Dismissed

Subramanian M v. Indian Overseas Bank

DRT31 Jan 2025SA/109/2023

Case brief

AI extract

What is this about?

A Debt Recovery Tribunal dismissed an application to set aside a SARFAESI possession notice. The court held the bank followed statutory procedures, noting the mortgaged RCC building was not exempt agricultural land under Section 31(i), and rejected claims regarding subsidy adjustment and NPA classification due to lack of proof.

What did the court decide?

Application dismissed; Deficit Bank entitled to proceed for recovery.

Subramanian M versus Indian Overseas Bank — Banking and Recovery | DRT (2025)

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SA NO.109/2023

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FAIR ORDER

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 31^st DAY OF JANUARY, 2025 PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd]

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PRESIDING OFFICER

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SA No. 109/2023

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Mr. M. Subramanian, S/o Muthu,

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D.No.54, Plot No.3, Anna Nagar, 100 feet Road, Dindigul-624 005.

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Mr. Nagarajan,

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S/o Mr. M. Subramanian, D.No.54, Plot No.3,

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Anna Nagar, 100 feet Road, Dindigul-624 005. Applicants

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-Vs-

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The Authorised Officer,

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Indian Overseas Bank,

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No.40, Eight Feet Road,

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Arignar Anna Nagar,

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Regional Office, Madurai-625 020.

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The Branch Manager, Indian Overseas Bank, Collectorate Branch,Dindigul-624 005 --- Defendants

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Appearance of Advocates: M/s C. Sundaravadivel---- Counsel for the Applicant Mr. R. Pandivel ---- Counsel for the Defendant Bank

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This Application was heard in the presence of M/s C. Sundaravadivel, Counsel for the Applicant and Mr. R. Pandivel,

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SA NO.109/2023

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Counsel for the 1^st Defendant Bank in the aforesaid case and upon hearing the arguments of both sides Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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ORDER

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This Application has been filed under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 with a prayer to setaside the possession notice dated 07.03.2023 issued by the Defendant Bank under section 13(4) of the SARFAESI Act, 2002.

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The brief averments of the Application filed by the Applicant are as follows:-

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The applicants have approached the 2^nd defendant bank and sought Agricultural Term Loan for a sum of Rs.66,00,000/- under Horticultural Subsidy scheme for the purpose of Land development, Minor irrigation, Micro irrigation, Farm Infrastructure, Farm Implements and establishment of orchards in 25.74 acres and same was sanctioned on 11.03.2015. Further, the applicants had executed necessary security documents in favour of the 2^nd defendant and also they have executed Memorandum of Deposit of title deeds dated 07.05.2015 with respect to the property described in the schedule hereunder and other agricultural lands with the 2^nd defendant bank as a collateral security for the loan amount. It is further submitted that apart from the loan documents, the 2^nd defendant bank obtained various signatures from the applicant who are kept in dark for what purpose they have been used for.

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SA NO.109/2023

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Further, the applicants submitted that the applicants have been regularly paying the loan dues, as per the terms and conditions stipulated in the sanctioned letter. However due to failure of Monsoon and severe drought and Gaja Cyclone, the applicants faced severe loss and lost all the plants planted on their land. So, the applicants were forced to replant80% of plants once again. Further due to the Gaja Cyclone entire plants i.e mango, guava and pomegranate were totally uprooted which were also subsequently replanted in their lands.

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Further, the applicants submitted that,after severe drought & Gaja Cyclone, the Covid – 19 pandemic affected entire nation and the Central Government of India announced lockdown. In the result, the applicants could not engage agricultural staff and effectively maintain the plants. Due to the above said reasons, they have incurred heavy loss in their agricultural activity.

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The applicants submitted that they have approached the bank and requestedthem to get subsidy claim amount from the government which may be credited to the loan accounts. But the bank did not take any steps to get subsidy from the government. Hence the 1^st applicant sent a detailed representation dated 03.12.2022 to the bank seeking One Time Settlement and agreed to pay a sum of Rs.80,00,000/- after deduction subsidy amount of Rs.6,80,000/- already deposited with the 2^nd defendant bank by the Central Government Horticultural departments.

