Dismissed

Shyamkumar N v. Federal Bank

DRT22 May 2026SA/155/2025

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed the securitization application seeking to set aside a demand notice and block the Advocate Commissioner's possession of secured assets. The court upheld the bank's rebuttal of objections, ruled that Section 26(D) registration requirements were met and directory in nature, and noted the applicant failed to prove procedural irregularities.

What did the court decide?

The Securitization Application No. 155 of 2025 was dismissed with no order as to costs.

Shyamkumar N versus Federal Bank — Banking and Recovery | DRT (2026)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 22nd DAY OF MAY, 2026

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

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S.A No. 155 of 2025

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Between

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Shyamkumar N, S/o Nanu, Aniyeri House, Kalady P.O, Ernakulam-683 574.

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--- Applicant

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And

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The Federal Bank Ltd., IFSC: FDRL0001004, P.B No.1927, Banerji Road, Ernakulam North, Kochi-682 018. Represented by its Zonal Manager.

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Authorized Officer, The Federal Bank Ltd., LCRD, Federal Towers, Marine Drive, Ernakulam-682 031.

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--- Defendants

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This Securitization Application coming on 05.02.2026 for final hearing before me in the presence of Mr. P. Shrihari, Counsel appearing for the Applicant and Mr. Viswanathan Advocate 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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SA No.155 of 2025

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O R D E R

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This Securitisation Application was filed on 28.02.2025 seeking to set aside Annexure-I demand notice, Annexure- A3 Order and Annexure-A5 notice issued by the Advocate Commissioner in M.C. No. 1138/2024 on the files of Additional Chief Judicial Magistrate Court (MPs/MLAs) Ernakulam and to direct the defendants to restore the possession of the property and to allow the cost of the proceedings.

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The applicant availed property power loan of Rs.75,00,000/- on 25.07.2018 as per Annexure-B1 sanction letter and the loan was restructured on 18.12.2020 as per re-structured sanction letter. Annexure-B1 Security interest has been created over the properties as detailed in Annexure-A1 demand notice as the collateral security for the availment of the aforesaid credit facilities.

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Due to default in repayment of the outstanding loan due to the defendant bank, the loan account of the applicant came to be classified as Non-performing Asset. Annexure-A1 demand notice dated 27.04.2023 was issued to the applicant, who is the co-borrower and Mrs. Usha Shyamkumar who is the principal borrower, 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-B3 objection letter to the demand notice. Annexure-B4 reply was sent by the defendant to the applicant and the principal borrower.

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Since the loan due was not settled, the defendants approached the Additional Chief Judicial Magistrate Court (MPs/MLAs), Ernakulam and filed Annexure-A2 application and affidavit under Section 14 (1) of the SARFAESI Act, 2002. Annexure-A3 Order dated 07.12.2024 in MC No.1138/24 came to be passed appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure-A5 notice to the applicant and the principal borrower informing them that he would take physical possession of the secured asset on after expiry of 14 days from the date of issuance of the notice. The applicant having aggrieved against the above measures, filed this S.A seeking for the reliefs stated supra.

¶20

A perusal of copy of letter dated 28.7.2018 and copies of settlement deed No.21/2006 and settlement deed No.22/2006 produced by the defendants along with memo in ID No.1747/26 shows that letter dated 27.7.2018 acknowledging the creation of mortgage by deposit of title deeds by the principal borrower, Usha Shyamkumar, who is the wife of the applicant has been issued to the 1st defendant bank. The original title deed has also been deposited

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Page 2 of 8

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SA No.155 of 2025

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with the 1st defendant bank. Therefore, the contention of the applicant in paragraph 12 of the S.A that no valid security interest has been created is absolutely incorrect.

