Partly allowed

Moitheen v. Urban Co. operative Bnak Ltd.

DRT22 Apr 2025SA/725/2023

Case brief

AI extract

What is this about?

Securitization Application where applicant challenged bank recovery measures under SARFAESI Act. Tribunal held CERSAI registration argument regarding the initial demand notice was not tenable. Order appointing Advocate Commissioner was quashed because the Chief Judicial Magistrate's order was in printed form, violating judicial discretion. Demand notice and NPA classification upheld.

What did the court decide?

Securitization Application partly allowed by setting aside the order appointing Advocate Commissioner and the possession notice; dismissed regarding demand notice and NPA classification.

Moitheen versus Urban Co. operative Bnak Ltd. — 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 22^nd DAY OF APRIL, 2025

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

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S.A No. 725 of 2023

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Between

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Moitheen, S/o. Kammu, Nechithadathil House, Residing at Valamboor, Thirurkkad P.O., Malappuram -679 351.

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--- Applicant

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And

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The Perinthalmanna Urban Co-operative Bank Ltd., Rep. by General Manager, Head Office, Perinthalmanna, Malappuram -679 322.

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The Authorized Officer, The Perinthalmanna Urban Co-operative Bank Ltd., Head Office, Perinthalmanna, Malappuram -679 322.

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-- Defendants

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This Securitization Application coming on 07.03.2025 for final hearing before me in the presence of Mr. Tony Thomas Inchiparambil Counsel for the Applicant and Mr. K.V.Anil, Counsel 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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SA No.725 of 2023

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O R D E R

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This Securitisation Application was filed on 29.11.2021 seeking to set aside Annexure-A4 Order and Annexure-A5 Advocate Commissioner notice and all the measures initiated by the defendants under the SARFAESI Act and Rules against the secured asset.

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The applicant has admitted the availment of term loan of Rs.30,00,000/- on 30.03.2019 by the Proprietor of M/s.Zam Zam Mobiles from the 1^st defendant bank. He has also admitted that he stood guarantor for the aforesaid availment of credit facility and has created security interest over his immovable property admeasuring an extent of 8.90 cents situated in Valambur village.

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Since the principal borrower defaulted in repayment of the loan account, the loan account of the principal borrower came to be classified as Non-performing Asset on 30.06.2019. Annexure-A1 demand notice was issued to the principal borrower and to the applicant calling upon them to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice. The receipt of the demand notice was admitted by the applicant. According to the defendants, the demand notice issued to the principal borrower was returned with postal remark “unclaimed” and he intentionally refused to accept the demand notice. The applicant neither sent any objection/representation to the demand notice nor did he clear off his liability due to the 1^st defendant bank.

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Subsequently, the defendants approached the Chief Judicial Magistrate Court, Manjeri and filed Annexure-A3 application and affidavit under Section 14 (1) of the SARFAESI Act, 2002. AnnexureA4 Order came to be passed in MC No.572/2023 appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure-A5 notice dated 03.11.2023 to the applicant and the principal borrower informing him that he would take physical possession of the secured asset on 24.11.2023. The applicant having aggrieved against the above measures filed this SA seeking the reliefs stated supra.

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The counsel appearing for the applicant submitted that the secured asset was registered with CERSAI on 21.06.2022, prior to issuance of Annexure-A1 demand notice and that therefore recovery measures initiated by the defendants is in violation of the provisions of Section 26 (D) of the SARFAESI Act 2002 and that the order passed by the learned Chief Judicial Magistrate Manjeri for taking physical possession of the secured asset also is illegal.

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Page 2 of 5

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SA No.725 of 2023

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Per contra , the counsel appearing for the defendants submitted that registration of the secured asset with CERSAI became mandatory with effect from 24.01.2020 and that demand notice was issued on 20.11.2019 which is prior to the above notified date and that however, security interest was registered with CERSAI prior to filing of the application and affidavit before the Chief Judicial Magistrate Court, Manjeri.

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As per Sec.26 (D) of SARFAESI Act 2002, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter-III unless the security interest created in its favour by the borrower has been registered with the Central Registry. Issuance of demand notice is not the measure contemplated under Sec.13 (4) of Chapter-III of the SARFAESI Act 2002. Be that it may so, AnnexureA1 demand notice was issued prior to notified date 24.01.2020 on which date the registration of security interest with CERSAI came to be made mandatory. Hence this Tribunal does not find any substance in the above submission of the counsel for the applicant.

