Dismissed

S Sugumar v. Shriram Finance Limited

DRT6 Oct 2025SA/312/2023

Case brief

AI extract

What is this about?

This application challenged enforcement steps under the SARFAESI Act by the respondent bank. The DRT held that non-registration of the charge in the Central Registry affects priority but invalidates the mortgage or impedes enforcement due to lack of substantial prejudice. The bank's procedural compliance with demand and possession notices was upheld, and the application was dismissed.

What did the court decide?

The present Securitization Application is dismissed upholding the Section 13(2) demand notice and Section 13(4) possession notice as valid. Interim order, if granted, is vacated.

S Sugumar versus Shriram Finance Limited — Banking and Recovery | DRT (2025)

SA No.312/2023

06.10.2025

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 06^th day of October, 2025

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SA No. 312 of 2023

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Mr. S. Sukumar, S/o. Selvanathan, No.65, Mallaiyah High Road, Manellore P.O, Thiruvallur -601 202.

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….Applicant

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-Vs-

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The Authorized Officer, Shriram Finance Limited, No.6, 1^st Floor, Sorrento Building, Lattice Bridge Road, Adyar, Chennai -600 020.

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Having Registered Office at:

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Sri Towers, Plot No.14A, South Phase, Industrial Estate, Guindy, Chennai -600 032. ….Respondent

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Counsels on record / appeared:

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Counsel for Applicant : M/s. K. Gayathri & R. Kannan Counsel for respondent : M/s. G. Sumathi

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ORDER ON SA 312/2023

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The present Securitization Application [SA] is filed on 30.05.2023 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].

SA No.312/2023

06.10.2025

The applicant has filed the present SA challenging the Possession Notice dated 12.05.2023 and the outstanding amount due as per Possession Notice is Rs.32,06,988/-

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Pleadings of the applicant:

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The applicant had availed a loan against property for a sum of Rs.15 Lakhs on 31.05.2019 to be repaid in 60 EMI of Rs.45630/- to meet the urgent requirements. Applicant have executed all the loan documents and mortgaged the property. It is contended that the applicant was regular in repaying the loan, however, due to Covid-19, applicant could not repay the interest portion alone and the account has been classified as NPA by the respondent bank.

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It is specifically contented that there is no security interest created favouring the respondent bank as registration of security interest is not carried out in the central registry, hence the bank cannot proceed under the Act. The bank have issued the notice dated 21.09.2022 calling upon the applicant to pay the outstanding amount of Rs.15,93,592/- as on 21.09.2022 and has invoke the securitization Act by issuing the demand notice dated 19.10.2022 under section 13(2) of the Act calling upon them to make a payment of Rs.32,06,988/- along with future interest.

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The demand notice was not served on all the parties, bank has not affixed the possession notice dated 12.05.2023 under section 13(4) of the Act, which is not valid notice as it is not served to all the parties. It is alleged that the bank has charged heavy interest apart from the agreed

SA No.312/2023

06.10.2025

rate of interest and levied penal interest as against the legal pronouncement of the Apex Court. Further the bank have not produced the statement of account even after repeated request made by the applicant. Hence the applicant prays to restrain the respondent proceeding further pursuant to the possession notice dated 12.05.2023.

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In the grounds it is contended that the classification of the account as NPA in the Sec.13(2) demand notice is without any basis. The bank has not issued any demand notice and its calming exorbitant rate of interest. Hence the applicant prays to squash the possession notice dated 12.05.2023.

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Objections of the respondent bank:

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The respondent bank has filed detailed counter denying all the contention as raised by the applicant and counted the allegation made in the para of the SA. It is contented that the applicant admitted the financial assistance was availed and execution all the loan documents. After the classification of the account as NPA, the bank have issued the Sec.13(2) demand notice dated 19.10.2022 to all the parties by registered post which is received by them on 22.10.2022 and the applicant has also sent an objection letter on 01.11.2022 after the receipt of the demand notice to which the bank have sent the rejoinder by registered post to the objections raised by the applicant on 15.11.2022.

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As the applicant did not liquated the liability, bank has issued the possession notice dated 12.05.2023 to all the parties as required under the

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06.10.2025

law and the applicant is put to strict proof of charging heavy interest and levying penal interest in contravention to RBI guidelines. It is submitted that the bank respondent is ready to accept the dues payable by the applicant, if the applicant is ready to settle its dues and denies the grounds raised in the SA.

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The possession notice dated 12.05.2023 is sent to the applicant and took symbolic possession of the property, possession notice is affixed on the property and also published in two newspapers in “Dinamani” (Tamil) and “The New Indian Express” (English) on 16.05.2023 within the four days from the date of possession.

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The respondent is entitled to enforce the security and has followed all the measures as contemplated under the Act. Hence, the respondent prays for dismissal of the SA.

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

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case

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The applicant does not dispute the availing of the credit facility, execution of the loan documents and the default in the repayment. The first issue raised by the applicant is that the secured creditor can invoke the provisions of enforcement of the security interest only after the registration of security in the central registry set up for registration of security interest. As the bank has not registered the security interest in the central registry, they cannot proceed under the SARFAESI Act.

SA No.312/2023

06.10.2025

Though a specific contention is raised in para 3 of the SA the respondent have not produced registration of charge before the Central Registry as contemplated under S.26D of the Act. It is apt to extract S.26D which reads as under:

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26D: Right of enforcement of securities:

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Notwithstanding anything contained in any other law for the time being in force, from the date of commencement of the provisions of this Chapter, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with the Central Registry.

