M/S. S. R. Educational and Charitable Trust represented by its Managing Trustee, Mr. Shaji R. TC vs Asset Reconstruction Company (India) Limited

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** ``` THE HONOURABLE MR.JUSTICE N.NAGARESH ``` # **`WEDNESDAY, THE 31[ST] DAY OF JULY 2024 / 9TH SRAVANA, 1946 OP (DRT) NO. 510 OF 2023`** ``` SA NO.603 OF 2023 OF DEBT RECOVERY TRIBUNAL- 2, ERNAKULAM ``` ## **`PETITIONERS/APPLICANTS IN SA:`** - **`1 M/S. S. R. EDUCATIONAL AND CHARITABLE TRUST REPRESENTED BY ITS MANAGING TRUSTEE, MR. SHAJI R. TC 2/2700, DIVYA PRABHA, MARAPPALAM, PATTOM P.O., THIRUVANANTHAPURAM, KERALA -, PIN - 695004`** - **`2 MR. SHAJI R. AGED 68 YEARS S/O. LATE RAGHAVAN, TC 2/2700, DIVYA PRABHA, MARAPPALAM, PATTOM P.O., THIRUVANANTHAPURAM, KERALA -, PIN - 695004`** - **`3 MS. SREEDEVI M. G. AGED 65 YEARS W/O. MR. SHAJI R., TC 2/2700, DIVYA PRABHA, MARAPPALAM, PATTOM P.O., THIRUVANANTHAPURAM, KERALA -, PIN - 695004`** - **`4 MS. SHILPA SHAJI AGED 40 YEARS W/O. MR. ALLE SHIV KUMAR TC 2/2700, DIVYA PRABHA, MARAPPALAM, PATTOM P.O., THIRUVANANTHAPURAM, KERALA -, PIN – 695004`** ``` BY ADVS. SRI.GEORGE POONTHOTTAM (SR) PRADEEP JOY K.DHRUV KUMAR DHARMYA M.S ANJALY ANN JOSEPH ROHAN KUMAR ``` ``` O.P (DRT) No.510 of 2023 ``` ``` 2 ``` ## **`RESPONDENT/RESPONDENT IN SA:`** ``` ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE THE RUBY, 10TH FLOOR, 29, SENAPATI BAPAT MARG, DADAR (W), MUMBAI -, PIN – 400028 ``` ``` By ADVS. SRI.SUNIL SHANKAR A SRI.SANDHRA.S(K/001610/2021) SRI.JERIN GEORGE(K/863/2023) ``` ``` THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 31.07.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` O.P (DRT) No.510 of 2023 ``` ``` 3 ``` ## **JUDGMENT** Dated this the 31[st] day of July, 2024 The petitioners are aggrieved by Ext.P1 proceedings dated 06.11.2023 of the Debts Recovery Tribunal-2, Ernakulam in S.A. No.603/2023, by which the Debts Recovery Tribunal has concluded that I.A. No.3504/2023 is infructuous. 2. The petitioners availed a financial advance from the South Indian Bank amounting to ₹1,60,81,20,000/-. When the petitioners failed to maintain the loan account, the South Indian Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 25.07.2019. An amount of 1,22,45,02,439/- was claimed by the Bank.₹ As the petitioners did not respond positively, the Bank filed O.A. No.739/2020 before the Debts Recovery Tribunal-2, ``` O.P (DRT) No.510 of 2023 ``` ``` 4 ``` Ernakulam. The Bank thereafter entered into an Assignment Agreement dated 16.07.2021, by which the Bank assigned loans in respect of the petitioners together with rights, title and interest and underlying Security Interest in favour of the respondent-Asset Reconstruction Company. 3. The petitioners state that subsequently, the petitioners and respondent entered into Settlement Term dated 13.07.2022, wherein it was proposed that the entire debt will be settled in full payment of ₹90 Crores. The petitioners could not adhere to the time schedule prescribed in the settlement. The petitioners state that they were to receive a significant amount of compensation from the Government of Kerala to the tune of 42 Crores as the₹ Government had utilised the hospital as a Covid Ward during the pandemic period. The petitioners approached the respondent for amendment of the said settlement for enlarging the time for repayment. However, the respondent ``` O.P (DRT) No.510 of 2023 ``` ``` 5 ``` did not yield. 4. Thereafter, the respondent issued Ext.P2 Sale Notice for sale of three immovable properties mentioned in the notice. According to the petitioners, the notice suffered from serious illegalities. The petitioners therefore filed Ext.P3(a) Securitisation Application before the Debts Recovery Tribunal-2, Ernakulam seeking to stay all further proceedings pursuant to Ext.P2 Sale Notice. 