Dismissed

Penku @ Fathima v. South Indian Bank

DRT27 Mar 2025SA/64/2023

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed an application challenging SARFAESI proceedings. The court held that issuing a fresh demand notice to legal heirs was unnecessary as the deceased guarantor had already received notice, and the proceedings were not vitiated by including a dead person.

What did the court decide?

SA 64/2023 dismissed without costs; Respondent to delete deceased's name from proceedings.

Penku @ Fathima 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 27^th day of March, 2025

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SECURITIZATION APPLICATION No.64/2023

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Between

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Penku @ Fathima, Pandikasalaparambil House, Thiruvathra P.O., Thrissur – 680 516. …Applicant

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And

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The Authorised Officer, South Indian Bank Ltd., Registered Office, SIB House, T.B.Road, Mission Quarters, Thrissur – 680 001.

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Mohammed Shehin, Pandikasalaparambil House, Thiruvathra P.O., Thrissur – 680 516. …Defendants This Securitization Application having been heard on 28.02.2025 in the presence of Advocate Sri.Sasi N. for the applicant, Advocate Sri.Sijo George for the 1^st defendant, the 2^nd defendant being absent and stood over to this day for consideration, the Tribunal delivered the following:

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SA 64/2023

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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 1^st 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/guarantor has filed this SA under S.17(1) of the SARFAESI Act seeking relief to set aside the entire securitization proceedings initiated by the 1^st defendant.

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Brief facts of the case :

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In the SA the applicant has averred that her son, the 2^nd defendant herein availed ODAP loan of Rs.22 lakhs from the defendant bank on 04.11.2016 and the applicant along with her husband stood as guarantors for the loan. The applicant’s husband expired on 25.03.2019. The applicant mortgaged the subject matter property having an extent of 5.97 Ares along with the residential building therein to secure the loan. The defendant bank initiated SARFAESI proceeding under the provisions of the SARFAESI Act and issued demand notice on 18.02.2019 marked Annexure-A2 calling the applicant to pay the outstanding amount. After receipt of the notice, the applicant approached the defendant bank for restructuring the loan but they did not consider her request and

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SA 64/2023

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proceeded to issue possession notice under S.13(4) of the SARFAESI Act on 23.07.2019 against the dead person, husband of the applicant who expired on 25.03.2019. The defendant bank also obtained an order from the CJM, Thrissur in MC No.94/2019 to take possession of the secured asset with the assistance of the Advocate Commissioner. All the statutory measures are vitiated as the order passed by the CJM is against the dead person without impleading his legal heirs. Hence the SA is filed for setting aside the entire securitization proceeding.

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The 1^st defendant filed written statement denying the claim and stated that the applicant has never informed the bank about the death of her husband P.M.Khadar. It came to the knowledge of the bank when the possession notice was returned with the endorsement ‘party expired’. The applicant has never claimed that except her and the 2^nd defendant, he left with any other legal heirs. Since the demand notice was received by P.M.Khadar, who stood as personal guarantor for the loan, there is no necessity to issue any fresh notice on any other legal heir. There is no manner of illegality in the securitization proceedings. Hence the SA, being devoid of any merit, may be dismissed.

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SA 64/2023

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From the respective case of the applicant and the 1^st defendant, the following points are emerged for adjudication in this case:

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(i) Whether the securitization proceeding is vitiated due to continuation of the proceeding against a dead person?

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(ii) Whether the applicant is 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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For the sake of convenience, both the points, being interlinked with each other, are taken up together for adjudication. The availing of the loan by the 2^nd defendant is not disputed. In paragraph 1 of the SA the applicant has stated that she mortgaged the property having an extent of 5.97 Ares with all other improvements therein including the residential building but no such material is available. In the schedule to Annexure-A1 demand notice, it is shown that the property was acquired by the 2^nd defendant/borrower Muhammed Shehin. Though it is averred that her husband stood as guarantor for the loan, there is no averment that he created any equitable mortgage in respect of the subject matter property. From the averment in the SA, it can be said that

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SA 64/2023

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husband of the applicant P.M.Khadar stood as personal guarantor to the loan availed by her son, the 2^nd defendant in this case.

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The applicant has produced death certificate of P.M.Khadar, who expired on 25.03.2019. It is not disputed that prior to the death of P.M.Khadar, demand notice was issued to the applicant, her son/2^nd defendant and her husband P.M.Khadar. No objection or representation was submitted under S.13(3-A) of the SARFAESI Act. Thereafter the 1^st defendant proceeded to take measure under S.13(4) of the SARFAESI Act on 23.07.2019. The defendant bank claimed that they had no knowledge about the death of P.M.Khadar and they came to know about the same only after return of the possession notice. In spite of the same, in MC No.94/2019 filed by the 1^st defendant under S.14 of the SARFAESI Act, the deceased P.M.Khadar was impleaded as a party and the CJM passed an order on 24.0.2019 appointing an Advocate Commissioner to take possession of the secured asset.

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The sole question arises whether such order can be

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treated as null and void due to impleading of a dead person in the proceeding and whether it is necessary to issue demand notice to any other legal heir after the death of P.M.Khadar, who is one of the guarantors. The 1^st defendant claimed that they have no

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SA 64/2023

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knowledge about any other legal heir of late P.M.Khadar nor the applicant or her son has ever informed about existence of any other legal heir except them.

