Dismissed

Smt Bindhu Shivakumar v. The Bangalore City Co. Operative Bank Limited

DRT24 Apr 2025SA/227/2024

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal considered whether recovery measures under the SARFAESI Act should be set aside due to lack of CERSAI registration under Section 26D. Finding no substantial prejudice to the applicant, the Tribunal dismissed the section 17 application but directed the secured creditor to comply with Section 26D before proceeding further.

What did the court decide?

The section 17 application was dismissed. Measures under Section 14 remain valid but the respondent is directed not to proceed further until Section 26D is complied with.

Smt Bindhu Shivakumar versus The Bangalore City Co. Operative… — Company and Corporate | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-II, BANGALORE Dated this 24th day of April 2025

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PRESENT: SHRI T. RAJESH PRESIDING OFFICER

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S.A. No. 227 of 2024

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Smt Bindhu Shivakumar, No.41, 3^rd Cross, Akshayanagara, Yelenahalli Cross Begur, Bommanahalli, Bengaluru 560 068.

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… Applicant

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Versus

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The Authorised Officer, The Bangalore City Co-operative Bank Ltd, No.3, 1^st Floor, Pampamahakavi Road, Chamrajpete, Bengaluru 560 018. … Respondent

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Ld. Counsels on record/appeared:

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For Applicant : Shri M.A. Rajendra For Respondent :- Shri K.V. Lokesh

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ORDER

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The measures initiated by the Respondent as per the

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provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( hereinafter

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referred to as the ‘Act’) leading to the procurement of impugned Order from the learned IX ADD Chief Judicial Magistrate, Bengaluru

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2 SA 227/2024

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in Crl.Misc. No.8342/2023 on 03.10.2024 is under challenge in this Section 17 Application filed by the Applicant.

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Draped in brevity, the Applicant’s case can be summarized as

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follows:- The Applicant initially availed a credit facility of Rs.1,00,00,000/- and later an additional facility of Rs.19,80,000/from the respondent bank for the construction of the house. It is also admitted that Security interest over the schedule properties were created in lieu of the facilities. The Applicant is further admitting the defaults and subsequent classification by the respondent as NPA. The issuance of the demand notice was also admitted by the Applicant.

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The Applicant further contends that after the issuance of demand notice, the account was regularized and despite the same, a possession notice was issued on 21/09/2022. It is also stated that the respondent had issued another demand notice as on 13/06/2023. Without issuing any subsequent notice, the respondent had issued an auction sale notice on 21/12/2022 fixing the auction on 31/01/2023. It is also stated that the Applicant had remitted an amount of Rs.15,00,000/- in the past, in compliance of

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3 SA 227/2024

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the interim order in WP 2931/2024 of the Hon’ble High Court and

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thereby regularized the account.

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The Applicant is also putting forward a contention that from the statement of accounts as provided by the respondent is showing the status as “closed” no measures could be continued. In respect of the measures the Applicant is also contending that the measures are not sustainable in view of want of registration of the Security Interest with Central Registry.

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The respondent had filed their objections denying the contentions of the Applicant as taken in the SA. It is stated in the objections that the Applicant approached the respondent and availed two mortgage loan facilities of Rs.1,00,00,000/- and Rs.19,80,000/-. It is also stated that as the repayment of the said facilities are defaulted, the measures are initiated after classifying the account as NPA on 07/05/2023. The demand notice dated 13/06/2023 was issued and served which was followed by a possession notice dated 11/09/2023 which was also published and served as required by law.

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4 SA 227/2024

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The contention of the Applicant as of the alleged misleading is

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also denied by the respondent. The respondent contends that there is no misrepresentation as far as the proceedings leading to the procurement of the security orders are concerned. It is also stated that a moratorium was also accorded to the Applicant along with objection, the respondent had produced the following copies of documents :

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1. Memorandum of deposits of title deeds.

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1. Loan account statement.

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1. Demand notice with acknowledgement card.

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1. Possession notice dated 11/09/2023.

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1. CERSAI report.

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1. Argument notes filed before the Magistrate.

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1. Moratorium agreement.

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On the basis of the above contentions and documents, Respondent

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seeks dismissal of the SA.

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Heard the respective counsels and considered the rival contentions. In view of the above pleadings and documents, the following issues arise for consideration:

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5 SA 227/2024

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I. Whether the measures initiated and continued by the respondent up to the impugned stage are in accordance with statute?

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II. What orders are to be passed?

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Both these issues are gone into and decided together.

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The main contention of the applicant is as to the alleged inconsistent NPA dates as mentioned in demand notice and the application before the Hon’ble Magistrate. The contention is put forward by the Applicant without disputing the defaults.

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It is also contended that despite regularization once, the possession notice is issued on the basis of the demand notice issued prior to the regularization instead of issuing it consequential to the 2^nd demand notice. This contention does not carry any merit as the legality of issuance of possession notice is not in lis in the Application.

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In respect of Demand notice, the Respondent had produced the proof of service of the same on the Applicant. The service and legality of the possession notice have nothing to do with the legality

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6 SA 227/2024

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of measures in respect of Section 14 and hence, this Tribunal is not

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required to find an answer as to the legality in issuance and service of possession notice.

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The next plea set up by the Applicant is as to want of registration with. According to the Applicant ever since the notification as to the incorporation of section 26D of the Act no secured creditor is entitled to exercise the rights of enforcement of Security under Chapter III unless the Security Interest created in its favor by the borrower is registered. On a plain reading of Section 26D, it is evident that the prohibition is absolute.

