Dismissed

Zenith Traders v. Urban Co. operative Bnak Ltd.

DRT29 Aug 2025SA/912/2024

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed the securitization application filed by Zenith Traders challenging the appointment of an Advocate Commissioner under Section 14(1) of the SARFAESI Act. The Tribunal rejected the claim that the mortgaged property was agricultural land, noting the applicant failed to prove its agricultural use on the date of the security interest and the property was voluntarily

What the court decided

AI extract

Zenith Traders versus Urban Co. operative Bnak Ltd. — Writ and Judicial Review | 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 29^th DAY OF AUGUST, 2025

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

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S.A No. 912 of 2024

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Between

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Zenith Traders, Melattur Road, Pandikkad Post, Malappuram Dist. Represented by its Proprietor Mohammed Shabeer, S/o. Mohammed Bin Mohammed, Paravetti House, Kamanam, Thuvvur – 679 327.

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--- Applicant

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And

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The Authorized Officer, The Urban Co-operative Bank Ltd. No.1758, Perinthalmanna, Malappuram District-679 322.

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The Urban Co-operative Bank Ltd. No.1758, P.B. No.10, Urban Bank Building, Pattambi Road P.O., Perinthalmanna, Malappuram – 679 322, Represented by its Managing Director.

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--- Defendants

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SA No.912 of 2024

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This Securitization Application coming on 11.08.2025 for final hearing before me in the presence of Mr. Philip Mathews, Counsel appearing for the Applicant and Ms. Jayasree K.P., Counsel appearing for the defendants and upon hearing arguments of learned Counsel 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 29.11.2024 seeking to set aside Annexure-A11 order and Annexure-A12 notice issued by the Advocate Commissioner and to declare that Annexure-A1 demand notice, Annexure-A4, A5 and A6 possession notices are illegal and unsustainable and allow the full costs from the defendants.

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Availment of loan amount of Rs.78,00,000/- from the 2^nd defendant bank upon creation of equitable mortgage by deposit of title deeds over the applicant’s immovable property admeasuring 36.90 Ares comprised in Sy. No.194/2015 of Thuvuur Village, Perinthalmanna Taluk, Malappuram District in favour of the 2^nd defendant bank is admitted by the applicant.

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The applicant has admitted his default in repayment of the outstanding loan due. It is also revealed from the perusal of the written statement of the defendants that since the applicant defaulted in repaying the loan amount his loan account was classified as NonPerforming Asset on 30.04.2023.

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Therefore, Annexure-A1 demand notice dated 18.11.2023 was issued 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 applicant sent Annexure-A2 objection dated 15.01.2024 to the 1^st defendant. One of the main representations is that since the secured asset is agricultural property, further proceedings against the property had to be dropped.

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For the aforesaid Annexure-A2 objection, the 1^st defendant sent A3 reply dated 17.01.2024 to the applicant clarifying the discrepancy with regard to the secured asset and the rate of interest. It was also stated that the secured asset is not classified as agricultural land as per land tax receipt, possession certificate issued by the Village authority and also in the title deed. Hence, it is evident that the defendants have complied with the statutory requirements contemplated under Section 13 (3A) of the SARFAESI Act 2002.

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Page 2 of 8

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SA No.912 of 2024

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Since the applicant failed to respond to the terms of the demand notice, Annexure-A4 Possession Notice dated 05.06.2024 was issued for symbolically taking physical possession of the secured asset. The applicant has himself admitted in the SA with regard to publication of the possession notice in Desabhimani edition dated 12.06.2024 and Kerala Kaumudi edition dated 12.06.2024 and he has also produced copies of the above paper publications as Annexure-A5 and A6. It appears that the applicant did not challenge the possession notice by filing SA.

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The defendants approached the Chief Judicial Magistrate Court Manjeri and filed Annexure-A10 application and affidavit under Section 14 (1) of the SARFAESI Act, 2002. Annexure-A11 Order dated 05.10.2024 came to be passed in MC No.984/24 appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure-A12 notice dated 12.11.2024 to the applicant informing him that he would take physical possession of the secured asset on 18.12.2024. The applicant having aggrieved against the above measures, filed this SA seeking for the reliefs stated supra.

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The counsel appearing for the applicant submitted that classification of the loan account of the applicant as Non-Performing Asset is illegal and that amount demanded in Annexure-A1 is exorbitant and that the secured asset is agricultural property, wherein crops are being cultivated and that hence the defendants are not entitled to proceed against the property in view of the bar u/s 31 (i) of the SARFAESI Act 2002. Excessive rate of interest has been charged. There is no valid mortgage or creation of security interest. Since the alleged creation of security interest was not registered with the Central Registry, the defendants are not entitled to proceed against the property.

