The Tribunal dismissed an application challenging a securitization proceeding under the SARFAESI Act. The court held that the secured properties were not exempt agricultural land, the Section 14 affidavit substantially complied with the law, and no MSME restructuring benefits were claimed or necessary.
Securitization Application dismissed without costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM
PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER
Dated this the 23rd day of February, 2026
SECURITIZATION APPLICATION No.907/2024
Between
SA 907/2024
2
This Securitization Application having been heard on 05.02.2026 in the presence of Advocate Mr.Tissarant A.G. for the applicants and Advocate Ms.Sally Thomas Chacko for the defendant and stood over to this day for consideration, the Tribunal delivered the following:
F I N A L O R D E R
Challenging the securitization proceeding initiated by the defendant 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 and Guarantors have filed this SA under S.17(1) of the SARFAESI Act with a prayer to set aside the demand notice, order of the CJM and the notice issued by the Advocate Commissioner.
Brief facts of the case :
2.1 The applicants availed various loans from the defendant starting from 2015 by creating security interest over the subject matter property described in the SA. It is claimed that the secured assets are agricultural land having cultivation of rubber and other mixed crops. Hence the properties are exempted under the provision of the SARFAESI Act under Section 31(i) of the said Act. In the SA the applicants claimed that the defendant has never sent
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the demand notice or possession notice to the applicants, instead they filed MC No.807/2024 before the Chief Judicial Magistrate Court, Kottayam to take possession of the secured asset. It is learnt from the copy of the demand notice that the defendant claims the total outstanding as on 29.02.2024 is Rs.1,74,26,608/which is not correct. The applicants also claimed that the defendant charged interest arbitrarily, which the applicants are not liable.
2.2 All the statutory requirements in filing application under section 14 of the SARFAESI act is not duly followed and the order passed by the CJM is vitiated. Lastly, in the SA it is claimed that the business of the applicant is an MSME. Before classifying the loan as ‘NPA’ the notification issued for MSME for restricting the unit was not followed and hence the classification of the loan as ‘NPA’ is illegal. The SA is filed with a prayer to set aside the demand notice, order of the CJM and the notice issued by the Advocate Commissioner.
3.1 The defendant filed written statement denying the averments and claimed inter alia that the first applicant is the absolute owner of 40 sq mtr. of land, the 2nd applicant is the owner of 39.40 Ares and 68 Ares of land and the 3rd applicant is the owner of 33.20 Ares of land, described in the demand notice. While availing the credit facilities the properties described, were
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mortgaged by the applicants in the year 2015 for the loan availed by the applicants for the purpose of contract work and for construction of a house. Claiming the secured asset as agricultural land is not true. In the loan application the properties are described as residential building and office building. Nowhere it is claimed that the secured asset is agricultural land. Due to default in repayment the loan was classified as ‘NPA’ and the securitization measure was taken. Annexure-A1 demand notice dated 29.02.2024 was issued to the parties. The demand notice issued to the applicants were duly served.
3.2 Due to non-repayment, possession notice under Section 13(4) of the SARFAESI Act was taken after following all the statutory requirements and the relevant materials are placed along with the record. There is no illegality in the proceeding under Section 14 of the SARFAESI Act. All the statutory measures are duly followed. The applicants never raised any claim against the demand notice. It is also submitted that the applicants never claimed MSME benefit or restructuring the MSME business. In absence of the same, the claim of the applicants is not sustainable and hence the SA, being devoid of any merit, may be dismissed.
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(i) Whether the securitization measure taken by the defendant in putting properties for sale suffer from any illegality?
(ii) Whether the applicants are entitled to get any relief in this proceeding?
FINDINGS:
Point No.(i) & (ii):-
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stand as bar in raising the claim of agricultural nature of the secured asset in this SA.
Section 14 of the SARFAESI Act was not duly followed while swearing affidavit before the CJM. The details of the secured assets are not stated in the affidavit and the payments made is also not stated in such affidavit, which vitiates the entire proceeding. Hence the SA may be allowed in setting aside entire proceeding.
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stated the secured asset as residential properties and they will not claim the property as agriculture in future. Hence the claim is not sustainable. So also the applicants have never claimed the benefit under the provision of MSME at any point of time. In absence of the same, the claim is not sustainable. Hence the SA may be dismissed.
