Dismissed

Kunhimoideen v. South Indian Bank

DRT28 May 2025SA/175/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the Securitization Application challenging a demand notice and possession order. The Tribunal upheld the bank’s right to proceed against secured assets, rejected the agricultural land exemption claim, and held that restructuring falls outside the Tribunal’s powers under the SARFAESI Act.

What did the court decide?

SA No.175 of 2024 is dismissed with no order as to costs.

Kunhimoideen versus South Indian Bank — 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 28^th DAY OF MAY, 2025

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

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S.A No. 175 of 2024

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Between

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Kunhimoideen, S/o. Mohammed,

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Kalathil House, P.O. Vallapuzha,

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Pattambi Taluk, Palakkad-679 336.

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Family Group of Trading Company, IV/424, Hayath Complex,

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P.O. Vallapuzha, Pattambi Taluk,

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Palakkad – 679 336,

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Represented by its

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Managing Partner Kunhimoideen.

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Pathumma Kutty C.P.,

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W/o. Kunhimoideen,

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Kalathil House, P.O. Vallapuzha,

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Pattambi Taluk, Palakkad-679 336.

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--- Applicants

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And

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The Authorized Officer, The South Indian Bank Ltd. Regional Office, Door No.733/2, 1^st Floor, D&D Arcade,

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Chitur Road, Near Manapulli Kavu, P.O. Kunnathurmedu, Palakkad – 678 013.

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The South Indian Bank Ltd. SIB House, T.B. Road, Mission Quarters, Thrissur -680 001.

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SA No.175 of 2024

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The South Indian Bank Ltd. Lakshmika Arcade, Chirankara, Mayannur Centre, P.O. Mayannur, Thrissur-679105, Represented by its Manager.

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--- Defendants

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This Securitization Application coming on 13.03.2025 for final hearing before me in the presence of Mr. Bijumon E.A. Counsel appearing for the Applicants and Ms. Ruby P. Paulose, Advocate representing the Counsel on record 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 29.02.2024 seeking to set aside Annexure-A1 to A4 Notices, A11 order of Chief Judicial Magistrate Court, Palakkad and to direct the 3^rd defendant bank to regularize, restructure and reschedule the applicants’ loan by permitting them to repay the loan amounts in instalments spanning over a period of seven years and direct the 3^rd defendant bank to proceed only against part of the security asset to realize the debt and to proceed against the residential property of the applicants only after exhausting the remedies to realize the debt from the other security assets.

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The 1^st applicant who is the Proprietor of M/s. M.P. Farms, as the principal borrower and the 2^nd applicant, Family Group of Trading Company and the 3^rd applicant Mrs. Pathummakutty as the guarantors availed credit facilities such as Cash Credit Open Loan, ECLGS from the 2^nd defendant bank upon creation of equitable mortgage by deposit of title deeds in respect of the immovable properties as described in Annexure-A7 demand notice.

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The applicants have admitted their default in repayment of the outstanding loan due. Hence the loan account of the applicants came to be classified as Non-performing Asset on 10.10.2023. Annexure-A7 demand notice dated 29.11.2023 (copy of the same is produced by the defendants as Annexure-AB1) 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. Annexure-B2 copy of postal receipts and Annexure-B3 copies of postal acknowledgment cards evidences the receipt of the demand notice by the applicants.

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Page 2 of 11

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SA No.175 of 2024

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4 The 1^st applicant sent objection/representation letter dated 06.10.2023 to the 2^nd defendant bank. The 2^nd defendant bank sent Annexure-B4 reply dated 16.12.2023 to the 1^st applicant. (copy of the same is produced by the applicant as Annexure-A3). Annexure-B4(a) postal receipts evidences the sending of Annexure-B4 to the 1^st applicant.

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Since the applicants failed to respond to the terms of the demand notice, Possession Notice dated 20.02.2024 Annexure-B5 was issued for symbolically taking physical possession of the secured asset. The defendants have produced Annexure-B6 copy of postal receipts in order to show that possession notice was served to the applicants. The defendants have also produced AnnexureB7, copy of photograph, Annexure-B7(a) copies of paper publications in order to prove their contention that possession notice was affixed on the conspicuous part of the secured asset and that it was published in the New Indian Express daily dated 23.02.2024 and Kerala Kaumudi daily dated 23.02.2024.

