Dismissed

Ms C Lakshmi and Another v. Mahila Co. Operative Bank Ltd.

DRT31 Oct 2025SA/193/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the applicants' Securitization Application challenging the bank's measures to obtain a Section 14 order. The court held there was no procedural flaw in the issuance of the possession notice despite objections regarding stamp duty, CERSAI registration, and service of notice.

What did the court decide?

Securitization Application No. 193 of 2024 dismissed; pending interpositions closed; parties to bear respective costs.

Ms C Lakshmi and Another versus Mahila Co. Operative Bank Ltd. — Banking and Recovery | DRT (2025)

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SA 193/2024

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IN THE DEBTS RECOVERY TRIBUNAL-II, BANGALORE

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Dated this 31^st day of October, 2025

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PRESENT: SHRI T. RAJESH Hon’ble Presiding Officer

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S.A.No.193 of 2024

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Mrs.C.Lakhsmi, W/o.S.Manjunath.

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Mr.Rakesha.M., S/o. Manjunatha S.

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Sri Monish.M., S/o. Manjunatha S.

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Both are residing at No.249, 6^th Cross, Bhuvaneshwarinagara, BSK 3^rd Stage, Near Karumariyamma Temple Left side, Bangaluru-560 085.

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… Applicants .

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Versus

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Authorized Officer, Mahila Co-operative Bank Ltd., No.14, South End Road, Sheshadripuram, Bangalore - 560 020. … Respondent.

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Ld. Counsels on record/appeared :-

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Counsel for Applicants :- Ms.Sowmya.C.N. Counsel for Respondent :-Sri Thribuvan.

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SA 193/2024

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: - O R D E R - :

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The measures leading to the procurement section 14 order by the respondent is under challenge in this Securitization Application, filed under section 17 of the Securitization And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act; herein after been referred to as SARFAESI Act.

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The applicants are impugning the measures contending that the schedule property is not legally and validly mortgaged to the respondent. The next contention taken by the applicants are that the respondent failed to comply with Rule 3A. The other contention taken by the applicants are that the possession notice was sent to the applicants only after 5 days of its issuance and hence there is violation of Rule 8(2)

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In the grounds of the SA, the applicants are reiterating the contention as to the right of enforcement of security. It is specifically contented by the applicants that there is no CERSAI registration. The 2^nd ground taken up by the applicants is that there is no Security Agreement and the instrument is not duly stamped. The 3^rd ground as put up on the SA is as to the alleged violation of Rule 3A. The 4^th ground that is urged in the SA is that the demand notice is issued only to the 1^st applicant. The fifth ground put forth by the applicant is alleged violation of Rule 3(i) of the

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SA 193/2024

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rules and in the next ground it is that alleged violation of 3^rd proviso to

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Rule 3(1).

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The applicants are also taking a contention that the account is not NPA so as to initiate the measures. The applicants are also raising contention as to the alleged flaws in issuance and service of the possession notice and also as to the interest levied by the respondent. In respect of the orders passed by the Ld. Magistrate, it is the contention of the applicants that the Ld. Magistrate ought to have examined the factual correctness of the assertions made by the respondent. It is also contended that the Bank had suppressed material facts and put forth false contentions while filing the affidavit as mandated u/s 14 of the Act.

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Along with the SA, the applicant had produced the following documents.

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Copy of Legal Notice dated 02.12.2023

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Copy of Reply Notice dated 12.12.2023

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Copy of Possession Notice dated 22.12.2023

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Copy of postal cover for having sent the possession notice dt.22.12.2023 to the 1^st applicant.

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Paper publication of possession notice in the New Indian Express Newspaper on 24.12.2023.

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SA 193/2024

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Certified copies of petition, affidavit and list of documents filed in Crl.MicC.1295/2024 before Hon’ble 37^th ACMM.

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Certified copy of the orders dt.29.08.2024 passed by Hon’ble 37^th ACMM.

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Copy of vacation notice issued by the respondent bank.

