Allowed

Sundarraj Kanagaraj v. The Chief Judicial Magistrate

DRT25 Mar 2026SA/72/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed a SARFAESI application seeking to set aside proceedings under Sections 13 and 14. It also noted that the respondent bank violated a stay order but dismissed the accompanying contempt petition as the Tribunal lacks contempt jurisdiction.

What did the court decide?

Impugned orders of CJM u/s 14 and possession notice u/s 13(4) set aside; stay order restored; expenditures excluded from loan account.

Sundarraj Kanagaraj versus The Chief Judicial… — Civil Procedure and Limitation | DRT (2026)

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SA No. 72/2023 & IA No. 1197/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 25^th DAY OF MARCH, 2026

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

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SA No. 72/2023 &

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IA No. 1197/2024 (Contempt Petition)

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Mr. Sundarraj Kanagaraj, S/o Mr. Kanagaraj,

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No. 2/224, Murugankoil Street,

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Kattur, Trichy – 620 019.

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Mrs. Rukmani, W/o Mr. Sundarraj,

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No. 2/224, Murugankoil Street, Kattur, Trichy – 620 019. --- Applicants

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-Vs-

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The Chief Judicial Magistrate, Trichy District, Trichy.

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M/s Phoenix ARC (P) Ltd.,

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Reg. Office 3^rd Floor Wallace Tower,

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No. 130-140/B/1, Crossing of Sahar Road, And West E-Way vile Parle East, Mumbai, Maharastra – 400 057. --- Defendants

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Appearance of Advocates:

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Mr. M. Arun Murugan ---- Counsel for the Applicant 1^st Defendant is none other than the Ld. CJM, Trichy 2^nd Defendant sets ex-parte

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Page 1 of 10

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SA No. 72/2023 & IA No. 1197/2024

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This SARFAESI Application was heard in the presence of Counsel for the Applicant and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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1 . This Application has been filed u/s.17(1) of the SARFAESI Act, 2002 by the Applicant praying that this Hon'ble Tribunal may be pleased to set aside all the proceedings initiated under SARFAESI Act. The Impugned Order in Cr. M.P. No. 28857/2022 dated 10.02.2023 passed by the 1^st Defendant U/s. 14 of the SARFAESI Act, 2002.

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2 . The brief averments of the Application filed by the Applicant are as follows:-

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The applicants availed home Loan from M/s Aspire Home Finance Corporation Ltd., vide Loan account No. of LXTRI00316-170043218 for an amount Rs.15,76,763/- which is allegedly calculated by the Defendant bank as Rs. 16,57,511/- (Rupees Sixteen lakh fifty-seven thousand five hundred eleven only) as per the Demand notice dated 18.01.2019. Inspite of paying the dues properly the Defendant has made a threat as per their demand notice alleging the account has been classified as NPA. Defendant bank without giving any opportunity to settle down after suffering heavily due to COVID-19 issued demand notice and possession notice on 15.05.2019 and directed the applicants to pay the entire amount of the loan and close the account without giving any opportunity. Defendant on verification of the securities sanctioned a sum above stated, based on the collateral security of the property which is residential in nature. The applicant regularly paid the amount to the bank as per the repayment schedule without any break or hindrance.

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(ii). Due to the market fluctuation and price rise and due to the pandemic COVID-19 the business became hit and sustained huge loss. But inspite of the situation the applicants have paid several lakhs to the tune of Rs.9.50 lakhs and bank is aware of the same and the loan has been drastically reduced. During the pandemic crisis the applicant is experiencing great uncertainty. However, with such high stakes on the line, entrepreneurs like applicant dealing with "paralysis," and break down and need to do into smaller steps to come out of it and then attend to issues based on their level of urgency. But the defendant bank did not wait for those periods and

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Page 2 of 10

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SA No. 72/2023 & IA No. 1197/2024

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charged interest on interest and penal interest. The applicants have so far deposited Rs.9.50 lakhs and the account is a regular account which is evident from the account statement. The amount has been regularly paid with some delay but paid altogether in one lump sum most of the times. The applicants have regularly paid the dues and as such the declaration of the account as NPA is totally arbitrary, perverse and illegal. The defendant bank who is well aware of the situation had pushed him into death trap by issuing the notice by imposing interest on interest without any break up details, which is very suicidal in nature. This act of the defendant is vindictive and arbitrary.