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a residential area. There is a under construction multi-storied building at a distance from the subject matter property and in some portion of the land there are some rubber trees. The existence of rubber trees in the residential properties in the State of Kerala is very common. Mere existence of rubber trees, the nature of the land will not be treated as ‘agriculture’ unless and until the applicants establish that they have intention to retain the properties as agricultural land at the time of availing the loan. Further the applicants have to establish that the properties were cultivated by them by planting rubber trees, which was their source of income. No such evidence was placed on record.
“7.1 The purpose of enacting Section 31(i) of the SARFAESI Act has been considered by this Court in the case of Blue Coast Hotels Ltd. (Supra) in paragraph 36, which reads as under:
“36. The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” assume significance. This provision, like many others is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court. The plain intention of the provision is to
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exempt agricultural land from the provisions of the Act. In other words, the creditor cannot enforce any security interest created in his favour without intervention of the court or tribunal, if such security interest is in respect of agricultural land. The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act. It is also intended to deter the creation of security interest over agricultural land as defined in Section 2(1)(zf)35. Thus, security interest cannot be created in respect of property specified in Section 31.”
7.2 Thus, as per the law laid down by this Court in the aforesaid two decisions, only in a case where the secured property is actually put to use as agricultural land and solely on the basis of the revenue records / Pattadar and once the secured property is put as a security by way of mortgage etc. meaning thereby the same was not treated as agricultural land, such properties cannot be said to be exempted from the provisions of the SARFAESI Act under Section 31(i) of the SARFAESI Act. Applying the law laid down in the aforesaid two decisions to the facts of the case on hand and when no evidence was led at all on behalf of the borrowers that the secured properties in question were actually put to use as agricultural land and/or any agricultural activity was going on, the High Court has committed an error in applying Section 31(i) of the SARFAESI Act and quashing and setting aside the entire Possession Notice, Auction Notice as well as Sale etc.”
In view of this ratio, the burden lies on the person claiming the
properties as agricultural land and also, they must prove their intention to retain the properties as agricultural at the time of availing the loan. No such evidence is placed on record. The advocate commissioner cannot say the status of the land at the time of availing the loan. Her report showing existence of the rubber trees is not sufficient to claim exemption of the properties on the ground of agricultural land.
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of the SARFAESI Act is illegal as the Authorised Officer has not duly sworn the affidavit as per the statutory requirement. On perusal of such affidavit produced by the defendant bank, the requirement of the proviso to Section 14 of the SARFAESI Act has been substantially complied. Nothing material illegality was found in such Judgment.
“17. Therefore, wherever this Court finds that the parameters indicated in Clauses (i) to (ix) of the first proviso to Section 14 (1) of the Act are broadly complied with, the Court is bound to invoke the doctrine of ‘substantial compliance’. It must be remembered that Clauses (i) to (ix) of the first proviso to Section 14 (1) of the Act merely provide the form in which the essential averments for an application under Section 14 of the Act are to be made. Therefore, what is important, is the substance and not the form.”
In view of the judgement, substantial compliance of the provision is essential which is complied with in filing the affidavit in this case. The claim of the applicants on this score is not sustainable.
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the applicants under such guidelines prescribed by the Reserve Bank of India for the MSME unit.
“17. It is also pertinent to note that sufficient safeguards have been provided under the said Chapter for safeguarding the interest of the Defaulters-Borrowers for giving them opportunities to discharge their debt. However, if at the stage of classification of the loan account of the borrower as NPA, the borrower does not bring to the notice of the concerned bank/creditor that it is a Micro, Small or Medium Enterprise under the MSMED Act and if such an Enterprise allows the entire process for enforcement of security interest under the SARFAESI Act to be over, or it having challenged such action of the concerned bank/creditor in the court of law/tribunal and having failed, such an Enterprise could not be permitted to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising the plea of being an MSME at a belated stage. Suffice it to say, when it is mandatory or obligatory on the part of the Banks to follow the Instructions/Directions issued by the Central Government and the Reserve Bank of India with regard to the Framework for Revival and Rehabilitation of MSMEs, it would be equally incumbent on the part of the concerned MSMEs to be vigilant enough to follow the process laid down under the said Framework, and bring to the notice of the concerned Banks, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework.”
In view of this ratio, filing of the application by the owner of the MSME unit seeking for restructure or revival of the business is essential. In absence of the same, they cannot claim any benefit under the MSME provision in view of the ratio decided by the Hon’ble Apex Court. The applicants have failed to establish any
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illegality or irregularity in the securitization proceeding to interdict and hence they are not entitled for any relief in this case. Hence the points framed are answered against the applicants.
Hence it is ordered:-
ORDER
(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 23rd day of February, 2026).