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Indisputably, the secured asset has been registered with Central Registry as evidenced from the perusal of Asset ID Based Search Report, Annexure-B9 and Annexure-B9 (a).

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The defendants approached the Chief Judicial Magistrate Court Palakkad and filed application Annexure-A9 and affidavit AnnexureA10 under Section 14 (1) of the SARFAESI Act, 2002. Annexure-A11 Order dated 26.02.2024 in MC No.296/2024 came to be passed appointing Advocate Commissioner for taking physical possession of the secured asset. According to the applicants, the Advocate Commissioner did not issue any notice for taking physical possession of the secured asset, but there is a threat on dispossession of their property. The applicants having aggrieved against the above measures filed this SA seeking for the reliefs stated supra.

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The counsel appearing for the applicants submitted that the entire secured assets worth of Rs.10 Crores need not be proceeded to realize an amount of Rs.1.5 Crore, which is actually payable by the applicants and not a sum of Rs.4,00,10,506.54 as demanded by the defendants. The defendants proceeded to initiate measures without considering the objection submitted by the applicants. The secured asset which is a farm land is an agricultural property. Hence the secured asset is exempted u/s 31 (i) of the SARFAESI Act 2002. The rate of interest claimed in the demand notice is exorbitant.

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The counsel appearing for the applicants further submitted that the 2^nd defendant bank classified the loan account as NPA on 10.10.2023 within a period of 25 days from the last transaction date of 15.09.2023. Therefore, classification of loan account as NPA is

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Page 3 of 11

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SA No.175 of 2024

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illegal and improper. The repayment made by the applicants has not been properly accounted. The learned Chief Judicial Magistrate Court, Palakkad without verifying the documents and without considering the payments made by the applicants after issuance of the demand notice passed order appointing Advocate Commissioner to take physical possession of the secured asset. The defendants failed to comply with the mandatory requirements of Sec.14 (1) of the SARFAESI Act 2002. Therefore, the SA may be allowed as prayed for.

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The counsel appearing for the defendants submitted that the loan accounts of the applicants were classified as NPA due to the default in repayment of the outstanding loan due and also due to the closure of the unit and non-availability of the stock. The interest rate applicable to the CCOL facility is floating rate linked to Repo rate as mentioned in Annexure-B10 sanction letter. The amounts paid by the applicants were duly credited into their loan accounts as evidenced from Annexures-B11, B11 (a) and B11 (b) account statements. MP Farm was primarily engaged in the production of poultry feeds and the property scheduled in Annexure-A4 is neither an agricultural land nor the loan availed is an agricultural loan.

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The counsel appearing for the defendants further submitted that the applicants failed to comply with the terms and conditions of the OTS proposal for an amount of Rs.345 Lakhs. There is no illegality or irregularity in Annexure-A11 order passed by the learned Chief Judicial Magistrate, Palakkad. Therefore, S.A may be liable to be dismissed with cost to these defendants.

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The applicants having created security interest over the immovable property described in Annexure-A7 demand notice by way of deposit of title deeds with the 3^rd defendant bank is estopped from contending now that the entire secured asset worth of Rs.10 Crore need not be proceeded to realize an amount of Rs.1.5 Crore which is actually payable by them. Copies of account statements pertaining to the three loan accounts, Annexure-B11, B11 (a) and B11 (b) shows that the outstanding loan amount payable by the applicants under each account is Rs.7,26,685.24, Rs.48,52,443.14 and Rs.3,58,997.61. The aforesaid amount is also mentioned in Annexure-A10 affidavit filed in MC No.296/24 before the Chief Judicial Magistrate Court, Palakkad. Hence, this Tribunal does not find any substance in the submission of the counsel for the applicants that actual amount payable by the applicants is Rs.1.5 crore and not Rs.4,00,10,506.54.

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The applicants have averred in paragraph 1 of the SA as follows:

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“The pandemic aggregated and confounded the matters and imposed a defaulting situation as most of the sources of the

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Page 4 of 11

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SA No.175 of 2024

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income had become defuncted. Applicants are not wilful defaulters.”

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The above categorical admission of the applicants is sufficient to hold that they defaulted in repayment of the outstanding loan due. Hence the contention of the applicants that classification of loan accounts of the applicants illegal and improper is absolutely incorrect.