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It is submitted further by the counsel for the applicant that application and affidavit was filed by the defendants u/s 14 (1) of the SARFAESI Act 2002 before the Chief Judicial Magistrate Court, Manjeri, suppressing the material facts including the nature of the property and amount repaid by the applicant. The rate of interest is not stated in Annexure-A10 affidavit. The Chief Judicial Magistrate Court, Manjeri passed order without verifying Annexure-A10 affidavit. The order passed in MC No.984/24 is a printed format prepared order. Name of the parties, date of foreclosure of loan, loan amount, Commissioner’s name, Village office and name of the police station are printed in bold letters of the previously prepared format. Therefore, the SA may be allowed as prayed for.

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Page 3 of 8

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SA No.912 of 2024

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The counsel appearing for the defendants submitted that valid security interest over the applicant’s property has been created by the applicant and that loan account of the applicant was classified as NPA as per the RBI guidelines and that interest has been charged as per the agreed terms of the loan agreement and that security asset is not agricultural property. Once the property is put as security by way of mortgage, the same could not be treated as agricultural land. Annexure-A7 photographs and Annexure-A8 certificate are not reliable documents and conclusive proof to prove that agricultural activities were being carried on at the time of creation of mortgage over the secured asset.

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It is submitted further by the counsel for the defendants that Application and affidavit (Annexure-A10) was properly filed in compliance with all the statutory requirements as prescribed u/s 14 (1) of the SARFAESI Act 2002 and that Annexure-A11 order passed by the learned Chief Judicial Magistrate, Manjeri is an administrative order and not a judicial order and that hence he was not required to conduct a detailed enquiry with regard to the details provided in the application and affidavit. Order was passed after ascertaining the declaration furnished in the affidavit filed by the 1^st defendant. Annexure-A11 order is not a printed format order as submitted by the counsel for the applicant. Therefore, the SA may be dismissed with cost to the defendants.

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The applicant having fairly conceded in paragraphs 2 and 3 of the SA with regard to his default in repayment of his outstanding loan due, is stopped from contending now that classification of loan account as Non-Performing Asset is illegal and wrong. Further he has not pointed out in the SA as to how the classification of loan account as Non-Performing Asset is wrong and illegal. He has not raised the aforesaid contention in Annexure-A2 objection sent to the 1^st defendant.

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The applicant has categorically admitted in paragraph 1 of the SA that for availment of the loan, his property admeasuring 36.90 Ares comprised in Sy. No.194/2015 of Thuvuur Village, Perinthalmanna Taluk, Malappuram District was offered as the security to the 2^nd defendant bank. Hence, this Tribunal does not find any substance in the contention of the applicant that there is no valid security interest created by him.

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The applicant has not produced any material before this Tribunal to prove his contention that the amount demanded in the Annexure-A1 demand notice is incorrect and that exorbitant rate of interest has been charged.

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Page 4 of 8

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SA No.912 of 2024

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One of the contentions raised by the applicant is that the secured asset is the agricultural property wherein crops are being cultivated for the past several years. The applicant has produced Annexure-A7 photographs, Annexure-A8 copy of certificate issued by the Agricultural Officer, Krishi Bhavan, Thuvvur Village and Annexure-A9 copy of receipt issued by the office of Thuvvur village in order to prove the above contention.

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A perusal of Annexure-A7 photographs shows the existence of few coconut trees, plantain and areacanut trees here and there. Hence, Annexure-A7 photographs is not a reliable document to accept the contention of the applicant that S.A schedule property is agricultural property.

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It is stated in Annexure-A8 certificate that coconuts, areacanuts, pepper vine are being cultivated in the property having an extent of 36.90 Ares situated in Sy.No.194/15 of Thuvvoor Village, Malappuram District. There is no mention in Annexure-A8 as to whether the Agricultural officer personally inspected the secured asset and ascertained the nature of the secured asset. Further there is no reference in Annexure-A8 as to whether agricultural activities were carried on the date of creation of security interest over the property.

¶39

The applicant has not produced any material before this Tribunal to show that secured asset was the agricultural property on the date of creation of security interest over the same. In Indian Bank and another v. K. Pappireddiyar and another AIR 2018 SC 3540 , the Hon’ble Supreme Court has held as follows:

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“ the classification of land in the revenue records as agricultural is not dispositive or conclusive of the question whether the SARFAESI Act does or does not apply. Whether a parcel of land is agricultural must be deduced as a matter of fact from the nature of the land, the use to which it was being put on the date of the creation of the security interest and the purpose for which it was set apart.”

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The Hon'ble High Court of Kerala referring to the above cited judgment of the Hon'ble Supreme Court and also another judgment of Hon'ble Supreme Court rendered in K.Sreedhar Vs. Raus Constructions Pvt. Ltd. (2023 SCC online SC 13) has observed in paragraphs 12 of its judgment delivered in Kaningat Ramachandra Menon Vs. State Bank of India OP (DRT) No.216/2023 as follows:

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“12. A reading of the above principles laid down by the Hon'ble Supreme Court undoubtedly shows that the pertinent question to be decided, when a contention that

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Page 5 of 8

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SA No.912 of 2024

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the property is an agricultural land, is to ascertain whether the land is agricultural or not on the date of creation of the security interest for the purpose of taking the loan.