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The objection sent to the demand notice was not produced by the applicant along with the SA. However, copy of the same has been produced by the defendants as Annexure-B3. In Annexure-B3 it is averred that classification of loan account as Non-Performing Asset is not correct and that even it was classified as Non-Performing Asset, it was not done without issuing any notice to them and that the rate of interest and description of the property is not clearly stated and that interest was charged after classification of loan account as NonPerforming Asset and that the amounts repaid was not seen accounted.

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For the above objection, the defendants sent Annexure-B4 reply. A perusal of the same shows that for the above averments raised by the applicant, suitable reply has been given. Therefore, this Tribunal does not find any force in the submission of the counsel for the applicant that Annexure-B4 is defective reply for the issues such as rate of interest applied, rate of charges applied and progressive total, raised by the applicant was not answered. This Tribunal is of the considered view that the aforesaid issues raised by the applicant does not fall under any of the measures referred to under Sec. 13 (4) of the SARFAESI Act 2002. It is pertinent to mention that the measures initiated under the SARFAESI Act 2002 and the Rules made there under is intended only to enforce security interest created on the secured asset and that the measures are not initiated for recovery of the outstanding loan due directly from the borrowers/guarantors. What has to be seen is as to whether any reply for the objection/ representation sent by the borrower to the demand notice, has been send or not. Indisputably, Annexure-B4 reply has been sent by the defendants. Therefore, Sec. 13 (3A) of the SARFAESI Act 2002 has been duly complied with by the defendants.

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A perusal of copy of the letter of memorandum of deposit of title deeds and copies of the settlement deeds produced by the defendants and Annexure-B1 demand notice shows that the description of the secured assets is correct. Therefore, this Tribunal does not find any substance in the contention of the applicants in paragraph 5 of the SA that description of the properties in Annexure-A1 demand notice is incorrect.

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The counsel appearing for the applicant submitted that the RBI Master Circular on Prudential Norms requires that all loan accounts be classified as SMA-0, SMA-1 and SMA-2 immediately upon default to prevent slippage and that the bank cannot exempt term loans from the mandatory requirement of identifying the stress prior to Non-

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Page 3 of 8

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SA No.155 of 2025

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Performing Asset classification. At the outset, it has to be emphasized that the above plea has not been raised either in the SA or in Annexure-B3 objection letter. If the aforesaid plea had been raised as stated above, the defendants would have suitably answered the above issue in Annexure-B4 reply. Raising the above plea for the first time in the argument notes submitted on behalf of the applicant is untenable. It is well settled law that if there is no specific plea on a particular issue in the pleading, the same which is raised for the first time during advancement of argument need not be considered and discussed. Be that as it may, counsel appearing for the defendants has pointed out in his written argument notes that the applicant was given only loan against property as term loan and that hence the identification of incipient stress/sickness does not arise and that there is a wide difference between term loan as a package given to the SMEs for purchase of machinery, and other equipments etc. Hence it is evident that since the applicant was given loan against the property, the identification of incipient stress/sickness does not arise.

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The counsel appearing for the defendants drew the attention of this Tribunal to the judgment of the Hon’ble Supreme Court rendered in Shri Shri Swami Samarth Construction & Finance Solution & Anr. Vs. The Board of Directors of NKGSB CO-OP Bank Ltd. & ors. [W.P (C) No.684 OF 2025] wherein it has been held as follows:

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“The petitioning enterprise does not seem to have ever claimed the benefit of the terms of the FRAMEWORK after the demand notice under Section 13 (2) of the SARFAESI Act was issued. It is at the stage of compliance with an order passed by the relevant Magistrate under Section 14 of the SARFAESI Act that his writ petition has been presented before this Court claiming benefits of the FRAMEWORK to restrain the respondent No.2 and its officers from proceeding further under the SARFAESI Act and other enactments except in the manner contemplated under the said Notification. We find the bona fide of the petitioning enterprise to be suspect.”

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It is pertinent to mention that the applicant has not raised the aforesaid issue even in Annexure-B3 letter. Hence, this Tribunal holds that the above plea raised by the applicant at the belated stage is not bonafide.

