Dismissed

M D Engandiyur Farmers Service Co. Bank Ltd. v. South Indian Bank

DRT23 Jun 2025SA/289/2024

Case brief

AI extract

What is this about?

The applicant bank challenged the bank's physically possession of a secured asset, claiming tenancy rights based on an unregistered lease. The Debts Recovery Tribunal held that an unregistered lease for over a year confers no right to resist summary possession, dismissing the application but directing eviction within four months.

What did the court decide?

The applicant was directed to vacate the premises within four months, after which the respondent bank can take physical possession.

M D Engandiyur Farmers Service Co. Bank Ltd. versus South Indian… — Cheque Dishonour | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated this the 23^rd day of June, 2025

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SECURITIZATION APPLICATION No.289/2024

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Between

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Managing Director, Engandiyur Farmer’s Service Co-operative Bank Ltd. No.F 977, Engandiyur P.O., Chettuva, Thrissur District-680 616. …Applicant

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And

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The Authorised Officer, The South Indian Bank Ltd., Regional Office, Ist Floor, Platinum Jubilee Building, Civil Lane Road, Ayyanthole, Thrissur, PIN 680 003.

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Saidu Mohammed, Panikkaveettil, Thirunelly House, Kundaliyur P.O., Chettuva, Thrissur, PIN 680 616.

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Sajeena Saidu Mohammed, Panikkaveettil, Thirunelly House, Kundaliyur P.O., Chettuva, Thrissur, PIN 680 616. …Defendants

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SA 289/2024

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This Securitization Application having been heard on 13.05.2025 in the presence of Advocates M/s.Rasmi Nair T. and Jithendran S. for the applicant and Advocate Shri.Anto Thomas Adipuzha for the 1^st defendant, and defendant Nos.2 and 3 being absent, and stood over to this day for consideration, the Tribunal delivered the following:

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F I N A L O R D E R

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Challenging the securitization proceeding initiated by the defendants under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’), the applicant, claiming as tenant in the subject matter property, has filed this SA under S.17(1) of the SARFAESI Act.

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Brief facts of the case :

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2.1 The applicant, a Co-operative Bank, has filed this SA through its Managing Director claiming that it is occupying the subject matter property from 08.12.2012 as a tenant under the owners of the said property, defendant Nos.2 and 3 in this case. A Lease Agreement between them was executed on dated 17.06.2013. The applicant continued to occupy the premises as

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SA 289/2024

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tenant under defendant no 2 and 3 and the rent from 01.08.2013 to 03.04.2024 was paid to them making entry in the ledger.

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2.2. It is further averred that defendant Ns.2 and 3 availed loan on 12.07.2018 creating security interest in respect of the subject matter property, while the applicant was continuing its business on the basis of Lease Agreement. Due to default committed by defendant Nos.2 and 3, the 1^st defendant Bank initiated securitization measure and proceeded to take physical possession of the subject matter property, in pursuance to the order passed by the Chief Judicial magistrate Court, Thrissur in a proceeding under Section 14 of the SARFAESI Act. The applicant came to know about initiation of such proceeding after getting notice from the Advocate Commissioner. Since the applicant is in possession of the secured asset as a tenant based on valid tenancy agreement, the 1^st defendant cannot evict it from the secured asset without taking legal recourse in proper forum. Hence the applicant seeks to set aside all the securitization measure initiated by the first defendant in respect of the subject matter property.

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3.1 The defendants filed written statement denying the averments in the SA and claimed inter alia that on 10.07.2018, 2^nd and 3^rd defendants availed SIB-Loan against property of

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SA 289/2024

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Rs.4,27,00,0000/- after executing necessary loan documents. Due to default committed by the borrowers, the loan was classified as ‘NPA’ and securitization proceeding was initiated by issuing demand notice to the defendant Nos.2 and 3. They did not claim about existence of tenancy over the secured asset at the time of availing the loan. Possession notice under Section 13(4) of the SARFAESI Act was also issued to the borrowers after compliance of the statutory requirement. As the defendants faced difficulty in taking physical possession of the secured asset, an application under Section 14(1) of the SARFAESI Act was filed before the Chief Judicial Magistrate Court, Thrissur to take physical possession of the secured asset. The Advocate Commissioner, being appointed by the Chief Judicial Magistrate to take possession of the secured asset, issued notice to take possession of the same, which is impugned in this proceeding by the applicant.

