Dismissed

Formost Center v. Hdfc Ltd.

DRT18 Jun 2025SA/291/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed an application by applicants challenging the classification of their loan accounts as NPAs, the issuance of possession notices, and a request for loan restructuring. The Tribunal held that the NPA classification was valid, the consolidated notice caused no prejudice, and restructuring is not a relief available under the SARFAESI Act.

What did the court decide?

Application for quashing NPA status, possession notice, and restructuring permission dismissed. No order as to costs.

Formost Center versus Hdfc Ltd. — Company and Corporate | 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 18^th DAY OF JUNE, 2025

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

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S.A No. 291 of 2022

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Between

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M/s Formost Centre, Door No.40/7116, 7117 & 7118, MG Road, Ernakulam,

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Kerala -682035.

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Mr. Kunchi Nelliyil Abdul Gafoor, “Rangoon”, 37/2127A, Kathrikadavu, Near Marvel Mansion, Kaloor,

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Kochi-682 017.

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Mrs. Jesna Abdul Gafoor, “Rangoon”, 37/2127A, Kathrikadavu, Near Marvel Mansion, Kaloor, Kochi-682 017.

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Fariz Al Kasmi, “Rangoon”, 37/2127A, Kathrikadavu, Near Marvel Mansion, Kaloor, Kochi-682 017.

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M/S Formost, Door No.40/7116, 7117 & 7118, MG Road, Ernakulam,

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Kerala -682035.

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Mrs. Husna Gafoor Kunchi Nelliyil, “Rangoon”, 37/2127A, Kathrikadavu, Near Marvel Mansion, Kaloor, Kochi-682 017.

--- Applicants

SA No.291 of 2022

And

HDFC Ltd., Ravipuram Branch, HDFC House, Ravipuram Junction, MG Road, Ernakulam -682 015 Represented by its Branch Manager.

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Manager, Ravipuram Branch, HDFC House, Ravipuram Junction, MG Road, Ernakulam -682 015.

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--- Defendants

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This Securitization Application coming on 07.03.2025 for final hearing before me in the presence of Mr. S. Prasanth, Counsel appeared for the Applicants and Mr. Anto Thomas Adipuzha, Counsel appeared for the 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 17.06.2022 seeking to declare Annexure – A17 is null and void and to quash Annexure – A3 possession notice and to restrain the defendants from taking physical possession of the secured asset and to direct the defendants to declassify the status as NPA and to permit the applicants to restructure their loan account as per RBI guidelines and to pay cost of this proceedings.

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Applicants 2, 3, 4 & 6 are the partners of the 1^st and the 5^th applicant firms. The availment of credit facility to a tune of Rs.1,37,00,000/- vide account No.619892224 by the applicants 2, 3, 4 & 6 and availment of credit facility to the tune of Rs.98,75,000/vide account No.619892420 by the applicants 2, 5 & 6 is admitted by the applicants.

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Creation of equitable mortgage by deposit of title deeds by the applicants 1 to 4 over their immovable property which is undivided share in 2.36 Ares of land comprised in Sy. No.751/5 of Poonithura Village, Kanyannur Taluk, Ernakulam District and commercial building in the 1^st floor thereon, as collateral security for the

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Page 2 of 9

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SA No.291 of 2022

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availment of credit facility of Rs.1,37,00,000/- is also admitted by the applicants.

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Creation of equitable mortgage by deposit of title deeds by the applicants 1, 5 & 6 over their 1/3^rd undivided share in 2.63 Ares of land comprised in Sy. No.751/5 of Poonithura Village, Kanyannur Taluk, Ernakulam District and commercial building in the ground floor thereon, as collateral security for the availment of credit facility of Rs.98,75,000/- is also admitted by the applicants.

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The applicants have not averred in the SA as to whether they were prompt in repayment of the outstanding loan due. According to the defendants, since the applicants defaulted in repayment of the outstanding loan due in respect of both loan accounts, the loan accounts of the applicants came to be classified as Non-Performing Asset on 31.08.2021 as per RBI guidelines.

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According to the defendants, Annexure – A11 demand notice dated 22.10.2021 was affixed on the conspicuous part of the secured assets and it was also published in newspapers. Subsequently, the demand notice was issued to the applicants calling upon them to pay the outstanding within a period of 60 days from the date of receipt of the demand notice. The applicants 1 to 4 sent Annexure – A12 representation dated 08.01.2022 and the applicants 2, 5, & 6 sent Annexure – A13 representation dated 08.01.2022 to the defendants stating the illegalities and arbitrariness in respect of issuance of demand notice and also violation of the rules of the SARFAESI Act. The defendants sent Annexure – A15 reply dated 11.01.2022 for the representations sent by the applicants.

