Dismissed

Autocross Private Ltd. Represented by its Managing Director v. South Indian Bank

DRT10 Jun 2025SA/140/2024

Case brief

AI extract

What is this about?

, the Debts Recovery Tribunal dismissed the Securitization Application filed by various applicants (company and guarantors) challenging the demand notice, possession notice, and appointment of an Advocate Commissioner. The Tribunal held that the applicants waived their right to object by failing to file objections to the demand notice and found no illegality in the NPA classification or the recove

What did the court decide?

The application was dismissed; the applicants were not entitled to the reliefs sought.

Autocross Private Ltd. Represented by its Managing Director… — Banking and Recovery | DRT (2025)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 10^th DAY OF JUNE, 2025

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

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S.A No. 140 of 2024

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Between

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M/s. Autocross Private Ltd., Represented by its Managing Director

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Shameem P.P., S/o. Muhammed Sali, 3699A, Vandipetta, Nadakkavu P.O. Kozhikode, Kerala -673 011.

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Shameem P.P., S/o. Muhammed Sali, Residing at ‘Shaminas’, Onden Road, Kannur -670 001.

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Ummathameem P.P., S/o. Muhammed Sali, Residing at ‘Shaminas’, Onden Road,

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Kannur -670 001.

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Mohammed Shafeeque P.P., S/o. Muhammed Sali, Residing at ‘Shaminas’, Onden Road, Kannur -670 001.

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Shameena Ashique, D/o. Muhammed Sali, Residing at ‘Shaminas’, Onden Road, Kannur -670 001.

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SA No.140 of 2024

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Shamil P., S/o. Muhammed Sali, Residing at ‘Shaminas’, Onden Road,

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Kannur -670 001.

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Junaid P.P., S/o. Muhammed Sali, Residing at ‘Shaminas’, Onden Road,

Kannur -670 001.

--- Applicants

And

The South Indian Bank Ltd. Represented by its Branch Manager Kannur Main Branch, Door No: 3475 A, Swadeshi Shopping Complex, Bank Road, Kannur-670 001.

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The Authorized Officer South Indian Bank Ltd. Regional Office, K.V.R. Tower, Pamban Madhavan Road, Talap, Kannur – 670 002.

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--- Defendants

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This Securitization Application coming on 13.02.2025 for final hearing before me in the presence of Mr. V.K. Peer Mohamed Khan, Counsel appearing for the Applicants and Ms. Ruby Paulose, Advocate representing the Counsel on record for Defendants 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 08.02.2024 seeking to set aside Annexure-I demand notice, II possession notice, III application before the CJM Court, IV and XV notices issued by the Advocate Commissioner and XVI and XVIII orders of CJM Court, Thalassery and to restrain the defendants from evicting the applicants from the SA subject matter of the properties and from taking possession and to allow the cost of this proceeding from the defendants.

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Page 2 of 10

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SA No.140 of 2024

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It is not in dispute that the applicants 2 to 7 stood as guarantors to the credit facilities such as, CCOL and ECLGS availed by the 1^st applicant company from the 1^st defendant bank. The applicants have admitted that applicants 2 to 6 are co-owners of the landed property admeasuring an extent of 11.11 Ares of land along with residential building comprised in Sy. No.51/6, Re.Sy.No.179/2 in Kannur village, Kannur Taluk and Kannur District.

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According to the defendants, the applicants 2 to 6 created security interest in favour of the 1^st defendant bank by way of deposit of title deeds pertaining to the above said immovable properties as the collateral security for the credit facilities availed by the 1^st applicant company. Annexure-B19 copy of letter evidences the creation of security interest by deposit of title deeds over the above said property by the applicants 2 to 6 in favour of the 1^st defendant bank. Therefore, the contention of the applicants no security interest has been created in favour of the 1^st defendant bank is absolutely incorrect.

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According to the defendants, since the applicants defaulted in repayment of the outstanding loan due, their loan account came to be classified as NPA. Annexure-1 demand notice dated 11.03.2022 was issued to the applicants calling upon them to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice (copy of the same has been produced by the defendants as Annexure-B1).

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According to the defendants, the demand notice was served on the applicants 1 to 5 and 7 and it could not be served on the 6^th applicant and hence substituted service of demand notice by way of paper publication and affixture of the demand notice on the conspicuous part of the residence wherein the 6^th applicant is residing was affected.

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Annexure-B2 copies of postal receipts and Annexure-B3 copies of acknowledgment cards proves the service of demand notice on the applicants 1 to 5 and 7. Annexure-B4 and B4(a) copies of paper publications and Annexure-B5 copy of photograph evidences the publication of the possession notices in The New Indian Express edition dated 07.05.2022 and in Madhyamam daily edition dated 07.05.2022 and affixture of the demand notice on the conspicuous part of the residence of the 6^th applicant. Hence, the contention of the applicants that demand notice was not served to all the parties is liable to be rejected. Indisputably, the applicants neither sent any objection/representation to the demand notice nor did they clear off their liability due to the 1^st defendant bank.

