Dismissed

Mini Sathyan v. Federal Bank

DRT30 Apr 2025SA/424/2024

Case brief

AI extract

What is this about?

The applicant challenged the maintainability of securitization proceedings initiated by the Federal Bank, alleging defective service of the demand notice and that the secured asset was agricultural land. The Tribunal held that service was valid under Section 27 of the General Clauses Act and the property was not exclusively agricultural, thereby dismissing the application.

What did the court decide?

Application dismissed with costs of Rs. 20,000/- awarded to the defendant bank.

Mini Sathyan versus Federal Bank — 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 30^th day of April, 2025

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SECURITISATION APPLICATION NO.424/2024

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Between

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Mini Sathyan, Aged 54 years, W/o. Sathyan T.K., Thamarassery House, Mudicode, Pananchery, Pattikkad P.O., Thrissur, Kerala – 680 652. …Applicant

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And

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Authorized Officer, The Federal Bank Ltd., LCRD Thrissur Division, 1^st Floor, Chenchery Tower, High Road, Ollur, Thrissur, Kerala – 680 306. …Defendant

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This Securitization Application having been heard on 07.04.2025 in the presence of Advocate Sri. S.S. Aravind for the applicant and Advocates M/s. M.S. Kiran, Lisha William, E.K. Ramesh Kartha and Rohith R Kartha for the defendant stood over to this day for consideration, the Tribunal delivered the following:

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SA 424/2024

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F I N A L O R D E R

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Challenging the securitization proceedings 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 has filed this SA under S.17(1) of the SARFAESI Act seeking relief to set aside Annexure-A1 order of the Chief Judicial Magistrate Court, Thrissur and A2 demand notice with costs and to declare that the securitization proceeding is not maintainable.

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Brief facts of the case :

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2.1 The applicant availed loan from the defendant bank in the year 2020. Her husband Mr.Sathyan T.K. and son Yadukrishna was the guarantors/co-obligants for such loan. The applicant had created equitable mortgage in respect of the subject matter property having with a building of 3800 sq. ft. to secure the loan. It is claimed by the applicant that major portion of the secured asset is agricultural in nature and classified as ‘nilam’ in revenue records. Subsequently the applicant came across with a proceeding before the Chief Judicial Magistrate, Thrissur after obtaining certified copy in Crl. M.P. No.6057/2024 dated 07.11.2023. It is claimed by the applicant that no demand notice was served on her and her

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SA 424/2024

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husband and son. The demand notice was received by one Chinnamma, who is a 3^rd party to the family members of the applicant. Hence there was no proper service of demand notice. The son of the applicant was not in India on the day of issuance of the demand notice. In absence of service of the demand notice, the securitization proceeding is not sustainable.

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2.2. It is also claimed by the applicant in the SA that the secured asset is an agricultural land. Even there is residential building of an area of 3800 sq. ft. over the said land but the substantial part is used as agricultural land and hence the securitization proceeding in respect of such property is not maintainable. All the statutory measures are also not duly followed by the defendant in securitization proceeding. In absence of compliance of statutory requirement, the entire securitization proceeding is not maintainable and hence the same may be set aside.

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3.1 The defendant filed written statement denying the averment and claimed inter alia that all the statutory measures are duly followed. The demand notice was duly served on the applicant and the other guarantors. In absence of any illegality, the applicant has no basis to challenge the proceeding in this forum.

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3.2 It is also claimed that the secured asset is not an agricultural land. There is a residential building over the said land.

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SA 424/2024

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No convincing material is placed by the applicant to establish the plea of agriculture nature of the secured land on the day of availing the loan. Hence the applicant is not entitled to get any relief in this case and the SA may be dismissed.

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From the respective case of both the parties, the following

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points are emerged for adjudication in this case:

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(i) Whether there is any illegality or defect in issuing demand notice and other measures taken by the defendant under the provisions of SARFAESI Act?

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(ii) Whether the subject matter property is an agricultural land, exempted under the provisions of the SARFAESI Act?

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

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FINDINGS:

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Point No.(i) to (iii):

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All the three points, being interlinked with each other, are taken up together for adjudication. Admittedly, the applicant availed housing loan from the defendant in the year 2020 by mortgaging the subject matter property of an extent of 24.28 Ares of land having a residential building of 3800 sq. ft. over the same.

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Due to default in repayment, the securitization proceeding is initiated by the defendant for realization of the outstanding amount.

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The learned counsel for the applicant strenuously contended that

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SA 424/2024

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the demand notice was not duly served on the applicant and other guarantors to the loan. At the time of issuance of the demand notice, the son of the applicant was staying outside the country. One 3^rd party namely, Chinnamma received the notice, which cannot be treated as due service of the demand notice. In absence

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of proper service of the demand notice, the entire securitization proceeding is not sustainable and maintainable. It is also claimed that the secured asset is an agricultural land exempted under the provisions of SARFAESI Act. Hence the securitization proceeding, being not sustainable, may be set aside.

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The learned counsel for the defendant would contend that the demand notice was duly served at the address of the applicant. The applicant has not challenged the non-service of demand notice in any other forum. Raising such contention at this stage is not at all entertainable. A false plea is advanced in this case about the agricultural nature of the secured asset to evade the outstanding in the loan account. There is a residential building over the same. Hence the claim is not entertainable and the SA is liable to be dismissed.

