Allowed

Ashraf K v. State Bank of India

DRT27 Jun 2025SA/675/2024

Case brief

AI extract

What is this about?

In this Securitization Application, the Tribunal allowed the plea of the applicants against the bank's recovery proceedings. The court held that the bank violated Rule 3(3A) by failing to reply within 15 days to the applicants' representation, rendering the demand notice invalid. Consequently, the affidavit under Section 14(1) and the subsequent possession notices and order were liable to be set a

What did the court decide?

Annexure-A1 demand notice, Annexure-A3 possession notice, Annexure-A10 order, and Annexure-A11 notice set aside with no order as to costs.

Ashraf K versus State Bank of India — 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 27^th DAY OF JUNE, 2025

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PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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S.A No.675 of 2024

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Between

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Ashraf K., S/o. Hamza K. Kalassery House, Athanikkal, Thrithala P.O Palakkad – 679 534.

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Naseema Ashraf, W/o. Ashraf K., Kalassery House, Athanikkal, Thrithala P.O Palakkad – 679 534. --- Applicants

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And

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State Bank of India Represented by its Authorized Officer and Chief Manager, Asset Recovery Management Branch, R.S. Building, M.G. Road, Ernakulam, Kochi -682 011.

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The Branch Manager, State Bank of India Thrithala Branch, Thrithala P.O., Palakkad – 679 534. --- Defendants

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SA No.675 of 2024

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This Securitization Application coming on 21.02.2025 for final hearing before me in the presence of Mr. Thomstine K. Augustine, Counsel appearing for the Applicants and Ms. Bini Das, Counsel appearing for the Defendants and upon 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 10.09.2024 seeking to set aside Annexure-A10 Order in MC No.282/2024 and A11 notice issued by the Advocate Commissioner and to direct the defendants to produce a detailed statement of accounts showing actual loan availed by the applicants, date of loan sanctioned, principal amount, repayment, arrears due etc. and to order to pay the actual due arrears in sufficient installments or to regularize the loan account in sufficient installments and to allow the applicants to recover the cost of this proceedings.

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The applicants have not disputed the availment of housing loan of Rs.10,58,000/- from the 2^nd defendant bank upon creation of Equitable mortgage over their immovable property comprising of residential house situated in Sy. No.63/2E in Thrithala Village, Pattambi Taluk, Palakkad District.

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The applicants have admitted their default in repayment of the outstanding loan due. Hence the loan account of the applicants came to be classified as Non-performing Asset on 26.09.2020. Annexure-A1 demand notice dated 18.10.2022 was issued to the applicants calling upon them to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice.

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The 2^nd applicant sent objection/representation, Annexure-A2 to the 1^st defendant on 18.12.2022, stating several issues such as failure to mention the date of declaration and disclosure of the amount of arrears as on the date of NPA, classification of loan account as Non-Performing Asset is illegal, non-service of demand notice to the husband, non-affixture of demand notice on the conspicuous part of the house, non-publication of notice in two leading newspapers, incorrect statement of accounts, etc.

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The 1^st defendant sent Annexure-A4 reply dated 16.01.2023, for the objection/representation sent by the 2^nd applicant in AnnexureA2. Annexure-A3 possession notice dated 07.01.2023 was issued for symbolically taking physical possession of the secured asset. Annexures-B1 to B3 produced by the defendants evidence the affixture of the possession notice on the conspicuous part of the

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Page 2 of 8

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SA No.675 of 2024

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secured asset and publication of the possession notice in The Hindu edition dated 20.03.2024 and Mathrubhoomi edition dated 20.03.2024. Subsequently, the defendants approached the Chief Judicial Magistrate Court, Palakkad and filed Annexure-A12 petition and affidavit under Section 14 (1) of the SARFAESI Act, 2002. Annexure-A10 Order dated 15.6.2024 came to be passed appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure-A11 notice dated 23.08.2024 to the applicants informing them that he would take physical possession of the secured asset. The applicants having aggrieved against the above measures filed this SA seeking the reliefs stated supra.

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The counsel appearing for the applicants submitted that the actual amount due on the date of classification of loan account as Non-Performing Asset and the date of declaration of the NPA was not stated in Annexure-A1 demand notice and that Annexure-A4 reply was sent belatedly for Annexure-A2 representation only after publication of Annexure-A3 possession notice.