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(iii). The applicants are unable to service its debts for reasons beyond their control for a limited time period. Under such circumstances, it is prudent for the secured creditors to support the applicant in its revival efforts so that interests of all concerned including those of the defendant can be protected and promoted. Further it is submitted that imposing interest on interest caused struggle to survive against harsh economic realities. It is submitted that the Bank or the Secured Creditor, though is entitled to classify an account as 'NPA" based on the guidelines issued by the Reserve Bank of India, the borrower can certainly question the issue of classification if he can establish that the Bank has acted unreasonably or the classification is perverse on the face of it. It may be really difficult for the borrower to question the classification of Account by the Bank, but, in some cases, the borrower may have a case to show that the Bank has acted unreasonably. It is submitted that the applicant went to the bank and made objections to the defendant and stated that the account is no more a NPA and also objected regarding the imposing of interest on interest and compounding the interest and penal interest and requested for the regulatory package and also requested for re-assess and restructure. Further requested for waiver of interest during COVID-19 under RBI circular. But the bank did not reply properly and did not consider the applicant's request. It is further submitted that the defendant bank without considering the representations now obtained the impugned order from the CJM by concealing the real facts. It is submitted that in the possession notice the authorized officer totally suppressed the measurement of the huge building in the schedule of property in a manner unknown to law.

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GROUNDS

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a) The action initiated by the defendant is illegal, arbitrary, motivated and suffers with malafide intent and therefore is liable to be set aside. The amount shown as outstanding and interest charged in the present order is

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Page 3 of 10

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SA No. 72/2023 & IA No. 1197/2024

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exorbitant / unreasonable and against all fundamental norms and rules and steeply on the higher side also the penal interest charged is illegal.

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NPA as mentioned in the Demand Notice is itself illegal and against the guidelines issued by the RBI as the applicants have made regular and proper payments till such time. There was no default prior to March 2021. Therefore, the action initiated assuming and claiming that the account has become NPA are all illegal and liable to be set aside. Amount mentioned in the Demand Notice dated 18.01.2019 is incorrect.

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b) The 1^st applicant in whose name the property stands was not issued with any Demand Notice and Possession notice as contemplated under sections 13(2) and (4) of the Act. Hence, the impugned order is issued clearly in violation of the procedures contemplated under the Act. The possession notice was not served to all applicants and also not published in the two leading newspapers within 7 days as contemplated in Rules and has also not been affixed the property. The Chief Judicial Magistrate, Thiruchirapalli has passed order under section 14 of the SARFEASI Act in a mechanical manner without applying mind. The impugned order passed by the Chief Judicial Magistrate, Thiruchirapalli, is a non-speaking order and the Chief Judicial Magistrate, Thiruchirapalli had failed to verify as to whether the provisions of the Act had been complied with by the defendant prior to the application under section 14 of the SARFAESI Act.

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c) The Chief Judicial Magistrate, Thiruchirapalli failed to see that the application is not filed as contemplated in the Act. The defendant has no locus to file the said application as it has to be filed by the Secured Creditor. Authorized Officer is not the same as Secured Creditor. The Chief Judicial Magistrate, Thiruchirapalli failed to see that the applicant does not contain the necessary particulars, annexure and affidavit which is mandatory. The order refers to an affidavit it does not contain the particulars as mandated under the Act. Therefore, the Chief Judicial Magistrate, Thiruchirapalli ought to have rejected the application. The non-consideration and rejection of the applicant's representation seeking regularization of the account as per the RBI guidelines are arbitrary and illegal. The action of the defendant in trying to dispossess the applicant under Section 14 without complying with the various provisions of the SARFAESI Act is illegal and arbitrary.

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d) The defendant failed to see that the property is a residential building and that the impugned order would adversely affect his family. The description of the property as mentioned in the impugned order is improper. The impugned proceedings of the defendant are per se illegal and non-Est in the eyes of law. The impugned order is contrary to the facts and evidence of the case. The impugned order suffers from non-application of mind and against

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Page 4 of 10

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SA No. 72/2023 & IA No. 1197/2024

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the probability of law. The defendant has wrongly invoked the SARFAESI Act without any prior intimation about the status of the loan account of the borrower to the applicants and the same is against the R.B.1 Guidelines and the principles of natural Justice, hence the entire action gets vitiates. The Applicant's account is not a doubtful or bad account and the Applicant's account has been deliberately made Inactive by the bank for reasons best known to them and any alleged action on the mistake of the bank is not binding on the Applicant. Various payments made into the loan account have not been duly credited and the demand made is highly excessive and illusive.

