ABDUL LATHEEF v. NILAMBUR URBAN CO-OPERATIVE BANK LTD

2.1 The admitted factual matrix in this case would be the applicant's availment of mortgage loan of Rs.10 Lakhs from the defendant bank mortgaging 10 Cents of land in Re. Sy. No. 281/2 (part), Block No. 140 of Porur Village, Malapppuram District; his inability to repay the installment due to unexpected, financial stringency and crisis faced by him; the defendant's issuance of Annexure - A1 demand notice dated 18.10.2016 followed by their institution of Annexure - A2 Section 14 petition dated 25.09.2017 in CMP No. 2672/2017 before the learned Chief Judicial Magistrate Court, Manjeri; and the Advocate Commissioner's filing of Annexure - A3 interim report dated 31.01.2018 as also her issuance of Annexure - A4 notice of dispossession dated 07.06.2018 noticing the applicant about the proposed inspection of the secured asset for assuming possession thereof on 18.06.2018.

2.2 According to Mr. Viswanatha Mallan Ld. counsel for the applicant, the contentions raised by them in the SA are threefold. Firstly Annexure - A2 Section 14 proceedings is sought to be declared as illegal in view of the defendant's non-filing of an affidavit which is a mandatory requirement of law pursuant to the amendment brought to Sub-section (1) of Section 14. Secondly the applicant contends to have stood prejudiced for the reason of defendant's non-consideration rather non-accounting of substantial payments made by him into the loan account. Thirdly the security interest is stated to be 'unenforceable' for the defendant's non-registration of it with CERSAI. The SA is sought to be allowed for the reasons as afore.

3. Mr. K. S. Dilip Ld. counsel for the defendant bank strenuously submitted that none of the contentions raised by the applicant is sustainable either on law or on facts. Advertence was made to Annexure - B1 affidavit dated 25.09.2017 filed by the defendant to demonstrate his due and proper compliance of the legal requirement of the amended provision contained in Section 14(1) of the Act. He thereupon stoutly denied the applicant's further allegation as to the substantial payments made by him and not duly accounted for by the bank. As Chapter IVA of the Act is yet to be notified, the applicant cannot harp on the non-registration of the security interest before the Central Registry to seek vitiation of the defendant's otherwise lawful proceedings, is his further submission.

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Contending that the SARFAESIA measures are proceeded with by the defendant bank only in accordance with law, the SA is sought to be dismissed with costs.

4.1 Considering the pleadings, evidence and the oral submissions that came to be made by the parties hereto it is but obvious that there is no denying the fact on the part of the applicant as regards his availment of the mortgage loan of Rs.10 Lakhs; his inability to repay installments leading to classification of his account as NPA; and his creation of 'security interest' as also the liabilities towards the defendant bank. The applicant's allegation as to the defendant's non-filing of a proper affidavit before CJM Court stood falsified by the latter's production of Annexure - B1 certified true copy of affidavit dated 25.09.2017 filed before the concerned court. A conspectus reading of that affidavit doth divulge the Authorised Officer's setting out of all the 9 declarations required to be affirmed therein in consonance with the amended provision.

4.2 Be it noted that but for the applicant's making of a vague allegation as to the defendant's non-consideration of his remittances, no documentary evidence could be adduced on his side to demonstrate as to what all payments made by him are since not duly accounted for. Per contra the Authorised Officer of the defendant bank had in para 10 of Annexure - B1 affidavit dated 25.09.2017 divulged about the applicant's repayment of Rs.1,65,000/- towards the 'financial assistance' granted to him. The applicant having no case or contention of remitting any other amount prior to the defendant's initiation of Section 14 measures, this contention of the applicant also deserves to be rejected.

4.3 The Tribunal now proceeds to consider whether the defendant's initiation of SARFAESIA measures as against the 'secured asset' would stand vitiated for non- registration of the said charges under Section 23 of the Act, even if it would be. The learned counsel for the applicant vociferously argued that in as much as the non- registration of the security interest entails penal consequences, the contemplation of law requiring its registration should only be held as mandatory, lest it shall be rendered unenforceable. The SARFAESI Act, 2002 came into force with effect from 21.06.2002. Section 20 providing for setting up of a Central Registry by the Central Government

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came to be constituted and became operational only with effect from 31.03.2011. Section 23 of SARFAESI Act requires the charge creating security interest over property to be filed with the Registry within 30 days from date of creation.

4.4 The object of setting up of Central Registry is to prevent frauds in loan cases involving multiple lending by different banks against the security of same property. This Section is analogous and akin to Section 125 of the Companies Act 1956 corresponding Section 77 of Companies Act 2013 which provides for registration of charges with the Register of Companies. As per the said provisions of Companies Act, the creation of charge is to be registered within thirty days of its creation. Like in the case of the Companies Act which vests powers on the authority concerned to extend the time beyond thirty days for registration of charges, the pre-amendment provisions of the SARFAESI Act that are applicable to the present case also vests similar powers on the Central Registrar to extend a further thirty days period on payment of additional registration fee. If a charge is not registered under Section 125 of old Companies Act, the consequences is that the said charge would be void as against the liquidator or any other creditor and the non-registration of charge would by itself not render the mortgage unenforceable. Some penal consequences are of course provided under Section 27 of SARFAESI Act, 2002 for the default occurred in filing the particulars under Section 23, which would of course be deemed to have been omitted from the date of coming into force of the provisions of Chapter V and Section 23 as amended by Act 44 of 2016.

4.5 Mr. K. S. Dilip Ld. counsel appearing for defendant bank would definitively state that Chapter IVA which starts with the heading 'REGISTRATION BY SECURED CREDITORS AND OTHER CREDITORS' comprising of four provisions inclusive of Section 26D has not been made effective till this day notwithstanding its insertion into the statute book on 16.08.2016. The learned counsel for the applicant could not controvert the submission made on the defendant's side as regards non-notification of the effective date of Chapter IVA to pursue his contention as regards non-enforceability of the security interest. On and from such date of commencement of the provisions of Chapter IV A, no secured creditor would be entitled to exercise the rights of enforcement

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of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with the Central Registry. As the said amended provisions is not yet made effective, it is not open for the applicant to contend that the mortgage created by him is void and unenforceable against him for the reason of non-registration of the same before the Central Registry.

5. Ergo, the SA fails and stands dismissed accordingly. Consequently IA 1561/2018 stands closed. No order as to costs. Handover. (Dictated to my PA directly on the computer, corrected and pronounced by me in the open Tribunal on this 18^th day of January, 2019)

[N.SOMASUNDAAR]

PRESIDING OFFICER

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Documents relied on the side of the applicant

Documents relied on the side of the defendant

PRESIDING OFFICER

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IN THE DEBTS RECOVERY TRIBUNAL-1,

ERNAKULAM

PRESENT: SRI.N.SOMASUNDAAR

PRESIDING OFFICER

Dated the 18^thJanuary, 2019

S.A No. 269 OF 2018

Between Abdul Latheef T, Thorappa House, Porur P.O.,

Malappuram

………Applicant And

The Authorised Officer, Nilambur Urban Co-operative Bank, Nilambur,

Malappuram - 678 239

..……Defendant

FINAL ORDER

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