Dismissed

Joy Paul v. South Indian Bank

DRT15 Jul 2026SA/269/2023

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal, Kerala dismissed an application by a borrower challenging the bank's classification of loans as NPA, issuance of possession notices, and sale notices under the SARFAESI Act, holding the bank's actions justified by RBI borrower-wise classification norms and lack of objection to the demand notice.

What did the court decide?

Application dismissed without cost; applicant permitted to submit representation regarding remittances for bank to verify outstanding and provide reply within 15 days.

Joy Paul versus South Indian Bank — Insolvency and Bankruptcy | DRT (2026)

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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 15^th day of July, 2026

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SECURITIZATION APPLICATION No.269/2023

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Between

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Joy Paul, S/o.N.T.Paul, Nadackal House, Athirampuzha, Kottayam – 686 562. …Applicant

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And

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South Indian Bank Ltd., Pannackal Buildings, Central Junction, Athirampuzha, Kottayam – 686 562, Represented by its Branch Manager.

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The Authorised Officer & Chief Manager, South Indian Bank Ltd. Pannackal Buildings, Central Junction, Athirampuzha, Kottayam – 686 562. …Defendants

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This Securitization Application having been heard on

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07.05.2026 in the presence of Advocate Sri.C.S.Manu for the

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applicant and Advocate Sri.Mohan Jacob George for the defendants

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SA 269/2023

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and stood over to this day for consideration, the Tribunal delivered the following:

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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 defendants 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/borrower filed this SA under S.17(1) of the SARFAESI Act seeking relief to declare the proceedings initiated by the defendants under S.13(2) and S.13(4) of the SARFAESI Act as illegal and restraining the defendants from taking possession of the secured assets. By way of amendment, the applicant sought to set aside the sale notice issued by the 2^nd defendant.

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Brief facts of the case :

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2.1 The applicant, being the managing partner of a partnership firm by name M/s.N.T.Paul & Co., Nadackal Building, Athirampuzha, Kottayam, availed four loans from the 1^st defendant bank and the balance outstanding in the loan accounts as on 20.10.2022 is stated in paragraph 2 of the application. It is claimed that all the loans were within limits except one loan which was overdrawn by Rs.7,61,702.08. The defendant bank classified all the

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SA 269/2023

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loans as NPA and issued demand notice under S.13(2) of the SARFAESI Act calling the applicant to repay the outstanding amount in all the loan accounts of Rs.2,37,74,763.62.

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2.2 The applicant approached the Hon'ble High Court of Kerala in W.P.(C) No.181/2023 challenging such demand notice with a prayer to give an opportunity to regularize the loans. The said writ application was disposed by judgment dated 19.01.2023 permitting the applicant to approach the bank with a proposal for settlement of the liability within a period of one week from the date of judgment and the defendants are directed to take proper decision on the proposal of the applicant. As per the direction of the Hon'ble High Court, the applicant submitted a proposal marked Annexure-A3 but without properly appreciating the proposal, the 2^nd defendant issued a letter asking the applicant to close the loan accounts at the earliest.

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2.3 Due to non-repayment of the demand within the statutory period, the 2^nd defendant issued possession notice under S.13(4) of the SARFAESI Act for taking possession of the secured assets including the residential property stating total outstanding in the loan accounts as Rs.2,51,22,432.62 as on 07.02.2023. The defendant has also issued another notice under S.13(8) of the

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SA 269/2023

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SARFAESI Act intimating that the properties will be sold by public auction if the amount is not repaid.

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2.4 The applicant approached the Hon'ble High Court of Kerala in W.P.(C) No.6143/2023 challenging Annexures-A5 and A6 notices issued under S.13(4) and S.13(8) of the SARFAESI Act respectively which was disposed by judgment dated 27.02.2023 giving opportunity to the applicant to submit fresh proposal for settlement. Accordingly, the applicant submitted a proposal for OTS which was rejected by the 2^nd defendant vide letter dated 09.03.2023 marked Annexure-A9.