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The applicant has not averred in the S.A as to whether the statutory requirements contemplated under Clause (i) to (ix) to the provisions of Section 14 (1) of the SARFAESI Act 2002 was not complied with in respect of filing Annexure-A3 application and affidavit. A perusal of Annexure-A3 application and affidavit shows that defendants have furnished the details as contemplated under Clause (i) to (ix) to the provisions of Section 14 (1) of the SARFAESI Act 2002.

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A perusal of Annexure-A4 order shows that M.C No., the name of the applicant/secured creditor and the name of the respondents/ borrowers has been written in ink. The quantum of the outstanding liability and the date is also written in ink. The name of the Advocate Commissioner and the name of the Village Office and the Station House Officer is also written in ink. Therefore, it is evident that the aforesaid particulars were filled in an already prepared printed format.

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The Hon'ble High Court of Kerala has held in The South Indian Bank Ltd. Vs. Jahfer M. [judgment dated 18.03.2025 in OP (DRT) No.336 of 2024] has held as follows :

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“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 filling in necessary details in blank spaces cannot be justified under any circumstances. It cannot be forgotten that the power under Section 14 of the SARFAESI Act involves drastic consequences and that is why the

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Page 3 of 5

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SA No.725 of 2023

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Parliament conferred the power to take action under Section 14 of the SARFAESI Act on high officials such as District Magistrate or the Chief Judicial Magistrate Court. While it may not be necessary to examine the correctness of the averments in the affidavit filed by a bank/financial institution in support of the application for orders under Section 14 of the SARFAESI Act, the Magistrate must clearly apply his mind to the averments in the application and determine as to whether procedure contemplated has been followed before passing an order under Section 14 of the SARFAESI Act. Therefore, I have no doubt in my mind that the Tribunal was justified in setting aside the order of the Chief Judicial Magistrate Court, Manjeri in MC No.929/2023.”

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Therefore, it is doubtful as to whether the learned Chief Judicial Magistrate, Manjeri would have applied his judicial mind to the contents of Annexure-A3 application and affidavit and the documents filed in MC No.578/2023. In the above said circumstances, AnnexureA4 order passed in MC No.578/2023 by the learned Chief Judicial Magistrate, Manjeri is liable to be set aside. Consequently, AnnexureA5 notice issued by the Advocate Commissioner to take physical possession of the secured asset is also liable to be set aside.

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However, this Tribunal does not find any procedural irregularity in respect of classification of loan account as NPA and issuance of Annexure-A1 demand notice. Therefore, the above said measures are not liable to be set aside.

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In view of the foregoing reasons and discussions, S.A. No.725/2023 stands partly allowed in respect of the relief pertaining to Annexure-A4 Order and Annexure-A5 notice issued by the Advocate Commissioner and S.A. partly stands dismissed in respect of the relief pertaining to other measures initiated by the defendants under SARFAESI Act 2002 and the Rules made thereunder.

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However, it is made clear that there shall be no bar for the defendants to approach the Chief Judicial Magistrate Court, Manjeri, for taking physical possession of the secured asset in accordance with law.

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There shall be no order as to costs.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and

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pronounced by me in the open court on this the 22^nd day of April, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 4 of 5

SA No.725 of 2023

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

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Sl. No.	Date	Particulars
1.	20.11.2019	True copy of Sec.13(2) demand notice issued to the applicant.	Annexure-A1
2.	21.06.2022	True copy of the CERSAI registration certificate.	Annexure-A2
3.	18.10.2022	True copy of application filed by the defendant along with affidavit in CMP 2960/2022 of the Chief Judicial Magistrate Court,Manjeri.	Annexure-A3
4.	20.09.2023	True copy of the order passed in MC No.578/2023 by the Chief Judicial Magistrate Court,Manjeri.	Annexure-A4
5.	03.11.2023	True copy of the notice issued by the Advocate Commissioner	Annexure-A5

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 5 of 5

Moitheen v. Urban Co. operative Bnak Ltd.

Case brief

What is this about?

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Moitheen v. Urban Co. operative Bnak Ltd.

Case brief

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