Dismissed

E Damodharan v. City Union Bank Limited

DRT15 Jul 2025SA/311/2025

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a Securitization Application filed by a tenant challenging eviction measures. The Tribunal found the lease, executed after the mortgage and shortly before the default notice, was not bona fide and violated Section 17(4A) of the SARFAESI Act due to its timing and lack of supporting evidence of residence.

What did the court decide?

The Securitization Application was dismissed; any interim order granted is vacated; pending IA is disposed of.

E Damodharan versus City Union Bank Limited — Banking and Recovery | DRT (2025)

SA No.311/2025

15.07.2025

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 15^th day of July, 2025

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Present: SMT. S.V. GOWRAMMA

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Presiding Officer

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SA No. 311 of 2025

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Mr. Damodharan S/o Mr. Ezhumalai Old No.C-76, 14^th Street, Periyar Nagar, Chennai – 600 082 ….Applicant

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-Vs-

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City Union Bank Rep. by its Authorized Officer No.102, Kutcherry Road, Virudhunagar – 626 001 Rep. by its Authorized Officer Mr. K. Dhinakaran

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C. Narayanan S/o Mr. Chinnathambi New No.21, Old No.C-76, 14^th Street, Periyar Nagar, Chennai – 600 082. ….Respondents

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Counsels on record / appeared:

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Counsel for Applicant : M/s. A. Muralidharan Counsel for respondent bank : M/s. A. Karthikeyan

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ORDER ON SA 311/2025

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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

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Security Interest Enforcement Rules, 2002 [for short the Rules].

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15.07.2025

The applicant has challenged the Order dated 28.02.2024 passed by Ld CMM, Egmore in Crl.MP.No.27556/2022 and the outstanding amount due as per the order dated 28.02.2024 is Rs.11,45,28,910/-

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3. Pleadings of the applicant:

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3.1 The applicant is a tenant residing at New No.21, Old No.C-76, 14^th Street, Periyar Nagar, Chennai – 600 082, had entered into a lease agreement with the 2^nd respondent on 12.04.2021 for a period of 5 years on a monthly rent of Rs.3000/- with a refundable deposit amount of Rs.2,00,000/-

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3.2 The 2^nd respondent stood as a guarantor for the loan availed by the M/s MMS Iron corporation from the respondent bank and mortgaged the property for security of the repayment.

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3.3 On 27.11.2024 an advocate commissioner along with the bank officials visited the property informed the applicant to vacate and handover the possession of the property, then about informed that the 1^st respondent bank had obtained an order in Crl.Mp. No.27756/2022 passed by Hon’ble learned CMM, Egmore dated 28.02.2024 and obtained an order of extension dated 09.09.2024.

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3.4 The respondent bank being aware that the applicant is residing in the possession of the property as a tenant or lease has not given any prior notice to the applicant during the SARFAESI measures and suppressed the facts of registered lease and tenancy.

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3.5 The applicant submits that he is residing in the possession since 12.04.2021 along with his family, in pursuant to the extension of warrant dated 09.09.2024 obtained from learned CMM, Egmore in Crl.M.P.27556/2022 advocate commissioner along with the aid of police may come and evict the applicant from possession of the property. Further, the applicant is a lawful tenant and if the applicant is evicted from possession of the property, he will suffer irreparable loss and hardships. The eviction of applicant is in violation of law under the Tamilnadu Regulation of rights and responsibilities of Tenants Act, 2017.

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3.6 Further, applicant has paid the rent to the possession of the property from 12.04.2021 as per the lease agreement and the agreement expires on 11.04.2026. Applicant had pressurized the 2^nd respondent for the advance amount of Rs.2.00 lakhs and the same is assured by 2^nd respondent to be paid within 4 months’ time.

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3.7 The applicant requires a 4 months time to vacate and to handover the property. In these circumstances applicant prays to set aside all the measures initiated by the respondent in pursuant to the order dated 28.02.2024 in Clr.M.P. No.27556/2022 and warrant dated 27.11.2024 issued to the advocate commissioner.

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3.8 In the grounds it is contended that the order obtained by the respondent bank is illegal, arbitrary and contrary. The measures initiated by the respondent bank is against the judgment of Hon’ble Apex Court. The warrant dated 28.02.2024 issued by the learned CMM, Egmore was

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subsequently renewed on 09.09.2023 in respect of schedule mentioned property which is against the principles of natural justice and the same is liable to be set aside.