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Further, the Applicants stated that, to the shock and surprise of the applicants, the 1^st defendant bank issued demand notice dated 12.12.2022 under Sec. 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest act against secured assets and directed the applicants to pay a sum of

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SA NO.109/2023

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Rs.1,39,36,662/- with subsequent interest and cost. On receipt of the said demand notice, the applicants approached the 2^nd defendant and requested to close the loan account under the One Time Settlement on waiver of interestand penal interest and other expenses charged by the bank. The 2^nd defendant also agreed and informed the applicants that they would forward the same to the 1^st defendant for necessary approval. Further they had advised the applicants to meet the 2^nd defendant in person and request him to consider their genuine proposal.

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Further, the applicants submitted that the 2^nd defendant has sent legal notice dated 05.11.2022 through its lawyer and directed them to pay a sum of Rs.1,37,88,652/- within 15 days from the date of notice. On receipt of the said legal notice, once again the applicants sent a letter dated 27.02.2023 extending/raising their One Time Settlement offer from Rs.80,00,000/- to Rs.90,00,000/- and get a subsidy and credit to the loan amount. The said proposal is still pending for consideration. In the meantime, when the OTS letter is pending, the 2^nd defendant had issued the present impugned undated possession notice under Sec. 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest act against the applicants. The said possession notice dated 24.11.2022 was not affixed in the conspicuous part of the mortgaged property. Further the said possession notice was not published in two leading news papers within 7 days from the date of possession notice.

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Further, the Applicants submitted that, Defendant Bank instead of considering the One Time Settlement offer, have issued the possession notice dated 07.03.2023 and directed the applicants to pay as sum of Rs.1,43,04,681/- as on 07.03.2023 and this act of the defendants

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SA NO.109/2023

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clearly shows that they want to sell the dwelling house for a throwaway price.

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Hence, Applicant requested that, to setaside the possession notice with exemplary costs on the following grounds:

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(i) The impugned notice dated 07.03.2023 passed by the 1^st defendant under Sec.13 (4) of the SARFAESI ACT is illegal in nature, contrary to law, want for weight of evidence etc., and thus liable to be set aside.

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(ii) It is submitted that the 1^st defendant bank failed to follow the procedures contemplated in the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and security interest rules.

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(iii) The impugned action of the 1^st defendant issuing possession notice under Sec.13(4) of the SARFAESI Act, seeking to proceed against the secured asset is contrary to law, without jurisdiction, arbitrary and unreasonable, violative of the principles of nature justice, is also colorable exercise of power and the measures had been taken in a unpredictable manner.

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(iii) The 2^nd defendant failed to claim the subsidy amount of Rs.6,80,000/- from the Central Government Horticultural department and failed to credit the same to the loan account.

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(iv) Wrongful Classification of NPA: The 1^st defendant bank wrongly classified the applicants accounts as Non Performing Assets (NPA). The defendants have not followed the Reserve Bank of India guidelines while classification the account as NPA.

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SA NO.109/2023

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(v) Non Compliance of Sec 13(2): The 1^st defendant bank has initiated proceedings under the SARFAESI act against the secured without classifying the account under NPA.

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(vi) Non Compliance of Sec 13(4): The 1^st defendant bank failed to issue the possession notice dated 07.03.2023 to the guarantors. Further they have failed to publish the possession notice in two leading newspapers.

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

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(viii) 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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(ix) Statement of account not furnished: The applicants further alleges that the 2^nd defendant bank has not furnished the complete statement of account as the details of certain to the account are not reflected. Hence the 2^nd defendant bank has to be directed to issue complete statement of accounts.

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(x) It is submitted that at the time of loan sanction the 2^nd defendant bank has obtained various signatures from the applicants in blank papers and prefilled forms and they were kept in dark which could be used against them. Thus in the interest of natural justice, the bank is called for the entire documents available as its custody which it alleges to repay upon confirming the creation of the mortgage.

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(xi) The interest levied by the 1^st defendant bank is against the principles laid down in Reserve Bank of India Guideline rules.

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(xii) The Applicant reserves their rights to file additional grounds as and when necessary.