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3.2 It is claimed by the defendants that the alleged Lease Agreement filed by the applicant is not a valid and legal document under Section 107 of Transfer of Property Act. A lease of immovable property from year to year or for any time exceeding one year can be made only by registering the instrument. Since there is no registered instrument, the alleged Lease Agreement is

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SA 289/2024

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not a valid document and the applicant is not entitled for any protection. Hence this SA, being devoid of any merit, may be dismissed.

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From the respective case of the applicant and defendants, the following points are emerged for adjudication in this case:

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(i) Whether the applicant has any tenancy right over the secured asset to restrain the defendant No.1 in taking possession of the secured asset?

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(ii) Whether the applicant is entitled to get any relief in this proceeding?

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FINDINGS:

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Point Nos.(i) & (ii):

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For the sake of convenience, both the points, being interlinked with each other, are taken up together for adjudication. Admittedly the defendant Nos.2 and 3 availed loan from the first defendant Bank by creating security interest over the subject matter property. Due to default committed by defendant Nos.2 and 3, securitization proceeding was initiated against them. After passing of the order by the Chief Judicial Magistrate Court, Thrissur in a proceeding under Section 14 of the SARFAESI Act and issuance of notice by the Advocate Commissioner to take possession of the

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SA 289/2024

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secured asset, the present SA is filed by the applicant claiming tenancy right over the subject matter property.

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In the SA the applicant claimed tenancy right over the subject matter property as per the lease agreement dated 17.06.2013 marked Annexure-A1 in this case. It is claimed that the applicant is paying rent from 01.08.2013 to 03.04.2024 by making entry in the ledger of the applicant, marked AnnexureA2. It is further claimed that the defendant Nos.2 and 3 availed loan on 12.07.2018 from the first applicant bank creating security interest over the subject matter property. The lease was created prior to creation of security interest by the defendant no.2 and 3. Due to default committed by defendants 2 and 3 in repaying the loan, the 1^st defendant cannot take possession of the secured asset in a summary proceeding, except taking recourse for eviction of tenant in accordance with the law. The applicant is not bound by the Order passed by the Chief Judicial Magistrate, Thrissur in C.M.P. No.8992/2023. Hence the SA is filed by the applicant seeking to declare that taking of possession of the secured asset by the defendant bank is illegal and to set aside all the securitization proceeding as illegal and not binding on it.

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SA 289/2024

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Admittedly, the 2^nd and 3^rd defendants availed loan from the 1^st defendant bank by mortgaging the subject matter properties on 10.07.2018. Due to default committed by the 2^nd and 3^rd defendants the securitization proceeding was initiated after following the statutory requirement. The relevant documents are filed in this case showing compliance of the statutory requirements.

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Admittedly Annexure A1 document is not registered. It was executed on 17.06.2013 between the 2^nd defendant and one Hema, Managing Director of the applicant Co-operative Bank, at a monthly rent of Rs.10,000/-. It is stated in the said agreement that the rent may be increased in a reasonable manner every 3 years as per mutual consent. From the averments of this lease agreement, it appears that it was created for a period of more than one year. Creation of lease by any registered agreement for more than one year is invalid in view of Section 107 of the Transfer of Property Act. Further no material is placed on record by the defendants regarding acknowledgement of the receipt of the rent by the 2^nd and 3^rd defendants, except on production of copy of the ledger accounts showing payment of Rs.10,000/-. In some places of the ledger, it is shown that the rent is transferred to the 2^nd defendant. Even if it is accepted that the applicant was rendering rent regularly

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SA 289/2024

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to the 2^nd and 3^rd defendants, the same would not stand as a bar

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to continue with securitization proceeding for realization of the outstanding dues from the 2^nd and 3^rd defendants.