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4. Objections of the respondent bank:

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4.1 The respondent denies all the averments made in the SA putting the applicant herein to strict proof of the same. It is submitted that the applicant has approached this Hon’ble Tribunal with unclean hands and the present SA filed is devoid of merits, vexatious and not maintainable both on law and facts.

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4.2 The respondent denies all averments made in Para No.VI(1) of the SA, as the 2^nd respondent herein has entered into alleged lease agreement on 12.04.2021 and the loan accounts were declared as NPA on 30.09.2020. The 2^nd respondent stood as guarantor for the credit facilities availed by the M/s MMS Iron Corporation by way of deposit of Memorandum of Title Deeds dated 12.07.2017 registered as Doc.No.2477/2017 in the office of Sub-Registrar, Sembiam. 2^nd respondent also secured the repayment by way deposit of Memorandum of Title Deeds dated 22.07.2019 registered as Doc.No.2476/2019 in the office of Sub-Registrar, Sembiam over the scheduled property

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4.3 The borrower M/s MMS Iron Corporation has availed the following credit facilities and 2^nd respondent stood as guarantor for the credit facilities.

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S.No.	Nature of the Credit Facility with Account Number	Amount sanctioned (Rs.)	Date when availed	Sanctioned ROI per annum in %
1)	CUB OSL Special – BR 501812080051228	3,00,00,000.00	30/03/2019	13.75%
2)	OLCC 512020010012966	3,50,00,000.00	31/05/2017	12.25%

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4.4 As the applicant being a tenant in-sufference cannot claim any right under Section 65A of the Transfer of Property Act, 1882. Respondent bank denies all the averments made in Para No.VI(3) of the SA as false and unsustainable in law, as there is no prior notice required under the law for the applicant at the time of SARFAESI measures initiated by the respondent bank. The tenancy created by the applicant is only to thwart the NPA against the scheduled property.

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4.5 After availing the aforesaid credit facilities, M/s MMS Iron Corporation defaulted in repayments. Due to default in repayment, the loan account of the borrower has been classified as NPA on 30.09.2020 as per the guidelines of the RBI. After classifying the accounts as NPA, respondent bank has issued Section 13(2) Demand Notice dated 23.04.2021 to the applicants demanding the following outstanding amount to the respective loan accounts.

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15.07.2025

S.No	Nature of Credit Facility with Account Number	Outstanding amount as on 11.04.2021 (Rs.)
1)	CUB OSL Special-BR 501812080051228	Rs.3,70,99,099.00/-
2)	OLCC 512020010012966	Rs.6,52,20,006.00/-

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4.6 Respondent bank has issued the Section 13(2) Demand notice dated 23.04.2021 is duly served on M/s CLN cinemas and Mrs. Kasthuri. The demand notice was returned unserved with respect to Mr. P. Praveen, Mr. E. Prasad, Mr. C. Narayanan and 2^nd defendant here in with remarks as “unclaimed”. The Demand Notice is also sent to Mrs. Radhika Kumaran and the same is returned with endorsement as “No such Person” and “Left”. The respondent bank has proceeded further and published the Demand notice in two Newspapers, one in “The New Indian Express” (English) and another in “Dinamani” (Tamil) both dated on 19.09.2021. Mrs. Kasthuri has come forward to discharge her outstanding due towards the CLN Cinemas and respondent bank has released the property of Mrs. Kasthuri.

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4.7 Subsequently, the borrower M/s MMS Iron Corporation has defaulted in repayment and did not repaid the entire liability within 60 days from the date of demand notice. Respondent bank has proceeded further and taken possession of the secured asset by issuing Section 13(4) Possession Notice dated 01.02.2022.The possession notice is also

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duly served to the applicants and others. Possession notice is also affixed on the conspicuous part of the secured property and published in two Newspapers, one in “The New Indian Express” (English) and another in “Dinamani” (Tamil) both dated on 04.02.2022 as prescribed under Rule 8(2) of the Security Interest (Enforcement) Rules, 2002.

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4.8 It is submitted that the applicant here in is a tenant-in-sufferance cannot question the execution of impugned order passed by Learned CMM. Therefore the grounds mentioned in the SA is not maintainable and bad in law. Hence the respondent bank prays for the dismissal of the present SA.

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4.9 The respondent bank submits that the applicant herein has vacated the Schedule property during January 2025.

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Heard both sides of the Counsels and perused the records of the case.

