Allowed

Ragupathi v. The Chief Judicial Magistrate

DRT26 Jun 2024SA/68/2023

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed the applicant proprietor's application to set aside a Chief Judicial Magistrate order and subsequent advocate commissioner notice. The bank failed to affix the possession notice on the conspicuous part of the property, violating Rule 8(1) of the Security Interest (enforcement) Rules, 2002.

What did the court decide?

Order dated 19.09.2022 under Sec. 14 and advocate commissioner notice dated 02.02.2023 set aside due to violation of Rule 8(1). Expenditure for CJM order excluded from loan account.

Ragupathi versus The Chief Judicial Magistrate — Banking and Recovery | DRT (2024)

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SA No.68/2023

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FAIR ORDER

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 26^TH DAY OF JUNE, 2024 PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd]

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PRESIDING OFFICER SA No. 68/2023

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Between

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Mr. Ragupathi, Propof M/s R C H Star General Trading No. 1A, Vilakku Road, Valuthur, Ramanathapuram District. ----- Applicant

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-Vs-

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The Chief Judicial Magistrate,

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Ramanathapuram,

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Ramanathapuram District.

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The Authorized Officer,

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M/s Karur Vysya Bank limited,

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Thirupalai Branch,

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North West Part of Campus Building,

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EMG Yadava Women’s College,

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New Natham Road, Thiruppalai,

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Madurai – 625 014.

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Appearance of Advocates: M/s T. Thevan --- Counsel for the Appellants/Applicants Mr. P. Madhan Alexandar -- Counsel for the Defendant No.2

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This SARFAESI Application was heard in the presence of Shri T. Thevan, Counsel for the Applicant and Shri P. Madhan Alexandar, counsel for Defendant Bank (D-2) and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

SA No.68/2023

O R D E R

1. This application has been filed under Sec.17 of the SARFAESI Act 2002 by the Applicants praying to setaside the advocate commissioner notice dated 02.02.2023 based on the order dated 19.09.2022 passed by the 1^st defendant in Cr.MP No.3374/2022 under section 14 of the SARFAESI Act, 2002.

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2 . The brief averments of the Application filed by the Applicants are as follows:-

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The applicant submitted that, he is a proprietor of M/s R.C.H. Start General Trading and availed the credit facility of Rs. 12.00 lakhs on 11.10.2013 for his business development and he had executed necessary security documents in favour of the 2nd defendant bank. It is further submitted that the applicant had mortgaged his dwelling house and created equitable mortgage over the scheduled property. Due to his business loss, the applicant could not be able to repay the loan dues as agreed to. But he never allowed his account to become Non Performing Assets on 10.10.2015 as alleged in the demand notice.

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Further, the applicant submitted that, the 2nd defendant bank has issued demand notice dated 18.01.2016 under Sec. 13(2) under SARFAESI Act and directed to pay a sum of Rs. 11,85,918/- with subsequent interest and costs. On receipt of the said demand notice, the applicant approached the 2nd defendant and explained about his situation and sought time to settle the loan account under One Time Settlement. The said proposal was accepted by the bank and advised the applicant to settle the loan account.

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In contra to the OTS offer which was duly accepted by the 2nd defendant bank, the 2nd defendant has issued possession notice dated 21.06.2016 under Sec. 13(4) of the SARFAESI Act against

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SA No.68/2023

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dwelling house. The said possession notice was not affixed in the conspicuous part of the mortgaged properties and the same was not published in two leading news papers within 7 days from the date of possession notice.

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The applicant has taken all the steps to close the loan account under the One Time settlement scheme with the help of his friends and well wishers. Despite being aware of the applicant’s difficulties, the 2nd defendant bank had issued sale notice against the applicant and tried to sell the secured assets at throw away price. But the said sale did not take place for want of bidders.

