Allowed

Zainuddeen Thalangara Abdul Rahiman v. Hdfc Bank

DRT3 Jan 2025SA/344/2022

Case brief

AI extract

What is this about?

This Debts Recovery Tribunal allowed a Securitization Application filed by borrowers against HDFC Bank. The Tribunal held that the bank failed to strictly comply with mandatory service requirements under the SARFAESI Act and Security Interest Rules regarding the demand notice and its publication/affixture, rendering subsequent possession proceedings liable to be set aside.

What did the court decide?

Set aside the Demand Notice (Annexure-I) and subsequent possession notices and orders; applicants entitled to reliefs sought.

Zainuddeen Thalangara Abdul Rahiman versus Hdfc Bank — Banking and Recovery | 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 3^rd DAY OF JANUARY, 2025

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

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S.A No. 344 of 2022

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Between

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Zainuddeen Thalangara Abdul Rahiman, Royal Gaden, Convent Cross Road, Kasargod – 671 121.

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Amina Zainuddeen, Royal Gaden, Convent Cross Road, Kasargod – 671 121.

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--- Applicants

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And

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HDFC Bank Ltd., Represented by its Branch Manager, Cochin Branch, 1^st Floor, SL Plaza, Palarivattom Junction, Kochi, Ernakulam – 682 025.

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The Authorized Officer, HDFC Bank Ltd., 1^st Floor, SL Plaza, Palarivattom Junction, Kochi, Ernakulam – 682 025. --- Defendants

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SA No.344 of 2022

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This Securitization Application coming on 20.12.2024, 30.12.2024 and 31.12.2024 for final hearing before me in the presence of Mr. V.K. Peer Mohamed Khan, Counsel appearing for the Applicants and Mr. Abhiram, Advocate representing the Counsel on record 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 10.06.2022 seeking to set aside Annexure-I demand notice, Annexure-II possession notice and Annexures-III to V proceedings in taking possession of the secured asset and to order restraining the defendants from evicting the applicants from the secured asset and allow the cost of this proceedings from the defendants.

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It is not in dispute with regard to the availment of term loan facility of Rs.3,44,00,000/- from the 1^st defendant bank by the applicants and other co-applicants who are not parties to this SA. It is also not in dispute with regard to creation of equitable mortgage by the applicants over their immovable properties which comprises of lands and buildings situated in Sy. No.44/2 of Thalangara village, Kasargod district as the collateral security for the aforesaid availment of credit facility in favour of the 1s defendant bank.

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Though the applicants have conveniently omitted to aver in the SA as to whether they were prompt in repayment of the outstanding loan due, a perusal of the written statement of the defendants reveals the facts that the applicants and other co-borrowers defaulted in repayment of the outstanding loan due, their loan account came to be classified as NPA on 07.12.2020.

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According to the averments of the defendants in their written statement, Annexure-A1 Demand Notice dated 17.12.2021 was served to all the borrowers including the applicants calling upon them to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice. Indisputably, the applicants neither sent any objection/representation to the demand notice nor did they clear off their liability due to the 1^st defendant bank.

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Therefore, Possession Notice dated 22.04.2022 Annexure-II was issued for symbolically taking physical possession of the secured assets. Subsequently, the defendants approached the Chief Judicial Magistrate Court, Kasargod and filed Annexure-III application and

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Page 2 of 9

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SA No.344 of 2022

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affidavit under Section 14 (1) of the SARFAESI Act, 2002. Order dated 16.03.2023, Annexure-IV came to be passed in CMP No.778/2023 appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued notice dated 20.04.2023 Annexure-V to the borrower Company and others (as mentioned in the notice) informing them that he would visit the property on 20.04.2023.

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The applicants having aggrieved against the above measures have filed this SA seeking for the reliefs stated supra.

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The counsel appearing for the applicants submitted that, Demand Notice was not served to all the parties to the loan transaction and that though the defendants have produced copies of five postal receipts to prove the sending of Demand Notice to the applicants and other borrowers, they have produced only copies of three postal acknowledgement cards as Annexure-B4 and that Demand Notice was not served on the borrower Company and other co-borrower.

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It is further submitted that the counsel for the applicants that the defendants have falsely averred in their written statement that Demand Notice was issued and served to all the borrowers including the applicants and that but, in Annexure-III application filed in CMP No.778/2023, it is averred that the demand notice sent to respondents 3 to 5 were acknowledged by them and that notice sent to respondents 1 and 2 was returned with endorsement “left”.