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5.1 It is manifest from the records that the applicant is a third party claiming to be a tenant and residing at New No.21, Old No.C-76, 14^th Street, Periyar Nagar, Chennai – 600 082. The applicant relies on the lease agreement dated 12.04.2021 entered with the 2^nd respondent.

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5.2 It is seen from the records that the borrower M/s MMS Iron Corporation had availed credit facilities to which the leassor M/s C. Narayanan stood as the guarantor and mortgaged the property favoring the respondent bank. M/s Iron Corporation Limited had availed various credit facilities and challenged the Sale notice dated 07.12.2023 in SA

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No.680/23 it is a matter on record that SA No.680/23 came to be dismissed on 11.04.2025. It is seen in SA No.680/23 that M/s C. Narayanan is one of the guarantor who had guaranteed the loan availed by M/s Iron Corporation Limited. The present SA is filed on 28.11.2024 challenging the CMM order dated 28.02.2024

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5.3 As the borrower M/s MMS Iron Corporation defaulted in repayment and the loan account was classified as NPA on 30.09.2021. Further, bank have issued Demand Notice under Section 13(2) dated 23.04.2021 which was duly served to the borrower and others. The Demand Notice is published in two Newspapers, one in “The New Indian Express” (English) and “Dinamani” (Tamil) both dated on 19.09.2021.

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5.4 The borrower and guarantor didn’t raised any objections nor made any representations, bank has proceeded further and issued Possession Notice under Section 13(4) dated 01.02.2022 which is duly served to the borrower and others. The Possession is published in two Newspapers, one in “The New Indian Express” (English) and “Dinamani” (Tamil) both dated on 04.02.2022 and affixed on the conspicuous part of the property.

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5.5 The applicant has filed a memo dated 04.03.2025 in the open court, submitting that the applicant is still residing in the secured asset. It is contended that the applicant is a registered tenant and tenancy expires only on 31.12.2026 and the applicant is continuing his tenancy in the secured asset and prays to take the same on record.

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5.6 The memo filed by the applicant was taken on record in the open court, however it is seen that the contends of the memo filed is contrary to the averments made by the applicant in Para 8 of Page No.5 of the SA, Further the respondent bank have submitted that applicant have vacated the premises in January 2025.

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5.7 Now considering the claim of the tenancy the Tribunal under the amendment sub section [4A] of S.17 has to adjudicate the claim of tenancy under S.17[4-A] which reads as under:

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Any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purpose of enforcement of security interest, have the jurisdiction to examine whether lease of tenancy

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a) has expired or stood determined; or

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b) is contrary to section 65A of the Transfer of Property Act,

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1882 (4 of 1882); or

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c) is contrary to terms of mortgage; or

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d) is created after the issuance of notice of default and demand

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by the bank under subsection (2) of section 13 of the Act; and

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the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub clause (c) or sub clause (d) of clause

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(i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.

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5.8 The Hon’ble Apex Court in Harshad Govardhan Sondagar and others Vs. International Assets Reconstruction Company Limited

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and others as held that in case where the tenancy is created before the mortgage, the borrower has already registered the property in favor of the lessee, then the lessee will have the right to enjoy the leased property in accordance with the terms and conditions of the lease. The Hon’ble Apex Court in Bajarang Shyamsunder Agarwal (supra) as held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, the lease has to be determined in accordance with Section 111 of TP Act for determination of the leases.

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5.9 In case if a tenancy comes into existence after the creation of the mortgage, prior to the issuance of Section 13(2) of the Act. The lease has to satisfy the conditions of the Section 65-A of the T.P. Act.

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5.10 It is seen from the Section 13(2) Demand Notice dated 23.04.2021 produced by the bank at Page No.7 of typed set, it is seen that Mr. C. Narayanan is the mortgagor who has executed the mortgage favoring the respondent bank towards the credit facilities availed by the bank M/s MMS Iron Corporations. It is seen from the Section 14 order dated 12.04.2023 that M/s MMS Iron Corporation had availed a Term Loan of

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Rs.3,50,00,000/- vide Loan Account No.512020010012966 at the rate of 12.25%, Extensional Loan of Rs.3,00,00,000/- vide Loan Account No.50182080051228 at the rate of 13.75% and further availed Extensional loan of Rs.2,00,00,000/vide Loan Account No.512020010012966 at the rate of 13.75%

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5.11 Records reflects that the 5^th respondent in Section 14 application ie., Mr. C. Narayanan has entered into a lease agreement with Mr. Damodharan who has mortgaged his property has security towards the credit facilities availed M/s MMS Iron Corporations. Mr. C. Narayanan had deposited the Memorandum of Deposit of Title Deeds in favor of the Petitioner Bank on 01.02.2016, 04.07.2016, 12.07.2016, 20.04.2018, 22.07.2017 which was registered as Document Numbers as follows 306/2016, 2416/2016, 2477/2017, 1377/2018, 2476/2019 with SRO Sembiam as a collateral security to the loan mentioned above.