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However the respondent has produced the Deed of simple mortgage dated 29.05.2019 establishing the charge on the property as a mortgagee. Even otherwise S.26D came to be effective on 24.01.2020 followed by a notification dated 26.12.2019. Evidently the simple mortgage is dated 29.05.2019 which is produced at pg.6-15. It seen that the applicant have created the mortgage for the loan availed and have also deposited the title deeds and there is no dispute about the mortgage of the property as security towards the credit facility availed which constitutes a secured asset.

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The registration of charge of any type on the secured asset or on the property is to ascertain the priority of charge. As per S. 26 E - After the registration of security interest with CERSAI, the debts of the secured

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creditor i.e. banks, FIs, NBFCs, ARCs, etc. shall be paid in priority over all other debts and all revenue, taxes, cessess and other rates payable to Central Government or State Government or Local Authority. Default in filing the charge as required under S.23 would attract punishment with fine, but not invalidated the mortgage or charge on the property. Thus it is evident that the bank or any NBFC who have mortgage of the property favoring them is a secured creditor and the mortgage of the property is a secured asset and registration of such charge is to ascertain the priority of charge. Further the applicant has not established the prejudiced caused to them in not registration of charge when the mortgage of the property is not disputed. The Tribunal places reliance on the judgment of the Hon’ble Supreme court in the case titled L&T Housing Finance Limited (S) v. Trishul Developers And Another (S) ([2020] INSC 611) procedural lapses, when devoid of malicious intent or substantial prejudice, do not impede the enforcement of security interests.

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Due to default in repayment, the respondent have classified the account as NPA and proceeded to issue the demand notice on 19.10.2022 which is admittedly received by the applicant. Though the applicant denies the services of the S.13(2) demand notice, it seen that they have raised an objection to the demand notice dated 19.10.2022 vide their objection letter dated 01.11.2022 which is produced at pg.22-25 of the bank documents which only counters their averments of non-service of demand notice.

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It seen that the applicant in their objections has specifically taken a contention that the property is not a secured assert and the classification

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of the account is not as an NPA as per RBI guidelines. The respondent have replied to the objections raised under 13(3A) vide reply letter dated 15.11.2022. In spite of receipt of S.13[2] demand notice, the applicant did not liquidated the liability within 60 days even after raising objections to demand notice under S.13[3A] of the Act.

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The respondent proceeded further in issuing the possession notice dated 12.05.2023, affixed the notice on the property and have published the possession notice in two newspapers on 16.05.2023 as required under the Act. Thus the respondent bank has established the compliance of procedures in initiating the measure under the Act.

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For the forgoing reasons, the present SA is only to be dismissed upholding the Sec.13(2) demand notice dated 19.10.2022 and Sec.13(4) possession notice dated 12.05.2023 as valid notices.

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Interim order granted if any stands vacated. Pending IA/s are closed.

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No order as to cost. Sd/-

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

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( Dictated to Steno (Suriya), transcribed by him, corrected, signed and pronounced by me on this the 06^th day of October, 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	Documents
No.		No.
1.	Notice issued by the Respondent bank dated	A-1
	21.09.2022.
2.	Impugned Possession Notice dated 12.05.2023.	A-2

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDNET

SA No.312/2023

06.10.2025

Sl. No.	Description of Documents	Documents No.
1.	Deed of Simple Mortgage dated 29.05.2019.	R-1
2.	Demand Notice dated 19.10.2022.	R-2
3.	Proof of Service for Demand Notice with Acknowledgement dated 22.10.2022.	R-3
4.	Objection Letter sent by the Applicant dated 01.11.2022.	R-4
5.	Rejoinder sent by the Respondent to the Applicant dated 15.11.2022.	R-5
6.	Possession Notice dated 12.05.2023.	R-6
7.	Possession Notice Proof Affixture Photo dated 12.05.2023.	R-7
8.	Paper Publication in Tamil daily Newspaper dated 16.05.2023.	R-8
9.	Paper Publication in English daily Newspaper dated 16.05.2023.	R-9
10.	Statement of Accounts dated 19.10.2023.	R-10
11.	Ministry of Finance Notification S.O. 652(E) dated 12.02.2021.	R-11

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DESCRIPTION OF THE IMMOVABLE PROPERTY

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Schedule –A (Large Property)

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All that pieces and parcel of house site situate at No.5, comprised in survey No.136/2A1B & Survey No.136/2A2A, Patta No.15, New Patta No.6040, as per Patta New Survey No.136/45 Sennivakkam Village, Ponneri Taluk, Thiruvallur District, Land measuring an total extent of 2400 Sq.ft., and,

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Bounded: North by : Vacant Land South by : 18 Feet Wide Road East by : Plot No.6 West by : Plot No.4 Measuring:

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East to West on the Northern Side : 48 Feet East to West on the Southern Side : 48 Feet North to South on the Eastern Side : 50 Feet

SA No.312/2023

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North to South on the Western Side: 50 Feet

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Situated with in the sub Registration district of Ponneri and registration district of North Chennai.

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Schedule –B

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(Subject Property of the Report)

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266.67 sq.ft., undivided share of land out of the schedule-A land together with a residential flat bearing Flat No.5., in the Ground Floor, with carpet area of 1170 Sq.ft., Balcony area 207 Sq.ft., (total Build-Up area of 1377 sq.ft.,) in the apartment building constructed on the schedule –A property and designated car parking.

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Sd/-

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

S Sugumar v. Shriram Finance Limited

Case brief

What is this about?

What did the court decide?

S Sugumar v. Shriram Finance Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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