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Page 3 of 10

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SA No.140 of 2024

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Therefore, Annexure-II possession notice dated 08.07.2022 was issued for symbolically taking physical possession of the secured asset. Annexure-B7 copy of photograph, Annexure-B8 and B9 copies of paper publications proves the affixture of the possession notice on the conspicuous part of the secured asset and publication of the possession notice in The New Indian Express daily dated 09.07.2022 and Malayala Manorama daily dated 09.07.2022. Annexure-B10 series acknowledgment cards evidences the service of the possession notice on the applicants.

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The defendants approached the Chief Judicial Magistrate Court, Thalassery and filed Annexure-III application and affidavit under Section 14 (1) of the SARFAESI Act, 2002. Annexure-XVI Order dated 25.01.2023 came to be passed in CMP No.4664/2022 appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure-IV notice dated 10.02.2023 to the applicants informing them that he would take physical possession of the secured asset on 02.03.2023. The applicants having aggrieved against the above measures, filed this S.A seeking for the reliefs stated supra.

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The counsel appearing for the applicants submitted that the classification of loan account of the applicants as NPA is against RBI norms and guidelines of master circular on prudential norms on income recognition, asset classification and provision pertaining to advances dated 01.10.2021. The account of the applicants cannot be termed as out of order as on the date of NPA ie., 28.01.2022. As per Covid relief package, there was a moratorium of 12 months for payment of principal during which period interest has to be serviced in respect of ECLGS account. CC accounts also cannot be termed as out of order. Therefore, demand notice is liable to be set aside.

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The counsel for the applicants further submitted that petition and affidavit Annexure-A2 filed by the defendants does not contain the statement with regard to the written objection if any, submitted by the applicants and reply thereon. The dues as on the date of filing of the affidavit is not stated in the affidavit. The defendants failed to comply with the provisions of Clause (i) to (ix) of Section 14 (1) of the SARFAESI Act, 2002. For the above said reasons, Annexure-A3 and A4 are liable to be set aside.

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Per contra, the counsel appearing for the defendants submitted that the applicants have not made any substantive pleading either in the SA or in the amended SA with regard to the classification of the loan account as NPA. Objection/representation was not sent for the demand notice raising the contentions with regard to classification of loan account as NPA. Therefore, raising the aforesaid issues at the argument stage is barred by the principle of waiver and acquiescence

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Page 4 of 10

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SA No.140 of 2024

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as laid down by the Hon'ble High Court of Kerala in AGP City Pvt. Ltd. Vs. Lynhx properties and Developers and others (2022 KHC 355 ). The counsel for the defendants further submitted that the applicants did not raise the contentions with regard to the classification of loan account as NPA in W.P. (C) No.28281/2022, W.A. No.551/2023 and W.P.(C) No.37886/2023 which were filed challenging the SARFAESI measures initiated by the defendants. Therefore, raising the aforesaid issues at the belated stage is barred by the principle of constructive res-judicata.

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It is the further submission of the counsel for the defendants that the applicants have themselves admitted in paragraph 3 in the SA that the situation had resulted in upsetting the stability of the payment structure having the chain reaction and that such circumstances led the situation of facing difficulties to repay the accounts. The account of the applicants could not be renewed due to the following reasons :

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The company have no sufficient stock or sales turn over and utilization of the fund for some other purposes than the sanctioned purpose. Company was not having sufficient account credit turn over during the last one year for renewal of the account. Kannur show room has been closed and Calicut unit was not functioning properly. Non-payment of overdue interest.

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The counsel for the defendants further submitted that ECLGS facility was availed by the 1^st applicant on 23.12.2020 and the accounts were classified as NPA on 28.01.2022 which is after a period of one year from the date of sanction of ECLGS facility and that benefit of moratorium is applicable to the ECLGS facility only and the same cannot be extended to other facilities availed by the applicants. There is no illegality in Annexure-III application and affidavit and Annexure-XVI order. Therefore, SA may be dismissed with costs to the defendants.

¶47

Indisputably, the applicants did not send any objection/ representation for Annexure-I demand notice with regard to the illegality in respect of classification of loan account of the applicants as NPA. It cannot also be disputed that there are no averments or pleadings in the SA, which are raised by the applicants for the first time in the written Argument notes submitted by their counsel. The applicants have also not raised the aforesaid contentions in W.P. (C) No.28281/2022, W.A. No.551/2023 and W.P.(C) No.37886/2023 which were filed by the applicants challenging the SARFAESI measures initiated by the defendant as rightly pointed out by the counsel for the defendants.

