HDFC v. A.Manimaran

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SARFAESI action of Appellant Institution. Aggrieved by the same, present Appeal is preferred.

3. Both parties have filed their respective Written Arguments and reiterated the same at the time of oral submissions.

4. I have perused material papers and impugned Order dated 04.04.2013.

5. This Appeal is filed in the year 2013. Until 2014, Respondent herein took time on the ground that he wants to settle the matter amicably with Appellant Institution though Appellant's side arguments were heard on 13.12.2013. After Chairperson, who heard the arguments demitted the Office; time was taken before new Chairpersons sometimes by Respondent and sometimes by Appellant and sometimes by both sides, that is how this Appeal remained un-disposed off

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for the last 10 years, and only on 12.07.2023, arguments are commenced and they were concluded on 17.07.2023.

6. As already referred to above, Securitisation Application is filed mainly challenging Possession Notice. The grounds urged in Securitisation Application is mainly that Possession Notice dated 12.06.2012 is not affixed as required under Rules, 2002. It is also questioned that loan account is classified as NPA without following the RBI guidelines. Appellant Institution specifically stated in the Counter that Possession Notice was sent to Respondent herein, who evaded service and it was also affixed on 12.06.2012, besides publishing it in 'Indian Express' and 'Dinamani'. Appellant Institution contended that Respondent herein suppressed material facts and filed Securitisation Application.

7. As seen from record, this is a Housing Loan of the year 2003, and Possession Notice is issued in 2012. Tribunal below mainly set aside SARFAESI Action relying on the

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judgement of Hon'ble High Court of Karnataka. Advocate for Appellant Institution submitted, Tribunal below wrongly applied the judgement of Hon'ble High Court, to the facts of this case. He further submitted, even otherwise, said judgement is no longer a good law, in view of judgement of Hon'ble Supreme Court in Standard Chartered Bank Vs. V. Noble Kumar & Ors., reported in

2013 (9) SCC 620 .

8. Advocate for Respondent reiterated the same version that Possession Notice was not affixed and classification of loan account as NPA was not as per RBI guidelines, and in view of judgement of Hon'ble High Court of Karnataka, Tribunal below is right in allowing Securitisation Application.

9. I have perused the judgement of Hon'ble High Court of Karnataka. In that case, Appellant therein filed Securitisation Application before DRT contending that there was no compliance of principles of natural justice as the Respondent Bank therein directly invoked Section 14 of

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SARFAESI Act, 2002, for taking possession without complying with procedure under Section 13(4) of SARFAESI Act, 2002. DRT allowed Securitisation Application which was challenged by Bank before DRAT, and DRAT has set aside the Order of DRT, and Hon'ble High Court of Karnataka allowed Writ Petition and restored the Order of DRT, while setting aside the Order of DRAT, holding that invoking Section 14 of SARFAESI Act, 2002, amounts to violation of principles of natural justice.

10. In our present case, Appellant Institution had not resorted to Section 14 of SARFAESI Act, 2002, and it only issued Possession Notice by following Rule 8(1) & (2) of Rules, 2002. The Order of Hon'ble High Court of Karnataka is dated 27.03.2012. As on that date, there was ambiguity as to whether Section 14 of SARFAESI Act, 2002, can directly be invoked or not. But, this was clarified by Hon'ble Supreme Court in Standard Chartered Bank Vs. V. Noble Kumar & Ors. case, by making it clear that there will be

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three methods for Secured Creditor to take possession of Secured Asset, which are as follows:-

i) The first method would be where the secured creditor gives the requisite notice under Rule 8(1) and where he does not meet with any resistance. In that case, the authorized officer will proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realize the amounts that are claimed by the secured creditor.

ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under Rule 8(1) is given. In that case he will take recourse to the mechanism provided u/s 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinize the application as provided in Section 14, and then if satisfied, appoint an officer subordinate to him as provided u/s 14 (1)

(A) to take possession of the assets and documents.

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For that purpose the Magistrate may authorize the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.

iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly u/s 14 of the Act. The Magistrate will thereafter scrutinize the application as provided in Section 14, and then if satisfied, authorse a subordinate officer to take possession of the assets and documents and forwards them to the secured creditor as under Clause (ii) above.

So, as per the above methods, it is the option of Secured Creditor for invoking Section 14 of SARFAESI Act, 2002, depending on the circumstances. But, in this case, when there is no invocation of Section 14 of SARAFAESI Act, 2002, Tribunal below, without examining the grounds raised by

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Respondent herein, simply by quoting the judgement of Hon'ble High Court of Karnataka, set aside the SARFAESI action of Appellant Institution.

11. As already referred to above, it is specific case of Respondent herein that Possession Notice date 12.06.2012 is not affixed as required under the Rules, 2002. But, in the Counter, it is specifically stated that Possession Notice was served on Respondent herein by affixture on 12.06.2012 and also published on 16.06.2012 in 'Indian Express' and 'Dinamani'. When such a specific stand is taken, it is for Respondent herein to establish that there was no affixture on 12.06.2012 as contended by Appellant Institution. Respondent, not even filed any Rejoinder questioning said statement nor he placed any material before Tribunal below or here, to show that statement made by Respondent Institution is incorrect. So, first ground that Possession Notice dated 12.06.2012 not affixed, is not made out.

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12. Second contention is that Appellant Institution has not followed RBI guidelines for classifying the loan account as NPA. Advocate for Appellant Institution submitted, this objection cannot be taken as a measure to be challenged under Section 17 of SARFAESI Act, 2002. He submitted, Financial Institution specifically stated in the Counter filed before Tribunal below that objection is not legally sustainable since the classification of loan account as NPA is done as per Section 2 (j) of SARFAESI Act, 2002, since the default is more than 90 days. It is clear from the pleadings of Securitisation Application, Respondent himself committed default in payment of EMI, but his contention is as there is change in employee code due to his promotion, default occurred. For that, Institution cannot be blamed, it is the lookout of Respondent herein to see that EMI is properly paid or deducted from his salary. Though this objection is not a ground to challenge under Section 17 of SARFAESI Act, 2002, it is also not tenable from the facts. So, viewed in any angle, as rightly pointed out by Advocate for Appellant Institution, Tribunal below completely erred in setting aside,

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SARFAESI Action of Appellant Institution, therefore, the impugned Order dated 04.04.2013, is liable to be set aside.

13. In view of my foregoing discussions and observations, it is held that Tribunal below is not correct in setting aside the SARFAESI action of Appellant Institution and its Order is not legally correct.

14. For these reasons, the Appeal RA (SA) 47/2013 is allowed, with costs. Impugned Order dated 04.04.2013 is set aside. Consequently, SA 239/2012 of DRT-III, Chennai, stands dismissed. All pending IAs, if any, stand closed. [Dictated to Athistamani, PS, transcribed by her, corrected, signed and pronounced by me in open court, this 8^th

of August, 2023]

[Justice S. Ravi Kumar]

CHAIRPERSON