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The respondent had field their statement of objection inter-alia contending that the measures initiated and continued by the respondent is in accordance with the statute. It is contended that the mortgage loan availed by the applicant for Rs.85,00,000/- was defaulted, resulting the account being classified as NPA. Demand notice was issued on 09.10.2023, which was followed by the possession notice dated 22.12.2023. It is also contended that the bank had also sent a reply to the representations submitted by the applicants. It is also reiterated that the respondent is holding a valid security as the same is created by deposit of title deeds and by execution of Memorandum of deposit of title deeds. The respondent had also given para wise rebuttal of all the contentions of the applicants as made in the SA.

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Along with the objection, the respondent had produced the following documents.

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i) Copy of Title deed mortgage dated 28.06.2021.

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SA 193/2024

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ii) Copy of notice dated 19.10.2023 u/s.13(2) of SARFAESI Act, 2002, Postal receipts and Acknowledgment of RPAD.

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iii) Copy of reply notice dt.02.12.2023 issued by the applicants.

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iv) Copy of reply notice dt.12.12.2023 issued by the Respondent.

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v) Copy of Notice dt.22.12.2023 u/s.13(4) of SARFAESI Act, 2002 & Postal Acknowledge of RPAD.

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vi) Copies of Paper publication dt.24.12.2023 (Two in numbers.)

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vii) Copy of Order passed in SA No.17/2024.

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viii) Copy of CERSAI MIS Report.

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ix) Copy of loan account statement from 04.01.2009 to 31.01.2024.

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x) Copy of Order passed in Crl. Misc.No.1295 of 2024.

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On the basis of above documents and pleadings the respondent seeks for

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dismissal of the SA.

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Heard the Ld. counsel for both sides and considered the rival contentions in the light of pleadings and evidence. The only issue that is to be gone into is as to the legality of measures leading to procurement of section 14 orders.

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The first and foremost contention taken by the applicants, who had no

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dispute as to the availment of credit facility is as to the NPA classification.

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SA 193/2024

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It is the case of the applicants that there is no security Interest. The applicants contend that the stamp duty is not paid. In this regard it is to be noted that the respondent is not having a case that there exists any deed of mortgage. The respondent had produced the title document deposited for the purpose of creation of simple mortgage. It is settled law that if only the parties intend to reduce the mortgage into a deed which is to be executed simultaneous with the mortgage, the same requires registration and even a document evidencing past creation of mortgage, there is no requirement for payment of stamp duty or for registration of the same.

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The next contention taken by the applicants as to the competence of the respondent to initiate and continue the measures for want of registration with the Central Registry. The applicants contend that the CERSAI report as produced by the respondent evidence is only a MIS report and not CERSAI certificate. It is also contended that the registration if any, on 29.01.2024 will not come in aid of the respondent evidencing their entitlement to proceed with demand notice dt.09.10.2023. Both these contentions are unacceptable as the requirement for registration with the Central Registry is for avoiding creation of multiple interest over the property and the same is enacted for the benefit of Secured Creditor. The

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SA 193/2024

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borrower cannot take benefit of non-registration, even if the same is correct. Even otherwise, the proof as to registration under section 26D as produced by the respondent evidences them entitlement to proceed further.

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The applicants are also taking a contention that there is no service of demand notice on all the applicants. Even though the respondent along with their objection had failed to prove the proof of service on all the applicants, this Tribunal is not inclined to accept the said contention as it the reply to the demand notice was issued for and on behalf of all the applicants. In view of the fact that the applicants had filed a common representation in reply to the demand notice, there is no force in the contention that there is no service of notice in 2^nd and 3^rd applicants.

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The applicants though contend as the legality of issuance and publication of the possession notice, this Tribunal is not adverting to the same as it is settled law that issuance of possession notice is sine qua non for initiation of section 14 measures. The Hon’ble Supreme Court in ‘ Hindon Forge

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Pvt Ltd & others V/s. State of UP and Others” (MANU/SC/1250/2018) had laid down as follows.

