Partly allowed

Sankaran Namboodiri v. Urban Co. operative Bnak Ltd.

DRT22 Jan 2025SA/380/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal adjudicated a Securitization Application challenging notices under the SARFAESI Act. The Tribunal set aside the Possession Notice for non-compliance with Rule 8 but upheld the Demand Notice as valid despite CERSAI registration delays and ruled it is not mandatory to file a Section 13(4) notice before proceeding under Section 14(1).

What did the court decide?

Annexure-A2 Possession Notice set aside; Annexure-A1 Demand Notice, Annexure-A4 notice, and Annexure-A6 order upheld.

Sankaran Namboodiri versus Urban Co. operative Bnak Ltd. — 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 22^nd 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. 380 of 2024

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Between

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Sankaran Namboodiri, S/o. M.N. Sankaran Namboodiri, Mullappalli Mana, Valapuram P.O., Pulamanthole, Perinthalmanna, Malappuram – 679 323, Presently residing at : Flat No.101, Siddhi Vonayaka Apartment, Thottakkattukara P.O., Aluva – 683 108.

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--- Applicant

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And

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Authorized Officer, M/s. Urban Co-operative Bank Ltd. No.1758, P.B. No.10, Head Office, Perinthalmanna, Malappuram -679 322, Having Branch at Moorkkanad.

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--- Defendant

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This Securitization Application coming on 28.08.2024 and 21.10.2024 for final hearing before me in the presence of Mr.Tinu Abraham, Counsel appearing for the Applicant and Mr. Jithendran, representing the Counsel on record for the defendant and upon

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SA No.380 of 2024

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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 15.05.2024 seeking to set aside Annexure-A6 order, Annexure-A2 possession notice and Annexure-A1 Demand Notice and to declare that the entire proceedings under the SARFAESI Act, 2002 are unsustainable and not in consonance with the provisions of the SARFAESI Act and Rules thereunder and allow the cost of the proceedings.

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The applicant has admitted the availment of housing term loan to the tune of Rs.30,00,000/- from the defendant bank. But he has denied creation of security interest over his property comprising of 32 cents of land in Sy Nos.246/1, 245/3, 235/1 in Kuruvamblam village, Perinthalmanna Taluk, Malappuram District. However, he has admitted the deposit of his title deed with the defendant bank. It is revealed from the perusal of the averments of the written statement of the defendant that the applicant deposited his title deed with intention to create security interest over his immovable property as the collateral security for the availment of the housing term loan. Therefore, this Tribunal does not find any substance in the above averment of the applicant that he had no intention for creation of security interest over his property by deposit of title deed.

¶18

The applicant has admitted his default in repayment of the outstanding loan due to the defendant bank. Hence the loan account of the applicant came to be classified as Non-performing Asset and demand notice dated 24.08.2021 Annexure-A1 was issued to the applicant calling upon him to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice. The applicant has admitted the receipt of the Demand Notice but he neither sent any objection/representation to the demand notice nor did he clear off his liability due to the defendant bank.

¶19

Since the applicant failed to respond to the terms of the demand notice, Possession Notice dated 29.01.2022 Annexure-A2 was issued for taking physical possession of the secured asset. The applicant has admitted the receipt of the possession notice.

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The counsel appearing for the applicant submitted that though the property was taken possession on 25.10.2021, Annexure-A2 possession notice dated 29.01.2022 was issued to the applicant after

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SA No.380 of 2024

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a period of more than three months from the date of taking possession of the property and that possession notice was not published within a period of seven days from the date of taking possession of the property and that possession notice was also not affixed on the property and that hence Rule 8 (1) & (2) of Security Interest (Enforcement) Rules 2002 was not complied with by the defendant bank.

¶24

It is submitted by the counsel for the defendant bank that possession notice dated 29.01.2022 was published in Mathrubhoomi and Deshabhimani newspapers on 02.02.2022, within a period of four days from the date of issuance of Demand Notice and that date of taking symbolic possession of the property is not 25.10.2021 and that it is the date on which the period of 60 days expired from the date of issuance of the Demand Notice and that from which date onwards the defendant bank can exercise its power to take possession of the property.