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2.5. The applicant has also remitted considerable amount in the loan accounts after issuance of the demand notice. The details of outstanding in the loan accounts are furnished by the applicant marked Annexures-A11(a) to A11(d). Lastly the applicant approached the Tribunal by filing this SA challenging the securitisation measures claiming that the demand notice is not proper as the details of loans are not furnished in violation of S.13(3) of the SARFAESI Act. The applicant has also challenged the proceeding initiated before the CJM, Kottayam u/s 14 of the SARFAESI Act bearing MC No.139/2023 in taking physical possession of the secured asset.

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SA 269/2023

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2.6 It is also submitted that classification of the loans as NPA is illegal and hence the applicant claims to set aside the entire securitisation proceeding initiated by the defendants against the CCOL, term loan-1, term loan-2, WCDL and ECLGS with a direction not to dispossess the applicant from the secured asset.

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3.1 The defendants filed written statement denying the averments in the SA and claimed inter alia that the applicant availed financial facility by way of CCOL for the business of trading of domestic and imported tiles which turned NPA on 31.08.2022 as the limit stood exceeded. As per the guideline of RBI, loans are to be classified as borrower-wise. Accordingly, other loans also turned NPA on 31.08.2022, followed by issuance of demand notice under S.13(2) of the SARFAESI Act. After receipt of the same, the applicant did not raise any objection or representation in disputing the classification of the loans as NPA and the demand advanced. Possession notice under S.13(4) of the SARFAESI Act was issued in accordance with law. All the relevant documents are produced and marked as Annexures-B4 and B5 series.

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3.2 As the defendants find difficulty in taking physical possession of the secured asset, they approached the CJM under S.14 of the SARFAESI Act bearing MC No.139/2023 to take physical

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SA 269/2023

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possession of the secured asset. There is no illegality or irregularity in any proceeding. The applicant filed various cases before the Hon'ble High Court of Kerala and he, being unsuccessful, has filed this SA having no valid, legal and tenable grounds. As on 31.10.2025, an amount of Rs.1,51,83,547.37 is due from the applicant. Subsequently, the defendant issued sale notices from time to time and the applicant filed various applications in challenging such measures. The SA, being devoid of any merit, may be dismissed.

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From the respective case of the applicant and defendants, the following points emerged for adjudication in this case:

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(i) Whether there is any illegality or irregularity or defect in the securitization proceedings initiated by the defendants to interdict with the same?

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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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Admittedly, the applicant availed various loans from the defendant bank and out of which, the business loan i.e., CCOL loan

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SA 269/2023

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A/c No.0116083000000391 was overdrawn by an amount of Rs.7,61,702.08. Consequently, the other loans were also declared as NPA. During argument, learned counsel for the applicant has only contended that NPA classification is illegal as except one account, other accounts are regular. In absence of proper classification of NPA, the entire securitization proceeding is illegal.

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The learned counsel for the defendants referred RBI Master Circular – Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated 01.04.2025 in which clause 4.2.7 under the head ‘Asset Classification to be borrower-wise and not facility-wise’ reads as follows:

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4.2.7 Asset Classification to be borrower-wise and not facility-wise

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4.2.7.1 It is difficult to envisage a situation when only one facility to a borrower/one investment in any of the securities issued by the borrower becomes a problem credit/investment and not others. Therefore, all the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof which has become irregular.

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4.2.7.2 If the debits arising out of devolvement of letters of credit or invoked guarantees are parked in a separate account, the balance outstanding in that account also should be treated as a part of the borrower’s principal operating account for the purpose of application of prudential norms on income recognition, asset classification and provisioning.

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4.2.7.3 The bills discounted under LC favouring a borrower may not be classified as a Non performing assets (NPA), when any other facility granted to the borrower is classified as NPA. However, in

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SA 269/2023

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case documents under LC are not accepted on presentation or the payment under the LC is not made on the due date by the LC issuing bank for any reason and the borrower does not immediately make good the amount disbursed as a result of discounting of concerned bills, the outstanding bills discounted will immediately be classified as NPA with effect from the date when the other facilities had been classified as NPA.

