Dismissed

S R Mohan v. State Bank of India

DRT16 May 2025SA/283/2025

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the Securitization Application challenging a Section 14 order passed by the CJM. The court held that an unregistered lease agreement for a period exceeding one year cannot defeat the secured creditor's enforcement rights under the SARFAESI Act, particularly when the renewal occurred after the account was classified as NPA.

What did the court decide?

The Securitization Application was dismissed on merits, and any interim order previously granted stands vacated.

S R Mohan versus State Bank of India — Cheque Dishonour | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 16^th day of May, 2025

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SA No. 283 of 2025

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Mr. S.R. Mohan, S/o, S. Rangasamy, D, Flat No.S1, 2^nd Floor, 49, Thamarai Street, Chakrapani Nagar, Gerugambakkam, Chennai – 600 128.

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….Applicant

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-Vs-

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State Bank of India, Represented by its Authorized Officer, RACPC, Ayyapanthangal Branch, No.50, AR Plaza, Mount Poonamalle High Road, Chennai -600 056.

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Mr. B. Sridhar, S/o, Mr. Balaraman. D No.501, F3, Kamalayam Apartments, Varadharajapuram MTH Road, Ambattur, Chennai -600 053.

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Also at Mr. B. Sridhar, S/o, Mr. Balaraman, Sri Balaji Enterprises, No.34, 1^st Cross Street, Trustpuram, Kodambakkam, Chennai -600 024. ….Respondents

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Counsels on record / appeared:

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Counsel for Applicant : M/s. T. Mariappan Counsel for respondent : M/s. S. Ambal Vannan

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ORDER ON SA 283/2025

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The present Securitization Application [SA] is filed under sub section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken by the secured creditor under the Security Interest Enforcement Rules, 2002 [for short the Rules].

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The applicant has filed the present SA impugning the S. 14 order dated 01.03.2025 passed by the Ld. CJM, Kancheepurm in Crl.M.P.No. 16 of 2025 for recovery of a sum of Rs. 15,00,000/-.

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The applicant claims to be a lessee of the secured asset namely D, Flat No. S1, 2^nd Floor, 49, Thamarai Street, Chakrapani Nagar, Gerugambakkam, Chennai – 600 128 and in occupation of the D, Flat No. S1, 2^nd Floor, 49, Thamarai Street, Chakarapani Nagar, Gerugambakkam, Chennai – 600 128, with fixtures entered into a Lease Agreement dated 08.02.2016 which is renewed by Renewal of Lease Agreement dated 31.12.2024 with the 2^nd respondent. The applicant has paid an amount of Rs. 15,00,000/- on 08.02.2016 and the 2^nd respondent has to refund when the applicant vacate the premises.

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On 19.03.2025, a notice was affixed in front of the leased premises by the Advocate Commissioner, to vacate the premises and hand over the vacant possession within 7 days, on or before 28.03.2025.

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The applicant rushed to second respondent who assured that applicant would receive a favourable order, hence the applicant continued

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to have residence in the said property as lessee in terms of the agreement dated 31.12.2024.

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The applicant came to know about the S. 14 order passed by the Chief Judicial magistrate in Crl.M.P.No. 16 of 2025 dated 01.03.2025 which is obtained by the 1^st respondent and the second respondent is the owner of the property had not given any documents in support of the favourable order which he has received and left with no other options hence, the present SA is filed by the applicant.

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The applicant is a self-employed having reputed name in the locality and a good standard of life as a law abiding citizen and suddenly the first respondent has taken steps to vacate the premises and if the physical possession is taken the applicant would suffer huge loss.

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In the grounds of the SA, it is contended that the action taken by the first respondent is bad in law, ought to have ascertained regarding the nature of possession of the applicant before creating mortgage over the property and as secured creditor cannot exercise right of taking possession under SARFAESI Act. The secured creditor cannot extinguish the right created by the 3^rd party without ascertaining of the rights over the secured asset.

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The 1^st respondent ought not to have affixed the possession notice in the premises when the security interest created over the property is subject to 3^rd party interest by way of substituted lease. The secured creditor without taking note of Sec.105 of the Transfer of property act are

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taking action under the SARFAESI Act. On these grounds, the applicant prays to set aside the order of the Ld. CJM in Crl.M.P.No. 16 of 2025.

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The respondent has filed their counter inter alia denied contending all the allegations made para 1 to 7 and grounds (a) to (h).

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It is the case of the first respondent bank, at the request of the 2^nd respondent ie., Mr. B. Sridhar vide written application dated 10.12.2015 requested financial assistance of home loan. The respondent vide arrangement letter dated 03.02.2016 sanctioned a home loan for a sum of Rs. 32,90,000/- vide Account No. 35540255727 to be repaid with interest @ 9.55% pa., in EMI of Rs. 30,775/- per month. 11. The 2^nd respondent in order to secure the loan has executed a Registered memorandum of Deposit of Title Deeds dated 03.02.2016 in favour of the State Bank of India, Registered as Document No. 709 of 2016 on the file of Sub-Registrar, Pammal. Along with the said Memorandum of Title Deeds the 2^nd respondent has deposited the original sale deed dated 04.02.2016, registered as Document Nos. 707 of 2016 on the file of SRO Pammal in favour of the Bank, i.e., the first respondent.