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SA NO.109/2023

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Typeset of documents filed by the Applicants:

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Sl.No.	Date	Documents particulars
1.	27.02.2015	Sanction letter
2.	03.12.2022	Requestinglettergiven bythe 1^stApplicant
3.	12.12.2022	DemandNotice u/s13(2) ofSARFAESI Act
4.	27.02.2023	Requestinglettergiven bythe 1^stApplicant
5.	07.03.2023	Possession Notice u/s 13(4)of the SARFAESI Act
6.	11.03.2015	NoDue Certificatefor Agri Loan
7.	24.04.2015	Sanction Letter for Agri Loan in favour of the Appicant
8	07.05.2015	Registered Memorandum of title deed in Doc. No.1231/2015 at SRODindigulJointI
9.		Adangal in the year 2015 in Pasali No.1424 for theAgricultural lands
10.	06.04.2016	Project Completion certificate issued by the 2^nd defendant
11.	09.01.2018	Account opened by 2^nddefendant for subsidy amount
12.	27.02.2018	Discharge summary receipt in the name of Jaiho Aanjaneyaissued by 2^nd defendant
13.	29.09.2018	Subsidy amountreceived by the 2^nddefendant
14.		Adangal in the year 2023 in Pasali Nos.1429 and 1432fortheAgricutural lands
15.	05.11.2022	Legal notice sent to the applicants
16.	03.12.2022	Request letter sent to the 2^nddefendant by the applicant
17.	13.12.2022	Reply letter sent from the 2^nddefendant by the applicants
18.	12.12.2022	Demand Notice sent by the Bank to the applicants
19.	10.02.2023	Reply notice sent to the 2^nddefendant by the applicant
20.	22.02.2023	Reply letter sent to applicant by the 2^nd defendant
21.	27.02.2023	Representation sent to the 2^nddefendant by the applicant
22.	02.03.2023	Reply letter sent by the 2^nddefendant to the applicant
23.		Encumbrance Certificate for the period at 01.06.2012 to 05.04.2024
24.	06.04.2024	Adangal for the year 2024 in Fasali No.1433 for theAgricultural lands
25.	21.04.2023	Deposit receipts for payments in the 2^nd defendantBankpursuant to theinterimorder

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SA NO.109/2023

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		passedin I.ANo.485/2023inSA No.109/2023
26.	17.02.2017	National Horticulture Board Inspection Photographs to prove that the lands which was served are actually being used as agricultural lands and agricultural activities having been goingon
27.	22.04.2024	GPS photograph showing agricultural activity in theland tilldate

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Citations relied by the Applicants:

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1. AIR 1977 Supereme Court 1789 – P.N. Bhagavathi and S. Murtaza fazal Ali JJ

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2. Ambati Narasayya Vs M. Subba Rao and another -06.10.1989

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3. 2004(3) CTC 671 S.No.Variava and H.K. Sema

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4. (2006) 3 Supreme Court caes 49 Balakrishnan Vs Malayandi Konar

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5. 2009 – 2- LW 375 – KJ Prakashkumar and 2 others Vs Rasheeda Yasin and one another

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6. Madras High Court - M/s Coconet Groves Pvt Ltd Vs The Registrar on 24.04.2017

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7. Supreme Court – K. Sreedhar Vs M/s Raus Constructions Pvt Ltd. – 05.01.2023

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3. On the other hand, the Defendant bank appeared and filed their Reply Statement and written arguments along with type set of papers:

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The Defendant Bank has denied all the allegations mentioned in the SARFAESI Application and strict to file the proof of every one of the said allegations.Further, the Applicants has categorically admitted the borrowing of loan, execution of loan documents, creation of mortgage, default in payment & receipt of the SARFAESI Notices in their Application.

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Further, Defendant Bank has stated that, the bank had issued demand notice and the same was also duly served on the applicants and the applicants have not sent any reply to the 13(2) demand notice.

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SA NO.109/2023

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Non sending reply to 13(2) demand notice is fatal to their case. Further, the defendant bank has taken symbolic possession of the property & possession notice was duly served on the applicants and affixed the possession notice on the conspicuous part of the property and the possession notice was also published both in Tamil Daily & in English daily.

