Dismissed

Mrs Pavana Nataraj Rao v. pegasus assets reconstruction Pvt. Ltd.

DRT26 Jun 2025SA/297/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the applicant's challenge against possession measures initiated by the ARC and continued by the bank. The court held the continuation valid and rejected the stamp duty and CERSAI objections.

What did the court decide?

The application challenging the possession notice was dismissed; all pending interlocutory applications were closed.

Mrs Pavana Nataraj Rao versus pegasus assets reconstruction… — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU

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Dated this 26^th Day of June, 2025

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Present: Sri. T. RAJESH Presiding Officer

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SA. No.297/2023

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BETWEEN:

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Mrs. Pavana Nataraja Rao W/o. Late Nataraj Janardhan Rao Aged about --- years R/at, No.1, Hari OM Apartments, Ground Floor, Opp Cottage Hospital, Silvassa, Union Territory of Dadra and Nagar Haveli - 396230

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… APPLICANT

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AND:

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1. The Authorised Officer

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Pegasus Assets Reconstruciton Pvt Ltd., Pegasus Group Thirty-Four Trust-I No.55-56, 5^th Floor, Free Press House, Nariman Point, Mumbai 400021

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2. The Authorized Officer

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NKGSB Co-operative Bank Ltd., Laxmi Sadan, No.361, V.P. Road, Girgaum, Mumbai- 400004

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...RESPONDENTS

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Counsel on record/appeared for:

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Applicant : E. Devaraja Respondents : M/s. Indilegal

SA. No. 297/2023

FINAL ORDER

The measures taken by the respondent under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( herein after referred to as SARFAESI Act or the Act) has been challenged by Applicants in the present SA. The applicants prays for setting aside the possession notice dated 12.10.2023.

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The possession notice issued by respondent ARC is under challenge by the applicant. The applicant admits the availment of Term loan of Rs.2.00 Crores and OD facility of 1.00 Crore from NKGSB Co-operative Ltd at Udupi. As the guarantor to the borrower who is none other than the applicant’s Late husband. The availment of three other loans namely Housing loan of Rs.70.00 lakhs and Mortgage loan of Rs.2.00 Crore and Rs.1.00 Crore from the 2^nd respondent bank is also admitted. It is also the case of the applicant that, the repayment was regular and prompt in the early stages, but the applicant admits that, the default occurred in the account which the applicant attributes to the loss of income due to Covid-19.

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The applicant contends that NPA classification is not in accordance with statute and the alleged mortgage in favour of the said Co-operative bank is not registered with CERSAI. It is also

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SA. No. 297/2023

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contended that no stamp duty is paid in respect of the assignment deed in favour of Asset Recovery Company which issued the impugned possession notice. The applicant is challenging measures alleging the non-compliance of Rule 8(1) and (2) and contends that there is also non-compliance of Rule 13(3)(a) as the representation made by the applicant on 17.05.2018 remains un-answered. Along with the SA, the applicant has produced the following documents: 1) Demand Notice; 2) Reply Demand Notice; 3) Order passed in SA.346/2023 and 4) Impugned Possession Notice. On the above premises the applicant seeks to set aside the measures leading to the impugned possession notice issued by the ARC.

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The 1^st respondent has filed their objections contending that, the measures taken by them are in accordance with statute and the SA filed without impleadment of other legal heirs of Late Nagaraja Rao, is to be dismissed on the ground of non-joinder of necessary parties. The 1^st respondent had submitted that, the debt has been assigned in favour of them and by the Assignment Agreement dated 26.03.2019. It is contended that, by virtue of the Assignment Agreement, the 1^st respondent, the assignee is having rightful and absolute right to continue the measures, already initiated by Co-operative Bank. The alleged non registration of CERSAI is also disputed by the 1^st respondent. The claim of the

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SA. No. 297/2023

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applicant as to the issuance of so claimed reply to the Demand notice is also denies specifically in the objections.

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Along with the objections the respondent has filed the

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following documents: Board Resolution of the Respondent No. 1 dated 12/12/2023; Sanction Letter dated 15-12-2015 in respect of ODAP loan and Mortgage Term Loan granted to Borrower Company; Certified true copy of the Resolution dated 16-12-2015; Facility Agreement dated 04-01-2016; Agreement for Overdraft dated 0401-2016; Demand promissory note dated 04-01-2016; Continuing Security Letter dated 04-01-2016; Letter of lien and set off dated 04-01-2016; Deed of guarantee dated 04-01-2016; Term Loan Agreement dated 04-01-2016; Demand promissory note dated 0401-2016; Letter of lien and set off dated 04-01-2016; Deed of guarantee dated 04-01-2016; Memorandum evidencing Deposit of Title Deeds dated 28-12-2015; Sale Deed dated 09-10-2013 in Favour of Late Nataraja J Rao and Pavana N Rao; Demand Notice dated 11-01-2018, issued under Section 13(2) of the Act, and postal receipts and acknowledgments; Possession Notice dated 12/10/2023 alongwith postal receipts and AD Cards; 18. Paper publications dated 17/10/2023 in New Indian Express and Kannada Prabha Udupi Editions and Business Standard and Gujarat Guardian Amdavad Editions; Photographs evidencing pasting of the