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As the second respondent failed to repay the loan, the account has classified as NPA on 08.05.2024. Consequently, the bank has issued the S. 13(2) demand notice on 09.05.2024 which is served on the second respondent.

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The 2^nd respondent did not submitted any letter under S. 13(3) of the SARFAESI Act and after the completion of the period of 60 days, the

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1st respondent took symbolic possession of the property under S. 13(4) of the act on 14.08.2024. The possession notice was affixed on the property on 14.08.2024 and the notice sent to the second respondent is served, the possession notice is also published in Tamil “Hindu Tamil” and in English “Financial Express” on 17.08.2024.

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In order to recover the loan dues, the first respondent has filed S. 14 application before the Ld. CJM and obtained an order dated 01.03.2025. The applicant being a lessee has challenged the present S. 14 order in the present SA. The lease agreement entered between the applicant and the 2^nd respondent is on 05.02.2016, which is subsequent to the Mortgage of the property with the first respondent and the stamp paper has been purchased subsequent to the lease deed i.e., on 13.02.2016 and even assuming the lease agreement has been renewed periodically i.e., every 11 months, the renewal of period ought to have been 11 months.

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First lease period from February 2016 to December 2016

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1^st Renewal must be from January 2017 to November 2017

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2^nd Renewal must be from December 2017 to October 2018

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3^rd Renewal must be from November 2018 to September 2019

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4^th Renewal must be from October 2019 to August 2020

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5^th Renewal must be from September 2020 to July 2021

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6^th Renewal must be from August 2021 to June 2022

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7^th Renewal must be from July 2022 to May 2023

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8^th Renewal must be from June 2023 to April 2024

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The 9^th Renewal ought to have been from May 2024, but the renewal of the lease has been made on 31.12.2024 which is after initiating the SARFAESI measures and the renewal of the lease has been made on 31.12.2024 for a period of 3 years from the date of execution.

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The respondent denies the allegation regarding payment of Rs. 15,00,000/through RTGS to Balaji Enterprises Account No. 660905500083 with ICICI Bank, Chennai and 1,20,000/- by cash and put the applicant to strict proof of the same. It is further submitted that the lease agreement has been entered subsequent to the mortgage and the renewal of lease also is unregistered one.

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It is submitted that the bank has followed all the formalities properly, being the lessee the applicant is precluded from raising these ground. While dealing with the application under Section 17 of the SARFAESI Act this Tribunal is only having its scope to analyse whether the procedural aspect under Section 13(4) had been complied with by the secured creditor for enforcement of security in accordance with the Act and Rules. In case if it is found that the proceedings initiated under Section 13(4) Act is not in accordance with Law and same should have to be interfered in the interest of justice to protect the interest of the borrower.

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On the other hand, if this Tribunal found that the proceedings initiated under Section 13(4) of the Act is in accordance with law the same

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cannot be restricted or interfered. In the present case respondent bank through this written statement as well as through the typeset of papers had clearly established the case on merits in their favour and the compliance of the mandates required under the Act and Rules. In such a case, the respondent bank prays this Tribunal to dismiss this appeal itself on merits and when the appeal itself is liable to be dismissed, the question in respect of granting interim stay should not be taken into consideration.

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The respondent Bank has reproduced S.17[1] of the Act and S.13[8], have highlighted the purpose of the SARFAESI Act. The amount divested to the 2^nd respondent and other borrowers loan account is public money which should not be rested with the defaulters for years and the first respondent has to pay Rs. 45,43,315/- as on 28.04.2025 and prays for the dismissal of the SA.

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Heard and perused the records of the case.

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The applicant is the third party who claims tenancy rights on the lease agreement dated 05.02.2016 which is entered with the second respondent who is the mortgagor of the first respondent bank. The terms of the lease is for a period of lease is 11 months and admittedly, the applicant has obtained the stamp papers on 13.02.2016 which is subsequent to the lease agreement dated 05.02.2016. Though applicant has produced the gas agency bill dated 23.02.2005. Aadhar card also reflects the same address. Applicant has also produced statement pass book in support of the case.

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The said lease agreement dated 08.02.2016 is renewed on 31.12.2024 which is produced by the applicant at Pg. 16 of the SA book which reflects that the renewal of lease is entered on 31.12.2024 between the second respondent and the applicant herein is for a period of 3 years from the date of execution which is not an registered document as required under Section 17 of the Registration Act.

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The respondent have produced the MODT dated 04.02.2016 which is one day prior to the first lease agreement dated 03.02.2016. However, as rightly pointed out by the first respondent counsel, though the lease dated 05.02.2016 the second respondent has mortgaged the property on 04.02.2016 admittedly, it is seen from the lease deed which is produced at Pg 12 of their SA book.

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Due to default in repayments, the respondent bank has classified the account as NPA on 08.05.2024, imitated measures under SARFAESI Act. Subsequent to classification of account as NPA have issued S.13[2] demand notice dated 09.05.2024 and S.13[4] notice dated 14.08.2024 which is duly served on the borrower.