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The counsel for the applicants submitted further that the secured asset which is classified as Nilam as per Annexure-A6 letter is an agricultural property and that therefore, the secured asset is exempted u/s 30 (i) of the Security Interest (Enforcement) Rules 2002. The signatures of the applicants in Annexure-A8 and A9 loan agreements are not seen affixed at proper place. The signatures of the applicants were obtained in blank papers in different places of each pages of the agreements and thereafter the agreements were drafted. The agreements were not drafted in non-judicial stamp papers. The learned Chief Judicial Magistrate without considering the discrepancies in the loan agreement mechanically appointed Advocate Commissioner to take physical possession of the secured asset. Therefore, the SA may be allowed as prayed for.

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The counsel appearing for the defendants submitted that loan account of the applicants was classified as NPA as per RBI guidelines and that it is not mandatory to mention the date of classification of loan account as NPA in the demand notice and that for the objection raised by the applicants in Annexure-A2, Annexure-A4 reply was sent to the applicants. Secured asset is not an agricultural property. Applicants signed in the loan agreements, Annexure-A8 and A9 which are genuine documents executed by the applicants.

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The counsel appearing for the defendants submitted further that possession notice was served to the applicants and that it was affixed on the conspicuous part of the secured asset and that it was published in two leading newspapers. The learned Chief Judicial Magistrate, Palakkad passed Annexure-A10 order after having

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Page 3 of 8

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SA No.675 of 2024

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perused the petition, affidavit and the documents produced along with the same. There is no illegality or infirmity in the order. Therefore, SA may be dismissed with cost to the defendants.

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The provisions u/s. 13 (2) of the SARFAESI Act 2002 does not mandate the mentioning of date of classification of loan account as NPA in the demand notice. In Annexure-A2 the credit facilities sanctioned to the applicants and the outstanding amount as on the issuance of the demand notice is clearly mentioned in schedule A and B. Therefore, the contention of the applicants that the outstanding amount as on the date of classification of the loan account as NPA is not mentioned in the demand notice is absolutely incorrect.

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A perusal of Annexure-A8 and A9 loan agreements shows that the applicants have put their signatures therein. They have not disputed their signatures seen in Annexure-A8 and A9 loan agreements. They are also not pointed out as to what provision of the Act Annexure-A8 and A9 agreements shall be drafted on non-judicial stamp papers. However, in Annexure-A8 and A9 agreements special adhesive stamps is affixed. Therefore, this Tribunal does not find any substance in the submission of the applicants that Annexure-A8 and A9 agreements were drafted subsequently after obtaining their signatures in the blank papers and that the agreements were not drafted on non-judicial stamp papers.

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One of the contentions raised by the applicants in the SA is that the secured asset is agricultural property and that therefore it is exempted u/s 30 (i) of the Security Interest (Enforcement) Rules 2002. The applicants have relied upon Annexure-A5 to A7 in order to prove their above contention. Annexure-A5 is the colour photograph which according to the applicants is pertaining to the secured asset. A perusal of the photograph shows that there are few trees and coconut trees with the height of 4 - 5 feet here and there and there is a residential house in the secured asset. Annexure-A5 is sufficient to disprove the contention of the applicants that secured asset is agricultural property.

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Annexure-A6 is the letter issued by Thrithala Grama Panchayat for the application submitted by the 2^nd applicant Naseema. In the letter it is stated that it is not possible to give permission for building construction as per Conservation of Kerala paddy Land and Wet Land Act, 2008. It is pertinent to mention herein that there is no reference with regard to the secured asset. Hence this document is not a reliable one to accept the contention of the applicants that secured asset is agricultural property.

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Page 4 of 8

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SA No.675 of 2024

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In Annexure-A7 possession certificate, the class of the land is described as wet. There is no reference in Annexure-A1 that the property is agricultural land. The mere description of the land as wet does not indicate that it is the agricultural land. Hence Annexure-A7 is also not a reliable document to accept the contention of the applicants that the secured asset is agricultural property.

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The Rule 3 (3 A) of the Security Interest (Enforcement) Rules 2002 provides that if the borrower makes any representation or raises any objection to the notice, the Authorized Officer shall consider such representation or objection and communicate within 15 days of receipt of representation or objection the reason for non-acceptance of the representation or objection to the borrower.

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Annexure-A1 demand notice was sent on 18.10.2022 to the applicants. The applicants sent Annexure-A2 objection on 18.12.2022 within a period of 60 days from the date of receipt of demand notice. Indisputably, the defendants failed to send reply within a period of 15 days from the date of receipt of Annexure-A2. But, they sent Annexure-A4 reply on 16.01.2023 after issuance of Annexure-A3 possession notice dated 07.10.2023. Therefor, it is evident that there is a blatant violation of Rule 3 (3 A) of Security Interest (Enforcement) Rules 2002. On this ground alone, Annexure-A1 demand notice is liable to be set aside.