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21. Another case strongly relied upon by learned Counsel for the Respondents is Noble Kumar (supra). This judgment decided that it is not necessary to first resort to the procedure Under Section 13(4) and, on facing resistance, then approach the Magistrate Under Section 14. The secured creditor need not avail of any of the remedies Under Section 13(4), and can approach the Magistrate straightaway after the 60-day

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SA 193/2024

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period of the notice Under Section 13(2) is over, Under Section 14 of the Act. This Court therefore held:

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35. Therefore, there is no justification for the conclusion that the Receiver appointed by the Magistrate is also required to follow Rule 8 of the Security Interest (Enforcement) Rules, 2002. The procedure to be followed by the Receiver is otherwise regulated by law. Rule 8 provides for the procedure to be followed by a secured creditor taking possession of the secured asset without the intervention of the court. Such a process was unknown prior to the Sarfaesi Act. So, specific provision is made Under Rule 8 to ensure transparency in taking such possession. We do not see any conflict between different procedures prescribed by law for taking possession of the secured asset. The finding of the High Court in our view is unsustainable. 36. Thus, there will be three methods for the secured creditor to take possession of the secured assets:

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36.1. (i) The first method would be where the secured creditor gives the requisite notice Under Rule 8(1) and where he does not meet with any resistance. In that case, the authorised officer will proceed to take steps as stipulated Under Rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realise the amounts that are claimed by the secured creditor.

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36.2. (ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice Under Rule 8(1) is given. In that case he will take recourse to the mechanism provided Under Section 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinise the application as provided in Section 14, and then if satisfied, appoint an officer subordinate to him as provided Under Section 14(1-A) to take possession of the assets and documents. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.

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36.3. (iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly Under Section 14 of the Act. The Magistrate will thereafter scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under Clause 36.2.(ii) above.

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36.4. In any of the three situations above, after the possession is handed over to the secured creditor, the subsequent specified provisions of Rule 8 concerning the preservation, valuation and sale of the secured assets, and other subsequent Rules from the Security Interest (Enforcement) Rules, 2002, shall apply.

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When this Court referred to the first method of taking possession of secured assets in paragraph 36.1.(i), this Court spoke of a case in which, once possession notice is given Under Rule 8(1), no resistance is met with. That is why, this Court states that steps as stipulated Under Rule 8(2) onwards to take possession, and thereafter, for sale of the secured assets to realise the amounts that are claimed by the secured creditor would

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SA 193/2024

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have to be taken, meaning thereby that advertisement must necessarily be given in the newspaper as mentioned in Rule 8(2), after which steps for sale may take place. This case again does not deal with the precise problem that is before the Court in this case. The observation made in paragraph 36.1.(i), which is strongly relied upon by the Full Bench of the High Court, to arrive at the conclusion that actual physical possession must first be taken before the remedy Under Section 17(1) can be availed of by the borrower, does not flow from this decision at all.

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Another reason for rejecting the challenge as to the measures leading up to the issuance of possession notice is that the respondent in their objection had pointed out that the said possession notice was impugned in SA No.17 of 2024 and the same stands dismissed for non-prosecution. Having filed the SA, challenging the possession notice and having got the same dismissed for non- prosecution, the same person cannot turn back and heard to contend that the issuance of possession notice is illegal.

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Even otherwise, the respondent had produced the proof as to the dispatch and paper publication of the possession notice. The applicant is only disputing the service of the possession notice and as the respondent had produced the proof as to dispatch and publication of possession notice, it is to be held that there is no procedural flaw in issuance of the same.

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The applicant’s contention as to the alleged fault in the affidavit cannot be ground to interfere with the measures. It is clear from the order sought to be impugned that the Ld. Magistrate having satisfied as to the compliance of the provisions of the Act had passed the order. Especially

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SA 193/2024

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as this Tribunal is not sitting in appeal over the order if the Ld. Magistrate,

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this Tribunal is not inclined to go into the legality of the order of the Ld. Magistrate.

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In view of the discussions as held in forgoing paragraphs and findings entered therein, this Tribunal is of the view that there is no merit in the SA and the same is liable to be dismissed.

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In the result SA No.193 of 2024 stands dismissed. All pending IA’s stands

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closed. The parties to bear their respective costs. Issue copies in accordance with Rule 16 of the Debt Recovery Tribunal (procedure) Rule.

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( Dictated to PS, transcribed by him, corrected, signed and pronounced by me in the Open Court, this 31^st day of October, 2025 )

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Sd./- (T. RAJESH) Hon’ble Presiding Officer DRT-II- BANGALORE

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Ms C Lakshmi and Another v. Mahila Co. Operative Bank Ltd.

Case brief

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What did the court decide?

Ms C Lakshmi and Another v. Mahila Co. Operative Bank Ltd.

Case brief

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