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Further, applicant submitted that, the applicant received undated notice from advocate commissioner stating that “he was duly appointed by the 1st defendant in Crl. M.P. No. 3374/2022 to take physical possession of the secured assets under Sec. 14 of the SARFAESI Act on 13.02.2023”. To the shock and surprise of the applicant, the applicant went to the 2nd defendant bank and requested them further time to settle the loan account under the OTS. But the 2nd defendant without hearing the applicant’s bonafide request, directed the applicant to pay the entire loan dues immediately, failing which the applicant will be evicted from the secured assets with the help of advocate commissioner duly appointed by the 1st defendant herein.

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In the light of above, the impugned order passed by the 1st defendant ought to be set aside with exemplary costs. SARFAESI application is filed by the applicant with the following Grounds:

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The impugned order dated 19.09.2022 passed by the 1st defendant under Sec. 14 of the SARFAESI Act and followed by the said order the advocate commissioner notice dated 02.02.2023 and also the

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SA No.68/2023

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entire measures initiated under the SARFAESI act are arbitrary in nature, and illegal.

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It is submitted that the 2nd defendant bank failed to follow the procedure contemplated in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Security Interest Rules.

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The impugned action of the 2nd defendant in obtaining the order dated 19.09.2022 under Sec. 14 of the SARFAESI Act, seeking to proceed against the dwelling house of the applicants claimed to be the secured asset is contrary to law, without jurisdiction, arbitrary and unreasonable, violative of the principles of natural justice.

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Wrongful Classification of NPA: The defendant bank wrongly classified the applicant’s account as Non Performing Assets (NPA). The 2nd defendant has not followed the Reserve Bank of India guidelines while classification of the account as NPA.

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Non Compliance of Sec 13(2): The 2nd defendant bank has initiated proceedings under the SARFAESI act without declaring account became Non Performing Assets.

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Non Compliance of Sec 13(4): The 2nd defendant bank has failed to affix the Possession Notice on the conspicuous part of mortgaged property and failed to publish the Possession Notice in two leading newspapers.

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The Sec. 14 application is liable to be set aside as admittedly the 2nd defendant bank has proceeded further without following the formalities under the SARFAESI Act.

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Non Compliance of Section 20 of the SARFAESI Act: The applicant submits that the 2nd defendant has failed to register the alleged transaction registered with the Central Registry as per the Act.

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SA No.68/2023

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It is submitted that the Authorized Officer is a Quasi Judicial Authority under the Act and hence the Authorized Officer name must be mentioned in the sale notice.

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Statement of account not furnished: The applicant further alleges that the 2nd defendant bank has not furnished the complete statement of account as the details of certain credits to the account are not reflected. Hence, the 2nd defendant bank has to be directed to furnish complete statement of accounts.

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It is submitted that at the time of loan sanction, the 2nd defendant bank has obtained various signatures from the applicant in blank papers and prefilled forms and he was kept in dark for which it could be used. Thus in the interest of natural justice, the bank is called for the entire documents available in its custody which it alleges to rely upon confirming the creation of the mortgage.

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The interest levied by the 2nd defendant bank is against the principles laid down in Reserve Bank of India Guideline rules.

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For the aforesaid reasons, the Applicant prayed for the following relief(s):-

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i) To call for the records pertaining to the initiation of proceedings under the SARFAESI Act, ending up with the undated notice issued by the advocate commissioner notice dated 02.02.2023 based on the order dated 19.09.2022 passed by 1st defendant in Cr. M.P. No 3374/2022 under Section 14 of the SARFAESI Act 2002 and quash the same.

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ii) To pay the cost of the proceedings

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iii) To award the cost of this Application and to grant compensation under section 19 of the act and such other reliefs as this Hon’ble Tribunal may deem fit and proper in the circumstances of the case and thus render justice.