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Further, the Defendant Bank stated that, the bank has not obtained signatures in any blank papers & prefilled forms and whereas the applicants have executed only filled up loan documents. Further, the applicants are willful & chronic defaulters and that the applicants have not paid the loan as per the terms & conditions. The applicants have not incurred any loss as alleged by them and that the bank has claimed the subsidy amount from the government and that an amount of Rd.6,68,000/- was credited to ‘Backend Subsidy Reserve Fund’ by NHB’ (National Horticultural Board).

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As per NHB guidelines, the subsidy amount should be adjusted in the borrower’s term loan account only, as part of the recovery of last installment. Since the applicant has not repaid the loan amount, the account became NPA. Since the account became NPA, the Bank cannot credit the subsidy amount to the loan as per the guidelines of NHB. Further, the Bank has replied to all the representations, made by the applicants, stating that the applicants are not eligible for OTS and that the bank has sent a reply dt.02.03.2023.

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Further, the defendant bank wasnot having any intention to sell the property for a throwaway price and the bank has followed all the procedures contemplated under the Act & Rules. The bank has taken measures only in a predictable manner and that the bank has issued possession notice to guarantors also. Further, the bank has registered

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SA NO.109/2023

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the transaction with the Central Registry and it is not necessary to mention the name of the Authorized Officer in the sale notice and that the bank has furnished the entire statement of accounts as & when requested by the applicants. Further, all the payments made by the applicants are duly credited to the loan account and bank has charged interest only as per the contract and so the possession notice is not liable to be set-aside. If the possession notice is set-aside, the defendant bank will be put to untold hardship and irreparable loss & injury on the other hand no prejudice will be cause to the applicants.

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Further, the Defendant Bank submitted that, the main intention of the applicants isonly to drag on the proceedings without making any payment. Since only remedy available to the applicants is to re-pay the entire dues to the defendant bank in order to stop the sale as per section 13(8) of the SARFAESI Act, the Hon’ble Tribunal cannot give shelters to the dishonest debtor like the applicants who are invoking the “SARFAESI Act” as a weapon against the lawful actions taken by the defendant bank, that too in the last minute. The applicants are liable to pay the amount mentioned in the SARFAESI Notices with subsequent interest & costs and that it is a Public Money. So in the interest of justice, the Hon’ble Tribunal has to reject the claim of the applicants.

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Further, defendant bank has stated that, as per written arguments of the Applicants, that they have availed/borrowed 2 loans namely a Term Loan for a sum of Rs.31,84,000/- and Agricultural Loan for a sum of Rs.66,00,000/- and they have admitted that all the properties are mortgaged for both the loans.It is true that the applicants have closed one of the loan account namely the said Term Loan for a sum of Rs.31,84,000/- however, totally 3 properties are mortgaged for both loans. -Item No.1 is Site & Building andItem Nos.2 & 3 are

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SA NO.109/2023

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Agricultural Properties as per the Additional written arguments filed by D/B Vide MOD dt.07.05.15 bearing Doc.No.1506/15 Vide Page 7 as well as the MOD dt.07.05.15 bearing Doc.No.1231/15 Vide Page 16 in this written arguments.Further defendant bank stated that, the contention of the applicants that the 1^st item of property namely site & building which was given as security for the Term Loan of Rs.31,84,000/- has to be released,but, the 1^st item of property site & building is mortgaged for both the loans.

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Further, the defendant bank has stated that, as per Section 31(i) of the SARFAESI Act, only Agricultural property alone is exempted and not the agricultural loan. Since the 1^st item of property namely site & building is mortgaged for agricultural loan also, the bank took symbolic possession of the said property. Since there are no procedural irregularities on the part of the bank, the SARFAESI Application is liable to be dismissed with costs and render justice.

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Typeset of documents filed by the Defendant Bank:

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S.No	Date	Particulars
1.	12.12.22	Demand Notice with Ad cards
2.	12.12.22	Demand Notice Paper publication published on 18.12.22in English daily“Indian Express”
3.	12.12.22	Demand Notice Paper publication published on 18.12.22in Tamil daily“Dhinamani”
4.	07.03.23	Possession Noticewith ADcards
5.	07.03.23	Possession notice paper publication published on 10.03.23 in English daily“Indian Express”
6.	07.03.23	Possession notice paper publication published on 10.03.23in Tamildaily“Dhinamani”
7.	07.03.23	Photography showing affixture of Possession notice
8.	31.01.23	ReplyLettersend by the bankto the applicant
9.	01.02.23	ReplyLettersend by the bankto the applicant
10	07.02.23	ReplyLettersend by the bankto the applicant
11.	22.02.23	ReplyLettersend by the bankto the applicant
12.	02.03.23	ReplyLettersend by the bankto the applicant
13.	07.03.23	ReplyLetter send bythe bank to the applicant