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In view of this guideline and circular of the RBI, the defendants have not committed any illegality in classifying all the loans of applicant as NPA. Hence the contention of the learned counsel for the applicant has no force to accept the same.

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Further, after receipt of the demand notice, the applicant has not raised any dispute under S.13(3-A) of the SARFAESI Act challenging such NPA classification and also did not object the demand due to non-furnishing of the details of loans and secured assets in the demand notice. In absence of the same, challenging the demand notice is not at all entertainable Further, on perusal of the demand notice, all the details of loans and interest charged and details of the secured assets are stated. In such premises, contention of the learned counsel for the applicant is not at all acceptable.

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In the SA there is no whisper regarding any illegality or defect in the proceeding taken by the defendants under S.13(4) of the SARFAESI Act or in the proceeding under S.14 of the SARFAESI

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SA 269/2023

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Act. During pendency of the SA, the defendant bank has taken physical possession of one item of the secured assets with the help of the Advocate Commissioner. In the affidavit filed by the applicant in IA No.301/2026, it is specifically admitted in paragraph 32 that on 07.10.2025, the bank took physical possession of the office property of the applicant. In absence of proof of any illegality in such proceeding taken under S.14 of the SARFAESI Act, interference with the same is not at all warranted. So also the sale notices issued by the defendants did not materialize and hence adjudication of the claim in respect of the same is also not necessary in the present case.

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Lastly, learned counsel for the applicant submitted that during pendency of the SA, the applicant remitted considerable amount in the loan account which is more than the demanded amount and hence the defendants cannot proceed with the securitization proceeding. Whereas, the defendants produced account statements of all the loans and stated that an amount of Rs.83,70,524.55 is outstanding in the loan accounts after adjusting the remittances made by the applicant. On perusal of the account statements, the remittance made by the applicant in the CCOL account is duly credited and Rs.18,22,943.58 is excess in the said

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SA 269/2023

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account as per Annexure-B12 statement. But the statements of other accounts produced by the defendants showing outstanding balance in such accounts. Accordingly, the defendants claim that after adjusting the excess amount, total outstanding in other accounts is Rs.83,70,524.55. This issue can be raised by the applicant before the defendant bank and the defendant bank is statutorily bound to consider the grievance of the applicant before proceeding with the securitization measures. But for that reason, the securitization proceeding already initiated cannot be held illegal in absence of proof of any illegality in such proceeding. The applicant is permitted to submit a representation with details of remittance to the defendant bank within fifteen days from passing of this judgement and the defendants shall give a reply in writing to the applicant within 15 days of receipt of such representation furnishing details of outstanding in the loan account for information and knowledge of the applicant before proceeding further in the securitisation proceeding.

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Hence it is ordered:-

SA 269/2023

ORDER

In view of the foregoing reasons and with the above observation, the SA, being devoid of any merit, is hereby dismissed but in the circumstances without cost.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 15^th day of July, 2026)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 269/2023

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Documents on the part of the applicant

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Annexures	Date	Particulars of documents
Annexure-A1	21.10.2022	Copy of demand notice under S.13(2) of the SARFAESI Act issued to the applicant.
Annexure-A2	19.01.2023	Copy of judgment in W.P.(C) No.181/2023 of the Hon'ble High Court of Kerala.
Annexure-A3	25.01.2023	Copy of application submitted to the defendants by the applicant.
Annexure-A4	04.02.2023	Copy of letter issued by the 2^nd defendant to the applicant.
Annexure-A5	08.02.2023	Copy of possession notice issued by the 2^nddefendant to the applicant.
Annexure-A6	14.02.2023	Copy of notice under S.13(8) of the SARFAESI Act issued by the 2^nd defendant to the applicant.
Annexure-A7	27.02.2023	Copy of judgment in W.P.(C) No.6143/2023 of the Hon'ble High Court of Kerala.
Annexure-A8	04.03.2023	Copy of letter submitted by the applicant to the defendant bank.
Annexure-A9	09.03.2023	Copy of reply letter issued by the 2^nd defendant to the applicant.
Annexure-A10	14.04.2023	Copy of agreement of sale.
Annexure-A11	…	Copy of the statement of account relating to the CCOL facility.
Annexure-A11(a)	…	Copy of the statement of account relating to the term loan-1.
Annexure-A11(b)	…	Copy of the statement of account relating to the term loan-2.
Annexure-A11(c)	…	Copy of the statement of account relating to WCDL.