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SA No.68/2023

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SCHEDULE OF THE PROPERTIES

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All that piece and parcel of the property situated at Ramanathapuram District, Valatharavi Group, Terku Kattur Village, Hamlet Valuthur, Comprising land and residential building measuring eastern 10 cents (i.e 4.360 sq.feet) out of 3 acre and 56 cents in Patta No. 57, 2538, S.No. 192/3 subdivision S. No. 192/3A, 192/3A2, Old No. 11/42C, New D. No.11/1548 bounded on the

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North by: 10 feet wide East West common pathway and lands of P. Ammasi Ammal

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East by : Lands of P. Ammasi Ammal

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South by : Lands of K. Angusamy and others

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West by : lands of P. Ammasi Ammal and North South

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Panchayath Road

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In this regard, applicant has filed the following documents:

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S.No	Date	Documents particulars
1.	18.01.2016	Demandnotice U/s13(2) ofSARFAESI Act
2.	21.06.2016	Possession notice U/s13(4) ofSARFAESI Act
3.	19.09.2022	Order passed by 1st defendant under Sec.14 of the SARFAESI Act
4.	02.02.2023	Notice issued by advocate commissioner along with postalcover

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3. The brief averments of the Reply Statement filed by the 2^nd Respondent /Defendant Bank are as follows:-

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The defendant bank submitted that, the claim of the applicant is false & baseless and he is not entitled to any relief as claimed in the SARFAESI Application. Hence the SA has to be dismissed inlimine.The applicant has categorically admitted the borrowal of loan, execution of loan documents creation of mortgage, default in payment & receipt of the SARFAESI Notices.

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SA No.68/2023

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The 2nd defendant bank further submitted that, order passed by the Chief Judicial Magistrate under Section 14 of SARFAESI Act and subsequent notice issued by the Advocate Commissioner along with the entire measures have followed the procedures properly.

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The 2nd defendant bank strongly & vehemently denied the allegations of wrong classification of the applicant’s account as NPA. The defendant bank classified the applicant’s account as NPA, in accordance with the guidelines, relating to assets classification as issued by the RBI.

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The 2nd defendant bank further submitted that, defendant bank has issued the demand notice and the same was served upon the applicant. The applicant has not sent any reply to the 13[2] demand notice and also failed to comply the Conditional Order.

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The 2nd defendant bank further submitted that, Defendant Bank has issued the possession notice and same was duly served on the applicant and affixed the possession notice on the conspicuous part of the property and the possession notice was also published both in Tamil Daily and in English daily.

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Further, the 2nd defendant bank submitted that there is no procedural irregularity on the part of the Defendant bank in issuing the Demand Notice and Possession Notice and obtaining Order under section 14 under the SARFAESI Act & Rules and that the alleged procedural irregularity mentioned in the SARFAESI Application are not factually & legally correct.

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The 2nd defendant bank submitted that, the applicant created a valid equitable mortgage and upon default of the applicant in loan repayment, the defendant bank has taken the recovery measures, against the secured asset which are neither

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SA No.68/2023

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unreasonable nor contrary to law. Further the defendant bank in due process of law has proceededthe recovery measures under SARAFESI Act against the applicant’s property.

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The 2nd defendant bank submitted that, the defendant bank has registered the transaction with regard to the secured asset with the Central Registry as per Section 20 of SARFAESI Act. Further, it is unwarranted to make allegation with regard to sale notice, while challenging the Section 14 Order alone.

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The 2nd defendant bank further submitted that, defendant bank furnished the statement of account to the applicant ‘as & when’ and ‘then and there’ as requested by him.

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The 2nd defendant bank further submitted that, whereas the facts remains that had the applicant been really prejudiced with regard to signing of blank papers, he ought to have to make representation in writing at the time of sanctioning of loan itself or even before the initiation of recovery measures. The defendant bank charged interest as per the agreed contractual terms in accordance with the guidelines of RBI.

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The 2nd defendant bank further submitted that, Hon’ble Tribunal cannot give shelter to the dishonest debtor like the applicant who is invoking the “SARFAESI Act” as a weapon against the lawful actions taken by the Defendant bank, that too in the last minute. So in the interest of justice and in order to safeguard the Public Money, the Hon’ble Tribunal has to reject the claim of the applicant. Hence, this SARFAESI Application is not maintainable either in law or on facts.

