Allowed

Ms Eeswara Mithran Agencies v. State Bank of India

DRT17 Feb 2026SA/35/2024

Case brief

AI extract

What is this about?

The DRT allowed a Securitization Challenge Application filed by a proprietorship firm and its guarantor against a bank. The court set aside the bank's Demand and Possession Notices held to be illegal because the bank lacked registered security interest for the enhanced loan portion of the claim, though the original secured amount remained valid.

What did the court decide?

Set aside Section 13(2) Demand Notice dated 26.10.2023 and Section 13(4) Possession Notice dated 28.12.2023; liberty to initiate fresh measures within the scope of registered security.

Ms Eeswara Mithran Agencies versus State Bank of India — Banking and Recovery | DRT (2026)

SA No.35/2024

17.02.2026

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 17^th day of February, 2026

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SARFAESI APPLICATION No. 35 of 2024

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M/s. Eeswara Mithran Agencies, Represented by its Proprietrix Mrs. G.Mekala, W/o. E. Jothibasu, having address at No.71, Main Road, Agarakeerangudi, Elanthangudi, Mayiladuthurai – 609 401.

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Mrs. G.Mekala, W/o. E. Jothibasu, Residing at 3/162, Amman Nagar, 2 nd Street, Manjalvaikal, Mayiladuthurai – 609 001.

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Mrs. E. Vasanthamalai, W/o. R.Edumbian, Residing at 3/162, Amman Nagar, 2^nd Street, Manjalvaikal, Mayiladuthurai – 609 001. ….Applicants -Vs-

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The Authorised Officer, State Bank of India, Mayiladuthurai Branch, Mayiladuthurai 609 001. ….Respondent

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Counsels on record / appeared:

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Counsel for Applicant : M/s. G. Sanjeevi & R. Priya Counsel for respondent : M/s. T. Ramasamy

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ORDER ON SA 35/2024

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The present Securitization Application [SA] is filed on 09.01.2024 under sub section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken by the secured

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17.02.2026

creditor under the Security Interest Enforcement Rules, 2002 [for short the Rules].

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The applicant has impugned Sec.13(4) Possession Notice dated 28.12.2023 and the outstanding amount due as per Possession Notice is Rs.42,80,015/-

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Pleadings of the applicant:

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The First applicant is the proprietorship firm represented by its Proprietrix Mrs. G. Mekala, who is the 2^nd applicant and the 3^rd applicant is the Guarantor to the loan availed by the 1^st applicant M/s. Eeswara Mithran Agencies. The 1^st applicant has availed Cash Credit facility to the tune of Rs.5 lakhs and availed another sum of Rs.14,25,000/- in the year 2011. The 3^rd applicant is the guarantor has mortgaged the property by deposited of title deed which is registered vide Doc.No.2680/2011 dated 30.11.2011.

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The respondent bank enhanced the Cash credit limit to Rs.22 Lakhs and another loan of Rs.22 lakhs under e-DFS (Electronic Dealer Financing Scheme). It is contended that the applicant has not provided schedule property as security for enhanced CC loan of Rs.22 lakhs and e-DFS Loan of Rs.22 Lakhs totaling together of Rs.44 Lakhs and have provided security only for an amount of Rs.14,25,000/-.

¶24

The applicant was regular towards the repayment without default, however, due to COVID 19 defaulted in the repayment. The bank without mentioning date of NPA in the Demand Notice has issued the notices to the 1^st applicant who is the Primary Borrower, the demand notice is not affixed

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17.02.2026

on the property nor published in the two newspapers. It is contented that the bank cannot enforce the 3^rd applicant property which is given only for the loan of Rs.14,25,000/-.

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It is contended that there is no proper description of the property extent of building constructed on the land, documents relating to the mortgage of Schedule B which only speaking about the agreements/letter entered into between the parties.

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The bank without serving the Possession Notice to the second and third applicant has affixed the Possession Notice dated 28.12.2023 on the outer wall of the property on 28.12.2023 intimating that the property would be subject to charge for Rs.42,80,015/- as on 27.12.2023.

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In the grounds, it is contended that the measure initiated is illegal, arbitrary and contrary to the law and the issuance of demand notice and possession notice for the 3^rd applicant for an amount of Rs.42,71,990/- & Rs.42,80,015/- is unlawful as the 3rd applicant has only mortgaged the property towards the security of Rs.14,25,000 and the claim made in the possession notice is wrong. Hence, the applicants prays to set aside the Possession Notice dated 28.12.2023.

