Partly allowed

Live E Zone v. South Indian Bank

DRT19 Jun 2024SA/445/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal examined a securitization application challenging a Demand Notice, Possession Notice, and CJM orders. It set aside the NPA classification and Demand Notice due to RBI guideline violations regarding loan renewal but rejected other reliefs unavailable under the SARFAESI Act.

What did the court decide?

Set aside the annexe-A9 Demand Notice and annexe-A13/C14 orders; denied relief to declare demand amount non-payable or grant compensation.

Live E Zone versus South Indian Bank — Specific Performance | 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 19^th DAY OF JUNE, 2024

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

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S.A No. 445 of 2022

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Between

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M/s. Live E Zone, Door No.KP/8, J.I.M.H.G, AB & AC Brothers Building, Bye-Pass Road,

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Kondotty P.O, Malappuram Represented by its

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Managing Partner Noufal N.K.

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Noufal N.K., s/o. Muhammed, M/s. Live E Zone, Door No.KP/8, J.I.M.H.G, AB & AC Brothers Building, Bye-Pass Road, Kondotty P.O, Malappuram-673638.

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Ummer K., S/o.Muhammed Haji, M/s. Live E Zone, Door No.KP/8, J.I.M.H.G, AB & AC Brothers Building, Bye-Pass Road, Kondotty P.O, Malappuram-673638.

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Kunhipathu, W/o. Ummar K., M/s. Live E Zone, Door No.KP/8, J.I.M.H.G, AB & AC Brothers Building, Bye-Pass Road, Kondotty P.O, Malappuram-673638.

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Aysha Shana, W/o. Noufal K., M/s. Live E Zone, Door No.KP/8, J.I.M.H.G, AB & AC Brothers Building, Bye-Pass Road, Kondotty P.O, Malappuram-673638.

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SA No.445 of 2022

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Subhaida P.M., W/o.Muhammed N.K., Naduvilkandiyil House, Vavad P.O., Koduvally, Kozhikode.

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--- Applicants

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And

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South Indian Bank Ltd. Thamarassery Branch, Matha Towers, Thamarassery P.O, Kozhikkode – 673 573, Kerala Represented by its Authorized Officer.

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--- Defendant

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This Securitization Application coming on 11.04.2024 for final hearing before me in the presence of Ms. Sabitha C.A., Advocate for the Applicants and Mr. Varughese Cherian, Advocate for the defendant and upon hearing arguments of learned Counsels for both 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 15.09.2022 seeking to declare that Annexure-A9 Demand Notice, Annexure-A10 possession notice and Annexure-A14 notice issued by the Advocate Commissioner are illegal and irregular and to set aside all recovery proceedings pursuant to Annexure-A9 Demand Notice and to declare that the amount sought to be recovered is not payable and excess and exorbitant and not legally recoverable and to grant compensation to the tune of Rs.10,00,000/- and cost to the applicants for the fiscal fraud committed by the defendant towards the applicants and also for the mental agony and hardship caused to the applicants.

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The 1^st applicant is a partnership firm in which the applicants 2 to 6 are the partners. Availment of Overdraft facility to the limit of Rs.60,00,000/- by the 1^st applicant firm in the defendant bank as per loan sanction letter, Annexure-A1, execution of cash credit facility agreement, Annexure-A2 and loan guarantee agreement Annexure-A3 is admitted by the applicants in the SA. It is also admitted by the applicants in the SA that the 6^th applicant deposited her title deeds pertaining to her immovable property admeasuring 44 cents with residential building therein situated in Re. Sy.No.8/5 in Vavad Village,

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Page 2 of 8

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SA No.445 of 2022

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Thamarassery Taluk, Kozhikode district by way of confirmation of deposit of title deeds, Annexure-A5 as the collateral security for the aforesaid availment of credit facility.

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The Counsel appearing for the defendant bank submitted that since the applicants defaulted in repayment of the outstanding loan due, their loan amounts were classified as NPA on 24.03.2021 with effect from 28.11.2020 and that Annexure-A4 renewal letter dated 08.01.2021 was executed along with Annexure-A6 acknowledgment of debt for the purpose of saving the limitation period in respect of the loan documents executed by the borrowers and that since the loan account of the applicants was not regular or standard on 08.01.2021 or thereafter, there is no question of renewal of account at all and that Annexure-A8 copy of statement of account itself shows the default committed by the applicants in repayment of the outstanding loan due.

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The issuance of Demand Notice dated 29.06.2021, Annexure-A9 and receipt of the same is admitted by the applicants in the S.A. The defendant bank has also produced Annexure-B1 series postal receipts and acknowledgment cards along with the Demand Notice to prove the service of Demand Notice to the applicants. The Counsel appearing for the applicants submitted that the applicants were prompt and regular in repayment of the outstanding loan due as per Annexure-A4, copy of loan sanction/renewal letter and that the reset payment of loan was 12 months and that the loan was renewed on 08.01.2021 and that the defendant bank wilfully suppressed the renewal of the loan and cash credit loan agreement signed and submitted by the applicants and that therefore, classification of loan account as NPA is incorrect and Demand Notice Annexure-A9 is void ab initio.