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Subsequently, Annexure – A3 possession notice dated 07.06.2022 was issued.

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The defendants approached the Chief Judicial Magistrate Court, Ernakulam and filed application and affidavit under Section 14(1) of the SARFAESI Act, 2002. The matter was made over to the Additional Chief Judicial Magistrate (MP & MLAs) Court Annexure – A16 order dated 27.04.2022 came to be passed appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure – A3 to the applicants informing that he would take physical possession of the secured asset on or after 22.06.2022. The applicants having aggrieved the aforesaid measures have filed this SA seeking for the reliefs sought for in supra.

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The counsel appearing for the applicants submitted that two accounts of the applicants were properly serviced and that there was no default till April, 1^st 2021 and that the classification of the loan account Nos.619892224 and 619892420 as NPA on account of default

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Page 3 of 9

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SA No.291 of 2022

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committed by the 2^nd applicant who had availed credit facility in account No.600177822 of which only one partner of the partnership firm has become NPA is not permissible as per RBI guidelines. The above classification can be done only when the borrower or entity is one and the same. All the loan accounts are not the same. Therefore, one or more account of the borrower only can be combined and the bank cannot combine the account belonging to another or to himself alone with another account which is a joint account as held by the Hon'ble High Court of Punjab & Haryana in Punjab National Bank Vs. Arura Mall Durga (AIR 1960 P & H 632).

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Per contra, the counsel appearing for the defendants submitted that the loan account No.600177822 in the name of Shri. Fajr K. N. and the 2^nd applicant who had availed credit facility to the tune of Rs.28 Lakhs had turned NPA and that SARFAESI measures were initiated by the defendants against them separately and that against the aforesaid measures, the above said Fajr K. N. and the 2^nd applicant have filed SA before this Tribunal.

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The counsel appearing for the defendants further submitted that both loan account Nos.619892224 and 619892420 were not classified as NPA on account of classification of loan account No.600177822 as NPA. The loan account Nos.619892224 and 619892420 turned NPA since the loan accounts were not eligible for loan restructuring and the said fact was intimated to the applicants as per E-mail dated 31.08.2021. SARFAESI measures were initiated only against the aforesaid two accounts and not against the loan account No.600177822.

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In Annexure – A11 demand notice only the two loan accounts of the applicants i.e. Nos.619892224 and 619892420 are referred to and there is no reference with regard to loan account No.600177822 as evidenced from perusal of schedule (I) to the demand notice. Therefore, it is evident that loan account Nos.619892224 and 619892420 were not classified as NPA for the reason of classification of loan account No.600177822. Hence, the submission of the counsel for the applicants that the classification of the loan account Nos.619892224 and 619892420 as NPA on account of default committed by the 2^nd applicant who had availed credit facility in account No.600177822 of which only one partner of the partnership firm has become NPA is not permissible as per RBI guidelines appears to be misconstrued. Hence, the judgment of Hon'ble High Court of Punjab & Haryana decided in Punjab National Bank Vs. Arura Mall Durga has no application to the facts of this present case. Therefore, this Tribunal does not find any illegality or procedural irregularity in respect of classification of loan account Nos.619892224 and 619892420 of the applicants as NPA.

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Page 4 of 9

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SA No.291 of 2022

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In Annexure – A11 demand notice, two different loan account numbers one pertaining to M/s. Formost and another one in respect of M/s. Formost Centre is referred to. The amount disbursed against the aforesaid loan accounts and date of classification of loan accounts as NPA is also referred to in the demand notice. Since the borrowers happened to be the partners of both firms, both loan accounts were consolidated together in the same demand notice. The applicants have not demonstrated in the SA as to what was the prejudice caused to them by sending the demand notice pertaining to both loan accounts. Hence, this Tribunal does not find any force in the contention of the applicants that issuance of demand notice for two different loan accounts is violation of the SARFAESI Act and the Rules made thereunder.

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The applicants have not pointed out in the SA as to what was the prejudice caused to them on account of affixture of the demand notice on the conspicuous part of the secured asset and publication of the same in the newspapers prior to personal service of demand notice to them. Further the proviso of Section 13 of Sub-Section (2) does not prohibit the secured creditor from affixing and publishing the demand notice prior to personal service of demand notice to the borrowers/guarantors as rightly submitted by the counsel for the defendants.