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e) The classification of the applicant account as NPA is contrary to section 2 (o) of the SARFAESI Act. The demand notice had not been served on all the Applicants and on this score alone the entire proceedings under the Act is liable to be set aside. The Authorized signatory of the proceedings under the Act is not duly nominated under the Act and is not competent to initiate proceedings under the Act and in the absence of substantive proof the proceedings initiated are liable to be set aside and the name of the Authorized signatory of the 13(2) notice is conspicuously absent in all the notice and the Authorized signatory is not competent to initiate the proceedings under the Act. The interest charged /claimed is contrary to the terms of sanction and needs to be revised in terms of the sanction. Penal interest has been capitalized contrary to the decision of the Hon'ble Supreme Court in central Bank of India Vs Ravindra.

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f) The defendant bank failed to mention the proper measurement of schedule of property in the possession notice. The Possession notice not served on the all the applicants as per rule 4 (2B) of the Security Interest Enforcement rules 2002 and hence the impugned order is liable to be set aside. The amount mentioned in the demand notice dated 18.01.2019 is incorrect and at any event the alleged claim of the defendant is imaginary and exorbitant. At any event the alleged claim of the Defendant is imaginary and exorbitant. The Applicants further reserves their right to file additional grounds as and when necessary.

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Therefore, it is prayed that this Hon'ble Tribunal may be pleased to stay of all further proceedings in the Impugned Order in Cr. M. P. No. 28857/2022 dated 10.02.2023 passed by the 1^st Defendant.

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Page 5 of 10

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SA No. 72/2023 & IA No. 1197/2024

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SCHEDULE OF THE PROPERTY

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All that piece and parcel of land and the proposed construction of Residential building comprised in Old Natham S. No. 234/31 Part & New Natham S. No. 234/31 measuring with an extent of 1076 Sq.ft Situated at Pappakurichi Village, Thiruverumbur Taluk within the limits of Tiruchirapalli city corporation Tiruchirapalli District and bounded on

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North by: Property belongs to Kathiravan South by: Property belongs to Anthonyraj East by: Road

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West by: Property belongs to Kalaiyarasan

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Totally 1076 Sq. ft situated within the sub registration District of Thiruverumbur and in the District of Thiruchirapalli.

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The Applicants have submitted the following List of documents in support of his claim in the SA, which are as follows:

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S. No.	Date	Description
1.	18.01.2019	Demand Notice
2.	15.05.2019	Possession Notice
3.	10.02.2023	Impugned Order of CJM order in
		Cr. M.P. No. 28857/2022

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The Applicants have submitted the following Additional List of documents in support of his claim in the SA, which are as follows:

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S. No.	Date	Description
1.	26.04.2023	Auction Sale Notice
2.	28.12.2023	Contempt Notice sent bythe Petitioner

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4 . PETITION IN IA No. 1197/2024 (CONTEMPT PETITION):

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The Petitioner submitted that aggrieved with the Chief Judicial Magistrate's (CJM) order, filed SA seeking relief. This Hon’ble Tribunal granted a stay, imposing conditions on me. To continue legal proceedings, I was directed to make payments totaling 50%, divided into two installments. The first installment of Rs. 4 lakhs was mandated to be paid on or before March 31, 2023, while the second installment of the same amount had a deadline of April 28, 2023. Demonstrating diligence and compliance, the

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Page 6 of 10

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SA No. 72/2023 & IA No. 1197/2024

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applicant fulfilled the conditions set by this Hon’ble Tribunal. The first installment of Rs. 4 lakhs was promptly paid on March 23, 2023, well before the stipulated deadline of March 31, 2023. Similarly, the second installment of the same amount was settled on April 26, 2023, meeting the requirement ahead of the specified date of April 28, 2023.

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(ii). The petitioner further submit that regrettably, despite the granted stay order by this Hon’ble Tribunal, a disconcerting development has occurred. The respondent herein, in apparent disregard of the tribunal's directives, issued an auction sale notice dated December 7, 2023. This notice specifies a sale date of January 11, 2024, thus contravening the stay order and disobeying the tribunal's clear instructions. Such actions are non compliance with legal procedures and are apparent violation of this Hon’ble tribunal's stay order. In response to the blatant violation of the stay order by the respondent financial Institution, the petitioner took decisive action by issuing a contempt notice dated December 28, 2023, this notice serves as a communication, drawing attention to the disobedience of the stay order. By sending the contempt notice, for the unauthorized auction sale notice and urging the respondent to rectify the breach of the tribunal's order promptly.

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(iii). The Petitioner submitted that given the respondent's failure to rectify the violation by withdrawing the auction sale notice, I am in pursuit of justice and adherence to the stay order, I am filing this contempt petition before the Honorable tribunal.

