Dismissed

Joe Louis v. South Indian Bank

DRT30 Apr 2025SA/565/2024

Case brief

AI extract

What is this about?

Applicants challenged securitization proceedings initiated by a bank, alleging illegality in the demand notice, CERSAI registration discrepancies, and Section 14 application. The Tribunal found the application and affidavit filed by the authorized officer valid under the Act and dismissed the application for lack of merit.

What did the court decide?

Application dated Security No. 565/2024 was dismissed with costs of Rs. 20,000/- to be paid by the applicants.

Joe Louis versus South Indian 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.565/2024

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Between

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Joe Louis, S/o.E.O. Louis, Eluvathingal House, Kizhakkumpattukara Desom, Chembukavu Village, Thrissur.

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Celine Louis, W/o. E.O. Louis, Eluvathingal House, Kizhakkumpattukara Desom, Chembukavu Village, Thrissur …Applicants

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And

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The South Indian Bank Ltd., Pudukkad Branch, D. No.IX/145, Mangalan Building, Ground Floor, NH-47 Road, Pudukkad P.O., Thrissur – 680 301, Represented by its Manager.

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Authorized Officer, The South Indian Bank Ltd, Regional Office, Irinjalakkuda, VI/950-B, Christ Nagar, AKP Junction, Irinjalakuda – 680 125. …Defendants

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SA 565/2024

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This Securitization Application having been heard on 15.04.2025 in the presence of Advocate M/s. P.Shrihari & Mary Nithiya K.J. for the applicants and Advocate M/s. C.Ajith Kumar for the defendants 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 defendants 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 applicants/borrowers have filed this SA under S.17(1) of the SARFAESI Act seek to declare the entire securitization proceeding starting from the stage of issuance of demand notice as illegal and to set aside the securitization measure including the order passed by the Chief Judicial Magistrate with some consequential relief.

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Brief facts of the case :

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2.1 In the SA the applicant Nos.1 and 2 have averred that they availed KCC OD limit of 1,27,00,000/- from the first defendant for agricultural operation by creating security interest over 80.94 Ares of land. Due to natural calamities and spread of Covid-19, the

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SA 565/2024

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agricultural operations were affected and the loan could not be repaid in time. The defendants classified the loan as ‘NPA’ and issued a demand notice under Section 13(2) of the SARFAESI Act on 03.06.2024 calling the applicants to pay an amount of Rs.1,62,06,290.39 due on 02.01.2024 along with interest and penal interest.

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2.2 On receipt of said illegal demand notice, the applicants raised objection under Section 13(3A) of the SARFAESI Act and the defendants issued a reply on 20.03.2024 denying the objection. It is further claimed that the security interest over the mortgaged land is not registered in the CERSAI portal. Hence the defendants cannot proceed with the securitization measure in view of the restriction contained under Section 26-D of the SARFAESI Act.

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2.3 The defendants also filed application under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate, Thrissur. It is claimed by the applicants that the affidavit filed by the Authorized officer is not as per the statutory requirement and the application under Sec.14(1) of the SARFAESI Act is not filed by the secured creditor. The learned Chief Judicial Magistrate, without applying mind to the documents and the erroneous affidavit, passed an order in taking possession of the secured asset, which is impugned in this SA. The applicants seek relief to declare the entire securitization

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SA 565/2024

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proceeding starting from the stage of issuance of demand notice as illegal and to set aside the demand notice as well as the order passed by the Chief Judicial Magistrate with some consequential relief.

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The defendants filed written statement denying the averments in the SA and stated that the applicants availed credit facility by mortgaging the collateral security 80.94 Ares of land as described in the application and in the written statement. The loan availed was renewed on 10.12.2018. But the borrowers failed to comply the repayment terms and did not service the interest. Consequently the loan was classified as ‘NPA’ on 09.11.2023. An OA was filed bearing No.105/2024 for recovery of the outstanding availed by the applicants. After issuance of the demand notice and receipt of the objection, due reply was given under Section 13(3A) of the SARFAESI Act. Due to typical mistake in the CERSAI portal, 2 cents of the land was shown, which was rectified subsequently. All the statutory measures in the securitization proceeding are duly followed. There is also no illegality in the proceeding under Section 14 of the SARFAESI Act filed before the Chief Judicial Magistrate. In absence of any illegality in any of the proceedings, the applicants are not entitled to get any relief.