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Page 5 of 10

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SA No.140 of 2024

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In AGP City Pvt. Ltd. Vs. Lynhx properties and Developers and others (2022 KHC 355 ) cited by the counsel for the defendants, the Hon'ble High Court of Kerala has held that when the demand notice was not responded to by the guarantor or borrower it can be said that they have waived their right to object and on the other hand acquiesced. The aforesaid dictum laid down by the Hon'ble High Court of Kerala is squarely applicable to the hands of the present case. Further, the applicants are not entitled to raise new plea with regard to the classification of account as NPA for the first time during the argument of the counsel for the applicants.

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In any event, this Tribunal finds considerable force in the submission of the counsel for the defendants that loan account of the applicants was classified as NPA since the 1^st applicant company had no sufficient stock and that it diverted the funds other than for the sanctioned purpose and that it did not have sufficient turn over during the last one year for renewal of the account and also nonpayment of overdue interest.

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It is also revealed from the perusal of the written statement of the defendants that the accounts of the applicants were classified as NPA after a period of one year from the date of sanction of ECLGS facility, and that the benefit of moratorium cannot be extended to other facilities except ECLGS facility. It is also pertinent to mention herein that the applicants have themselves admitted impliedly in the third paragraph of the SA about their default in repayment of the outstanding loan due. Therefore, this Tribunal does not find any merit in the submission of the counsel for the applicants with regard to the illegal classification of loan account as NPA.

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In Annexure-III application and affidavit, the details such as availment of credit facilities by the applicants upon creation of equitable mortgage over the immovable property, default in repayment of the outstanding loan due, classification of loan accounts as NPA, issuance of demand notice to the applicants, failure of the applicants to repay the outstanding loan due even after receipt of the demand notice, publication and affixture of the demand notice, secured asset being not in possession of lessee under a valid lease prior to creation of mortgage, outstanding liability as on 24.08.2022, are furnished.

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In paragraph 12 of the affidavit, there is specific averment that the respondents neither responded nor paid the amount due to the petitioner. The words “neither responded” implies that the applicants did not send any objection/representation. Clause (vii) to the provisions of Sec.14 (1) of the SARFAESI Act, 2002 mandates the Authorized Officer of the secured creditor to state as to whether objection/representation in reply to the demand notice has been considered by the secured creditor. If objection/representation is not

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Page 6 of 10

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SA No.140 of 2024

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received, it is not mandatory for the Authorized Officer to state in the affidavit that the borrower did not send any objection/representation to the demand notice. Therefore, this Tribunal does not find any considerable force in the submission of the counsel for the applicants that Clause (vii) to the provisions of Sec.14 (1) of the SARFAESI Act, 2002 was not complied with by the defendants.

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A perusal of Annexure-XVI order shows that the learned Chief Judicial Magistrate Court, Thalassery after having perused the contents of the affidavit and the documents filed in support of the affidavit and after having satisfied over the same, passed order appointing Advocate Commissioner to take physical possession of the secured asset. This Tribunal does not find any infirmity or illegality in the above order.

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The applicants have failed to prove their case so as to get the reliefs sought for in the SA. In view of the foregoing reasons, this Tribunal holds that the applicants are not entitled to get the reliefs sought for in this SA.

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Resultantly, S.A No.140 of 2024 stands dismissed. However, there shall be no order as to 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 10^th day of June, 2025.

(Su. WILLYAHM)

PRESIDING OFFICER

Mj/

Page 7 of 10

SA No.140 of 2024

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

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Sl. No.	Date	Particulars
1.	11.03.2022	True copy of the demand notice issued by the 2^nd defendant	Annexure-I
2.	08.07.2022	True copy of the possession notice	Annexure-II
3.	---	True copy of the application along with affidavit in CMP No.4664/2022 on the files ofCJMCourt,Thalassery.	Annexure-III
4.	10.02.2023	True copy of the notice issued by the Advocate Commissioner in CMP No.4664/2022 on the files of CJM Court,Thalassery.	Annexure-IV
5.	27.02.2023	True copy of the order in W.P. (C) No.28281/2022 of the Hon'ble High Court of Kerala.	Annexure-V
6.	27.03.2023	True copy of the judgment in W.A. No.551/2023 of the Hon'ble High Court of Kerala.	Annexure-VI
7.	---	True copies of the payment slip for payment of Rs.50,00,000/-	Annexure-VII
8.	26.07.2023	True copy of the judgment in W.P. (C) No.28281 of 2022 of the Hon'ble High Court of Kerala.	Annexure-VIII
9.	24.08.2023	True copy of the order in IA No.5/2023 in W.P.(C)No.28281/2022	Annexure-IX
10.	21.08.2023 and 14.09.2023	True copies of the payment slip.	Annexure-X
11.	25.09.2023	True copy of the representation submitted by the1^st applicant.	Annexure-XI
12.	05.10.2023	True copy of the letter issued by the defendant bank.	Annexure-XII
13.	05.01.2024	True copy of the judgment in W.P. (C) No.37886 of 2023 of the Hon'ble High Court of Kerala.	Annexure-XIII
14.	23.01.2024	True copy of the notice issued by the defendant bank	Annexure-XIV
15.	---	True copy of the notice issued by the Advocate Commissioner dt. Nil in CMP No.5380/2023 on the files of the CJM Court,Thalassery.	Annexure-XV