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In the afore cited case, the Hon’ble Supreme Court has also referred to its another judgment rendered in Pro Knits Vs. Canara Bank case holding that it would be equally incumbent on the part of the MSMEs concerned to be vigilant enough to follow the process laid down under the said framework, and bring to the notice of the banks concerned, by producing authenticated and veritable documents/ material to show its eligibility to get the benefit of the said framework.

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Page 4 of 8

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SA No.155 of 2025

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Indisputably, in the present case on hand, no such documents/ material was submitted to the1st defendant bank. Therefore, the plea of application of incipient stress prior to classification of loan account as Non-Performing Asset cannot be raised now.

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The counsel appearing for the applicant submitted that the defendants are not entitled to exercise the rights of the enforcement of securities under Chapter III, unless the security interest created in its favour has been registered with the Central Registry and that since no valid security interest has been crated and registered with the Central Registry in respect of the secured lands and buildings, the defendants are not entitled to initiate the measures in view of the non-compliance of the provisions of Sec. 26 (D) of the SARFAESI Act 2002.

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Per contra, the counsel appearing for the defendants countered the above contention of the counsel for the applicant submitting that the provisions of Sec. 26 (D) of the SARFAESI Act 2002 came into effect only from 24.01.2020 and that since the credit facility was granted during 2018, the above provisions of the Act is not applicable to the present case and that however, security interest was duly registered with the Central Registry on 09.08.2018 as per AnnexureA4 produced by the applicant himself. He also relied upon the judgment of the Hon'ble High Court of Karnataka delivered in C.Sarassamma Vs. Karnataka State Financial Corporation and ors. [Dated 07.09.2023 in W.P No.20356/2018, NC: 2023: KHC: 32236].

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The Hon'ble High Court of Karnataka has held in paragraph 48 of the judgment delivered in C.Sarassamma Vs. Karnataka State Financial Corporation and ors (referred to supra) as follows:

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“48. For period from 21.06.2022 (i.e. date of enactment of SARFAESI Act) till 24.01.2020, which is date of Chapter-IVA, coming into force, Section 23 (unamended) stipulated period of 30 days from date of creation of security interest for registration, with proviso permitting extension upto 30 days. Admittedly, there was no default provision, providing for consequences of non-registration. Hon’ble Supreme Court in case of Administrator, Municipal Committee Charkhi Dadri Vs. Ramji Lal Bagla , has held that absence of provision for consequences in case of non-compliance with requirements prescribed would indicate that said requirement was directory in nature. Therefore, for want of specific provision about effect of non-registration, requirement of registration has to be held as directory for said period.”

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Page 5 of 8

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SA No.155 of 2025

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As per the dictum laid down in the above judgment, registration of the security interest with the Central Registry is directory. However, the counsel appearing for the applicant drew the attention of this Tribunal to paragraph 51 of the above cited judgment submitting that the Hon'ble High Court of Karnataka has referred to the judgment of Full Bench of the Hon'ble High Court of Bombay delivered in Saljaon Janta Sahakari Bank Ltd. It has been held in the above case that requirement of registration u/s 26 (D) of the SARFAESI Act 2002 is mandatory. The views of this Tribunal that the provisions of Sec. 26 (D) of SARFAESI Act 2002 is not mandatory is reflected in the above cited judgment of Hon’ble Supreme Court delivered in Administrator, Municipal Committee Charkhi Dadri Vs. Ramji Lal Bagla for the reason that there is no specific provision in the Act with regard to the consequences of non-registration of the security interest with the Central Registry.

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Be that as it may, in the present case, the security interest on the secured asset was duly registered with the Central Registry on 09.08.2018 as evidenced from the perusal of Annexure-A4, copy of ID based asset search report. The defendants initiated the measures with issuance of Annexure-A1 Demand notice on 27.4.2023. Hence it is evident that, the defendants did not initiate the measures under the SARFAESI Act 2002 and the Rules made there under prior to registration of the security interest with the Central Registry.