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The secured creditor shall state in the affidavit filed u/s 14 (1) of the SARFAESI Act 2002 as to whether the borrower/guarantor shall send any objection/representation to the demand notice and as to whether reply for the objection/representation was sent by the Authorized Officer as laid down under Rule (vii) to the proviso of Section 14 (1) of the SARFAESI Act 2002.

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In paragraph 12 of Annexure-A12 affidavit it is stated as follows:

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“There was no reply or objection to the demand notice was received from the respondent and respondent failed to repay the entire amount demanded as per the demand notice issued u/s 13 (2) of the SARFAESI Act 2002”.

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It cannot be disputed that the applicant sent Annexure-A2 representation to the defendants on 18.12.2022 and that the defendants sent Annexure-A4 reply rather belatedly ie., after issuance of Annexure-A3 possession notice. Even sending reply for AnnexureA2 representation was also not disclosed in Annexure-A12 affidavit. Therefore, it is evident that the defendants have failed to comply with the statutory requirements stipulated under Clause (vii) to the

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Page 5 of 8

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SA No.675 of 2024

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provision of Sec.14 (1) of SARFAESI Act 2002. On this ground alone Annexure-A12 application and affidavit are invalid and illegal.

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The learned Chief Judicial Magistrate Court, Palakkad after having perused the contents of the affidavit and documents filed along with the affidavit passed Annexure-A10 order for taking physical possession of the secured asset. Since the sending representation Annexure-A2 by the applicants for the demand notice and sending Annexure-A4 reply by the defendants to the applicants was not disclosed in Annexure-A12 affidavit, Annexure-A10 order passed is also liable to be set aside.

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In view of the foregoing reasons, this Tribunal holds that Annexure-A1 demand notice, Annexure-A3 possession notice and A10 order and A11 notice issued by the Advocate Commissioner are liable to be set aside.

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Therefore, SA No.675 of 2024 stands allowed setting aside Annexure-A1 demand notice, Annexure-A3 possession notice and A10 order and A11 notice issued by the Advocate Commissioner. However, there shall be no order as to costs.

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It is made clear that there shall be no bar for the defendants to proceed further afresh against the applicants with issuance of demand notice and initiation of subsequent measures under the SARFAESI Act 2002 and the Rules made thereunder.

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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 27^th day of June, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 6 of 8

SA No.675 of 2024

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

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Sl. No.	Date	Particulars
1.	18.10.2022	True copy of the demand notice issued by the1^st defendant bank	Annexure-A1
2.	18.12.2022	True copy of the representation sent by the 2^ndapplicant to the 1^stdefendant bank.	Annexure-A2
3.	07.01.2023	True copy of the possession notice issued by the1^st defendant bank.	Annexure-A3
4.	16.01.2023	True copy of the reply issued by the 1^st defendant bank.	Annexure-A4
5.	---	True photographs of applicants’ property	Annexure-A5
6.	02.03.2021	True copy of the letter issued by the Thrithala GramaPanchayath.	Annexure-A6
7.	---	True English translation of Anx.A6	Annexure-A6a
8.	18.11.2021	True copy of the possession certificate issued by the Village Officer, Thrithala village.	Annexure-A7
9.	---	Certified copy of the loan agreement	Annexure-A8
10.	---	Certified copy of the loan agreement	Annexure-A9
11.	15.06.2024	Certified copy of the order in MC No.282/2024 of Chief Judicial Magistrate Court,Palakkad.	Annexure-A10
12.	23.08.2024	True copy of the notice issued by the Advocate Commissioner in MC No.282 of 2024 of Chief Judicial Magistrate Court,Palakkad.	Annexure-A11
13.	06.05.2024	True copy of the affidavit and application filed by the defendants in MC No.282 of 2024 of Chief Judicial Magistrate Court,Palakkad.	Annexure-A12

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Page 7 of 8

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SA No.675 of 2024

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List of documents filed by the defendants along with the written statement

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Sl. No.	Date	Particulars
1.	---	True copy of photograph showing the affixture of Annexure-A3notice.	Annexure-B1
2.	20.03.2024	True copy of the news paper publication publishedin TheHindu daily.	Annexure-B2
3.	20.03.2024	True copy of the news paper publication publishedintheMathrubhumidaily.	Annexure-B3

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 8 of 8

Ashraf K v. State Bank of India

Case brief

What is this about?

What did the court decide?

Ashraf K v. State Bank of India

Case brief

What is this about?

What did the court decide?

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