale notice dated 01.08.2023 and that the sale was not materialized due to the collusion between the 1^st defendant and the 2^nd defendant who is none other than the southern side neighbour of the applicant and that the 2^nd defendant had approached the applicant on several occasions by offering reasonable amount to purchase the property and that but the applicant has no intention to sell the property to him and that the 1^st defendant in collusion with the 2^nd defendant issued Annexure-A9 sale notice by reducing 10% of the reserve price fixed in Annexure-A8 sale notice at Rs.80,44,000/- and that the 1^st defendant fixed the reserve price based on Annexure-B14 valuation report and that reserve price of the property was not fixed in consultation with the secured creditor and that in the valuation report Annexure-A10 produced by the applicant, the value of the building is fixed at Rs.66,31,143/- and that but in Annexure-B14 valuation report, the value of the building is mentioned as Rs.44,38,677/- and that since the sale of the secured asset conducted pursuant to Annexure-A9 sale notice is illegal, it is liable to be set aside and that therefore the SA may be allowed as prayed for.

¶34

Per contra, the counsel appearing for the 1^st defendant submitted that since the applicant failed to raise any objection/ representation as contemplated under Section 13 (A) of the SARFAESI Act, 2002, he has waived his statutory right to challenge the same on the ground that the Demand Notice does not contain the details of the amount payable by the borrower and the details of the secured asset and that Possession Notice dated 22.06.2022 was withdrawn in view of error crept in respect of the description of the immovable property and that pursuant to order passed in Crl. MP 2609/2022 physical possession of the secured asset was handed over to the 1^st defendant on 23.06.2023 and that all the statutory requirements contemplated under Section 14(1) of the SARFAESI Act, 2002 were furnished in the affidavit filed in CMP No.2609/2022 on the file of the Chief Judicial Magistrate Court, Kasaragode and that Possession Notice dated 23.06.2023, Annexure-B2 was issued for taking physical possession of the secured asset and that in the sale notice dated 01.08.2023, the reserve price of the secured asset was fixed at Rs.88,39,000/- based on Annexure-B14 valuation report of the approved valuer and that Annexure-B16 is the valuation report obtained at the time of availment of credit facility by the borrower in the 1^st defendant bank and that the applicant has not produced any document to

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Page 5 of 10

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SA No.389 of 2023

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substantiate his claim that the market value of the secured asset will fetch more than Rs.200 Lakhs and that since sale was not materialized for want of bidders pursuant to Annexure-A8 sale notice, Annexure-A9 sale notice was issued by fixing the reserve price at Rs.80,44,000/- and that sale was not materialized for want of bidders and that therefore, Annexure-A9 sale notice dated 11.10.2023 was issued by fixing the reserve price at Rs.80,44,000/- and that property was sold to the highest bidder, who is the 2^nd defendant herein for a sale consideration of Rs.80,60,000/- and that he paid a sum of Rs.20,60,000/- which is the 25% of the amount of the sale price including earnest money deposited and that sale of the property was confirmed on payment of the entire sale consideration amount and that sale certificate could not be issued to the 2^nd defendant in view of deferment order against issuance of sale certificate passed by this Tribunal and that the Hon’ble Supreme Court has held in Aree Polymers Private Limited Vs. M/s Alphine Pharmaceuticals Private Limited and others reported in 2021 KHC 6783 that the lender knows its interest and how to secure best value of the property and that the mortgaged property had to be sold for the recovery of debts due and payable to the bank and that the SA may be dismissed with costs.

¶38

It is submitted by the counsel appearing for the 2^nd defendant that the bid was knocked down in favour of the 2^nd defendant for an amount of Rs.80,60,000/- and that he remitted a sum of Rs.12,55,600/-, being the 25% of the bid amount on the same day and that he remitted a sum of Rs.50,00,000/- on 15.11.2023 and that in view of interim order granted by this Tribunal, confirmation of sale stood deferred and that upon the request of the 2^nd defendant, the 1^st defendant extended the time till 17.12.2023 for payment of the balance amount and that after the modification of the interim order on 29.11.2023 by this Tribunal, the 2^nd defendant remitted the balance amount of Rs.10,00,000/- on 12.12.2023 and that the 2^nd defendant is the bonafide purchaser of the property and that sale certificate was registered in his favour and that therefore, the SA may be dismissed with costs to the 2^nd defendant.

