Allowed

Renjith T Mathew v. State Bank of India

DRT20 Jan 2025SA/322/2024

Case brief

AI extract

What is this about?

The Tribunal allowed the applicant's challenge to a bank's securitization proceedings. The court held that the defendant could not enforce security interest over a specific plot because it was not registered in the CERSAI portal as required by Section 26-D of the SARFAESI Act, relying on High Court precedent.

What did the court decide?

The securitization proceeding under Section 14 of the SARFAESI Act in respect of the unregistered plot was set aside; the defendant may proceed afresh after registration.

Renjith T Mathew versus State Bank of India — Banking and Recovery | 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 20^th day of January, 2025

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SECURITIZATION APPLICATION No.322/2024

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Between

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Renjith T. Mathew, S/o.Dr.T.V.Mathew, Architect, Mainarch, Thayil House, RS P.O., Kuttupuzha Village, Thiruvalla, Pathanamthitta – 689 111. …Applicant

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And

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State Bank of India, Represented by the Authorised Officer/ Chief Manager, SARB, LMS Compound, Opp. Museum West Gate, Vanchiyoor, Vikas Bhavan P.O., Thiruvananthapuram – 695 033. …Defendant

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This Securitization Application having been heard on 02.01.2025 in the presence of Advocates M/s.P.Shrihari, Dr.Elizabeth Varkey and Mary Nithiya K.J. for the applicant and Advocate Sri.Tom K.Thomas for the defendant, 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 defendant 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/borrower filed this SA under S.17(1) of the SARFAESI Act.

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SA 322/2024

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Brief facts of the case :

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In the SA it is averred that the applicant availed a housing loan of Rs.21,07,996/- from the defendant which was sanctioned vide sanction letter dated 30.11.2004. The applicant availed the loan after creating security interest in respect of 4.75 Ares in Re-Sy.No.499/15 in Kuttapuzha Village. After availing the loan, the applicant was repaying the instalments but due to some financial constraints, there was default in repayment. The defendant filed OA No.675/2023 for recovery of an amount of Rs.35,89,567/-. On verification of documents produced in that case, the applicant came to know that the defendant bank included another piece of land of an extent of 2 Ares in Re-Sy.No.512/12 which was not mortgaged by the applicant. After obtaining CERSAI registration certificate, it was noticed that properties in Re-Sy.Nos.499/12 and 499/15 were the secured assets for which security interest was created and the extent of property described in the CERSAI portal does not tally with the extent of property claimed by the defendant. In absence of valid registration in the CERSAI portal, the defendant cannot proceed with the securitization measures. In spite of such illegality, the defendant filed MC No.18/2024 before the CJM, Pathanamthitta and obtained an order in appointing an Advocate Commissioner to take possession of the secured asset. On receipt of notice from the Advocate Commissioner, the applicant came to know about the issuance of demand notice under S.13(2) of the SARFAESI Act which was not received and the property described in the demand notice is also not correct. The order passed by the CJM in MC No.18/2024 is illegal and based on such order, the defendant cannot take possession of the properties described in the application

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SA 322/2024

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under section 14 of the SARFAESI act. Hence the securitization proceeding starting from the stage of demand notice may be set aside and declare that the defendant has no right to proceed in respect of the property in Re-Sy.No.512/12, with some ancillary relief.

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The defendant contested the claim by filing written statement denying the allegations and claimed that all the statutory procedures are duly followed. Due to irregular repayment, loan was classified as NPA on 30.01.2023 and OA No.675/2023 was filed as early on 04.12.2023. The applicant appeared in this case but no written statement was filed in denying the claim. All the loan documents were duly executed by the applicant at the time of availing the loan and the defendant is entitled to proceed against two plots situated at one place having common boundary and the details of which are described in the application under section 14 of the SARFAESI act. In such premises, the SA, being devoid of any merit, may be dismissed.

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From the respective contentions of both sides, the following points are emerged for adjudication in this case:

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(i) Whether the securitization proceedings initiated by the defendant suffer from any illegality, defect or irregularity to intervene with the same?

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

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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. The

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SA 322/2024

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availing of housing loan by the applicant is not disputed. The sole question arises for adjudication is whether the applicant created security interest in respect of two plots viz., 2 Ares in ReSy.No.512/12 and 4.75 Ares in Re-Sy.No.499/15, totaling to 6.75 Ares to secure the housing loan. The learned counsel for the applicant has brought to my notice that as per the sanction letter produced in this case marked Annexure-A1, Re-Sy.No.499 is mentioned. There is no whisper about other plot bearing Re-Sy.No.512/12. In absence of creation of security interest in respect of the said plot, securitization proceeding is not sustainable.

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On the other hand, learned counsel for the defendant refuted the claim and contended that the applicant entered into agreement with the defendant at the time of availing the loan and he also executed deed of guarantee and memorandum of deposit of title deeds by creating mortgage in respect of both the plots in ReSy.Nos.512/12 and 499/15. Hence the contention on this aspect is not sustainable and the SA may be dismissed.