5. On 06.11.2023, when the matter came up before the Debts Recovery Tribunal, the respondent submitted that no sale fructified as per Exts.P2(a) and P2(b) Sale Notices. The Debts Recovery Tribunal passed Ext.P1 order in I.A. No.3504/2023 in S.A. No.603/2023 stating that since sale did not fructify, there is no necessity to dispose I.A. No.3504/2023 on merit. The stay application is rendered infructuous due to non-participation of bidders on the sale date. ``` O.P (DRT) No.510 of 2023 ``` ``` 6 ``` 6. The grievance of the petitioners is that thereafter on 17.11.2023, the respondent issued a notice to the petitioners relying on the earlier notices i.e., Exts.P2(a) and P2(b), as a continuing measure thereof. Under Ext.P5 Sale Intimation Notice dated 17.11.2023, the petitioners were given time for redemption of mortgaged / secured assets. The Sale Intimation Notice stated that the respondent would proceed to sell the mortgaged assets after the expiry of 15 days from the date of issue of the notice. The petitioners would submit that the said notice is issued despite the submission made by the respondent that Exts.P2(a) and P2(b) notices are infructuous. 7. According to the petitioners, Ext.P5 Sale Intimation Notice dated 17.11.2023 is illegal and invalid as the same was made possible by the respondent declaring that the proceedings under challenge in I.A. No.3504/2023 have become infructuous. ``` O.P (DRT) No.510 of 2023 ``` ``` 7 ``` 8. The petitioners urged that Ext.P4 Assignment Agreement is not registered in the State of Kerala and therefore the same is not a valid document under the provisions of the Registration Act, 1908. Ext.P4 Assignment Agreement is not stamped under the Kerala Stamp Act, 1959 and therefore it is non-est in the eye of law. When the petitioners have such substantial grounds to impugn the Sale Notification issued by the respondent, the Tribunal ought to have granted an interim order in favour of the petitioners. 9. The respondent resisted the writ petition. On behalf of the respondent, it is submitted that the earlier Sale Notification issued by the respondent was challenged by the petitioners filing I.A. No.3504/2023. On the date of sale, no qualified bidders turned up. This was intimated to the Tribunal. Thereupon, the Tribunal found that the stay application is rendered infructuous due to non-participation ``` O.P (DRT) No.510 of 2023 ``` ``` 8 ``` of bidders on the sale date. Hence, I.A. No.3504/2023 was dismissed as infructuous giving liberty to the applicants to raise all claims in respect of such Sale Notice at the time of hearing the main S.A. or in subsequent proceedings. Ext.P1 order therefore cannot be impugned on the grounds urged by the petitioners. If the petitioners are aggrieved by the subsequent notices issued by the Bank, the petitioners are at liberty to challenge those notices, appropriately before the Debts Recovery Tribunal. This O.P. (DRT) is therefore without any merit and it is liable to be dismissed, contended the Standing Counsel representing the Bank. 10. The counsel for the petitioners argued that after rejecting the I.A. filed by the petitioners as infructuous, the respondent could not have issued any subsequent notices, which are in continuation of the earlier notices (Exts.P2(a) and P2(b)), because those notices were found to be infructuous by the Debts Recovery Tribunal. In support of the ``` O.P (DRT) No.510 of 2023 ``` ``` 9 ``` petitioners’ case on merits, counsel for the petitioners pointed out that in the judgment in **Elumalai Chetty and others v. P. Balakrishna Mudaliar** [AIR 1922 Madras 344], the Hon’ble High Court of Madras has held that the indorsee of a negotiable instrument does not get any right to the mortgage by deposit of title deeds in his indorser’s favour by the mere indorsement of the note without registered transfer of the mortgage rights. In the case of the petitioners, there is no registered transfer of mortgage to the respondent. 