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Objections of the respondent bank:

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The respondent bank in their counter contend that the 1^st applicant is the proprietary firm to which the 2^nd applicant is the proprietrix and they are one entity. The loan account of applicant was declared as NPA on 08.10.2023 as per the RBI norms and guidelines. The Sec.13(2) Demand

SA No.35/2024

17.02.2026

Notice dated 26.10.2023 is issued under section 13(2) of the Act followed by the Possession Notice dated 28.12.2023 u/s.13(4) of the Act. The paper publication of possession notice is affected on 03.01.2024 in the Hindu and Dhinathanthi (Tamil) and affixed the possession notice on the secured assets on 28.12.2023 for enforcing the security interest. The Demand Notice and Possession Notice was duly served on the applicant’s as per the provisions of Rule 3 of SIE Rules.

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The possession notice issued is as per the format contained in Appendix IV of SIE Rules which is delivered to the applicants, 1^st applicant is the proprietary firm represented by the second applicant as the proprietrix are not different entities, they are one. Therefore, the service of the demand notice on the second applicant is sufficient. The possession notice was affixed at the conspicuous place of the property as per Rule 8(1) of the SIE Rules and the Possession Notice is duly published in two leading newspapers in English and Tamil having sufficient circulation in that locality in accordance with the provisions of Rule 8(2) of the SIE Rules.

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The respondent bank is not responsible for the setback or other contingent circumstances allegedly faced by the applicants and the applicants to make arrangement to ensure prompt repayments in order to honor the commitments. The bank is entitled to recall the entire loan amount under the concept of acceleration after the loan account is classified as NPA any part payment cannot cure the character of NPA after the account has been classified as NPA.

SA No.35/2024

17.02.2026

The part payments made by the applicants have been duly credited to the loan account and the liability has been correctly computed and interest has been charged as per the contractual terms and prevailing norms. The applicant being guarantor and mortgagor has duly executed the letter of Arrangement dated 01.07.2020, Supplemental Agreement dated 01.07.2020 and Guarantee Agreement dated 01.07.2020 for enhancement of the loans, thus extending the security for the enhanced loans also.

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In view of the default of the borrowers, the loan account has been classified as NPA and have proceeded further, the Chief Manager in Scale IV of the respondent bank as Authorized Officer is competent authority to exercise the rights of the secured creditor as provided under Rule 2(a) of the SIE Rules. The action taken by the respondent bank against the applicants under the provisions of the SARFAESI Act which is legally sustainable. Hence respondent bank prays for dismissal of the SA.

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Heard both sides of the Counsels and perused the records of the case

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It is an admitted fact the 1^st applicant is the borrower, a Proprietary concern represented by its Proprietrix Mrs. G. Mekala, the 2^nd applicant herein and the 3^rd applicant Mr. E. Vasanthamalai is the guarantor and also the mortgagor who has mortgaged the property as collateral security towards the credit facility availed by the applicants herein.

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In fact, the applicant does not dispute the availing of the facilities and the mortgage of the property including the default in the repayment. Due

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17.02.2026

to continuous default in the repayment, the loan account of the applicant was classified as NPA and the bank has proceeded further in the measures.

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The first contention as raised by the applicant is that in the Sec.13(2) Demand Notice produced at Pg.10-15 of SA Book, there is no mention of the date of NPA which is an infirmity and the bank without mentioning the date of NPA cannot proceed further.

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Ld. Counsel for the respondent taking resort to Section 13(3) of the SARFAESI Act contents that there are no mandatory requirements that the date of NPA should be mentioned in demand notice. In reference to the said contention, it will be appropriate to reiterate Section 13(3) of the Act.

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Section 13(3): The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of nonpayment of secured debts by the borrower.

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Thus, by virtue of the above provision, the contention of the applicant that non- mentioning of the date of NPA vitiates the demand notice is legally unsustainable. Further, the respondent in their counter has specially mentioned the date of NPA as on 08.10.2023 which is followed by the issuance of the Sec.13(2) demand notice on 26.10.2023.

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Additionally, in Para 4 of the Sec.13(2) notice, the bank has clearly mentioned “that the operation of the said financial assistance has become irregular and the debt has been classified as NPA in accordance with the directive/guidelines relating to asset classification issued by the RBI consequent to the default committed by you in repayment of principal debt

SA No.35/2024

17.02.2026

and interest thereon ”. Hence any contra contention that non-mention the date of NPA vitiates the measures cannot sustain.