¶25

Annexure-A1 Demand Notice was issued on 24.08.2021. If the 60 days period is calculated from the date of issuance of the Demand Notice, the date on which the defendant bank would have to take further measure would fall on 22.10.2021. Hence the contention of the defendant bank that 25.10.2021 is the date from which onwards the defendant bank can exercise its power to take possession of the property is absolutely incorrect. Further, there is no specific mention in Annexure-A2 Demand Notice as to on which date possession of the property was taken.

¶26

When the applicant has raised the contentions in the SA that possession notice was not published within the period of seven days from the date of issuance and that it was not affixed on the secured asset, it is the bounden duty of the defendant bank to disprove the above contention by producing relevant proof before this Tribunal. But no proof has been produced for publication of the possession notice and affixture of the possession notice conspicuously on the secured asset. Therefore, this Tribunal has no other choice except to accept the contention of the applicant that the defendant bank has failed to comply with the mandatory requirements contemplated under Rule 8 (1) & (2) of the Security Interest (Enforcement) Rules 2002.

¶27

The defendant bank approached the Chief Judicial Magistrate Court, Manjeri and filed affidavit Annexure-A5 under Section 14 (1) of the SARFAESI Act, 2002. Annexure-A6 Order dated 26.02.2024 came

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SA No.380 of 2024

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to be passed in MC No.299/2024 by the learned Chief Judicial Magistrate, Manjeri appointing Advocate Commissioner to take physical possession of the secured asset. The Advocate Commissioner issued Annexure-A4 notice dated 04.05.2024, to the applicant informing him that he would take possession of the property on 21.05.2024.

¶31

On perusal of Annexure-A5 affidavit shows that all the details, such as, availment of credit facility by the applicant from the defendant bank upon creation of security interest over his immovable property by deposit of title deed, description of the secured asset, default in repayment of the outstanding loan due, classification of loan account as NPA, issuance of Demand Notice to the applicant and the guarantor, payment made after receipt of the Demand Notice, nonsubmission of objection/representation to the Demand Notice, failure of the applicant to clear off his liability, the outstanding amount as on the date of filing of the affidavit, were furnished by the defendant bank. Hence it is evident that the statutory requirements under Clause (i) to (ix) to the proviso of Section 14 (1) of the SARFAESI Act, 2002 has been complied with by the defendant bank in respect of filing of affidavit in MC No.299/2024 before the Chief Judicial Magistrate Court Manjeri. A perusal of Annexure-A6 order shows that the learned Chief Judicial Magistrate Manjeri perused the contents of the affidavit and the documents filed in support of the affidavit, passed order appointing Advocate Commissioner to take physical possession of the secured asset. .

¶32

It is averred by the applicant in the SA that the Advocate Commissioner called the applicant over mobile phone informing that actual possession would be taken on 21.05.2024 and that inspite of the fact that Annexure-A1 and A2 notices were served to the present address of the applicant, Advocate Commissioner deliberately failed to issue the notice to the present address of the applicant. It is further averred in the SA that on account of the persistent request, notice was affixed at the door of the secured asset which is more than 150 Km away from the present address of the applicant. According to the applicant, Annexure-A4 notice is true copy of the notice issued by the Advocate Commissioner through waatsapp.

¶33

It can be noticed from the above averments of the applicant that the applicant was residing 150 Km away from the secured asset. Therefore, it was not possible for the Advocate Commissioner to go to the present residence of the applicant. The applicant has also not

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SA No.380 of 2024

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produced any proof to show that he furnished his present address to the Advocate Commissioner. However, the applicant has himself admitted in the SA with regard to the service of Annexure-A4 notice through whatsapp. Hence this Tribunal holds that Annexure-A4 notice is deemed to have been properly served on the applicant. Therefore, this Tribunal does not find any substance in the contention of the applicant that deliberate failure of the Advocate Commissioner to issue the statutory notice is illegal.