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Therefore it is humbly prayed that this Hon'ble tribunal may be pleased to:

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a) Punish the 2nd Respondent authorized officer as per section 19(17) Recovery of Bank and Financial Dept due to Institution Act for the disobedience and breach of the terms on which the order was made. b) Direct the respondents to restore the original position as it was at the time the stay was granted dated 28.10.2022 and

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c) Pass any order/ orders deems fit and proper in the circumstances of the case and thus render justice.

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5 . On the other hand, the Defendant Bank did not appear before this Tribunal inspite of service of notices, hence this case was heard Ex-Parte.

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Page 7 of 10

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SA No. 72/2023 & IA No. 1197/2024

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6. ON THE BASIS OF ABOVE PLEADINGS OF SA AS WELL AS AVERMENTS MADE IN THE CONTEMPT PETITION BY THE PETITIONER/APPLICANT THE POINT WHICH ARISES FOR CONSIDERATION IS:-

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1. Whether the Applicant is entitled to get the reliefs as prayed for in main SA?

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2. Whether the Defendant Bank has violated the Order of this Tribunal and is liable for any Contempt Proceedings?

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7 . Having heard the parties and after going through the entire documents available on records, and also after considering the arguments by the Counsels, I find that it is admitted fact that the Applicant has taken loan from the Defendant Bank but the Applicant failed to repay the loan amount the loan account has been classified as NPA and thereafter the Bank has issued Demand Notice u/s. 13(2) of the SARFAESI Act on 18.01.2019 demanding a sum of Rs. 16,57,511/- (Page Nos. 12 to 15 of Main SA). Thereafter the Bank has also issued Possession Notice on 15.05.2019. I find that the applicants has though admitted that he has received the Demand notice, but he has not filed any chit of paper to show he has filed any objections or representation U/s 13(3-A) of the SARFAESI Act.

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The Applicants in their pleadings stated that the account could not have been classified as NPA. And there are several irregularities in respect of classification of account as NPA.

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Further, the applicant contended that the Defendant Bank had issued Possession Notice U/s. 13(4) of SARFAESI Act on 15.05.209 for a sum of Rs. 16,57,511/- (Page No. 16 of Main SA). The Applicant in his averment stated that the Bank has failed to follow the procedure contemplated in the SARFAESI Act. Further, the Applicant in his pleading has alleged that the Bank has failed to affix the Possession Notice on the conspicuous part of the

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Page 8 of 10

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SA No. 72/2023 & IA No. 1197/2024

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property and not published the same in two leading newspapers and the Chief Judicial Magistrate, Trichy has passed order in Cr. M.P. No. 28857/2022 on 10.02.2023 under Sec 14 of SARFAESI Act and he had failed to verify as to whether the provision of the Act has been followed by defendant bank or not. The CJM, Trichy failed to see that the applicant does not contain the necessary particulars, annexure and affidavit which is mandatory. Hence, the order of CJM, Trichy ought to have rejected the application.

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On the other hand the defendant bank did not appear inspite of service of notice to produce the evidence and to rebut the allegation of the applicant, hence I find that the applicant has proved his case in his favour.

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I also find that during the pendency of the case, this Tribunal has granted a conditional stay order dated 03.03.23 for a sum of Rs. 8,00,000/(Rupees Eight Lakhs only) to be paid in two instalments each Rs. 4,00,000/by the Applicant, the Applicant has also complied with the conditional order and proved his bona-fide.

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IA No. 1197/2024 (Contempt Petition) : So far this petition is concerned I find that applicant was granted stay order on payment of some amount and he has complied the order and the stay was made absolute but while stay was in operation, the defendant bank has issued sale notice which violets the order of the Tribunal. Since, this Tribunal is not a court. It can’t initiate a proceeding for contempt of court, hence this Contempt Petition can not be entertained. Accordingly, this Contempt Petition IA No. 1197/2024 is closed.

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In view of the above facts and circumstances, I find merits in this SARFAESI application, hence this SA is allowed but with no cost.

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Page 9 of 10

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SA No. 72/2023 & IA No. 1197/2024

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In the result,

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(a) SA No. 72/2023 is allowed as prayed for. Possession Notice dated 15.05.2019 is hereby set aside by this Tribunal.

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(b) The Impugned Order passed by the Ld. CJM, Trichy in Cr. M.P. No. 28857/2022 dated 10.02.2023 is also hereby set aside.

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(c) All the expenditures incurred in issuance of Impugned Order passed by the Ld. CJM, Trichy in Cr. M.P. No. 28857 of 2023 dated 10.02.2023 and further all the expenditures incurred in respect of Possession Notice dated 15.05.2019 and Sale Notice dated 26.04.2023 etc. shall not be included in the loan account of the Applicant.

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