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The applicants have not produced any material before this Tribunal that the secured asset is a poultry farm. Further it is revealed from the averments of the written statement of the defendants that M/s. MP Farm was engaged in production of poultry feeds and that credit facilities were granted to the applicants for meeting working capital requirements of the firm. The above purpose of granting facility is also clearly mentioned in Annexure-B10 sanction letter. Therefore, this Tribunal does not find any force in the submission of the counsel for the applicants that secured asset is agricultural property.

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In Annexure-B10 sanction letter, it is clearly mentioned that the effective rate of interest may also vary due to change in other componence of operating costs are spread. Therefore, it is evident that the applicants have agreed to pay the floating rate of interest as per Annexure-B10 sanction letter. Hence the contention of the applicants that the rate of interest claimed in the demand notice is exorbitant does not hold good.

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The applicants have not specifically averred in the SA as to how the repayment made by the applicants has not been properly accounted. However, a perusal of Annexure-B11, B11 (a) and B11 (b) account statements show that all payments made by the applicants has been credited.

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A perusal of Annexure-A10 affidavit shows that all the statutory requirements contemplated under Clause (i) to (ix) to the provisions of Section 14 (1) of the SARFAESI Act 2002 has been complied with by the defendants. A perusal of Annexure-A11 order shows that the learned Chief Judicial Magistrate, Palakkad after having perused the contents of the affidavit and the documents filed in support of the affidavit and having satisfied over the same, passed order appointing Advocate Commissioner to take physical possession of the secured asset. The applicants have not produced any material before this Tribunal to prove their contention that they made payments towards outstanding loan due after receipt of Annexure-B1 demand notice. Hence the contention of the applicants that the learned Chief Judicial Magistrate, Palakkad without considering the payments made by the applicants after issuance of the demand notice passed order to take physical possession of the secured assets is absolutely untenable.

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Page 5 of 11

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SA No.175 of 2024

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This Tribunal does not find any procedural irregularity or infirmity either in Annexure-A10 affidavit or in Annexure-A11 order.

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One of the reliefs sought for by the applicants in the S.A is to direct the 3^rd defendant bank to regularize, restructure and reschedule the loan accounts of the applicants and to permit them to repay the loan dues in installments spanning for a period of seven years. The above relief sought for by the applicants does not fall under the measures referred to in Sec.13 (4) of the SARFAESI Act 2002. It is for the applicants to approach the 3^rd defendant bank for getting these reliefs.

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The other reliefs sought for by the applicants is to direct 3^rd defendant bank to proceed against the residential property of the applicants only after exhausting the remedies to realize the debt from other security assets. Two items of the immovable properties referred to in Annexure-B1 demand notice are the secured assets. The defendants are entitled to proceed either against one item or both items of the secured assets. Therefore, this Tribunal cannot give such direction as prayed for by the applicants, to the defendants.

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20 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.175 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 28^th day of May, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 6 of 11

SA No.175 of 2024

Schedule of property Item No.1(A)

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District : Palakkad Taluk : Ottapalam Village : Vallapuzha Sy. No. : 315/1 Re. Sy. No. :

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Description of Property

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All that forms, part and parcel of land having an extent of 22 cents of land situated in Sy. No.315/1, Vallapuzha Village, Ottapalam Taluk, Palakkad District, Kerala.

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Four Boundaries

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East : Panchayath Road. South : Property sold to Sulekha West : Kudiyirippu Share Property North : P W D Road.

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Schedule of property Item No.2

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District : Palakkad Taluk : Ottapalam Village : Mannur Sy. No. : Re. Sy. No. : 351/1, 2, 4 of Re.Sy. Block No.8, Old Sy. No.164/2, 164/6, 163/1 and 164/4.

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Page 7 of 11

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SA No.175 of 2024

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Description of Property

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All that forms, part and parcel of land having an extent of 463 cents of land situated in Sy. No.351/1, 2, 4 of Re.Sy Block No.8, Old Sy No.164/2, 164/6, 163/1 and 164/4 of Mannur village, Palakkad Taluk, Palakkad District, Kerala.

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Four Boundaries

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East : Kudiyiruppu of children of Kuttan and properties purchased by Pathummakutty C.P. South : Pathway West : Pathway North : Kudiyiruppu of children of Ankalan, property of Ussanar, property sold by Chinnan Nair and Pathway.