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On careful consideration of the submissions of both sides, it appears from Annexure-A1 sanction letter that in the column ‘security’, only survey number “499” is mentioned without any description of area, boundaries etc. The defendant has also not produced any loan agreement, memorandum of deposit of title deeds and guarantee agreement to appreciate their contention. It is submitted by the learned counsel for the defendant that the said documents were produced before the CJM. When the applicant has disputed the claim in this proceeding, the defendant ought to have produced all the documents for proper appreciation of the case which

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SA 322/2024

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was not done in this case. In the certificate of registration of security interest produced by the applicant marked Annexure-A4 which was created in the CERSAI portal on 28.03.2012, in the column ‘asset details’, Sy.Nos.499/12 and 499/15 are mentioned. From such document, it is clear that creation of security interest in plot in ReSy.No.512/12 is not registered in the CERSAI portal. The defendant produced a document at the time of hearing without any averment in the written statement showing that security interest was created in the CERSAI portal on 19.01.2024 indicating the Sy.Nos.512/12 and 499/15 and also without any explanation as to why Re-Sy.No.499/12 is included in the asset details at the time of earlier registration in the CERSAI portal.

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8. S.26-D of the SARFAESI Act reads as follows:

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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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In view of this provision, enforcement of security interest is not permissible without the registration of security interest in the CERSAI portal, which is mandatory in nature. It is true that in the demand notice issued earlier vide Annexure-A2, both the plots are mentioned. But the documents produced by the defendant indicate that security interest created over Sy.No.512/12 was registered in the CERSAI portal on 19.01.2024 i.e., after issuance of the demand notice. In view of the order of the Hon'ble High Court of Karnataka in the case of C.Sarasamma vs. Karnataka State Financial Corporation & others [order dated 07.09.2023 in W.P.No.20356/2018] , issuance of demand notice is not enforcement of security interest but filing of the

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SA 322/2024

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application under section 14 of the SARFAESI act before the CJM to take possession of the property is an enforcement of the security interest which is not permissible without registration of the security interest in the CERSAI portal in view of the bar contained in section 26-D of the SARFAESI Act. In absence of any explanation by the defendant and non-production of relevant documents, it can only be said at this stage that the defendant cannot exercise the rights of enforcement of securities in respect of plot in Re-Sy.No.512/12. It is also the admitted fact that Re-Sy.No.512/12 and Re-Sy.No.499/15 situate at one place having common boundaries. In absence of demarcation of Re-Sy.No.512/12, the order passed by the CJM for taking possession cannot be enforced by the Advocate Commissioner at the spot. In such premises, the proceeding under section 14 of the SARFAESI act is illegal without registration of the plot in ReSy.No.512/12 in the CERSAI portal. Since the same is registered in the CERSAI portal as per Annexure-B4, the defendant may proceed afresh by filing fresh application under section 14 of the SARFAESI Act before the CJM in accordance with law. In case of accrual of any fresh cause of action, the applicant cannot raise any dispute in respect of all other measures taken prior to filing of fresh application under section 14 of the SARFAESI act. With the above observation, both the points are answered accordingly.

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Hence it is ordered:-

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ORDER

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In view of the forgoing reason, this SA is allowed on contest. The securitization proceeding initiated by the defendant under S.14 of the SARFAESI Act in respect of both the plots in Re-

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SA 322/2024

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Sy.No.512/12 and Re-Sy.No.499/15 is hereby set aside, but in the

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circumstances without costs.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 20^th day of January, 2025)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 322/2024

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Documents on the part of the applicants

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Annexures Date Particulars of documents Annexure-A1 30.11.2004 Copy of sanction letter issued by erstwhile State Bank of Travancore to the applicant. Annexure-A2 24.07.2003 Copy of settlement deed No2081/2003. Annexure-A3 01.12.2004 Copy of memorandum of deposit of title deed executed by the applicant. Annexure-A4 28.03.2012 Copy of report regarding registration of security interest in CERSAI portal. Annexure-A5 08.04.2024 Copy of notice issued by the Advocate Commissioner in MC No.18/2024. Annexure-A6 31.01.2023 Copy of demand notice under S.13(2) of the SARFAESI Act issued to the applicant. Annexure-A7 20.12.2023 Copy of S.14 application filed by the defendant before the CJM, Pathanamthitta. Documents on the part of the defendant Annexure-B1 19.01.2024 Copy of report regarding registration of security interest in CERSAI portal.

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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 20^th January, 2025

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SA No.322/2024

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Between

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Renjith T. Mathew, S/o.Dr.T.V.Mathew, Architect, Mainarch, Thayil House, RS P.O., Kuttupuzha Village, Thiruvalla, Pathanamthitta. …Applicant

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And

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State Bank of India, Represented by the Authorised Officer/ Chief Manager, SARB, LMS Compound, Opp. Museum West Gate, Vanchiyoor, Vikas Bhavan P.O., Thiruvananthapuram. …Defendant

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F I N A L O R D E R

Renjith T Mathew v. State Bank of India

Case brief

What is this about?

What did the court decide?

Renjith T Mathew v. State Bank of India

Case brief

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