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The 2^nd contention raised by the applicant is there no service of Sec.13(2) notice to the 1^st applicant. The demand notice is sent by RPAD to the 1^st applicant, and copy of the S.13(2) demand notice and postal acknowledgment cards are produced. The 2^nd and 3 applicants have received the notice as per the postal acknowledged cards produced at Pg.5 and 6. As the 2^nd applicant is the proprietrix of the 1^st applicant has received the demand notice amounts to due service of notice to the 1^st proprietary firm. A notice to the proprietor firm must be addressed directly to the proprietor as the firm has no legal entity. The demand notice is sent to the 2^nd applicant via registered post which is received, hence notice is duly served to the 1^st applicant.

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In spite of receipt of Sec.13(2) demand notice, as the borrower and the guarantor did not liquate the liability within the period of 60 days nor raised any objections to the demand made. Though 2^nd applicant has received the S.13(2) demand notice as per the postal acknowledgement card failed to raise any objections to the S.13(2) notice. Hence contention of non-service of S.13[2] demand notice cannot sustain.

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The further contention that the Sec.13(2) demand notice is not duly affixed on the property nor published in the two newspapers also cannot sustain as S.13(2) notice is duly served to the proprietrix of the firm, ie., the 2^nd applicant. Rule 3 of the Security Interest [Enforcement] Rules,2002

SA No.35/2024

17.02.2026

necessitates affixture of demand notice and its paper publication in two newspapers when the authorized officer has reason to believe that the borrower or his agent is avoiding the service of notice.

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In the instant matter, the applicants are duly served as per the acknowledgement cards and there is no reason to believe notices are being avoided. Hence the said contention also fails.

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It is an admitted fact that the 3^rd applicant has stood as guarantor and mortgagor deposited the title deeds of the property favoring the respondent bank only to the first loan of Rs.14,25,000, which is registered in the office of the Sub Register vide Document No.2680.2011 dated 30.11.2011. The Encumbrance certificate produced also reflects the MOTD for Rs. 14,25,000/-. Subsequently, the borrower has availed Cash Credit limit to Rs.22 Lakhs and e-DFS loan of Rs.22 lakhs to which the applicants have executed supplementary agreements and guarantee agreement agreeing to repay the loan amount. However, 3^rd applicant has not executed the extension of mortgage to the 02 loan availed by the 1^st applicant.

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On the other hand, the respondent counsel reliance on the Supplementary Agreement and the Guarantee Agreement dated 01.07.2023 contending that the mortgage created by the 3^rd applicant is extended to the enhanced limit. However, the bank has not produced original/copy of MOTD dated 30.11.2011 and also the mortgage for the

SA No.35/2024

17.02.2026

enhanced limits. Hence, the contention as raised by the applicant is not countered by the respondent bank with supporting documents.

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The further contention of the applicant that the bank cannot enforce the security under the SARFAESI Act, as the mortgage created is not registered with the central registry. Though the bank has produced the registration with the central registry vide registration No.A001630083, it is seen that the charge is registered by the bank only on 19.01.2024 which is subsequent to filing of the present SA on 09.01.2024 towards the secured amount of Rs.27,03,835.00. Whereas the amount due as on 27.12.2023 as per the possession notice is Rs.42,80,015/-. Thus it is evident that the respondent bank being secured creditor firstly has failed to produce the documents towards the mortgage for the enhanced CC Loan of Rs.22 Lakhs and e-DFS loan of Rs.22 Lakhs totalling together of Rs.44 lakhs and has failed to establish the enhanced limit totally to Rs.44 lakhs is registered with Central Registry as required under the SARFAESI Act.

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Additionally charge was registered with CERSAI on 19.01.2024 which is subsequent the issuance of Sec.13(2) demand notice dated 26.10.2023 and the Sec.13(4) possession notice dated 28.12.2023. The respondent has invoked measures under the Act for all the three loan without there being a secured asset for the two loans CC Loan of Rs.22 Lakhs and e-DFS loan of Rs.22 Lakhs totalling together of Rs.44 lakhs.

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Consequence of non-registration of charge before the Central Registry would not invalid the secured creditor in invoking the measures

SA No.35/2024

17.02.2026

under the SARFAESI Act, but they lose their status on priority over other charges on the same asset.