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In fact the applicant admits the affixure of S.13[4] notice on the secured asset which is also informed to the borrower who has not challenged it under S.17 of the Act, which clearly reflects that the borrower is not aggrieved by the measures taken by the bank under the Act.

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Now the S.14 Order dated 01.03.2025 is impugned by the applicant claiming to be a lease on the secured asset is untenable as the

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lease agreement relied upon is for a period 3 years and un-registered one. The Tribunal places reliance of the case Bajarang Shyamsunder Agarwal V. Central Bank of India , the three-judge bench had observed that if a tenant claims possession of a Secured Asset for a term exceeding one year, then it has to be supported by execution of a registered instrument. In absence of such instrument, the tenant shall not be entitled to possession beyond the prescribed period under the provisions of the Transfer of Property Act.

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26. In the instant matter the claim on tenancy is based on unregistered agreement that too for a period of 03 years cannot frustrate the measures taken by the bank where he is not a bono fide tenant is not entitled for any protection. The Tribunal places reliance on the Supreme Court's decision in Hemraj Ratnakar Salian v. HDFC Bank Ltd. Cannot maintain the present SA.

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The claim of tenancy is not bonafide, accordingly the present SA stands dismissed.

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Interim order granted, if any stand vacated, pending IAs are disposed of in terms of in terms of this final order. No order as to cost.

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Sd/(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

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(Dictated to Steno (MS), transcribed by her, corrected, signed and pronounced by me on this the 16^th day of May, 2025)

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SCHEDULE OF THE PROPERTY

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SCHEDULE A PROPERTY

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All that piece and parcel of land bearing Plot No.49, measuring an extent of 1920 sq.ft., comprised in Survey No.36, Patta No.2577, as per patta Survey No.36/20, situated in “Chakkarapani Nagar” of Gerugambakkam Village, in Sriperumbudur Taluk, Kancheepuram District, within the Registration District of South Chennai and Sub-Registration District of Pammal bounded on the.

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North by : Land belongs to Srinivasan South by : Plot No.50 (Plot belongs to C. Radha) East by : 24 Feet Road West by : Plot No.51.

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Measuring:

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North to South on the Eastern Side	: 35	Feet
North to South on the Western Side	: 29	Feet
East to West on the Northern Side	: 60	Feet
East to West on the Southern Side	: 60	Feet

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SCHEDULE B PROPERTY

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The Proportionate undivided share area 463 Sq.ft., with all common rights title interest including the right to use the same in common in and out of 1920 Sq.ft., together with residential Flat No.S1, having plinth area measuring about 967 Sq.ft., inclusive of common area in the Ground Floor and one car parking in still Floor area, together with all the fixtures and fitting, electrical installation TNEB Service connection along with the security deposit and all the amenities in Flat No.S-1, situated at Plot No.49,comprised in Survey No.36, Patta No.2577, as per patta Survey No.36/20, known as “CHAKKARAPANI NAGAR” of Gerugambakkam Village in Sriperumbudur Taluk, Kancheepuram

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District, within the Registration District of South Chennai and Sub Registration of Pammal.

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LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl.	Description of Documents	Doc No.
No.
1.	Memorandum of Application.	A-1
2.	Lease Agreement dated 08.02.2016.	A-2
3.	Renewal Lease Agreement dated 31.12.2024.	A-3
4.	Bank Statement dated 08.02.2016.	A-4
5.	The Order copy of CJM Court, Kancheepuram in Crl. M.P. No.16 of 2025, dated 01.03.2025.	A-5
6.	Advocate Commissioner Notice dated 19.03.2025.	A-6
7.	Aadhar Card Copy of Applicant/Petitioner.	A-7
8.	Aadhar Card Copy of Mrs. Mahalakshmi.	A-8
9.	Gas Bill Receipt Copy of the Applicant/Petitioner.	A-9

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDENT

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Sl. No.	Description of Documents	Doc No.
1.	Counter filed by the first respondent dated 29.04.2025.	R-1
2.	Application form dated 10.12.2016.	R-2
3.	Sanction Letter dated 30.01.2016.	R-3
4.	Arrangement Letter dated 03.02.2016.	R-4
5.	Loan Agreement dated 03.02.2016.	R-5
6.	Sale deed dated 04.02.2016.	R-6
7.	Memorandum Relating of Deposit of Title Deeds dated 04.02.2016.	R-7
8.	Demand Notice issued under Section 13(2) of SARFEASI Act with acknowledgment cards dated 09.05.2024.	R-8
9.	Possession notice issued under Section 13(4) of SARFAESI Act with returned cover and photo dated 14.08.2024.	R-9
10.	Copy of paper publication in Tamil and English dated 17.08.2024.	R-10
11.	Statement of Accounts dated 29.04.2025.	R-11
12.	CERSAI Certificate.	R-12
13.	Petition filed under Section 14 of SARFAESI Act dated 23.09.2024.	R-13
14.	Order in Crl,M.P.No.16 of 2025 dated 01.03.2025.	R-14

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Sd/(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

S R Mohan v. State Bank of India

Case brief

What is this about?

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S R Mohan v. State Bank of India

Case brief

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