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SA 565/2024

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From the respective case of both the parties, the

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following points are emerged for adjudication in this case:

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(i) Whether the securitization proceeding initiated by the defendants suffers from any illegality, defect or irregularity to intervene with the same?

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(ii) Whether the applicants are 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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In this case, the applicants in the SA and also during

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argument raised the following points in support of their case:

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The area described in the CERSAI Certificate is only 2 cents. But the security interest was created in respect of 80.94 Ares of land. In absence of proper registration in the CERSAI Portal, the defendants cannot proceed in the securitization measure in view of the bar contained in Section 26-D of the SARFAESI Act.

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The penal interest charged is not shown in the demand notice and objection was submitted under Section 13(3A) of the SARFAESI Act, which was not replied properly. Hence the securitization proceeding is vitiated.

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The measure under Section 14 of the SARFAESI Act is illegal as the application was not filed by the writing of the

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SA 565/2024

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secured creditor. The authorized officer has no authority to file such application. So also the proviso of Section 14(1) of the SARFAESI Act is not duly complied.

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The learned counsel for the applicants contended that in view of such illegality, the SA may be allowed by setting aside the entire proceedings.

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On the other hand the learned counsel for the defendants would contend that there is no defect in the CERSAI Registration. The area shown as 2 cents is an typographical error which was modified in the CERSAI Portal and the land measuring 80.94 Ares is shown in the CERSAI portal, which is apparent from the certificate marked Annexure-B1 in this case. Hence the contention on this aspect is not acceptable. Further there is no illegality in the securitization proceeding including the proceeding under Section 14(1) of the SARFAESI Act. As per the statute, the authorized officer is authorized to act on behalf of the secured creditor. Hence there is no illegality. So far, the penal interest is concerned, OA is filed to recover the same. The applicants can raise their issue in the OA and the Tribunal will consider the same. The dispute regarding the penal interest is not a ground to resist the securitization proceeding. Hence the SA, being devoid any merit, may be dismissed.

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SA 565/2024

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On careful consideration of the submissions and materials placed by both sides, it appears that the main dispute is regarding non registration of the security interest over the mortgaged properties in the CERSAI Portal. As per Annexure-A5 the area of the plot No.815/1, which was mortgaged, is shown as 2 cents. But the equitable mortgage is credited for 80.94 Ares of land. The defendants produced the modified certificate of CERSAI portal, marked Annexure-B1 which indicates that the area of the land is modified to 80.94 Ares. Hence the contention on this aspect of the learned counsel for the applicants has no force and the same is not acceptable.

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So far, the contention regarding filing of application under Section 14 of the SARFAESI Act in writing by the secured creditor, it is discernible from the materials on record that the application was filed by the Authorized officer of the defendant bank. Section 2(1)(zd) of the SARFAESI Act defines the ‘secured creditor’ as follows:-

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“(i) any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified in clause (l)”

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SA 565/2024

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In view of the statutory provision bank or financial institution is the secured creditor in whose favour the security interest was created for availing the loan. The bank or the financial institution functions through their officers are employees. Rule 2(a) of the Security Interest (Enforcement) Rules, 2002 defines the authorized officer. Power to exercise the rights of a secured creditor under the SARFAESI Act is given to the Authorized officer. Hence there is no illegality in filing the application and affidavit by the authorized officer. He has filed the application in the capacity of the secured creditor and sworn the affidavit in the capacity of an authorized officer. The contention on this aspect has no force.

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During argument stage the learned counsel for the applicants could not point out any specific illegality in such proceeding. Only it is stated that the proviso to Section 14(1) of the SARFAESI Act is not complied. On careful consideration of the submission, the authorized officer has stated in details of the loan transaction in the affidavit as per the statutory requirement. Even if there is any defect in the affidavit, the same is not a ground to set aside the order passed under Section 14(1) of the SARFAESI Act by the Chief Judicial Magistrate. The defendants can correct the mistake, if any, by filing a corrected affidavit in view of the ratio

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SA 565/2024

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decided by the Hon’ble High Court of Kerala in Shibu George vs. State of Kerala & another , reported in 2016 (1) KLJ 22.