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In the present case at hand, the applicant has not produced any documents in order to show that secured asset was agricultural land on the date of creation of security interest over the same. In view of the above reasoning, and also in the light of the judgments laid down in the aforesaid cases, the contention of the applicant that secured asset is agricultural land is liable to be rejected in toto.

¶47

Even assuming for argument’s sake that the secured asset is agricultural land as contended by the applicant, it has to be treated as noN-agricultural property on account of the voluntary offer of his property as the security for the availment of credit facilities, as laid down by the Hon’ble Supreme Court in ITC Limited Vs. Bluecoast Hotels Pvt. Ltd. & others [2018 (15) SCC]. It has been held as follows:

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“ Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis .”

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Hence on the aforesaid ground alone, the applicant is not entitled to get the exemption provided under Clause 31 (i) of the SARFAESI Act 2002.

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A perusal of Annexure-A10 application and affidavit shows that all the statutory requirements contemplated under Clause (i) to (ix) to the proviso of Section 14 (1) of the SARFAESI Act, 2002 were furnished by the defendants. A perusal of Annexure-A11 order shows that the learned Chief Judicial Magistrate, Manjeri after having perused the contents of the affidavit and having satisfied over the same, passed order appointing Advocate Commissioner to take physical possession of the secured asset. This Tribunal does not find any infirmity or procedural irregularity in the above order.

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The applicant has produced Annexure-A13 certified copy of the Order passed in MC No.544/2024 (pertaining to another case) by the learned Chief Judicial Magistrate, Manjeri and also copy of the Order of this Tribunal, Annexure-A14 passed in SA No.286/2024 in order to prove his contention that Annexure-A11 Order passed in MC No.984/24 is a printed format order and that this Tribunal passed order allowing SA No.286/2024 on the ground that order passed by the Chief Judicial Magistrate Court, Manjeri in MC No.929/2023 was the printed format order.

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Page 6 of 8

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SA No.912 of 2024

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On careful perusal of Annexure-A11 order clearly shows that it is not the printed format order as contended by the applicant. It cannot be presumed from the mere showing of the name of the parties, date of foreclosure of loan, loan amount, Commissioner’s name, Village office and name of the police station in bold letters that the order is a printed format order. This Tribunal allowed SA No.286/2024 on the ground that the order passed by the learned Chief Judicial Magistrate, Manjeri is a printed format order wherein the date of foreclosure of the loan, quantum of outstanding loan due, Advocate Commissioner’s name, name of the village and the police station were written in pen and the date of pronouncement of order was also written in ink. The aforesaid aspect is not seen in AnnexureA11 order. Therefore, this Tribunal does not find any merit in the contention of the applicant that Annexure-A11 order is a printed format order.

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In view of the foregoing reasons and discussions, this Tribunal holds that he applicant has failed to establish his case so as to get the reliefs sought for in the SA.

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In the result, S.A No.912/2024 stands dismissed. However, there shall be no order as to costs.

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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 29^th day of August, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 7 of 8

SA No.912 of 2024

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

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Sl. No.	Date	Particulars
1.	18.11.2023	Copy of demand notice	Annexure-A1
2.	15.01.2024	Copy of objection given by the applicant toAnnexure-A1demandnotice.	Annexure-A2
3.	17.01.2024	Copy of reply given by the 1^stdefendant toAnnexure-A2 objection.	Annexure-A3
4.	05.06.2024	Copy of possession notice	Annexure-A4
5.	12.06.2024	Copy of possession notice dt. 5.6.2024 publishedin Deshabimanidaily.	Annexure-A5
6.	12.06.2024	Copy of possession notice dt. 5.6.2024 published in Kerala Kaumudhydaily.	Annexure-A6
7.	---	Four photographs of the secured asset	Annexure-A7
8.	13.02.2024	Copy of certificate No.KBTVR/C2/2024 issued by Agricultural Officer, Krishi Bhavan,Thuvvur,Malappuram Dist.	Annexure-A8
9.	26.06.2023	Copy of receipt issued by the office of Thuvvur village office.	Annexure-A9
10.	---	Certified copy of application in MC No.984/2024 before the Chief Judicial Magistrate Court,Manjeri.	Annexure-A10
11.	05.10.2024	Certified copy of order in MC No.984/2024 before the Chief Judicial Magistrate Court,Manjeri.	Annexure-A11
12.	12.11.2024	Copy of the notice issued by the Advocate Commissioner	Annexure-A12
13.	21.06.2024	Copy of order in MC No.544/2024 passed by Chief Judicial Magistrate Court, Manjeri.	Annexure-A13
14.	01.08.2024	Copy of order in SA No.286 of 2024 of this Tribunal.	Annexure-A14
15.	18.11.2024	Copy of the proceedings of this Tribunal in NDN/1384/2024 (SA)	Annexure-A15

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 8 of 8

Zenith Traders v. Urban Co. operative Bnak Ltd.

Case brief

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Zenith Traders v. Urban Co. operative Bnak Ltd.

Case brief

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