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SA NO.109/2023

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14.	07.05.15	Memorandum of deposit of title deeds executed by applicants in favour of Defendant Bank (Doc.No.1506/2015)
15.	07.05.15	Memorandum of Deposit of title deeds executed by applicants in favour of Defendant Bank (Doc. No.1231/2015)
16.	24.06.24	OA copy filed by the Defendant Bank against the applicants

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5. On the basis of the above pleadings, the following issues have been framed:

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(i) Whether actions initiated by the Respondent Bank in respect of the schedule mentioned property under the SARFAESI Act are illegal, void and contrary to the settled principles of Law?

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(ii) Whether the applicant is entitled for relief as claimed for?

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Having heard the parties and after going through the documents filed by the Applicant as well as the Respondents, I find the following:

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The Applicants have availed 2 loans namely a Term Loan for a sum of Rs.31,84,000/- and Agricultural Loan for a sum of Rs.66,00,000/and they have mortgaged threeproperties forboth the loans. I find that, out of the two loans, one term loan account was closed by the applicants and another loan was agricultural loanfor which the defendant bank has issued the possession notice for the mortgaged properties of land & building. Further, defendant bank has filed the OA for recovery of Agricultural loan dues.

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I find that, Agri loan was declared as NPA on 10.11.2022 vide Demand Notice dated 12.12.2022 (page nos.1 to 3 of typeset of D/B) and the same was received by the borrowers on 15.12.2022. I also find that a reply was made by the Applicants u/s 13(3) of the Act

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SA NO.109/2023

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against the demand notice dated 12.12.2022 stating that the classification of NPAis wrong which is available at Page No.12 to 14 of Applicants typeset [signature of the Applicant and proof of service to defendant bank is missing]. Moreover, at the end of the request letter, Applicant has acceptedthe OTS after adjusting the subsidy. So, it is not proved by the applicant that NPA is wrong.

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Another ground raised by the Applicant is that, 2^nd defendant bank failed to claim subsidy amount from National Horticultural Board and failed to credit the same in the borrowers loan account. On the other hand, defendant bank informed that, the subsidy amount was claimed from NHB for Rs.6,68,000/- and the same was already credited to borrower’s term loan account as part of the recovery of last installment, but no document has been produced by the Defendant Bank in support of their averment.

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Further, another ground raised by the Applicant is that, the 1^st defendant bank failed to issue the possession notice 07.03.2023 to the guarantors and failed to publish the possession notice in two leading newspapers. On verification with the documents, I find that, Possession notice was served to the borrowers vide D/B typeset page nos. 13 to 18and they have published in two news papers English and Tamil vernacular languages vide D/B typeset page nos.19 to 22.The affixture of possession notice was also produced by the defendant bank vide typeset page no.23 which are legible.

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Further, Applicant has alleged that, loan was sanctioned by the defendant bank for the agricultural purposes andas per section 31(i) of the SARFAESI Act, possession notice dated 07.03.2023 issued by the defendant bank u/s 13(4) of the Act is liable to be setaside. I find that,

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SA NO.109/2023

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Defendant Bank has proceeded the Schedule-1 of the property i.e., RCC building and which was mortgaged as collateral security for the Agricultural loan. As per section 31(i) of Act, bank cannot proceed for any security interest created in agricultural land. Hence, possession notice issued for the land and building is not a agricultural property. Hence, section 31(i) is not applicable in this case.

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In view of the foregoing reasons, issue numbers 1 and 2 are decided against the Applicants. Accordingly, I find that, the Applicantshave not been able prove their case in their favour and hence they are not entitled for any relief.

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In result, SA No.109/2023 is dismissed. All the pending IAs are closed. Defendant Bank is entitled to proceed further as per law. (Dictated to Assistant, taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court in this the 31^st January, 2025).

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Subramanian M v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

Subramanian M v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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