11. The counsel for the petitioners further relied on the judgment of the Apex Court in Civil Appeal No.1958 of 2023, wherein the Hon’ble Apex Court has held that no title could be transferred with respect to immovable properties on the basis of an unregistered agreement to sell or on the basis of an unregistered General Power of Attorney. Law is well settled that no right, title or interest in immovable property can be conferred without a registered document. ``` O.P (DRT) No.510 of 2023 ``` ``` 10 ``` The counsel for the petitioners reiterated that Ext.P4 Assignment Agreement is not registered in the State of Kerala. It is an invalid document. Ext.P4 Assignment Agreement is not stamped under the Kerala Stamp Act, 1959 and it is therefore non-est in the eye of law. 12. The Standing Counsel representing the respondent relied on the judgment of the Apex Court in **M/s.South Indian Bank Limited and others v. Naveen Mathew Philip and another** [2023 (4) KLT 29 (SC)]. The Standing Counsel contended that a writ of certiorari is to be issued over a decision when the Court finds that the process does not conform to the law or statute. In other words, the Courts are not expected to substitute themselves with a decision making authority while finding fault with the process along with the reasons assigned. Such a writ is not expected to be issued to remedy all violations. A question as to whether such violation would be over a mandatory ``` O.P (DRT) No.510 of 2023 ``` ``` 11 ``` prescription as against a discretionary one is primarily within the domain of the Tribunal. In the facts of the case, Ext.P1 order cannot be impugned. 13. The Standing Counsel further relied on the judgment of this Court in W.P.(C) No.33707 of 2023 to contend that what is transferred by a Bank / Financial Institution to an Asset Reconstruction Company is only a transfer of economic interest and there is no conveyance of property or proprietary rights. The transfer of legal ownership of the loan is limited to the extent to the economic interest transferred. Such conveyance will not fall in any of the categories mentioned in Article 22 of the Kerala Stamp Act, 1959. 14. I have heard the learned counsel for the petitioner and the learned Standing Counsel representing the respondent. ``` O.P (DRT) No.510 of 2023 ``` ``` 12 ``` 15. The grievance of the petitioners is regarding continuation of the proceedings even after the Tribunal passing Ext.P1 order. In S.A. No.603 of 2023, the petitioners had challenged Exts.P2(a) and P2(b) notices. When the I.A. came up for hearing on 06.11.2023, the respondent submitted before the Tribunal that the sale which is impugned in the S.A. did not materialise due to want of successful bidders. The said submission was taken on record by the Debts Recovery Tribunal. The Debts Recovery Tribunal held that since sale did not fructify, there is no necessity to dispose the I.A. on merit. The stay application is rendered infructuous due to non-participation of bidders on the sale date. Hence, I.A. No.3504/2023 was dismissed as infructuous giving liberty to the petitioners to raise all claims in respect of such Sale Notice at the time of hearing the main S.A. or in the subsequent proceedings. The case was further listed on 08.11.2023. ``` O.P (DRT) No.510 of 2023 ``` ``` 13 ``` 16. Subsequently, when the respondent issued further notices, the petitioners have approached this Court contending that such notices are unsustainable because those are in continuation of Exts.P2(a) and P2(b) notices, which were held to be infructuous by the Debts Recovery Tribunal. 