Partly allowed

Aboobecker Haji v. South Indian Bank

DRT30 Apr 2025SA/629/2024

Case brief

AI extract

What is this about?

In a securitization application challenging proceedings under the SARFAESI Act regarding agricultural land, the Tribunal held that while the order by the Chief Judicial Magistrate was set aside for being a printed form without applied mind, the applicant failed to prove agricultural exemption or procedural defects in the notice service.

What did the court decide?

Securitization application allowed in part. Order of Chief Judicial Magistrate in MC No.588/2024 set aside without costs. Defendants directed to file fresh application.

Aboobecker Haji 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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SECURITIZATION APPLICATION No.629/2024

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Between

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Aboobecker Haji, S/o. Beeran, Kariyangattu Kavil, Marvanchery, Kadancheri P.O., Malappuram – 679 582. …Applicant

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And

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South Indian Bank Ltd. represented by its Branch Manager, Ayyanthole Branch, Civil Line Road, Ayyanthole P.O., Thrissur – 680 003.

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The Authorized Officer, South Indian Bank Limited, Regional Office, Platinum Jubilee Building, 1^st Floor, Ayyanthole P.O., Thrissur – 680 003. …Defendants

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SA 629/2024

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This Securitization Application having been heard on 04.04.2025 in the presence of Advocates M/s. Peer Mohamed Khan, C.J.Chacko and Suresh S. for the applicant and Advocate M/s. K.N.Sivasankaran, Sunil Shankar, Devayani Nair & Sandhra S. for the defendants 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 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 have filed this SA under S.17(1) of the SARFAESI Act seeking relief to declare the entire securitization proceeding as illegal.

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Brief facts of the case :

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2.1 The applicant is a guarantor to the credit facilities extended by the defendant bank to M/s. New Kerala Fruits, a sole Proprietorship firm of Mr.Abdul Gafoor P.M. and the property described in the SA was mortgaged for the said loan. The Overdraft

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SA 629/2024

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facility was extended to Rs.1,80,00,000/- on 29.03.2019. The applicant joined in the execution of loan documents in respect of extended Overdraft limit. The applicant claims that he has no knowledge about the other loans availed by the Proprietor of the firm.

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2.2. Due to default in repayment, the loans were classified as ‘NPA’ and the demand notice under Section 13(2) of the SARFAESI Act was issued on 23.06.2021 calling the applicant and legal heirs of the borrower to pay the outstanding amount of Rs.1,98,93,277.28 followed by issuance of possession notice on 08.02.2022 under Section 13(4) of the SARFAESI Act. It is claimed that possession notice was not duly served as per the statutory requirement.

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2.3. The defendants also approached the Chief Judicial Magistrate Court, Manjeri in MC No.588/2024 for taking physical possession of the secured asset in a proceeding under section 14 of the SARFAESI Act. The Chief Judicial Magistrate passed an order appointing an Advocate Commissioner to take possession of the secured asset which is impugned in this case. Subsequently the defendants issued a sale notice dated 09.08.2024 for sale of the

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SA 629/2024

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property. It is claimed that the reserve price fixed is not as per the prevailing market value of the property.

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2.4. In the SA the applicants challenged the securitization

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proceeding mainly on the following grounds:-

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(a) The demand notice under Section 13(2) of the SARFAESI Act was not duly served on all the legal heirs of the deceased borrower and hence the securitization proceeding is vitiated.

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(b) The proceeding under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate, Manjeri and the order passed in the said proceeding is not as per the statutory requirement and hence the Advocate Commissioner cannot take physical possession of the secured asset based upon such illegal proceeding and order of the Chief Judicial Magistrate, Manjeri.

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(c) The secured asset is agriculture property of the applicant and hence the same is exempted under Section 31(i) of the SARFAESI Act.

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(d) The sale notice issued by the defendant is also illegal as the reserve price is not fixed as per the market value of the property and hence the same is liable to be set aside.

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3.1 The defendants filed written statement denying the averments and claimed interalia that all the statutory measures in

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SA 629/2024

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the securitization proceeding are duly complied. It is averred in the written statement that late Mr.Abdul Gafoor P.M. availed following facilities as Proprietor of the business M/s. New Kerala Fruits by mortgaging the property of the applicant of an extent of 44.31 Ares of agricultural land and other properties.

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3.2. Due to non-repayment of the loan amount, all the loans were classified as ‘NPA’ and the demand notice was issued to the legal heirs of the deceased, late Mr.Abdul Gafoor P.M., who expired on 04.10.2020 and the guarantors including the present applicant. It is also submitted that the possession notice was duly served after compliance of all the statutory requirements and the relevant documents are filed in support of the same.