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According to the counsel appearing for the applicants, Rule 3 (1) of the Security Interest (Enforcement) Rules 2002 was not complied with by the defendants in respect of affixture of Demand Notice on the premises of the principal borrower and other co-borrower and publication of the Demand Notice in two leading newspapers. Hence Annexure-I Demand Notice and subsequent measures in respect of issuance of the possession notice Annexure-II, Annexure-IV Order and Annexure-V notice are liable to be set aside.

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Per contra , the counsel appearing for the defendants submitted that Demand Notice sent to the 1^st borrower company mentioned in the Demand Notice was returned un-served and that however Demand Notice was served to the 3^rd borrower mentioned in the Demand Notice and that since he is the Managing Partner of the borrower company Demand Notice is deemed to have served on the borrower company.

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Page 3 of 9

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SA No.344 of 2022

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It is further submitted by the counsel appearing for the defendants that the Demand Notice sent to Azeena Faizal, the 2^nd borrower mentioned in the Demand Notice was returned un-served and that she is not a party to the SA and that however, Demand Notice was published in newspapers and that possession notice was served to all the borrowers and that it was affixed on the conspicuous part of the secured asset and that it was also published in two leading newspapers and that there is no irregularity in respect of filing of the application and affidavit in CMP No.778/2023 and that therefore the SA is liable to be dismissed.

¶32

In para 5 of the written statement filed by the defendants it is averred as follows :

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“It is further submitted that Rule 3 of the Security Interest (Enforcement) Rules 2002 and the SARFAESI Act had been complied by the defendant bank. The Demand Notice was issued and served to all borrowers which includes the applicants as well. The true copy of the Demand Notice dated 17.12.2021 issued to the borrowers is produced herewith and marked as Annexure-B2. The true copy of the postal receipt dated 20.12.2021 of the Demand Notice is produced herewith and marked as Annexure-B3. The true copy of the acknowledgement card is produced herewith as Annexure-B4”.

¶34

According to the above averments of the defendants, Annexure-I Demand Notice was served to all the borrowers as mentioned in the Demand Notice wherein FCOM Trading Company is the borrower, one Azeena Faizal and Faizal Thulangara Zainuddin are shown as coapplicants 2 and 3 and the applicants herein are shown as coapplicants 4 and 5 respectively.

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The copy of the application filed by the defendants in CMP No.778/2023 before the Chief Judicial Magistrate Court Kasargod has been produced as Annexure-III by the applicants. Subsequently, on 31.12.2024 the counsel for the applicants filed a memo along with copy of the affidavit filed by the defendants in CMP No.778/2023 before the Chief Judicial Magistrate Court Kasargod. In both the application and the affidavit, the 2^nd defendant herein, who is the Authorised Officer, has averred that the notices sent to the respondents 3 to 5 were acknowledged by them and notice sent to respondent Nos.1 and 2 was returned with endorsement “left”.

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Page 4 of 9

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SA No.344 of 2022

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A perusal of Annexure-B3 copies of postal receipts and Annexure-B4 copies of acknowledgement cards shows that though Demand Notice was sent to the principal borrower company and other co-applicants including the applicants, Demand Notice was served only upon the 3^rd co-applicant mentioned in the Demand Notice and the applicants herein and that Demand Notice was not served on the borrower company and the 2^nd co-applicant as mentioned in the Demand Notice.

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Rule 3 (1) of the Security Interest (Enforcement) Rules 2002 mandates that service of Demand Notice under Section 13 (2) of the SARFAESI Act, 2002 shall be made by delivering (including hand delivery) or transmitting at the place where the borrower or his agent empowered to accept the notice actually and voluntarily resides or carries on business or by registered post with acknowledgment due. The proviso to the above rule also provides that the Authorised Officer has reason to believe that the borrower or his agent is avoiding the service of notice or for any other reason, the service cannot be made service can be effected by affixing a copy of the Demand Notice on the outer door or some other conspicuous part of the house or building in which the borrower or his agent ordinarily resides or carries on business or personally works for gain and also by publishing the contents of the Demand Notice in two leading newspapers, one in vernacular language having sufficient circulation in that locality.