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The issuance of Annexure-A4 sanction/renewal of credit facilities on 08.01.2021 to the 1^st applicant firm is admitted by the defendant bank. A perusal of Annexure-A4 shows that the credit facilities granted to the 1^st applicant firm was renewed pursuant to the application dated 05.03.2018 submitted by the 1^st applicant firm. Thus it is evident that the credit facilities granted to the 1^st applicant firm was renewed by the defendant bank with effect from 08.01.2021. A perusal of Annexure-A8 copy of statement of account which was filed by the defendant bank in Crl. MP No.821/2022 on the file of the Chief Judicial Magistrate Court, Kozhikode would show that renewal charges by way of GST and flood cess has been levied on 29.01.2021 and that the deposits made by the 1^st applicant firm has been given credit. Hence the submission of the Counsel for the defendant bank that Annexure-A4 was executed along with Annexure-A6 acknowledgment of debt for the purpose of saving the limitation period in respect of the loan documents executed by the borrowers and that since the loan account of the applicants was not regular or standard

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Page 3 of 8

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SA No.445 of 2022

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on 08.01.2021 or thereafter, the question of renewal of account does not arise is untenable. Therefore this Tribunal is constrained to hold that since the applicants could not have committed default in repayment of the outstanding loan due, pursuant to issuance of Annexure-A4 renewal letter, the classification of the loan account of the applicants as NPA on 24.03.2021 with effect from 28.11.2020 is against the RBI guidelines.

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Issuance of Annexure-A10 Possession Notice dated 27.01.2022 for symbolically taking possession of the secured asset and the receipt of the Possession Notice is admitted by the applicants in the SA.

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One of the reliefs sought for by the applicants in the SA is to declare that Annexure-A10 Possession Notice is illegal and set aside the same. The applicants have not specifically stated any reasons in the SA as to why the Possession Notice is illegal and is liable to be set aside. Further, the Annexure-A10 Possession Notice was issued on 27.01.2022. The applicants did not file the SA challenging AnnexureA10 Possession Notice within the period of 45 days from the date of issuance of the Possession Notice. Hence the contention of the applicants that Annexure-A10 Possession Notice is illegal and is liable to be set aside does not hold good.

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The defendant bank filed petition, Annexure-A11 and affidavit Annexure-A12 before the Chief Judicial Magistrate Court, Kozhikode for taking physical possession of the secured asset. The learned Chief Judicial Magistrate, Kozhikode passed Annexure-A13 order dated 08.07.2022 appointing Advocate Commissioner to take physical possession of the secured asset. The Advocate Commissioner issued Annexure-A14 notice dated 01.09.2022 informing the applicants that he would take physical possession of the secured asset on 17.09.2022.

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It is submitted by the Counsel for the applicants that the defendant bank has mentioned the due amount as on 31.12.2021 only in the Annexure-A12 affidavit which was filed on 18.05.2022 and that the amount due on the date of filing of the application was not disclosed in the affidavit and that this constitutes a clear violation of the mandatory requirement stipulated in Section 14(1)(i) of the SARFAESI Act, 2002 and that boundary description for the property in Annexure-A9 Possession Notice and in Annexure-A11 petition does not tally with each other and that the remittances made by the applicants are suppressed in Annexure-A11 petition and A12 affidavit and that complete loan account statement was not filed along with Annexure-A11 and A12 in Crl. MP No.821/2022 and that therefore, Annexure-A13 order and A14 notice are liable to be set aside.

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Page 4 of 8

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SA No.445 of 2022

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It is submitted by the counsel for the defendant bank that correct statement of account was filed along with the petition and affidavit before the Chief Judicial Magistrate Court, Kozhikode and that there is no mandatory requirement for producing copy of statement of accounts in the proceedings under Section14 of the SARFAESI Act, 2002 and that all the requirements contemplated under Section 14 of the SARFAESI Act, 2002 were complied with and that the learned Chief Judicial Magistrate Court Kozhikode, after having perused the contents of the affidavit and having satisfied over the same, passed Annexure-A13 order to take physical possession of the secured asset and that therefore, Annexure-A13 order and A14 notice are not liable to be set aside.

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This Tribunal fully concurs with the submission of the counsel for the defendant bank that there is no mandatory requirement for producing copy of statement of accounts in the proceedings under Section14 of the SARFAESI Act, 2002. However, it is mandatory requirement to mention the outstanding loan due as on the date of filing of the petition and affidavit under Section 14 of the SARFAESI Act, 2002. In the present case at hand, Annexure-A11 petition and A12 affidavit was filed in Crl. MP No.821/2022 on 18.05.2022. In Annexure-A11 petition as well as Annexure-A12 affidavit, it is mentioned that the balance outstanding due as on 31.12.2021 is Rs.56,55,089.62. The proviso (i) to the provisions of Section 14(1) of the SARFAESI Act, 2002 mandates that the affidavit shall be affirmed declaring the aggregate amount of financial assistance granted and the total claim of the bank as on the date of filing of the application. Hence it cannot be disputed that the defendant bank has failed to comply with the above mandatory requirement.