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3.3 The measure under Section 14 of the SARFAESI Act was taken to take physical possession of the secured asset. All the statutory requirements are duly followed and the Chief Judicial Magistrate passed a reasoned order in appointing an Advocate Commissioner in taking possession of the same. There is no illegality in the said proceeding and hence interference with the same is not warranted.

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3.4. The secured asset is not an agricultural land at the time of creation of security interest nor any agriculture activity was

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SA 629/2024

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being carried on the secured asset at any point of time. Hence the contention of the applicant on this aspect is not acceptable.

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3.5. The sale notice dated 09.08.2024 scheduling the sale on 01.10.2024 did not fructify. Since all the statutory provisions are duly complied in this case, the applicant cannot challenge the same in this Forum.

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3.6. It is further averred by the defendants that the legal heirs of the deceased borrower were duly served with demand notice. They have not claimed omission in service of the demand notice on other legal heir of the deceased. The applicant, being a guarantor, cannot challenge the same. Hence the SA, being devoid of any merit, may be dismissed.

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From the respective contentions of both sides, the

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following points are emerged for adjudication in this case:

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(i) Whether there is any defect or illegality in the demand notice issued under Section 13(2) of the SARFAESI Act and the securitization measure taken by the defendants including the measure under Section 14 of the SARFAESI Act?

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(ii) Is the secured asset is an agriculture 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 proceeding?

SA 629/2024

FINDINGS:

All the points, being interlinked with each other, are taken up together for adjudication. Admittedly the applicant stood as guarantor for the loan availed by late Mr.Abdul Gafoor P.M., Proprietor of M/s. New Kerala Fruits. Due to default committed by the borrower in repaying the loans, the securitization proceeding was initiated. As the borrower expired on 04.10.2020, the demand notice was served on his legal heirs, including the guarantors. Due to non-receipt of the claim amount, measure under Section 13(4) of the SARFAESI Act was taken and the proceeding under Section 14 of the SARFAESI Act was initiated before the Chief Judicial Magistrate Court, Manjeri to take physical possession of the secured asset.

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In the SA the applicant claims that the father of the deceased borrower was not noticed under Section 13(2) of the SARFAESI Act and hence the securitization proceeding is vitiated. To show the legal heirs of the deceased, a certificate was obtained from the Village Officer on 01.12.2021 is produced stating that father of the deceased, namely Abdulla Muhammed is one of the legal heirs of the deceased. Admittedly after receipt of the demand notice, the successors of the deceased did not raise any objection

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SA 629/2024

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claiming that any legal heir of the deceased was left out in the demand notice. The applicant, being a guarantor, has no valid right to raise such issue in this proceeding. Hence the contention on this aspect is not entertainable in the above circumstances.

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The applicant also claims that the secured asset is agricultural land exempted under the provisions of the SARFAESI Act. In the SA it is specifically stated that the applicant is the owner in possession of 44.31 Ares of agricultural land with a residential building thereon. No material is placed by the applicant that the secured asset was ever used as agricultural land and he was deriving his source of income from agricultural activities over the secured asset at the time of availing the loan. On mere claim that the secured asset as agricultural land, the same cannot be exempted under the provisions of SARFAESI Act.

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The law is very well settled on the point that burden of proving the land as agricultural is on the person claiming exemption on the ground of agricultural nature of the secured asset. In a judgment of the Hon’ble Apex Court reported in 2023 KHC 6012 in case of K.Sreedhar v. M/s.Raus Constructions Pvt. Ltd. &

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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

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SA 629/2024

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properties were agricultural lands, the same 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 claimant 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. Hence the applicant’s claim on this aspect is not entertainable and acceptable due to lack of any material evidence on this aspect.

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During the course of argument, the learned counsel for the applicant strenuously contended that the application under Section 14(1) of the SARFAESI Act and the declaration made by the authorised officer is not as per the statutory requirement. It is also contended that the Order passed by the Chief Judicial Magistrate is not sustainable in view of the Judgment of the Hon’ble High Court of Kerala in OP (DRT) No.336/2024, wherein it was held as follows:-

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SA 629/2024

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…………” Thus it is clear that, though the exercise of jurisdiction by the Magistrate under Section 14 of the SARFAESI Act does not involve any adjudication, the act of the Magistrate in passing orders in printed form by filing in necessary details in blank spaces cannot be justified under any circumstances”.