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The respondent though produced CERSAI registration of the same evidences that the said registration pertains to the Security Interest created on 04/03/2017 and there is no evidence as to the registration of the Security Interest created on 09/08/2018. Hence in the absence of production of any evidence proving to the satisfaction, there is no proof as to the compliance of mandate of section 26D prior to the initiation of the measures.

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7 SA 227/2024

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Now on the basis of above findings the only question to be

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answered is whether the measures are liable to be set aside for want of CERSAI registration, the learned counsel for the respondent placed reliance as to the decision of the Hon’ble DRAT Allahabad in Appeal 247/2019, where in the Hon’ble Appellate Tribunal held that the non-registration of the Secured Asset with the Central Registry will no way cause any prejudice to the mortgagor. But it is to be noted that the Hon’ble Appellate Tribunal decided the issue prior to the notification by which section 26D was made operative.

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The fact that one security interest created in the year 2017 is registered with Central Registry will not absolve the obligation as Section 24 of the Act mandates the Secured Creditor to send to the Central registration, the particulars of such modifications.

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In deciding the conundrum, it is also required to look into the

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purpose of the enactment of Section 26D which could be gathered by a reference to 26A of the Act which reads:

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26A. Rectification by Central Government in matters of registration, modification and satisfaction, etc.

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(1) The Central Government, on being satisfied-

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8 SA 227/2024

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(a) that the omission to file with the Registrar the particulars of any transaction of securitization, asset reconstruction or security interest or modification or satisfaction of such transaction or; the omission or mis-statement of any particular with respect to any such transaction or modification or with respect to any satisfaction or other entry made in pursuance of section 23 or section 24 or section 25 of the principal Act was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors; or

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(b) that on other grounds, it is just and equitable to grant relief,

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may, on the application of a secured creditor or asset reconstruction company or any other person interested on such terms and conditions as it may seem to the Central Government just and expedient, direct that the time for filing of the particulars of the transaction for registration or modification or satisfaction shall be extended or, as the case may require, the omission or mis-statement shall be rectified.

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(2) Where the Central Government extends the time for the registration of transaction of security interest or securitisation or asset reconstruction or modification or satisfaction thereof, the order shall not prejudice any rights acquired in respect of the property concerned or financial asset before the transaction is actually registered.

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Now by virtue of section 26A, it will be open for the Central Government to extend the time for registration in given cases and the only rider set by said provision is that “it is not of a nature to prejudice the position of creditors.” ( emphasis applied ). Hence

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9 SA 227/2024

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taking into consideration the purpose of enactment of section 26D is

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for the benefit of creditors and also the dictum laid down by the

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Hon’ble Apex Court in L & T Housing Finance Ltd V/s. Trishul Developers and others ” (2010) 10 SCC659 :

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“ 19 In the facts and circumstances, when the action has been taken by the competent authority as per the procedure prescribed by law and the person affected has a knowledge leaving no ambiguity or confusion in initiating proceedings under the provisions of the SARFAESI Act by the secured creditor, in our considered view, such action taken thereof cannot be held to be bad in law merely on raising a trivial objection which has no legs to stand unless the person is able to show any substantial prejudice being caused on account of the procedural lapse as prescribed under the Act or the rules framed thereunder still with a caveat that it always depends upon the facts of each case to decipher the nature of the procedural lapse being complained of and the resultant prejudiced if any, being caused and there cannot be a straitjacket formula which can be uniformly followed in all the transactions”, Hence unless the debtor is able to show any substantial prejudice caused on account of the procedural lapse as prescribed under the Act and Rules framed thereunder, a still with a caveat that it always depends upon the facts of each case to decipher the nature of procedural lapse being complained of and the resultant prejudice, if any, being cause. In the case in hand apart from alleging minor discrepancies which no way will cause any prejudice to the applicant, the applicant was not able to put forward any valid challenge as to the legality of measures”. (emphasis supplied).

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10 SA 227/2024

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Hence by non-registration in the Central registry, no prejudice what

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so ever nature is caused to the Applicant, as the said provision is incorporated for the benefit of creditors. This Tribunal is not enticed to set aside the measures as such. However at the same time, this Tribunal cannot shut its sight to the fact that the mandate of section 26D as notified makes it obligatory for the Secured Creditor to register the Security Interest with Central Registry. Hence considering the totality of facts and evidences this Tribunal deems it fit to pass following order u/s 17(3)(c) of the Act.

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Hence by non-registration in the Central registry, no prejudice whatsoever nature is caused to the Applicant, as the said provision is incorporated for the benefit of creditors. This Tribunal is not enticed to set aside the measures as such. However at the same time, this Tribunal cannot shut its sight to the fact that the mandate of section 26D as notified makes it obligatory for the Secured Creditor to register the Security Interest with Central Registry. Hence considering the totality of facts and evidences this Tribunal deems it fit to pass following order u/s 17(3)(c) of the Act.

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11 SA 227/2024

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In the result, SA 227 of 2024 stands dismissed;

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(a) The measures taken by the respondent leading to the procurement of section 14 order is not interfered with. However the respondent is directed not to proceed further until the mandate of section 26D is complied with.

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(b) In the facts and circumstances there is no order as to costs.

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Copy of this order be communicated to the parties concerned.

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(Dictated to my PS directly on the Computer, corrected and pronounced by me in the open Court on this the 24th day of April 2025)

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Sd/(T. RAJESH) PRESIDING OFFICER

Smt Bindhu Shivakumar v. The Bangalore City Co. Operative Bank Limited

Case brief

What is this about?

What did the court decide?

Smt Bindhu Shivakumar v. The Bangalore City Co. Operative Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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