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The learned counsel for the 1^st defendant has cited a judgment of the Hon'ble High Court of Kerala reported in 2019 KHC 7606 i n the case of The Authorised Officer, Tamilnadu Mercantile Bank Limited vs. Devi Prasad wherein similar issue was considered and at paragraph 14 it is held as follows:-

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“14.............Question is whether the death of the original borrower occurred at that stage of the proceedings will abate the entire steps taken. Or in other words, whether the secured creditor is at an obligation to initiate fresh steps, right from issuing notice under sub-section (2) of Section 13. Considering the object, nature and scheme of the above said provisions of the SARFAESI Act, we can only answer the above question in the negative........”

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The Hon'ble High Court has answered the question in negative by saying that after service of the demand notice, bank has no obligation to initiate fresh step against the legal heirs right from the stage of issuance of notice under S.13(2) of the SARFAESI Act. In this case, after service of demand notice to P.M.Khadar, he expired. Demand notice was also issued to the applicant and her son 2^nd defendant who are the legal heirs of the deceased. The deceased has not left any other legal heir to be heard. The property belongs to the borrower/2^nd defendant, who created the mortgage. Even if

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SA 64/2023

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he has any other legal heir, fresh demand notice to them is not necessary. Non-impleading of other legal heirs in the securitization proceeding would not vitiate the proceeding in view of the ratio decided by the Hon'ble High Court of Kerala referred supra .

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The learned counsel for the 1^st defendant has also cited another judgment of the Hon'ble High Court of Punjab and Haryana reported in AIR 2022 P&H 169 i n the case of Kotak Mahindra

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Bank Ltd. vs. The District Magistrate and another wherein by referring the judgment of the Hon'ble High Court of Kerala ( supra) , similar view was expressed and also observed that since the demand notice was served during the lifetime of the deceased, there is no necessity to issue fresh demand notice to the legal heirs of the deceased. Both the ratio decided by the Hon'ble High Court of Kerala as well as the Hon'ble High Court of Punjab and Haryana are against the contention of the applicant.

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In the judgment passed by the Hon'ble High Court of Kerala in the case of The Authorised Officer, Tamilnadu Mercantile Bank Limited vs. Devi Prasad referred supra at paragraph 14, it is held that in the event of taking steps before the Magistrate Court under S.14 of the SARFAESI Act, a legal heir who is stepping into the shoes of the mortgagor/borrower should be

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SA 64/2023

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impleaded as a party, which was done in this case. Since the deceased has not left any other legal heir, impleading of any other legal heirs in the said proceeding does not arise at all. Due to impleading of the deceased as a party to the proceeding under S.14 of the SARFAESI Act, who having no interest over the secured asset, the entire securitization proceeding is not vitiated and the order of the Chief Judicial Magistrate cannot be said as null and void. The applicant is not entitled to get any relief in this case and both the points are answered against her. However, before proceeding further under S.14 of the SARFAESI Act, the 1^st defendant shall take step to delete the name of the deceased from the proceeding and proceed further in accordance with the law.

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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 observation, this SA is dismissed but in the circumstances without costs.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 27^th day of March, 2025)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 64/2023

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Documents on the part of the applicant

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Annexures	Date	Particulars of documents
Annexure-A1	25.04.2019	Copy of death certificate of A.M.Khadar.
Annexure-A2	18.02.2019	Copy of demand notice issued to the applicant and others.
Annexure-A3	23.07.2019	Copy of possession notice issued to the applicant.
Annexure-A4	16.10.2019	Copy of petition under S.14 of the SARFAESI Act filed by the 1^stdefendant before the CJM, Thrissur.
Annexure-A5	16.10.2019	Copy of affidavit filed by the Authorised Officer of the defendant bank before the CJM, Thrissur.
Annexure-A6	24.10.2019	Copy of order in MC No.94/2019 passed by the CJM, Thrissur.
Annexure-A7	25.01.2023	Copy of notice issued by the Advocate Commissioner in MC No.94/2019.

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Documents on the part of the 1^st defendant

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Annexure-B1	18.02.2019	Copy of demand notice issued by the 1^stdefendant.
Annexure-B2	25.02.2019	Copy of acknowledgment card signed by the 2^nddefendant.
Annexure-B3	25.02.2019	Copy of acknowledgment card signed by Khader Muhammed.
Annexure-B4	25.02.2019	Copy of acknowledgment card signed by the applicant.
Annexure-B5	23.07.2019	Copy of possession notice under S.13(4) of the SARFAESI Act issued by the 1^stdefendant.
Annexure-B6	25.07.2019	Copy of postal receipts (3 Nos.) evidencing dispatch of possession notice to the borrowers.

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SA 64/2023

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Annexure-B7	29.07.2019	Copy of acknowledgment card signed by the applicant.
Annexure-B8	...	Copy of returned postal envelopes addressed to the 2^nddefendant and Khader Muhammed.
Annexure-B9	26.07.2019	Copy of publication of possession notice in Mangalam daily.
Annexure-B10	26.07.2019	Copy of publication of possession notice in The New Indian Express daily.