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SA. No. 297/2023

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Possession Notice dated 12/10/2023; Extract of the Statement of Accounts in respect of Overdraft (Rs 1.00 Crore) and Term Loan (Rs 2.00 Crore) upto 30/01/2024; CERSAI search Report; Relevant Portions of the Assignment agreement dated 26/03/2019; Letter intimating the Borrowers of the assignment dated 25/04/2019 a/w the postal receipts; Letter dated 16/09/2023 requesting OTS issued by the appellant and Valuation Report and reply dated 29/09/2023 issued by the Respondent No.1 a/w. consignment note and delivery proof. Heard the counsels for both sides.

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The only issue arise for consideration is as to the legality of the measures initiated by NKGSB Co-Operative Bank Ltd., and continued by the 1^st respondent herein leading to the issuance of the impugned possession notice. The applicant who is not disputing the disbursement of the facility, creation of security interest and the defaults is disputing the NPA classification that too without furnishing any particulars as to the payments made by them. In absence of any evidence as to the payments made by the borrowers, this Tribunal is not in a position to entertain any challenge as to the NPA classification.

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The next contention taken by the applicant is that, the respondent had issued the possession notice after the lapse of 4

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SA. No. 297/2023

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years that too in continuation of the demand notice issued by the Co-operative Bank. This Tribunal finds no fault in this measures, after the assignment it is for the assignee to decide when and how to continue the measures or whether to go denovo measures. There is no ill-legality in continuing the earlier measures taken by the 2^nd respondent, the assignor for the credit facilities.

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Even though, the applicant has taken the contention that the no stamp duty is paid in Karnataka, the Ld. Counsel for the respondent placing reliance on decision of the Hon’ble Madras High Court in M/s. Veena Textiles Limited Vs The Authorized Officer, it is stated that:

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(13.) It is not in dispute that the above properties thus assigned under the deed of assignment dated 25.05.2011, are admittedly situated in Tamil Nadu and not within the jurisdiction of the Registering Authority at Calcutta. Therefore, it is very clear that the said assignment deed made at Calcutta in respect of property situated in Tamil Nadu and got registered before the Registering Authority, Calcutta was against Section 28 of the Registration Act as amended by the Tamil Nadu Act 19 of 1997 with effect from 29.03.1997, which reads as follows:-

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28. Place for registering documents relating to land: Save as in this part otherwise provided:- (a) Every document mentioned in clauses (a), (b), (c), (d) and (e) of sub-section (1) and sub-section (2) of Section 17 in so far as such document affects immovable property and in clauses (a),

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SA. No. 297/2023

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(b), (c) and (ce) of Section 18, shall be presented for registered in the office of a Sub-Registrar within whose subdistrict the whole or some portion of the property to which such document relates is situate in the State of Tamil Nadu, and

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(b) any document registered outside the State of Tamil Nadu in contravention of the provisions of clause (a) shall be deemed to be null and void. 1

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(14.) A perusal of the above said provision of law would show that the document registered outside the State of Tamil Nadu in contravention of the provisions of clause (a) of Section 28 of the Registration Act shall be deemed to be null and void. Therefore, there cannot be any doubt that the deed of assignment dated 25.05.2011 is deemed to be null and void, since the same was made in violation of the Registration Act. Consequently, the first respondent, having not empowered to act legally against the petitioners in pursuant to the said deed of assignment dated 25.05.2011, was not entitled to initiate the proceedings before the second respondent under the SARFAESI Act, which has resulted in passing the impugned order by the second respondent under Section 14(3) of the SARFAESI Act.

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Taking into consideration of the above res-Integra laid down by the Hon’ble Madras High Court, this Tribunal is of the view that, this Tribunal has to discard the contention of the applicant in this regard.

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SA. No. 297/2023

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The applicant has produced the Final Order passed in the SA.No.346/2023 wherein this Tribunal had proceeded to pass the final order as the 1^st respondent herein failed to appear and file their objections. It is pertinent to note that, even though the final order is passed taking note of the non-participation of the first respondent, this Tribunal has not set aside the demand notice issued by the Co-operative bank which leads to conclusion that the continuation of the measures by the 1^st respondent in pursuant to above demand notice cannot found fault with.

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The respondent bank had produced the proof as to the compliance of Rule 8(1) and (2) of Rules and also as to the CERSAI registration, which leads to the conclusion that there is no merits in the SA.

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In the result S.A.No.297 of 2023 stands dismissed. All pending IAs stand closed. The parties to bear their respective costs. Copy of this order be communicated to the parties concerned.

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[Dictated to the Stenographer (PR), transcribed by her, corrected and signed and pronounced by me in the Open Court, this the 26^th Day of June 2025].

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Sd/-

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DRT-II, BENGALURU

Mrs Pavana Nataraj Rao v. pegasus assets reconstruction Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Mrs Pavana Nataraj Rao v. pegasus assets reconstruction Pvt. Ltd.

Case brief

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What did the court decide?

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