[SOVAN KUMAR DASH] PRESIDING OFFICER
SA 907/2024
13
Documents on the part of the applicants
| Annexures | Date | Particulars of documents |
|---|---|---|
| Annexure-A1 | 29.02.2024 | True copy of the demand notice. |
| Annexure-A2 | True copy of the MC No.807/2024. | |
| Annexure-A3 | 22.11.2024 | True copy of the order of the Chief Judicial Magistrate Court, Kottayam. |
| Annexure-A4 | 06.12.2024 | True copy of the Advocate Commissioner’s notice. |
Documents on the part of the defendant
| Annexures | Date | Particulars of documents |
|---|---|---|
| Annexure-R1 | The copy of the application form for MSEs. |
|
| Annexure-R2 | 29.02.2024 | The copy of the notice served in person on the 1stapplicant. |
| Annexure-R3 | 29.02.2024 | The copy of the notice served in person on the 3rdapplicant. |
| Annexure-R4 series |
The copies of the communication received by the Superintendent of the Post Offices, Changanacherry division along with the details of delivery of the notice. |
|
| Annexure-R5 | True copy of the possession notice under Rule 8(1) issued to the applicants. |
|
| Annexure-R6 series |
Copies of the acknowledgment cards received by the applicants. |
|
| Annexure-R7 | True copy of the photograph showing the notice affixed on the building. |
|
| Annexure-R8 series |
17.07.2024 | Copy of the notices published in the Mangalam, Malayalam newspaper and Hindu, English newspaper. |
| Annexure-R9 | Copy of the guarantee agreement executed by the applicants 2 and 3. |
|
| Annexure-R10 | 01.01.2015 | True copy of the affidavit. |
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| Annexure-R11 | 12.05.2014 | True copy of the possession certificate. |
|---|---|---|
| Annexure-R11(a) | 12.05.2014 | Translation of possession certificate. |
| Annexure-R12 | 22.11.2018 | Copy of the possession certificate. |
| Annexure-R13 | 08.11.2013 | Copy of the possession certificate. |
| Annexure-R13(a) | 08.11.2013 | Translation of possession certificate |
| Annexure-R14 | 12.05.2014 | Copy of the possession certificate in the name of Scaria. |
| Annexure-R14(a) | 12.05.2014 | Translation of possession certificate in the name of Scaria. |
| Annexure-R15 | 12.05.2014 | Copy of the possession certificate in the name of Pennamma. |
| Annexure-R15(a) | 12.05.2014 | Translation of possession certificate in the name of Pennamma. |
| Annexure-R16 | 19.11.2018 | Copy of the thandapper Account. |
| Annexure-R16(a) | 19.11.2018 | Translation of thandapper Account. |
PRESIDING OFFICER
SA 907/2024
IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM
PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER
Dated the 23rd February, 2026.
SA No.907/2024
Between
Joshy Zacharias, Aged 57 years, S/o. Scariah V.V., Vattakavumkal House, Chengalam P.O., Kanjiramattam, Chengalam East, Kottayam 686585 & 2 Ors.
…Applicants
And
The Authorised Officer, State Bank of India, Stressed Asset Recovery Branch, 7th Floor, Venkarath Towers, Palarivattam Bypass Junction, Kochi–682024. …Defendant
F I N A L O R D E R
3 issues framed by the court
Whether the securitization measure taken by the defendant suffers from any illegality, specifically regarding the claim that agricultural land is exempt under Section 31(i)?
Whether the applicants are entitled to any relief in this proceeding?
Whether the proceedings under Section 14 of the SARFAESI Act were valid despite alleged irregularities in the affidavit and MSME classifications?
Colour shows how this judgement treated each authority
K.Sreedhar v. M/s.Raus Constructions Pvt. Ltd. & othersReferred¶48
2023 KHC 6012
ITC Limited vs. Blue Coast Hotels Ltd. & othersReferred¶48
2018 (4) SCC 793 · Who else cites this
Indian Bank & another vs. K.Pappireddiyar & anotherReferred¶48
2018 (18) SCC 252 · Who else cites this
Tulsi Rocks Pvt. Ltd., Secunderabad & others v. Bank of India & Anr.Explained¶61
2019 KHC 3959
M/s.Pro KnitsReferred¶68
M/s.Pro Knits
3 provisions across 1 enactments
Joshy Zacharias
Scariah V.V.
Pennamma Scariah
Authorised Officer, State Bank of India
Sovan Kumar Dash
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