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5.12 As the applicant, borrower and the mortgagor were irregular in the repayments, loan accounts of the applicant were classified as NPA on 30.09.2020 and issued Demand Notice dated 23.04.2021 under Section 13(2). In spite of demand made in the Demand Notice, borrower and mortgagors didn’t raise any objections nor representations, bank has issued Section 13(4) Possession Notice dated 01.02.2022 and the symbolic possession was taken. The Possession notice was affixed on the property and published the statutory notices in two Newspapers, one in “The New Indian Express” (English) on 18.09.2021 and 04.02.2022,

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another in “Dinamani” (Tamil) on 18.09.2021 and 04.02.2022 as mandated under the Act.

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5.13 The present SA is filed challenging order passed by Learned CMM, Egmore in Crl.M.P.No.27556/2022 dated 28.02.2024 for taking physical possession of the property and the outstanding amount due is Rs.11,45,28,910/- together with a applicable interest.

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5.14 It is seen from the records that the Tribunal directed to issue notices to the respondents vide proceedings dated 29.11.2024 and applicant counsel has produced the Affidavit of Service along with the Postal receipt, it is seen that the applicant taken out the notice on the SA only to the 1^st respondent. However there is no proof of service or postal receipt for having taken receipt on the 2^nd respondent. Applicant had admittedly not taken steps on the 2^nd respondent who is the lessor, who had executed the lease agreement dated 12.04.2021 favoring the applicant here in. The issue for consideration is where the applicant who claims to be a tenant on the secured asset based on the lease agreement dated 12.04.2021 entered between the applicant and Mr. C. Narayanan who is the mortgagor of the property is a bonafide tenant.

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5.15 It is seen that the Mr. C. Narayanan had mortgaged the property on 01.02.2016, 04.07.2016 and the latest extension of mortgage is on 22.07.2019favoring the respondent, the mortgaged property is situated at: The property is a house, Ground and premises, old No.C-76, New No.21, 14^th Street, Periyar Nagar, Chennai – 600 082 comprised in

SA No.311/2025

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T.S.No.201, Old Survey No.382m then 382/1, Block No.32 of Pervallur Village.

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5.16 Admittedly the applicant is claiming to be tenant on the lease agreement dated 12.04.2021 is subsequent to the mortgage of the property favoring the secured creditor.

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5.17 Due to default in the repayment, loan account was classified as NPA on 30.09.2020 and issued Section 13(2) Demand Notice dated 23.04.2021 and the applicant who claims to be a tenant has registered lease dated on 12.04.2021 is subsequent to the creation of the mortgage.

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5.18 The applicant has produced the Aadhar card, Gas bills and PAN card to contend that they are residing on the secured asset. However it is seen that the Aadhar card does not carry the same address of the secured asset to claim tenancy on the property as per lease agreement. Considering the lease agreement dated 12.04.2021 only one gas bill dated 14.10.2024 is produced. Further there is no rent receipt produced or bank statement reflecting the payment of rent for having paid the rent of Rs.3000/pm from 12.04.2021 till date of filing the SA on 28.11.2024.

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5.19 The applicant has only based his claim on the registered lease agreement to support the claim of tenancy based on registered lease. However there are no cogent evidence produced to establish that the applicant is residing in the premises from 12.04.2021 till the date of filing of SA.

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5.20 The applicant voluntarily submitted to vacate the premises with 4 months at Para 8 in Page No.5 of their averments in SA and contrary to their own statement filed the memo only to frustrate the procedures. Hence the Tribunal comes to conclusion that the claim of tenancy is not bonafide and the same is not supported by sufficient documents to establish tenancy to be protected under SARFAESI Act.