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Due to non-repayment of the loan availed by the applicant, a demand notice under Section 13(2) of the SARFAESI Act was issued to the applicant, her husband and son in the address

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SA 424/2024

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furnished by them at the time of availing the loan. It is seen from the record that the applicant produced the acknowledgement card marked Annexure-A3 series which indicate that the registered notices were received by one Chinnamma. It is also seen from the record that after availing the loan, the applicant entered into a supplementary agreement with the defendant for receiving the loan on 12.07.2021 furnishing the same address to which the demand notices were sent by registered post.

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Section 27 of the General Clauses Act, 1897 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. S ince the defendant issued the notices to the last known address of the applicant, her husband and son by registered post, presumption would be drawn that the same were duly served. The applicant ought to have raised objection before the postal department to ascertain to whom the said notice was served. But no such step was taken by the applicant before the postal authority in disputing such service of demand notice. The plea advanced in this case about the non-service of the demand notice to the applicant and her family members is afterthought and not acceptable. It is also not established by the applicant that her son visited outside India after giving intimation to the bank. Hence the defendant has no scope to know about the same. In such

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SA 424/2024

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premises, issuance of the demand notice in the address furnished by the applicant and her family members cannot be said illegal in any manner.

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The applicant claims that the secured asset is agricultural land, which was recorded as ‘nilam’ in the revenue records, marked Annexure-A7. The law is very well settled on the point that revenue record is not sufficient to establish the plea as agricultural nature of the land seeking exemption under the provisions of SARFAESI Act. Except this revenue record, no other material is filed to substantiate the claim of agricultural nature of the secured asset.

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The Hon'ble Apex Court in the judgment reported in 2018

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(18) SCC 252 in the case of Indian Bank & another vs. K.Pappireddiyar & another it is held that the question as to whether the land is agricultural has to be determined on the basis of the totality of facts and circumstances including the nature and character of the land, the use to which it was put and the purpose and intent of the parties on the date on which the security interest was created.

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In another judgment of the Hon’ble Apex Court reported in 2023 KHC 6012 in case of K.Sreedhar v. M/s.Raus Constructions Pvt. Ltd. & others it was held that “ When it was the case on behalf of the borrowers that in view of Section 31(i) of the SARFAESI Act, the properties were agricultural lands, the same

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SA 424/2024

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were being exempted from the provisions of the SARFAESI Act, the burden was upon the borrower to prove that the secured properties were agricultural lands and actually being used as agricultural lands and/or agricultural activities were going on.”

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In view of the ratio, the burden lies on the claimants to establish that at the time of availing loan the secured asset is exclusively used for agricultural purpose and the claimant was depending on the source of income derived from such agricultural activities over the secured asset. No such evidence is led in this case. Rather the material indicates that there is a residential building of 3800 sq. ft. over the secured asset. The defendant has also produced building tax receipt, marked Annexure-D4. In absence of any material, it cannot be said that the secured asset is agricultural land exempted under the provisions of SARFAESI Act.

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No other point is raised by the applicant indicating any defect or illegality in the measure taken under the provision of SARFAESI Act or in the proceeding under Section 14(1) of the SARFAESI Act. The defendant has also produced all relevant documents regarding compliance of all statutory provisions including the agreement dated 30.04.2020 by the Applicant, her husband and son, marked as Annexure-D8. These documents also do not show that the secured asset is agricultural land at any point of time. It is seen from the record that the applicant executed

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SA 424/2024

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one unregistered lease agreement to one Basheer for a period of one year in September 2021. The period of lease is already over and it is against the terms and conditions of the agreement executed by the applicant at the time of availing the loan. In absence of any illegality in the securitization proceeding, the applicant is not entitled to get any relief and hence all the points are answered against her.

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Hence it is ordered:-

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ORDER

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In view of the foregoing reasons, this SA, being devoid of any merit, is hereby dismissed with costs of Rs.20,000/- (Rupees twenty thousand only) to the defendant bank, as the applicant has unnecessarily delayed the securitization proceedings without any valid claim.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 30^th day of April, 2025)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 424/2024

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Documents on the part of the applicant

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Annexures	Date	Particulars of document
Annexure-A1	03.06.2024	True copy of the Order in Crl. M.P. No.6057/2024.
Annexure-A2	07.11.2023	True copy of the demand notice produced
		by the defendant in Crl. M.P. No.6057/2024.
Annexure-A3		True copy of the proof of service.
Annexure-A4		True copy of the relevant pages of the passport of the guarantor Mr. Yadukrishna T.S.
Annexure-A5	12.07.2023	True copy of the supplementary MOD.
Annexure-A6	21.05.2024	True copy of the application under Section14.
Annexure-A7	10.07.2022	True copy of the possession certificate.
Annexure-A8		True copy of the lease agreement for agriculture purpose.

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Documents on the part of the defendants

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Annexure-D1	07.11.2023	True copy of demand notice under Section 13(2).
Annexure-D2	10.11.2023	True copy of the proof of services (Acknowledgement cards received back).
Annexure-D3	12.07.2021	True copy of the supplementary agreement for rescheduling of loan.
Annexure-D4	06.06.2020	True copy of the building tax receipt issued by Nenmanikkara Grama Panchayath in the name of Mini Sathyan.

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SA 424/2024

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Annexure-D5	08.02.2024	True copy of the possession notice.
Annexure-D6		The proof of delivery of possession notice of applicant and her husband along with returned cover addressed to Yadukrishna T.S.
Annexure-D7		True copy of the Paper publication.
Annexure-D8	30.04.2020	True copy of the housing loan agreement executed by the defendant.