17. I find that such an argument is not sufficient to interfere with the proceedings before the Debts Recovery Tribunal. By Ext.P1, the Debts Recovery Tribunal meant that since the sale pursuant to Exts.P2(a) and P2(b) are not fructified due to want of bidders, the I.A. has become infructuous. In Ext.P1 order, the Debts Recovery Tribunal specifically gave liberty to the petitioners to raise all claims in respect of such sale notice at the time of hearing the main S.A. or in subsequent proceedings. The petitioners have challenged the subsequent notices before the Debts Recovery Tribunal. Along with filing applications against the ``` O.P (DRT) No.510 of 2023 ``` ``` 14 ``` subsequent notifications, the petitioners have filed this O.P. (DRT) also. 18. When the petitioners have approached the Tribunal challenging the subsequent notices, it may not be proper for this Court to entertain this O.P.(DRT). Furthermore, Standing Counsel submits that even the subsequent notifications did not fructify in sale. In that view of the matter, the subsequent notifications also have been rendered infructuous. 19. In the facts and circumstances of the case, I find no reason to interfere with the proceedings of the Debts Recovery Tribunal in exercise of Article 226 of the Constitution of India. The O.P.(DRT) fails and it is therefore dismissed. Sd/- ## **N.NAGARESH** ## **JUDGE** hmh ``` O.P (DRT) No.510 of 2023 ``` ``` 15 ``` ## **`APPENDIX OF OP (DRT) 510/2023`** ## **`PETITIONER EXHIBITS`** ``` Exhibit P1TRUE COPY OF THE PROCEEDINGS DATED 06.11.2023 IN I.A. 3504 OF 2023 IN S.A. NO. 603/2023 BEFORE HON'BLE DRT-2 Exhibit P2TRUE COPY OF THE NOTICE OF SALE DATED 26.09.2023 BEARING REFERENCE NUMBER BGVG/SS/FY24/3076 ``` ``` Exhibit P2(b)TRUE COPY OF THE SALE NOTICE PUBLISHED IN NEW INDIAN EXPRESS DATED 27.09.2023 BY THE RESPONDENT Exhibit P3(a)TRUE COPY OF S.A. NO. 603/2023 FILED BY THE PETITIONERS BEFORE THE DRT- 2,ERNAKULAM. ``` ``` Exhibit P3(b)TRUE COPY OF THE I.A. 3504 OF 2023 IN S.A. NO. 603/2023 FILED BY THE PETITIONERSBEFORETHEDRT- 2,ERNAKULAM. Exhibit P4TRUE COPY OF THE ASSIGNMENT AGREEMENT BETWEEN SOUTH INDIAN BANK (SIB) AND THERESPONDENT,I.E.,ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED (ARCIL), DATED JULY 16, 2021, Exhibit P5TRUE COPY OF THE SALE INTIMATION NOTICE DATED 17.11.2023 BEARING NO. BGVG/SS/FY24/3940 ``` ``` Exhibit P6TRUE COPY OF THE UPDATED SCHEDULE KERALA STAMP ACT, 1959 Exhibit P7TRUE COPY OF THE MEMORANDUM OF ORIGINAL PETITION (DRT) BEARING NO. 449/2023 . ``` ``` Exhibit P8TRUE COPY OF THE ORDER OF THIS HON'BLE COURT DATED 27.10.2023 IN OP(DRT) 449/2023 Exhibit P9TRUE COPY OF THE PROCEEDINGS DATED 31.10.2023 ``` ``` O.P (DRT) No.510 of 2023 ``` ``` 16 ``` ``` Exhibit P10 ``` ``` Exhibit P11 Exhibit P12 ``` ``` Exhibit P13 ``` ``` Exhibit P14 ``` ``` TRUE COPY OF THE ADDITIONAL AFFIDAVIT DATED 02.11.2023 ``` ``` SALE NOTICE DATED 21.02.2024 BEARING BGVG/FY24/SS/5164 SENT BY RESPONDENT SALE NOTICE DATED 23.03.2024 ISSUED BY THE RESPONDENT AS EXHIBIT-P12 ``` ``` TRUE COPY OF PRIVATE SALE NOTICE BEARING REFERENCE NO. BGVG/FY25/SS/129 ISSUED UNDER SECTION RULE 8 AND RULE 9(1) OF SECURITY INTEREST ENFORCEMENT RULES, 2002 DATED 16.04.2024 ``` ``` TRUE COPY OF PRIVATE SALE NOTICE BEARING REFERENCE NO. CRG/SS/FY24/2279 ISSUED UNDER SECTION 13 (8) OF SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002 ("SARFAESI ACT 2002") READ WITH RULE 9 (1) OF SECURITY INTEREST (ENFORCEMENT) RULES, 2002 ("RULES") DATED 20.06.2024 ```