¶37

The counsel appearing for the applicant submitted that security interest in respect of the secured asset was not registered with the Central Registry prior to issuance of Demand Notice and possession notice and that though security interest was created on 23.05.2015, security interest was registered with the CERSAI only on 19.07.2023 as per Annexure-A3 and that hence Demand Notice, possession notice and measures under Section 14 of the SARFAESI Act which were initiated prior to registration of security interest with CERSAI are liable to be set aside. In support of his above submission he relied on the judgments of the Hon’ble Gauhati High Court in Goverdhan Prasad Atal Vs. Assam Gramin Vikash Bank and others. [2021 KHC Online 2202]

¶38

Per contra the counsel appearing for the defendant bank submitted that the secured asset was registered with CERSAI on 19.7.2023 and that registration with CERSAI became mandatory only when Section 26 (D) was initiated in the SARFAESI Act, 2002 as per the enforcement of Security Interest and Recovery of Debts, Loss and Miscellaneous Provisions (Amendment) Act 2016 and that the above provision came into effect from 24.01.2020.

¶39

It is further submitted by the counsel appearing for the defendant bank that the loan was sanctioned on the applicant on 30.12.2015 and that property was registered with the CERSAI prior to filing of application and affidavit under Section 14 of the SARFAESI Act, 2002 and that issuance of Demand Notice under Section 13 (2) of the SARFAESI Act, 2002 was not the measure and that hence registration of the security interest with the CERSAI is not at all required prior to issuance of the Demand Notice and that hence there is no illegality in the measures initiated by the defendant bank. In support of his above submission, he relied on the judgment of the Hon’ble High Court of Karnataka delivered in C. Sarasamma Vs. Karnataka State Financial Corporation. [judgment dated 07.09.2023 in Writ Petition No.20356 of 2018 (GM-KSFC)] .

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SA No.380 of 2024

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In C. Sarasamma Vs. Karnataka State Financial Corporation cited by the counsel appearing for the defendant bank, the Hon’ble High Court of Karnataka by referring to the judgment of the Hon’ble Supreme Court delivered in Mardia’s Chemical’s case has held that notice issued under Section 13 (2) of the SARFAESI Act, 2002 would not give raise to cause of action to file writ petition and that mere issuance of notice under Section 13 (2) of the SARFAESI Act, 2002 would not amount to enforcement of Security Interest and that consequently, effect of non-registration security interest with the central Registry cannot be a ground for testing validity of notice under Section 13 (2) of the SARFAESI Act, 2002.

¶43

In the present case at hand, admittedly, Annexure-A1 Demand Notice was issued prior to registration of the security interest with the Central Registry. As per the dictum laid down in the afore cited judgment, it is not mandatory requirement for the secured creditor to get the security interest over the secured asset registered with the Central Registry prior to issuance of the Demand Notice. Hence this Tribunal does not find any force in the submission of the counsel for the applicant that Annexure-A1 Demand Notice is liable to be set aside.

¶44

In Goverdhan Prasad Atal Vs. Assam Gramin Vikash Bank and others [2021 KHC Online 2202] relied on by the counsel for the applicant, the Hon’ble Gauhati High Court has categorically held as follows :

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“Respondent bank cannot be allowed to proceed with the possession notice issued under Section 13 (4) of the SARFAESI Act, 2002 read with Rule 8 of the Security Interest (Enforcement) Rules 2002 which was published in the newspaper on the subsequent date with regard to the secured asset since the security interest pertaining to the property was registered with the Central Registry only on 30.11.2019 more than an year after issuance of the possession notice”.

¶46

In the present case on hand, Annexure-A2 possession notice was issued on 29.01.2022. But security interest in respect of the secured asset was registered with the Central Registry only on 19.07.2023 as evidenced from the perusal of Annexure-A3 copy of security interest Id Based Search Report, ie., after issuance of Annexure-A2 possession notice. As per the dictum laid down in the

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SA No.380 of 2024

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afore cited judgment of the Hon’ble High Court of Gauhati, issuance of Annexure-A2 possession notice is liable to be set aside. It is also pertinent to mention that this Tribunal has already observed in para 8 of this order, that the defendant bank has failed to comply with the mandatory requirements contemplated under Rule 8 (1) & (2) of the Security Interest (Enforcement) Rules 2002.