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Schedule of property Item No.3

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District : Palakkad Taluk : Ottapalam Village : Mannur Sy. No. : Re. Sy. No. : 351/3 of Re.Sy. Block No.8, Old Sy. No.163/2, 163/1 and 164/4.

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Description of Property

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All that forms, part and parcel of land having an extent of 131 cents of land situated in Sy. No.351/3 of Re. ASy Block No.8, Old Sy No.163/2, 163/1 and 164/4 of Mannur village, Palakkad Taluk Palakkad District, Kerala.

Page 8 of 11

SA No.175 of 2024

Four Boundaries

East : Kudiyiruppu of children of Kuttan and properties purchased by Pathummakutty C.P. South : Pathway West : Properties purchased by Pathummakutty C.P North : Property of Ussanar,

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(Su. WILLYAHM) PRESIDING OFFICER

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Page 9 of 11

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SA No.175 of 2024

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

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Sl.	Date	Particulars
No.
1.	20.10.2023	True copy of the loan recall notice	Annexure-A1
2.	20.10.2023	True copy of the guarantee invocation letter issued to the applicants 2 and 3 by the1^strespondent.	Annexure-A2
3.	16.12.2023	True copy of the objection in demand noticeissued by the1^strespondent.	Annexure-A3
4.	20.02.2024	True copy of the possession notice issued by the1^strespondent.	Annexure-A4
5.	31.12.2020	True copy of the loan sanction document	Annexure-A5
6.	28.12.2021	True copy of the sanctioned loan letter on WCTL-ECLGS (Extension)	Annexure-A6
7.	29.11.2023	True copy of Sec.13(2) notice issued to theapplicants.	Annexure-A7
8.	16.12.2023	True copy of the reply by the defendant bank on objection filed by the applicants onSec.13(2)notice.	Annexure-A8
9.	30.05.2024	True copy of Sec.14 application as MC No.296/2024 before the Chief Judicial Magistrate Court,Palakkad.	Annexure-A9
10.	30.05.2024	True copy of the affidavit in support of Anx.A9 application before the Chief Judicial Magistrate Court,Palakkad	Annexure-A10
11.	22.06.2024	True copy of the order in MC No.296/2024 before the Chief Judicial Magistrate Court,Palakkad.	Annexure-A11

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

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Sl. No.	Date	Particulars
1.	29.11.2023	True copy of Sec.13(2) notice issued by the defendant bankto applicants	Annexure-B1
2.	---	Copy of the postal receipt evidencing the issuance of Anx B1 notice to the applicants.	Annexure-B2

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Page 10 of 11

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SA No.175 of 2024

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3.	---	Copy of the acknowledgment cards evidencing the receipt of Sec.13(2) demandnotice by the applicants.	Annexure-B3
4.	06.12.2023	Copy of the reply issued to Annexure- A2notice.	Annexure-B3a
5.	19.12.2023	Copy of the reply sent by the defendant bankto the1^st applicant	Annexure-B4
6.	---	Copy of the postal receipt evidencing theissuance of reply to the objection	Annexure-B4a
7.	20.02.2024	Copy of the possession notice issued by the defendant bank.	Annexure-B5
8.	---	Copy of the postal receipt evidencing issuance of possession notice to the applicants.	Annexure-B6
9.	---	Copy of photograph evidencing the affixture of the possession notice on a conspicuous part of the building in the secured property.	Annexure-B7
10.	23.02.2024	Copy of the paper publication in the New Indian Express (English daily) in respect ofthe possession notice	Annexure-B8
11.	23.02.2024	Copy of the paper publication in the Kerala Kaumudi in respect of the possession notice	Annexure-B8a
12.	---	Copy of the certificate evidencing the registrationofsecurity property.	Annexure-B9
13.	---	Copy of the certificate evidencing the registrationofsecurity property.	Annexure-B9a
14.	31.12.2020	Copy of the loan sanction letter issued by the defendant bank	Annexure-B10
15.	---	Copy of account statement of CCOL facility.	Annexure-B11
16.	---	Copy of account statement of ECLGS-1 facility.	Annexure- B11(a)
17.	---	Copy of account statement of ECLGS-II facility.	Annexure- B11(b)
18.	15.10.2022	Copy of the valuation report.	Annexure-B12

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 11 of 11

Kunhimoideen v. South Indian Bank

Case brief

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Kunhimoideen v. South Indian Bank

Case brief

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