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Though the registration with the CRESAI is mandatory Chapter IV requires the registration both old and new charges. Non registration does not completely negate the existence of the debt. But it makes the security interest effectively unsecure for the purpose of special speedy recovery mechanism, SARFAESI Act Mandated filing of such particulars of the charge with the central registry even after delay with a penalty.

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The applicant have admittedly given an OTS proposal on 03.12.2025 contenting the Sec.13(4) Possession notice is challenged in SA.35 of 2024 and has complied with the interim order and intents to settle the liability of Rs.42 lakhs as full and final settlement and have deposited 10% of the OTS amount as an upfront payment and undertook to pay the balance within the period of 60 days, along with the OTS of the DD copy of Rs.4,30,000 is also produced.

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The applicant has challenged Sec.13(4) possession notice and have established that there is no extension of the mortgage to the enhanced limit of RS.44 lakhs, whereas respondent bank relies on the guarantee agreement for due repayment and made an attempt to bind the mortgagor for the extended limit which is not supported by any document.

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Though the respondent has initiated measures under the Act and established compliance of the procedures as contemplated under the Act in enforcing the security with supporting documents as required under the

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Act. However, the measures initiated after classifying the account as NPA, Sec.13(2) Demand Notice dated 26.10.2023 and Sec.13(4) Possession Notice dated 28.12.2023 are issued for the recovery of the entire outstanding amount due in all the three loan account where there is no security interest for the CC and e-DFS of Rs.44 lakhs.

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As there is no mortgage for the two loan CC Loan of Rs.22 Lakhs and e-DFS loan of Rs.22 Lakhs totalling together of Rs.44 lakhs bank cannot enforce the security extended by the 3^rd applicant for the credit facility of Rs.14,25,000/- but can enforce and recover the unsecured loan as permissible and admissible under law. Hence, the measures initiated for enforcing the security for the recovery of all three loan accounts cannot sustain and the same is held as infirmity in the measure taken by the bank.

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For the foregoing reasons, the S.13[2] Demand Notice dated 26.10.2023 and S.13[4] Possession Notice dated 28.12.2023 are hereby set aside. The respondent is at liberty to initiated fresh measures to the extent of mortgage created which forms a secured asset in recovering the outstanding loan amount.

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Accordingly present SA is allowed. Interim Order granted, if any stands vacated, pending IAs are disposed of in terms of this final order. No order as to cost. Sd/-

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(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

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( Dictated to Steno (Suriya), transcribed by him, corrected, signed and pronounced by me on this the 17^th day of February, 2026)

SA No.35/2024

17.02.2026

LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl. No.	Description of Documents	Documents No.
1.	Demand Notice dated 26.10.2023.	A-1
2.	Impugned Possession Notice and Newspaper Publication Tamil and English dated 28.12.2023.	A-2
3.	EC reflecting MODT dated 30.11.2011.	A-3

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDNET

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Sl. No.	Description of Documents	Documents No.
1.	Demand Notice with Acknowledgement of Service dated 26.10.2023.	R-1
2.	Possession Notice with Acknowledgement of Service dated 28.12.2023.	R-2
3.	Photos evidencing Affixation of Possession Notice dated 28.12.2023.	R-3
4.	Publication of Possession Notice in the Hindu dated 03.01.2024.	R-4
5.	Publication of Possession Notice in Dhinathanthi dated 03.01.2024.	R-5
6.	Letter of Arrangement dated 01.07.2020.	R-6
7.	Supplemental Agreement dated 01.07.2020.	R-7
8.	Guarantee Agreement dated 01.07.2020.	R-8

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DESCRIPTION OF IMMOVABLE PROPERTIES

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SCHEDULE - I

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In Mayiladuthurai Registration District, Mayiladuthurai joint 1 Sub Registry, Mayiladuthurai Taluk, 55, Pattamangalam Village, Manjal Vaikkal, Amman Nagar, Plot No.17, in R.S.No. 423/5 an extent of 2655 Square feet land with building thereon measuring 2280 sq.ft.

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Boundaries:

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East of : Thiruvarur Road South of : Plot No.16 West of : Plot No.18

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North of : Road

Total extent of land 2665 Square feet with building thereon measuring 2280 sq.ft.

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Sd/-

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(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

Ms Eeswara Mithran Agencies v. State Bank of India

Case brief

What is this about?

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Ms Eeswara Mithran Agencies v. State Bank of India

Case brief

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