¶50

Now, the crucial issue which arises for consideration before this Tribunal is as to whether issuance of possession notice under Section 13 (4) of the SARFAESI Act, 2002 is a mandatory requirement for the secured creditor prior to seeking remedy under Section 14 (1) of the SARFAESI Act, 2002 for taking physical possession of the secured asset. This issue has been elaborately dealt with by the Hon’ble Supreme Court in Standard Chartered Bank and Ors. Vs. V. Noble Kumar and Ors. [Criminal Appeal No.1218 of 2013] .

¶51

It will be pertinent to reproduce herein the observation of the Hon’ble Supreme Court in para 29 of its judgment :

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“It is in the above-mentioned background of the legal frame of Sections 13 and 14, we are required to examine the correctness of the conclusions recorded by the High Court. Having regard to the scheme of Sections 13 and 14 and the object of the enactment, we do not see any warrant to record the conclusion that it is only after making an unsuccessful attempt to take possession of the secured asset, a secured creditor can approach the Magistrate. No doubt that a secured creditor may initially resort to the procedure under Section 13(4) and on facing resistance, he may still approach the Magistrate under Section 14. But, it is not mandatory for the secured creditor to make attempt to obtain possession on his own before approaching the Magistrate under Section 14. The submission that such a construction would deprive the borrower of a remedy under Section 17 is rooted in a misconception of the scope of Section 17.”

¶53

It is discernable from the above observation of the Hon’ble Supreme Court that issuance of possession notice under Section 13 (4) of the SARFAESI Act, 2002 is not a mandatory requirement for the secured creditor prior to taking measures under Section 14 (1) of the SARFAESI Act, 2002 for taking physical possession of the secured asset.

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SA No.380 of 2024

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In the present case at hand, the defendant bank approached the Chief Judicial Magistrate Court Manjeri and filed application and affidavit under Section 14 (1) of the SARFAESI Act, 2002 only after registration of the security interest over the secured asset with the Central Registry. However this Tribunal holds that Annexure-A2 possession notice is liable to be set aside on the ground of noncompliance of Rule 8 (1) & (2) of Security Interest (Enforcement) Rules 2002.

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In view of the foregoing reasons and discussions, this Tribunal holds that issuance of Annexure-A2 possession notice is liable to be set aside and that Annexure-A1 Demand Notice is not liable to be set aside, Annexure-A4 notice issued by the Advocate Commissioner and Annexure-A6 order passed by the learned Chief Judicial Magistrate, Manjeri in MC No. 299/2024 are not liable to be set aside.

¶58

In the result, SA No.380 of 2024 stands partly allowed in respect of the relief sought for to set aside Annexure-A2 possession notice and SA stands partly dismissed with regard to the reliefs sought for to set aside Annexure-A1 Demand Notice, Annexure-A4 notice issued by the Advocate Commissioner and Annexure-A6 order passed by the learned Chief Judicial Magistrate, Manjeri in MC No. 299/2024. 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 22^nd day of January, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 8 of 9

SA No.380 of 2024

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

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Sl. No.	Date	Particulars
1.	24.08.2021	True copy of the Demand Notice with translation.	Annexure-A1
2.	29.01.2022	True copy of the possession notice with translation.	Annexure-A2
3.	---	True copy of the security interest ID based search report.	Annexure-A3
4.	04.05.2024	True cop of the notice issued by the Advocate Commissioner.	Annexure-A4
5.	---	True copy of the affidavit filed in MC No.299/2024before the CJM Manjeri	Annexure-A5
6.	26.02.2024	True copy of the order in MC No.299/2024before the CJM Manjeri	Annexure-A6

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Sankaran Namboodiri v. Urban Co. operative Bnak Ltd.

Case brief

What is this about?

What did the court decide?

Sankaran Namboodiri v. Urban Co. operative Bnak Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

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