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SA 269/2023

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Annexure-A11(d)	…	Copy of the statement of relating to ECLGS facility.	acc	ount
Annexure-A12	15.11.2025	Copy of e-auction sale notic by the 2^nddefendant to the ap	e is plic	sued ant.
Annexure-A13	…	Copy of the statement of pertaining to CCOL facility.	acc	ount
Annexure-A14	…	Copy of the statement of pertaining to WCDL.	acc	ount
Annexure-A15	…	Copy of the statement of pertaining to term loan-1.	acc	ount
Annexure-A16	…	Copy of the statement of pertaining to term loan-2.	acc	ount
Annexure-A17	…	Copy of the statement of pertaining to ECLGS facility.	acc	ount
Annexure-A18	02.09.2022	Copy of notice issued defendant bank to the applica	by nt.	the
Annexure-A19	20.12.2025	Copy of letter submitted applicant to the defendant ba	by nk.	the
Annexure-A20	31.12.2025	Copy of letter submitted applicant to the defendant ba	by nk.	the

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Documents on the part of the defendants

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Annexure-B1	21.10.2022	Copy of demand notice under S.13(2) of the SARFAESI Act issued to the borrowers.
Annexure-B2	…	Copy of postal receipts evidencing issuance of Annexure-B1 demand notice.
Annexure-B3	02.11.2022	Copy of acknowledgement cards evidencing receipt of notice by the borrowers.
Annexure-B4	08.02.2023	Copy of possession notice issued to the applicant.
Annexure-B4(a)	09.02.2023	Copy of postal receipts evidencing issuance of possession notice.

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SA 269/2023

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Annexure-B5	09.02.2023	Copy of paper p possession notice in T Express daily.	ublication of he New Indian
Annexure-B(a)	09.02.2023	Copy of paper p possession notice Manorama daily.	ublication of in Malayala
Annexure-B6	26.07.2023	Copy of judgment No.282/2023 of the Court of Kerala.	in O.P.(DRT) Hon'ble High
Annexure-B7	03.09.2024	Copy of judgment No.175/2024 of the Court of Kerala.	in O.P.(DRT) Hon'ble High
Annexure-B8	27.09.2024	Copy of jud R.P.No.1012/2024 of High Court of Kerala.	gment in the Hon'ble
Annexure-B9	12.02.2025	Copy of judgment No.43857/2024 of the Court of Kerala.	in W.P.(C) Hon'ble High
Annexure-B10	14.07.2025	Copy of judgment No.21670/2025 of the Court of Kerala.	in W.P.(C) Hon'ble High
Annexure-B11	18.10.2025	Copy of valuation repo the defendant bank.	rt obtained by
Annexure-B12	…	Copy of statement relating to CCOL accou	of account nt.
Annexure-B13	…	Copy of statement relating to WCDL acco	of account unt.
Annexure-B14	…	Copy of statement relating to ECLGS acco	of account unt.

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PRESIDING OFFICER

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IN THE DEBTS RECOVERY TRIBUNAL2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated the 15^th July, 2026

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SA No.269/2023

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Between

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Joy Paul, S/o.N.T.Paul, Nadackal House, Athirampuzha, Kottayam – 686 562. …Applicant And

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South Indian Bank Ltd., Pannackal Buildings, Central Junction, Athirampuzha, Kottayam – 686 562, Represented by its Branch Manager & another. …Defendants

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F I N A L O R D E R

Joy Paul v. South Indian Bank

Case brief

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Joy Paul v. South Indian Bank

Case brief

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