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In Annexure-A10 Possession Notice the boundaries for the secured asset is described as follows :

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North : Private road. East : Property of Ahammedkutty South : Property of Mammunny West : Panchayat road

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Whereas in Annexure-A11 petition filed in Crl. MP No.821/2022 of the Chief Judicial Magistrate Court, Kozhikode, the boundaries of the secured asset is described as follows :

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North : Naduvilangpurayi paramba East : 8^th No. in partition deed South : 6^th No. in partition deed West : Oodu nirath

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Page 5 of 8

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SA No.445 of 2022

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It is established that the boundaries for the secured asset mentioned in Annexure-A10 Possession Notice does not tally with the boundaries for the secured asset mentioned in Annexure-A11 petition as rightly submitted by the Counsel for the applicants. It is also evident that the correct details of the secured asset was not furnished in Annexure-A10 petition as contemplated under the proviso (iii) to Section 14(1) of the SARFAESI Act, 2002.

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This Tribunal has already rendered its finding that Annexure-10 Possession Notice is not liable to be set aside. The relief sought for by the applicants to declare that the amount sought to be recovered is not payable and that it is excess and exorbitant does not fall under the category of any of the measures in Section 13(4) of the SARFAESI Act, 2002. This Tribunal cannot grant any such further time to the applicants to clear off the legally recoverable dues. It is for the applicants to work out the remedy with the defendant bank. The applicants have not proved that fiscal fraud has been committed by the defendant bank. Hence this Tribunal holds that applicants are not entitled to get the aforesaid reliefs.

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In view of the foregoing reasons and discussions, this Tribunal holds that since the classification of the loan account of the applicants as NPA is not in accordance with the guidelines issued by the RBI, the issuance of Annexure-A9 Demand Notice is not valid and is liable to be set aside and that since the learned Chief Judicial Magistrate Kozhikode has failed to notice that the mandatory requirements stipulated under the proviso (i) and (iii) to Section 14 of the SARFAESI Act, 2002 was not complied with in respect of filing of Annexure-A10 petition and A11 affidavit filed in Crl. MP No.821/2022, the Order Annexure-A13 dated 08.07.2022 passed by the learned Chief Judicial Magistrate, Kozhikode in Crl. MP No.821/2022 and Annexure-A14 notice dated 01.09.2022 issued by the Advocate Commissioner are liable to be set aside.

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In the result, S.A No.445 of 2022 stands allowed in respect of the reliefs sought for in para 6(1) and (2) in the S.A. 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 19^th day of June, 2024.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 6 of 8

SA No.445 of 2022

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

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Sl. No.	Date	Particulars
1.	12.03.2018	Copy of the loan sanction letter.	Annexure-A1
2.	13.03.2018	Copy of the cash credit facility agreement.	Annexure-A2
3.	13.03.2018	Copy of the loan guarantee agreement	Annexure-A3
4.	08.01.2021	Copy of confirmation of deposit of title	Annexure-A5
5.	08.01.2021	Copy of loan sanction letter	Annexure-A4
6.	08.01.2021	Copy of the acknowledgement of debt and security	Annexure-A6
7.	10.01.2022	Copy of the relevant page of statement of account produced by the defendant bank in CMP No.821/2022 before CJM Kozhikode.	Annexure-A7
8.	24.08.2022	Copy of statement of account issued to the1^stapplicant by the defendant.	Annexure-A8
9.	29.06.2021	Copy of Demand Notice issued under Section 13(2) of SARFAESI Act, 2002 by the defendant bank in CMP No.821/2022 before CJM Kozhikode.	Annexure-A9
10.	27.01.2022	Copy of the Possession Notice issued under Sec.13(4) of SARFAESI Act, 2002 r/w Rule 3 of Security Interest (Enforcement) Rules 2002 bearing date 29.9.2021.	Annexure-A10
11.	18.05.2022	Copy of petition in CMP No.821/2022 before the Chief Judicial Magistrate Court,Kozhikode.	Annexure-A11
12.	18.05.2022	Copy of affidavit filed along with the petition in CMP No.821/2022 before the Chief Judicial Magistrate Court, Kozhikode.	Annexure-A12
13.	08.07.2022	Copy of order of the Chief Judicial Magistrate Court, Kozhikode in CMP 821/2022.	Annexure-A13
14.	01.09.2022	Copy of the notice by the Advocate Commissioner.	Annexure-A14

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Page 7 of 8

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SA No.445 of 2022

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List of documents filed by the defendant along with the written statement

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Sl.	Date	Particulars
No.
1.	---	Copy of Demand Notice along with its	Annexure-B1
		postal receipts and acknowledgement cards.	(series)

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 8 of 8

Live E Zone v. South Indian Bank

Case brief

What is this about?

What did the court decide?

Live E Zone v. South Indian Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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