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In this case it is also noticed from the order passed by

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the Chief Judicial Magistrate that the same was passed by applying mind to the documents and the affidavit produced and being satisfied passed the impugned Order, marked Annexure-A9. Even if there is no error in the Section 14 application or affidavit filed by the Authorized officer the same can be corrected. But no such major error is noticed in such application or Affidavit causing substantial prejudice to the applicants. Hence interference with the proceeding before the learned Chief Judicial Magistrate is not at all warranted in the present case.

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It is seen from the records that after receipt of the demand notice, the applicants submitted objection under Section 13 (3-A) of the SARFAESI Act, marked Annexure-A3. No dispute is raised about the penal interest. The bank has given a reply on 20.03.2024 stating the details and denying the objection. Section 13(3-A) proviso prescribes that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 of the SARFAESI Act. In view of the statutory

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SA 565/2024

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provision, the applicants cannot challenge the reply in this proceeding as erroneous. Even if there is any dispute about the penal interest, the same can be raised in the OA filed by the defendants as rightly pointed out by the learned counsel for the defendants. The dispute regarding the penal interest cannot be a ground to interdict with the securitization proceeding. No other illegality or defect or irregularity in the securitization proceeding is established by the applicants and hence they are not entitled to get any relief. Both the points are answered against the applicants.

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Hence it is ordered:-

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O R D E R

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In view of the foregoing reasons, this SA, being devoid of any merit, is hereby dismissed with cost of Rs.20,000/- (Rupees Twenty Thousand only). The applicants shall pay the cost to the defendants due to unnecessary delay caused by them in the securitization proceeding.

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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 347/2023

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Documents on the part of the applicants

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Annexures	Date	Particulars of documents
Annexure-A1	26.03.2014	True copy of Agreement of Hypothecation (Agricultural Advances).
Annexure-A2	03.01.2024	True copy of Section 13(2) Demand Notice issued by the 2^nddefendant.
Annexure-A3	01.03.2024	True copy of Section 13 (3A) objection sent by applicants.
Annexure-A4	20.03.2024	True copy of Section 13 (3A) reply.
Annexure-A5		True copy of Asset Based CERSAI ID Based
		Search Report (Transaction ID No.200310702144 dated 19.06.2024) with respect to Asset ID No.200007187104.
Annexure-A6		True copy of Section 14 Application (Crl. M.P. No.7753/2024) filed by 2^ndDefendant on the file of Chief Judicial Magistrate Court, Thrissur.
Annexure-A7		True copy of Affidavit in (Crl. M.P. No.7753/2024) filed by 2^ndDefendant on the file of Chief Judicial Magistrate Court, Thrissur
Annexure-A8		True copy of Statement of Dues as on 28.06.2024 produced by the 2^ndDefendant in Crl. M.P. No.7753/2024 on the file of Chief Judicial Magistrate Court, Thrissur.
Annexure-A9	15.07.2024	True copy of Section 14 Order in Crl. M.P. No.7753/2024 on the file of Chief Judicial Magistrate Court, Thrissur.

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SA 347/2023

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Documents on the part of the defendants

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Annexures Date Particulars of documents

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Exhibit-B1

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True copy of the satisfaction of charge rectifying the mistake in the extent, obtained from the Central Registry.

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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 this the 30^th day of April, 2025

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S A No.565/2024

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Between

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Joe Louis, S/o.E.O. Louis, Eluvathingal House, Kizhakkumpattukara Desom, Chembukavu Village, Thrissur & Anr

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... Applicants

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And

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The South Indian Bank Ltd., Pudukkad Branch, D. No.IX/145, Mangalan Building, Ground Floor, NH-47 Road, Pudukkad P.O., Thrissur – 680 301, Represented by its Manager .…Defendants

Joe Louis v. South Indian Bank

Case brief

What is this about?

What did the court decide?

Joe Louis v. South Indian Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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