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5.21 Further the Tribunal has also adjudicated the measures taken by the respondent in the case filed by the borrower and the guarantor including Mr.C.Narayanan challenging the Sale notice dated 07.12.2023 fixing the sale on 29.12.2023 in SA No.680/2023. In fact Borrower and guarantors Mr.C. Narayanan had also produced the registered lease deed dated 12.04.2021 registered as Doc.No.1351/2021 which is produced as Annexure – 7 without having any claim of tenancy in SA No.680/2023

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5.22 Further it is also seen that the guarantor Mr.C. Narayanan has created mortgage at various dates on the secured asset which has been continued. On the other hand it is seen that the claim of tenancy which is registered as Doc.No.1351/2023 dated 12.04.2021 is just prior to issuance of Demand Notice dated 23.04.2021 and after the S.14 order passed by Ld. CMM order dated 12.04.2023. The mortgagor C.Narayanan has entered into the lease agreement when the bank has claimed the outstanding amount due as on 11.04.2021 and immediately on 12.04.2024 the lease agreement is entered. Further the applicant has not taken steps on the 2^nd respondent clearly highlights the facts that the present SA is filed by the 3^rd party, claiming to be a tenant on the secured

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asset had wantedly not taken steps to the 2^nd respondent who is the lessor of the mortgage of the property.

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5.23 Thus it is seen that the applicant who is claiming to be tenant under the registered lease agreement is not a bonafide tenant who is to be protected under the SARFAESI Act and as per the Section 4-A clearly reflects that the terms of the lease entered is contrary to Section 4-A (c), & (d). Hence the Tribunal is satisfied that the tenancy claim made by the applicant does not falls under 4-A (c), (d). Hence, the claim of the applicant as a tenant is not a bonafide one.

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Resultantly the present SA stands dismissed. Interim Order granted, if any stands vacated, pending IAs are disposed 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 (Mogesh), transcribed by him, corrected, signed and pronounced by me on this the 15^th day of July, 2025)

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ANNEXURES

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LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl.	Description of Documents	Document
No.		No.
1.	Application u/s 17(4) of SARFAESI Act 28.11.2024	A-1

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2.	Registered lease agreement 12.04.2021	A-2
3.	Copy of warrant issued to the Advocate Commissioner 28.02.2024	A-3
4.	Notice of eviction affixed in the wall of the property with clean copy 27.11.2024	A-4
5.	Gas refilling receipt 14.10.2024	A-5
6.	Vakalat 28.11.2024	A-6

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDENTS

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Sl. No.	Description of Documents	Document No.
1.	Demand Notice U/s 13(2) of the Act of Respondent Bank issued to the Applicants and others 23.04.2021	R-1
2.	Acknowledgement Cards/Returned Covers of Demand Notice dated 23.04.2021	R-2
3.	Publication of the content of the Demand Notice 23.04.2021 in English Newspaper “The New Indian Express”19.09.2021	R-3
4.	Publication of the content of the Demand Notice 23.04.2021 in Tamil Newspaper “Dinamani” 19.09.2021	R-4
5.	Possession Notice U/s 13(4) of Act, respondent bank issued to applicants 01.02.2022	R-5
6.	Acknowledgement Cards and return covers of the Possession Notice 01.02.2022	R-6
7.	Publication of Possession Notice in “The New Indian Express”(English) 04.02.2022	R-7
8.	Publication of Possession Notice in “Dinamani” (Tamil) 04.02.2022	R-8
9.	E-copy of the order made in Crl.M.P.No.27556/2022, U/s 14 of Act by the Learned CMM, Chennai. (SA schedule property of the 2^ndapplicant) 12.04.2023	R-9

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SCHEDULE OF PROPERTY

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The property is a house, ground and premises old door No.C-76, New No.21, 14^th Street, Periyar Nagar, Chennai – 600 082 comprised in

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TS No.201, old survey No.382 and then survey No.382/1, Block No.32 of Peravallur Village,

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Bounded on the

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North by: Plot No.C77 (TS No.200)

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South by: Plot No.C75 (TS No.202)

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East by: 40 feet road, 14^th street

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West by: Plot No.E-85, (TS No.195), E-86 (TS No.194) E-87 (TS No.193)

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Admeasuring

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East to west on the northern side: 60 feet

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East to west on the southern side: 60 feet

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North to south on the eastern side: 40 feet

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North to south on the western side: 40 feet

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Total extent of 2400 sq.ft. of land with building measuring 1115 sq.ft in the ground floor and 1115 sq.ft in the first floor with the sub-registration district of Sembiam and registration district of Chennai North.

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Sd/-

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

E Damodharan v. City Union Bank Limited

Case brief

What is this about?

What did the court decide?

E Damodharan v. City Union Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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