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On the other hand, the learned counsel for the defendants contended that in absence of any illegality and causing of substantial prejudice to the applicant, the Order passed by the Chief Judicial Magistrate cannot be interfered with and the claim may be dismissed.

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During argument stage, the learned counsel could not point out any defect in the application or in the affidavit filed in support of declaration by the Authorized Officer causing substantial prejudice to him. No material defect in filing the affidavit along with application under section 14(1) of the SARFAESI Act is also noticed. Even if there is any error or omission in the affidavit, the same cannot be a ground to set aside the order of the Chief Judicial Magistrate and the same can be rectified by filing fresh affidavit by the secured creditor in view of the ratio decided by the Hon'ble High Court of Kerala in the case of Shibu George vs. State of Kerala & another , reported in 2016 (1) KLJ 22.

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SA 629/2024

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So, as far as the order passed by the Chief Judicial Magistrate is concerned, it appears that the Order was passed by him in a printed form, which is not at all permissible and acceptable. The Order can be said as illegal as the Chief Judicial Magistrate has not applied his mind to the materials placed on record and passed an Order in stereo typed manner, which is not permissible in view of the judgment of the Hon'ble High Court of Kerala as cited by the learned counsel for the defendants in OP (DRT) No.336/2024 (Supra). In such premises, the Order passed by the Chief Judicial Magistrate cannot be treated as valid Order in enforcing the securitization measure and the defendants cannot proceed further based upon such illegal Order. However, the defendants may file fresh application with the declaration in the form of affidavit as per the statutory requirement and take the assistance of the Chief Judicial Magistrate to take possession of the secured asset in accordance with the law. It is also clarified that in the event of challenge to such subsequent proceeding under Section 14 of the SARFAESI Act, the points already adjudicated in this case shall not be re-agitated by the applicant.

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SA 629/2024

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Hence it is ordered:-

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ORDER

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In view of the foregoing reasons and with the above observations, this SA, is allowed in part. The Order passed by the CJM in the proceeding, MC No.588/2024 is hereby set aside but in

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the circumstances, without costs.

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(Dictated to my steno, 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]

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PRESIDING OFFICER

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Documents on the part of the applicant

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Annexures	Date	Particulars of documents
Annexure-1	23.06.2021	True copy of the demand notice issued by the defendant bank.
Annexure-2	08.02.2022	True copy of the possession notice.
Annexure-3	02.08.2024	True copy of the notice of the Advocate Commissioner.
Annexure-4	21.05.2024	True copy of the petition and affidavit filed by the defendant bank in MC No.588/2024 in Chief Judicial Magistrate Court, Manjeri.
Annexure-5	02.07.2024	True copy of the Order of the Chief Judicial Magistrate Court, Manjeri in MC No. 588/2024.
Annexure-6	09.08.2024	True copy of the sale notice.
Annexure-7	01.12.2021	True copy of the family membership certificate issued by the village officer Ollukkara/Nettissery.
Annexure-7(a)		True English translation of Annexure 7 document
Annexure-8	11.03.2020	True copy of the land tax receipt for the property issued by Tavanur Village.
Annexure-8(a)		True English translation of Annexure 8
	Documents on	document. the part of the defendants
Annexures	Date	Particulars of documents
Annexure B1		True copy of the demand notice and the postal receipt/ return cover/ acknowledgement cards.
Annexure B2	02.11.2021	True copy of the paper publication in the New Indian Express, Thrissur edition and the Deepika newspaper, Thrissur edition.
Annexure B3		True copies of the possession notice, acknowledgement cards, returned postal cover and postal receipts.
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Annexure B4	11.02.2022	True copy of the paper publication published in the New Indian Express and the Deepika Newspaper, Thrissur and Kozhikkode edition.
Annexure B5		True copy of the photographs evidencing

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affixture.

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Annexure B6 True copy of Sec.14 petition and affidavit.

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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 30^th April, 2025

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SA No.629/2024

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Between

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Aboobecker Haji, S/o. Beeran, Kariyangattu Kavil, Marvanchery, Kadancheri P.O., Malappuram – 679 582. …Applicant

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And

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South Indian Bank Ltd. represented by its Branch Manager, Ayyanthole Branch, Civil Line Road, Ayyanthole P.O., Thrissur – 680 003 & Another …Defendants

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F I N A L O R D E R

Aboobecker Haji v. South Indian Bank

Case brief

What is this about?

What did the court decide?

Aboobecker Haji v. South Indian Bank

Case brief

What is this about?

What did the court decide?

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