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The applicants have not specifically averred in the SA as to whether the affidavit filed by the defendants in MC No.243/2022 is not in compliance with the statutory requirements contemplated under Clause (i) to (ix) to the proviso of Section 14 of Sub-Section (1) of the SARFAESI Act, 2002. A perusal of Annexure – A16 order shows that the Chief Judicial Magistrate Court, Ernakulam after having perused the contents of the affidavits and the documents filed in support of the affidavit and having satisfied with the compliance of the statutory requirements of Section 14(1) of the SARFAESI Act, 2002 passed order appointing Advocate Commissioner to take physical possession of the secured asset. This Tribunal does not find any illegality or infirmity in the order.

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One of the reliefs sought for by the applicants in the SA is to permit them to restructure their loan accounts as per RBI guidelines. The above said relief does not fall under any of the category of the measures referred to in Section 13(4) of the SARFAESI Act, 2002. It is for the applicants to approach the 1^st defendant bank for getting the aforesaid relief.

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Page 5 of 9

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SA No.291 of 2022

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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, SA No.291 of 2022 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 18^th day of June, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 6 of 9

SA No.291 of 2022

‘A’ S C H E D U L E

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Boundaries

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Survey No.751/5

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East : Property of Gopalakrishnan and Chandrasekharan North : Property of Chandrasekharan West : N.H. Service Road South : Property of Gopalakrishnan

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Description

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2/3^rd undivided shares in 2.63 Ares of land comprised in Sy. No.751/5 of Poonithura Village, Kanayanoor Taluk, Ernakulam District together with commercial space numbered 49/268 (30/1266B1) and 49/268-A (30/1266-B2) having a built up area of 98.44 Sq. meters each in the 1^st and 2^nd floor in the three storied complex along with car parking area in the ground floor bearing No.49/267 and having built up area of 98.44 Sq. Meters in ground floor together with 1/3 undivided share of land in 2.63 Ares in Sy. No.751/5 situated at Poonithura Village, Kanayannur Taluk, Ernakulam along with car parking area.

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(Su. WILLYAHM) PRESIDING OFFICER

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Page 7 of 9

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SA No.291 of 2022

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

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Sl. No.	Date	Particulars
1.	01.04.2016	True copy of the partnership deed for applicantNo.1 Firm.	Annexure-A1
2.	01.04.2016	True copy of the partnership deed for applicantNo.5Firm.	Annexure-A2
3.	07.06.2022	True copy of the notice issued to 1^st applicant by the Advocate Commissioner.	Annexure-A3
4.	20.06.2016	True copy of the sanction certificate givento applicantNo.1 Firm.	Annexure-A4
5.	26.05.2016	True copy of the loan agreement given to applicantNo.1 Firm.	Annexure-A5
6.	---	True copy of the communications between the representative of the applicant firm and the defendant from 03.06.2021to 07.09.2021.	Annexure-A6
7.	---	True copy of the email communications dt. 16.11.2021 and 18.11.2021 between the applicantfirms.	Annexure-A7
8.	---	Photos evidencing the affixation of Sec.13(2) notice on the premises of the schedule property.	Annexure-A8
9.	26.11.2021	True copy of the mail communication	Annexure-A9
10.	---	True copy of the courier tracking details and acknowledgement slip of the demandnotice.	Annexure-A10
11.	22.10.2021	True copy of the demand notice issued to the applicants.	Annexure-A11
12.	08.01.2022	True copy of Sec.13(3A) representations made by applicants1to4.	Annexure-A12
13.	08.01.2022	True copy of Sec.13(3A) representations made byapplicants 2, 5and 6.	Annexure-A13
14.	---	True copy of the acknowledgment receipts ofSec.13 (3A)representations	Annexure-A14
15.	11.01.2022	True copy of the letter issued by the defendants declining Sec.13(3A) representationsmade by the applicants	Annexure-A15
16.	27.04.2022	True certified copy of the order in MC No.243/2022 by the Additional Chief Judicial Magistrate (MPs/MLAs) Court, Ernakulam	Annexure-A16

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Page 8 of 9

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SA No.291 of 2022

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17.	---	True certified copy of petition filed by	Annexure-A17
		the defendants under Sec.14 of
		SARFAESI Act, before the Chief Judicial
		Magistrate Court,Ernakulam.

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

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Sl.	Date	Particulars
No.
1.	----	True copy of home loan agreement in accountNo.619892224	Annexure-A1
2.	----	True cop of loan agreement in account No.619892420	Annexure-A2
3.	----	True copy of receipts issued by the courier company while sending Annexure– A11demandnotice	Annexure-A3

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 9 of 9

Formost Center v. Hdfc Ltd.

Case brief

What is this about?

What did the court decide?

Formost Center v. Hdfc Ltd.

Case brief

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