¶39

Annexure-A5 is the affidavit filed by the 1^st defendant in CMP 2609/2022 before the Chief Judicial Magistrate Court, Kasaragode. A perusal of the same shows that all the requirements such as availment of credit facility by the applicant in the 1^st defendant bank upon creation of security interest over his immovable property, default in repayment of the outstanding loan due, classification of loan account as Non-performing Asset, issuance of demand notice to the applicant and the principal borrower and other guarantor, publication

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Page 6 of 10

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SA No.389 of 2023

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of demand notice in two leading newspapers and affixture of the demand notice on the outer door of the house of the respondents 1 and 2, failure of the respondents to repay the outstanding liability, the outstanding liability as on 26.08.2022, secured asset being free of any leasehold right, are furnished. A perusal of Annexure-A6 order shows that the learned Chief Judicial Magistrate Kasaragode after having perused the contents of the petition and affidavit and documents and having satisfied over the same, passed order appointing Advocate Commissioner to take physical possession of the secured asset. Hence this Tribunal does not find any substance in the submission of the counsel for the applicant that the points covered under Clause (i) to (ix) to the provisions of Section 14 (1) of the SARFAESI Act, 2002 is not furnished in Annexure-A5 affidavit and that the learned Chief Judicial Magistrate, Kasaragode without applying his mind, passed order mechanically appointing Advocate Commissioner to take physical possession of the secured asset. Pursuant to the direction given to the Advocate Commissioner he took possession of the secured asset after having prepared Annexure-A7 mahazar.

¶43

The 1^st defendant has produced Annexure – B14 copy of the valuation report which was prepared by the approved valuer prior to issuance of the first sale notice. A perusal of Annexure – B14 shows that the approved valuer after having visited the secured asset on 21.10.2022 and having considered characteristics of the site, the building and its nature and the prevailing market value and the guideline value obtained from the Registrar concerned SRO valued the property as follows :

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(a) Market Value of the property Rs.89,38,000/-

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(b) Realisable Value of the property Rs.80,44,200/- (90% of the market value)

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¶47

The applicant has produced copy of valuation report dated 16.02.2024 obtained from one valuer as Annexure – A10. The valuer has valued the secured asset in Annexure – A10 at Rs.66,31,143/-. It cannot be disputed that the above value of the property is far less than the value fixed for the secured asset in Annexure – B14 valuation report. Be that it may so, the valuer could not have visited the secured asset prior to preparation of the valuation report on 16.02.2024, since the physical possession of the secured asset had already been taken by the 1^st defendant. Hence no reliance can be placed upon Annexure–A10. Hence no reliance can be placed upon Annexure-A10.

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Page 7 of 10

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SA No.389 of 2023

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In Annexure – A8 sale notice dated 25.01.2023, the reserve price for the property has been fixed at Rs.89,38,000/- which is fixed as the market value of the property in Annexure – B14 valuation report. The applicant has himself admitted in the SA that sale was not held for want of bidders. Therefore, the 1^st defendant issued another sale notice dated 11.10.2023 Annexure–A9 wherein the reserve price fixed for the property is Rs.80,44,000/-. Since the 2^nd defendant bidded the property for an amount of Rs.80,60,000/-, he was declared as a successful bidder to purchase the property. This Tribunal does not find any valid reason to accept the contention of the applicant that the reserve price for the property in Annexure – A9 notice was very low. The applicant has also not produced any material before this Tribunal to substantiate his claim that market value of the property is more than Rs.200 Lakhs.