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SA No.68/2023

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Typed set filed on the side of the Defendant Bank as details below:

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S.No.	Date	Particulars
1	18.01.16	DemandNoticewith ADCards
2	21.06.16	Possession Noticewith ADCards
3	25.06.16	Paper Publication of Possession Notice dt.21.06.21 in English Daily
4	25.06.16	Paper Publication of Possession Notice dt.21.06.21 in Tamil Daily
5	19.09.22	CJMOrder
6	08.04.24	Statement of Accounts

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4. On the basis of the above pleadings, the point for consideration is that, whether the applicant is entitled for relief as prayed for?

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Having heard the parties and after going through the written arguments and typeset of papers filed by the Applicant as well as the Defendant Bank, I find the following:

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The applicant is a proprietor of M/s R.C.H. Start General Trading and he has availed the credit facility of Rs. 12.00 lakhs on 11.10.2013 for his business development and he had executed necessary security documents in favour of the 2nd defendant bank. Due to his business loss, the applicant could not be able to repay the loan dues and hence the account was classified as NPA on 10.10.2015. I also find that the Defendant bank has issued demand notice dated 18.01.2016 under Sec. 13(2) under SARFAESI Act and directed the applicant to pay a sum of Rs. 11,85,918/- with subsequent interest and costs. It is also the case of the applicant that, after that, applicant had approached the defendant bank for OTS and the same was accepted by the

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SA No.68/2023

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defendant bank. The applicant has not filed any document in proof of his averment.

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However, the main ground of the Applicant is that, during pendency ofOTS offer, 2nd defendant had issued Possession Notice dated 21.06.2016 under Sec. 13(4) of the SARFAESI Act against dwelling house. The said Possession Notice was not affixed in the conspicuous part of the mortgaged property and the same was not published in two leading Newspapers within 7 days from the date of Possession Notice. On verification of typeset filed by the defendant bank, I find that, Demand Notice and Possession Notice were served to the Applicant. Further, Defendant Bank had produced the paper publication of Possession Notice in English and Tamil daily, and they have been published within 7 days from the date of Possession Notice.

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But, at the same time, another ground raised by the Applicant is that, Possession Notice was not affixed on the outer door or at such conspicuous place of the property.The Defendant Bank has not filed any documentary proof to show the affixture of Possession Notice though Bank has asserted in its Reply Statement. Possession Notice and CJM order is continuous cause of action, the Defendant Bank has not affixed the Possession Notice on the conspicuous part of mortgaged property which amounts to violation of Rule 8(1) of the Security Interest (enforcement) Rules, 2002.

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In view of the above facts and circumstances, I find that applicant has been able to prove his case as Defendant Bank has failed to follow the procedure as contemplated in SARFAESI Act.

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SA No.68/2023

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In result, this SA No.68/2023 stands allowed on the following terms and directions :-

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(i) CJM order passed in Crl MP No.3374/2022 dated 19.09.2022 along with Advocate Commissioner Notice dated 02.02.2023 are hereby setaside because,the Defendant Bank has violated Rule 8(1) of the Security Interest (Enforcement) Rules, 2002.

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(ii) All the expenditure incurred on the issuance of CJM order in Crl.MP No.3374/2022 dated 19.09.2022 and subsequent proceedings are not included in the loan account of the borrower.

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The pending IAs, if any, shall stand closed and disposed of by this Tribunal.

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(Dictated to Assistant, taken down, transcribed, typed by him corrected and pronounced by me in the open court this the 26^th June, 2024)

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Sd/(SEEMA SINHA) PRESIDING OFFICER

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Ragupathi v. The Chief Judicial Magistrate

Case brief

What is this about?

What did the court decide?

Ragupathi v. The Chief Judicial Magistrate

Case brief

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