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Admittedly, the Sy. No. has been wrongly mentioned as 3968/56 instead of 398/56 and that instead of mentioning the same as Sy. No. it is mentioned against the plot No column in Annexure-A4. The above mistake appears to be a typographical error by which no prejudice would have caused to the applicant in any manner. Above all, transaction ID for the registration of security interest is clearly mentioned in Annexure-A4. Hence, this Tribunal does not find any force in the submission of the counsel for the applicant that the details furnished in respect of the secured asset in Annexure-A4 is defective.

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A perusal of Annexure-A2 affidavit filed in MC No.1138/24 before the Additional Chief Judicial Magistrate Court (MPs/MLAs), Ernakulam shows that all the details mandated under Clauses (i) to (ix) to the provisions of Section 14 (1) of the SARFAESI Act 2002 such as availment of credit facility by the applicant on 25.7.2018 upon creation of secured asset over the immovable property, the restructure of the credit facility on 18.12.2020, registration of the security interest with the Central Registry, default in repayment of the outstanding loan due, classification of loan account as Non-Performing Asset, issuance of demand notice to the applicant and receipt of the demand notice by the applicant, payment made after receipt of the demand notice, sending objection to the demand notice by the applicant and

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Page 6 of 8

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SA No.155 of 2025

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reply notice by the defendants to the applicant , the total outstanding amount as on the date of filing of the petition and affidavit, absence of tenancy in the property and declaration with regard to compliance of all the provisions of the Act and the Rules and claim of the amount within the limitation period, has been clearly furnished. This Tribunal does not find any procedural irregularity or non-compliance of the aforesaid provisions of the Act in respect of filing of Annexure-A2.

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A perusal of Annexure-A3 order shows that the learned Additional Chief Judicial Magistrate (MPs/MLAs), Ernakulam after having perused the contents of the affidavit and the documents produced along with the affidavit and after having satisfied over the same, passed order appointed Advocate Commissioner to take physical possession of the secured asset. Hence, this Tribunal does not find any infirmity or illegality in the above order. The applicant has miserably failed to establish his case so as to get the relief sought for in the SA.

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Resultantly, S.A No.155/2025 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 22nd day of May 2026.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 7 of 8

SA No.155 of 2025

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

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Sl. No.	Date	Particulars
1.	27.04.2023	True copy of Demand Notice issued by the 2^nd defendant	Annexure-A1
2.	04.10.2024	True copy of Application and Affidavit numbered as M.C.No. 1138/2024 on the file of Additional Chief Judicial Magistrate Court (MPs/MLAs) Ernakulam	Annexure-A2
3.	07.12.2024	True copy of order in M.C.No. 1138/2024 on the file of Additional Chief Judicial Magistrate Court (MPs/MLAs)Ernakulam	Annexure-A3
4.	----	True copy of the CERSAI Report produced in M.C.No.1138/2024 on the file of Chief Judicial Magistrate Court Ernakulam	Annexure-A4
5.	08.01.2025	True copy of Notice issued by the Advocate Commissioner in M.C. No.1138/2024 on the file of Additional Chief Judicial Magistrate Court (MPs/MLAs)Ernakulam	Annexure-A5

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List of documents filed by the defendants along with the written

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		statement
Sl. No.	Date	Particulars
1.	19.07.2018	Copyof the original sanction	Annexure-B1
2.	18.12.2020	Copy of the Restructured sanction	Annexure-B2
3.	11.12.2023	Copy of objection letter by the applicant	Annexure-B3
4.	21.12.2023	Copy of reply of defendant	Annexure-B4
5.	----	Copy of proof of delivery	Annexure-B5
6.	----	Copy of proof of delivery	Annexure-B6
7.	----	Copy of statement of account	Annexure-B7

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Shyamkumar N v. Federal Bank

Case brief

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Shyamkumar N v. Federal Bank

Case brief

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