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Page 8 of 10

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SA No.140 of 2024

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16.	25.01.2023	True copy of the order in CMP No.4664/2022 on the file of CJM Court,Thalassery.	Annexure-XVI
17.	---	True copy of the application along with affidavit in CMP No.5380/2023 on the files ofCJMCourt,Thalassery.	Annexure-XVII
18.	12.01.2024	True copy of the order in CMP No.5380/2023 on the files of CJM Court,Thalassery.	Annexure-XVIII
19.	---	True copy of the CCOL loan account No.0133083000061122 maintained by the 1^stdefendant with the applicant for the periodfrom21.05.2019 onwards.	Annexure-A19
20.	---	True copy of the ECLGS account No.0133656000000142 for the period from05.11.2020 onwards.	Annexure-A20
21.	---	True copy of the Emergency Credit Line Guarantee Scheme (ECLGS) Operation Guidelines issued by the Central Government.	Annexure-A21

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List of documents filed by the defendants along with the written

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statement

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Sl. No.	Date	Particulars
1.	11.03.2022	Copy of Sec. 13 (2) demand notice	Annexure-B1
2.	---	Copy of postal receipt evidencing the issuance of Annexure-B1 notice to the applicants.	Annexure-B2
3.	--	Copy of the acknowledgement cards evidencing thereceipt ofdemandnotice.	Annexure-B3
4.	07.05.2022	Copy of the paper publication made in TheNew Indian Express daily.	Annexure-B4
5.	07.05.2022	Copy of the paper publication made in Madhyamamdaily.	Annexure-B4a
5.	07.05.2022	Copy of the photograph showing affixture of demand notice on the conspicuous part of the building whereinthe 6^th applicantisresiding.	Annexure-B5
6.	08.07.2022	Copy of the possession notice issued by the 2^nd defendant.	Annexure-B6
7.	---	Copy of photograph evidencing the affixture of the possession notice on a conspicuous part of the building in a security property.	Annexure-B7
8.	09.07.2022	Copy of the paper publication made in theNew Indian Express daily.	Annexure-B8
			Page 9 of 10

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SA No.140 of 2024

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9.	09.07.2022	Copy of the paper publication made in theMalayalaManorama daily.	Annexure-B9
10.	---	Copy of the acknowledgement cards evidencing the receipt of possession notice	Annexure-B10 series
11.	---	Copy of CERSAI certificate evidencing the registration of the property with the central registry.	Annexure-B11
12.	---	Copy of application in CMP No.4664/2022 filed before the CJM Thalassery.	Annexure-B12
13.	---	Copy of the affidavit filed by the Authorized Officer along with Sec.14 application.	Annexure-B13
14.	06.02.2023	Copy of Sec.13 (2) demand notice issued to the applicants.	Annexure-B14
15.	---	Copy of acknowledgement cards evidencing receipt of the demand notice by 6^th, 3^rd,4^th and 5^th applicants.	Annexure- B14(a)
16.	15.07.2023	Copy of publication of demand notice made in leading English daily The New Indian Express,Kannuredition.	Annexure-B15
17.	18.07.2023	Copy of publication of demand notice made in leading Malayalam daily Mangalam Kannuredition	Annexure- B15(a)
18.	12.10.2023	Copy of the possession notice	Annexure-B16
19.	13.10.2023	Copy of the possession notice published in leading English daily The New Indian ExpressKannuredition.	Annexure-B17
20.	13.10.2023	Copy of the possession notice published in leadingMalayalamdailyDeepika.	Annexure- B17(a)
21.	---	Copy of the postal receipts evidencing theissuance ofpossession notice	Annexure- B17(b)
22.	01.09.2022	Copy of letter issued by the defendant bank to the Managing Director of the 1^st applicant	Annexure-B18
	30.07.2019	Copy of the letter confirming the deposit of title deeds and creation of mortgage towards security for the financial facilitiesavailed.	Annexure-B19

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 10 of 10

Autocross Private Ltd. Represented by its Managing Director v. South Indian Bank

Case brief

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Autocross Private Ltd. Represented by its Managing Director v. South Indian Bank

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