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In the judgment of the Hon'ble Apex Court in the

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case of Bajarang Shyamsunder Agarwal v. Central Bank of

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India & another , reported in 2019 (9) SCC Page no. it was held in paragraph 24 as follows:-

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“24.1 If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant’s possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of the TP Act for determination of leases. As the existence of a prior existing lease inevitably affects the risk undertaken by the bank while providing the loan, it is expected of Banks/Creditors to have conducted a standard due diligence in this regard. Where the bank has proceeded to accept such a property as mortgage, it will be presumed that it has consented to the risk that comes as a consequence of the existing tenancy. In such a situation, the rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.

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24.2 If a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65A of the T.P. Act.

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24.3 In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the T.P. Act.”

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SA 289/2024

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During pendency of the SA an Advocate commissioner visited the spot to report about the status of the subject matter property. In her reports he has stated specifically that the branch of the applicant is situated on the ground floor of the said building which was used for normal banking operation of the applicant. Possession of the applicant is not disputed. Question arises whether such possession of the applicant is valid under the law. In view of this ratio decidenti of the Hon’ble Hon’ble Apex Court, tenant has no right over the property if the lease was created for more than one year by unregistered document. Hence the applicant has no legal right over the subject matter property and it is bound to hand over the possession of the secured asset to the defendant No.1. The applicant is not entitled to get any relief. Hence both the points are answered against the applicant. As a bank is functioning in the subject matter property the applicant shall vacate the premises within 4 months from passing of this Judgment. After availing of the said period, if the applicant will not hand over the vacant possession of the subject matter property to the defendant Nos.1, he may proceed in the securitization measure in taking physical possession of the secured asset in accordance with the law.

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SA 289/2024

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Hence it is ordered:-

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ORDER

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In view of the foregoing reasons and with above

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observation, this SA, being devoid of any merit, is hereby dismissed

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but in the circumstance without cost.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 23^rd day of June, 2025).

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 289/2024

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Documents on the part of the applicant

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Annexures	Date	Particulars of documents
Annexure-A1	17.06.2013	True copy of the Lease Agreement with English Translation.
Annexure-A2		True copy of the rent payment ledger of the applicant from 01.08.2013 to 03.04.2024.
Annexure-A3		True copy of the possession notice issued by the 1^stdefendant.
Annexure-A4	02.04.2024	True copy of the notice issued by the Advocate Commissioner with English translation.
Annexure-A5	20.09.2023	True copy of CMP No.8992/2023.
Annexure-A6	18.10.2023	True copy of Order.

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Documents on the part of the defendants

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Annexure-B1	10.07.2018	True copy of the Credit Facility Agreement executed by the applicant in favour of the Bank.
Annexure-B2	05.04.2023	True copy of the Demand Notice issued under Section 13(2) of the SARFAESI Act by the 1^stdefendant to the borrowers.
Annexure-B3	04.07.2023	True copy of the Possession Notice issued under Section 13(2) of the SARFAESI Act
Annexure-B4	09.04.2024	True copy of Sale Notice issued by the 1^st defendant.
Annexure-B5		True copy of CERSAI Certificate.
Annexure-B6	10.07.2018	Deed of Declaration from the Mortgager (6 Nos.)

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PRESIDING OFFICER

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated the 23^rd June, 2025

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SA No.289/2024

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Between

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Managing Director, Engandiyur Farmer’s Service Co-operative Bank Ltd. No.F 977, Engandiyur P.O., Chettuva, Thrissur District. …Applicant

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And

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The Authorised Officer, The South Indian Bank Ltd., Regional Office, Ist Floor, Platinum, Jubilee Building, Civil Lane Road, Ayyanthole, Thrissur, PIN 680 003 & Ors. …Defendants

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F I N A L O R D E R

M D Engandiyur Farmers Service Co. Bank Ltd. v. South Indian Bank

Case brief

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M D Engandiyur Farmers Service Co. Bank Ltd. v. South Indian Bank

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