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The applicant has not pleaded in the SA that the 2^nd defendant is the neighbour and that he approached the applicant on several occasions by offering reasonable amount to purchase the property and that the applicant had no intention to sell the property to him and that the 2^nd defendant colluded with the 1^st defendant in order to purchase the property. The counsel appearing for the applicant has raised the above plea only in the written argument notes filed on behalf of the applicant. Hence, this Tribunal does not find any substance in the above argument of the counsel for the applicant.

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In view of the foregoing reasons, this Tribunal holds that the applicant has miserably failed to establish his case so as to get the reliefs sought for in the SA. In the result, SA No.389 of 2023 stands dismissed. No costs.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the open court on this the 14^th day of August, 2024.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 8 of 10

SA No.389 of 2023

List of documents filed by the Applicant along with the S.A.

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Sl. No.	Date	Particulars
1.	01.09.2021	True copy of the Demand Notice received by theapplicant.	Annexure-A1
2.	22.06.2022	True copy of the Possession Notice issued by the defendant to the applicant	Annexure-A2
3.	25.08.2022	True copy of the judgment in W.P.(C) No.25782/2022.	Annexure-A3
4.	---	True copy of the counter foil issued by the defendant.	Annexure-A4
5.	---	True copy of the counter foil issued by the defendant.	Annexure-A4a
6.	---	True copies of the counter foil issued by the defendant.	Annexure-A4b
7.	---	True copy of CMP 2609/2022 and the affidavit filed under Sec.14 of the SARFAESI Act before the Chief Judicial Magistrate Court,Kasaragod.	Annexure-A5
8.	25.01.2023	Tre copy of the order in CMP 2609/2022 of the Chief Judicial Magistrate Court,Kasaragod.	Annexure-A6
9.	23.06.2023	True copy of the Mahazar issued by the Advocate Commissioner.	Annexure-A7
10.	01.08.2023	True copy of the tender cum auction sale notice issued by the defendant bankto the applicant.	Annexure-A8
11.	11.10.2023	True copy of the sale notice issued by the defendant to the applicant.	Annexure-A9
13.	16.02.2024	True copy of valuation report	Annexure-A10

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List of documents filed by the 1^st defendant along with the written statement

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Sl.	Date	Particulars
No.
1.	31.08.2019	True copy of loan agreement	Annexure-B1
2.	23.06.2023	True copy of the Possession Notice.	Annexure-B2

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Page 9 of 10

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SA No.389 of 2023

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3.	--	True copy of the returned postal article.	Annexure-B3
4.	28.06.2023	True copy of the Possession Notice publishedin Madhyamamdaily.	Annexure-B4
5.	28.06.2023	True copy of the Possession Notice publishedin New Indian Express daily.	Annexure-B5
6.	---	True copy of the photograph regarding the affixture of Possession Notice dated 23.06.2023.	Annexure-B6
7.	---	True copy of the Asset Id Based Search Report.	Annexure-B7
8.	---	True copy of the acknowledgement card duly signed by the applicant.	Annexure-B8
9.	---	True copy of the returned postal article addressed to ShamnaMol.	Annexure-B9
10.	---	True copy of the returned postal article addressed toMohammed Sheriff.	Annexure-B10
11.	15.10.2023	True copy of the Tender cum Auction Sale Notice dated 11.10.2023 published in MalayalaManorama daily.	Annexure-B11
12.	15.10.2023	True copy of the Tender cum Auction Sale Notice dated 11.10.2023 published in New Indian Express daily.	Annexure-B12
13.	---	True copy of the photograph regarding the affixture of Tender cum Auction sale notice dated11.10.2023.	Annexure-B13
14.	21.10.2022	True copy of the Valuation Report of the approvedValuer.	Annexure-B14
15.	---	True copy of the statement of account of the Mortgage Loan A/c No.0617652000000122	Annexure-B15
16.	---	True copy of the valuation of the secured asset at the time of availing the loan facility taken by the bank dated 18.07.2019.	Annexure-B16

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/-

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Page 10 of 10

Abdul Khader Mohammed v. South Indian Bank

Case brief

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What the court decided

Abdul Khader Mohammed v. South Indian Bank

Case brief

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