Allowed

Mr Shivakumar v. Karnataka Gramin Bank

DRT19 Jun 2025SA/174/2023

Case brief

AI extract

What is this about?

Securitization Tribunal allowed the application seeking to set aside a possession order obtained under Section 14 of the SARFAESI Act. The court found the order illegal because the secured creditor failed to file the mandatory affidavit as required under the proviso to Section 14, despite the concession made by the respondent.

What did the court decide?

Securitization Application allowed; measures to procure the impugned Section 14 possession order shall be set aside as illegal; respondent directed to reinstate applicant in possession of the property

Mr Shivakumar versus Karnataka Gramin Bank — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU

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Dated this the 19^th Day of June, 2025

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Present: Sri. T. Rajesh Hon’ble Presiding Officer

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SA.No.174/2023

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BETWEEN:

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Mr. Shivakumar, S/o Hanumanthrao Patil, H.No. 1-910/55/15, Bhagya Nagar, Sedam Road, Kalaburgi- 585101.

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…APPLICANT

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AND

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The Authorised Officer, Karnataka Grameen Bank, Having Head Office, No. 32, Sangankal Road, Gandhinagar, Ballari- 583 103.

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Regional Office, R and L Section, Kalaburgi, Represented by, Its Chief Manager, Sri. Gururaj, S/o Late S.S. Rao

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…RESPONDENT

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Counsels on record/appeared for:

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Applicant : Sri. Rudrabhusan C. Benakanalli Respondent : M/s. MSS Law and Associates

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SA 174/2023

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: ORDER ON SA.No.174/2023:

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This Securitization Application, in short S.A is filed under sub

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section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002, herein after referred to as “SARFEASI Act” or “The ACT” with a prayer to set aside the measures in particular, the Order dated 13.04.2023 passed by the Deputy Commissioner in Case bearing No. DCB/195/2022-23.

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The applicant is admitting the availment of the credit facility of Rs. 3.00 Lakhs in a housing loan and Rs. 5.00 Lakhs as mortgage loan. The creation of security interest is not disputed by the applicant. In respect of the measures, it is the case of the applicant that the loan account was never classified as NPA and the applicant was not served with any demand notice which is a pre-condition for initiation of measures. In respect of the order sought to be impugned, it is the case of the applicant that the same is obtained without following the procedure as required under the statute, in particular the mandatory requirement u/s 14 of the Act. The applicant had also taken a specific contention that no affidavit as required under proviso to section 14 is filed before the authority which passed the S.14 Order.

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Along with the S.A the applicant has produced the following documents: 1) Copy of the order dated 13.04.2023 passed by deputy

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SA 174/2023

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commissioner in Case bearing No. DCR/195/2022-23, 2) Typed Copy of Order dated 13.04.2023 passed by deputy commissioner in Case bearing No. DCB/195/2022-23, 3) Copy of the notice of possession of immovable property dated 30.01.2023 and 4) Typed Copy of notice of possession of immovable property dated 30.01.2023.

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Respondent entered appearance and filed their objections interalia contending that the measures taken by them leading to procurement of S.14 Orders is in accordance with statute and there is no procedural lapses in their measures. The respondent has reiterated the fact that the account was rightly classified as NPA due to the defaults in the repayments and demand notice as required under the statute was issued and served on the borrowers. Even as when no repayments were forthcoming, the S.14 application was filed to take physical possession of the property and the impugned order has been procured. According to the respondent there is no procedural fault in these measures and respondent seeks for the dismissal of the S.A.

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Along with the objections the respondent has produced the following documents:- 1) Loan agreements dated 25.06.2014 and 04.06.2015, 2) Demand Notice dated 19.11.2022 signed by applicants on 21.11.2022, 3) Paper publication on 30.01.2023 with notice of symbolic

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SA 174/2023

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possession affixed on property and 4) Possession Order No. DCB/195/2022-

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23 dated 13.04.2023 passed by deputy commissioner.

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Heard the counsel for both sides.

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The only issues arising for consideration is legality of the measures

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initiated and continued by the respondent leading to the procurement of the impugned order from the Deputy Commissioner.

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Even though the applicant had not specifically admitted the

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availment of the credit facility the production of loan agreements dated 25.06.2014 and 04.06.2015 were not disputed by the applicants. Even though the applicant has taken the specific contention that no demand notice is served on them, the production of the demand notice which carries the signature of the applicant is sufficient to prove the compliance of with

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Rule 3(1) of Security Interest Enforcement Rules. Even though the respondent had produced the proof as to the service of the possession notice this Tribunal is not adverting to the same as the same is not a sinequanon for initiation of measures u/s 14.

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Now the pivotal question that arises for consideration is whether

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the order passed by the Deputy Commissioner is in accordance with the mandate of S.14 of the Act or not. This Tribunal is aware that this Tribunal

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SA 174/2023

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is not sitting in appeal over the orders of the Ld. Magistrate and can only go

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into the legality of the measures taken by the respondent in procuring the said order.

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The applicant has taken the specific contention that no affidavit stating that the secured creditor had followed the mandates of the Act and exact due amount had been filed before the concerned authority which passes the S.14 Order. Despite such a specific contention being taken in the application no documents is produced by the respondent along with their objections to discredit the above contention. The respondent has not cared to address the said contention in their objection and not furnished the copy of the affidavit.

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The Ld. Counsel for the respondent at the time hearing has fairly conceded that no such affidavit is filed before the Deputy Commissioner. However the Ld. Counsel contends that it is for the Deputy Commissioner to decide whether an order is to be passed without insisting for filing of an affidavit or not. This Tribunal is not in agreement with the above contention as the non-filing of the affidavit which is mandated under proviso to section 14 will tamper the procedure of the secured creditor.

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In view of the admitted case that no affidavit as required under

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section 14 (B) proviso is filed the procedure followed by the respondent in

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SA 174/2023

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procuring the S.14 Order is flawed by procedural irregularity and is liable to

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be interfered with. Even though this Tribunal has entered into a finding that

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there is a procedural irregularity in procuring the S.14 order, this Tribunal is

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of the view that the measures taken by the respondent upto the procurement of the S.14 Orders need not be interfered with.

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Hence,

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(i) S.A N0. 174/2023 stands allowed.

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(ii) The measures taken by the respondent in procuring the Impugned Order DCB/ 195/2022-23 from the Deputy Commissioner is found to be illegal and accordingly set aside.

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However the issuance of demand notice and other measures taken

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by the respondent are not interfered with.

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(iii) If physical possession of the property is already taken in

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pursuant to the impugned order, the respondent is directed to

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reinstate the applicant in the possession of the property forthwith. In the facts and circumstances of the case there is no cost.

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SA 174/2023

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Communicate a copy of the order to the parties concerned.

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(Dictated to the Stenographer (AJ), after its transcription and necessary corrections, signed and

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Order is passed on this day 19^th Day of June, of 2025)

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Sd/- (T.RAJESH) PRESIDING OFFICER DRT-2, BENGALURU

Mr Shivakumar v. Karnataka Gramin Bank

Case brief

What is this about?

What did the court decide?

Mr Shivakumar v. Karnataka Gramin Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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