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In the present case at hand, though the counsel appearing for the defendants during the advancement of argument submitted that Demand Notice was published in newspapers, no proof has been produced by the defendants to show the publication of the Demand Notice in two leading newspapers. It is pertinent to mention herein that there is no plea or averment either in the written statement or in the additional written statement filed by the defendants that Demand Notice was published in two leading newspapers. Above all, the mandatory requirements stipulated in Rule 3(1) of Security Interest (Enforcement) Rules 2002 in respect of affixture of the Demand Notice on the premises of the borrower company and on the premises of the other co-applicant Azeena Faizal was also not complied with by the defendants. This Tribunal does not find any substance in the submission of the counsel for the defendants that, since Demand Notice was served on the other co-applicant Faizal Thalangara Zainuddeen, who represents the borrower company as the Managing Partner, the Demand Notice is deemed to have been served on the

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Page 5 of 9

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SA No.344 of 2022

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borrower company. Reason being, the borrower company is shown as party No.1 in Annexure-I Demand Notice and the address of the borrower company and that of the other co-applicant, Faizal Thalangara are different.

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The defendants have not stated any reason in their written statement as well as additional written statement as to why Demand Notice was not published and affixed on the aforesaid manner. Therefore, it is established that the defendants have failed to adhere to the statutory requirements contemplated under Rule 3 (1) of the Security Interest (Enforcement) Rules 2002 in respect of service of Demand Notice to the borrower company and other co-applicant.

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In Dipak Babaria & another Vs. State of Gujarat & others [judgment dated 23.01.2014 in Civil Appeal No.836/2014] the Hon’ble Supreme Court has categorically held as follows :

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“It is well settled that when the statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner”.

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In this case, this Tribunal finds that there is material lapse and illegality in respect of non-service of Demand Notice to all the borrowers to the loan transaction and that as such Annexure-I Demand Notice is liable to be set aside. Once it is established that, Annexure-I Demand Notice is liable to be set aside, subsequent measures such as, issuance of Annexure-III possession notice, Annexure-IV order of the learned Chief Judicial Magistrate, Kasargod passed in CMP No.778/2023 for taking physical possession of the secured asset and consequent issuance of Annexure-V notice by the Advocate Commissioner to the applicants to take physical possession of the secured asset are liable to be set aside as invalid.

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In view of the foregoing reasons and discussions, this Tribunal holds that the applicants are entitled to get the reliefs sought for in the S.A.

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However, it is made clear that the defendants are at liberty to initiate fresh measures under the SARFAESI Act, 2002 and the Rules made thereunder against the applicants and the principal borrower company and other co-borrowers who are not parties to this S.A., after issuance of fresh Demand Notice.

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Page 6 of 9

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SA No.344 of 2022

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Resultantly, this S.A. No.344 of 2022 stands allowed. 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 3^rd day of January, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 7 of 9

SA No.344 of 2022

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

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Sl. No.	Date	Particulars
1.	17.12.2021	True copy of the demand notice issued by the defendant bank.	Annexure-I
2.	22.04.2022	True copy of the possession notice	Annexure-II
3.	---	True copy of the petition filed by the defendant bank before the CJM Court Kasargode.	Annexure-III
4.	16.03.2023	True copy of the order of the CJM Court KasargodeinCMP 778 of2023.	Annexure-IV
5.	20.04.2023	True copy of the notice issued by the Advocate Commissioner.	Annexure-V

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List of documents filed by the defendants along with the written statement

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Sl. No.	Date	Particulars
1.	---	True copy of the loan agreement	Annexure-B1
2.	17.12.2021	True copy of the Demand Notice	Annexure-B2
3.	20.12.2021	True copy of the postal receipts	Annexure-B3
4.	---	True copy of the Acknowledgment card of DemandNotice.	Annexure-B4
5.	22.04.202	True copy of the Possession Notice	Annexure-B5
6.	22.04.2022	True copy of the postal receipt of the Possession Notice	Annexure-B6
7.	---	True copy of the Acknowledgment card ofthePossession Notice	Annexure-B7
8.	---	True copy of the photo of the Possession Noticeaffixed.	Annexure-B8
9.	---	True copy of newspaper publication of the Possession Notice both in English andvernacular language.	Annexure-B9

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SA No.344 of 2022

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10.	18.05.2022	True copy of the order in W.P.(C) No.14934/2022	Annexure-B10
11.	---	True copy of the returned envelopes.	Annexure-B11
12.	10.02.2022	True copy of the newspaper publications ofSec.13 (2)notice	Annexure-B12

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 9 of 9

Zainuddeen Thalangara Abdul Rahiman v. Hdfc Bank

Case brief

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Zainuddeen Thalangara Abdul Rahiman v. Hdfc Bank

Case brief

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