DRAT Mumbai: The present appeal is filed by the appellants to challenge the order passed in the Securitisation Application, that was filed by them to quash and set aside claim of the Respondent, Kotak Mahindra Bank Ltd., and to set aside the order dated 11-7-2014 of the District Magistrate. G. Chandrasekharan, J., Chairperson, while allowing the appeal, set aside the order passed under Section 14 of the SARFAESI Act, 2002 by the District Magistrate, on the ground that the respondent bank failed to prove the personal service of Section 13(2) Demand Notice on the appellants and filing of Affidavit required under Section 14 of the SARFAESI Act.
Background:
The appellants, husband and wife entered into a Home Loan Agreement with CitiFinancial Consumer India Ltd. (‘CCFIL’) on 31-1-2008 and that the repayment schedule was later amended on 25-3-2009. At the appellants request, CCFIL issued a new repayment schedule on 16-1-2010, to enable early closure of the loan. The appellants claimed to have paid the entire loan and thus, the loan account was closed.
According to the appellants, they were never informed about the assignment of the loan to the respondent bank, nor did they receive any notice under Section 13(2) of the SARFAESI Act or any information about proceedings initiated under Section 14. Therefore, the appellants filed the Securitisation Application, alleging that the loan had already been closed. They contended that the Presiding Officer failed to appreciate the evidence of loan closure, prompting the present appeal.
The respondent bank submitted that the appellants availed five loans, out of which, three loan accounts were closed and the remaining two were pending with an outstanding amount of Rs. 28.13 lakh. Further, as per the appellants request, the said loan accounts were internally buyout and thus, new loan account for Rs. 28.13 lakh was created. Additional funds were later infused by CCFIL for 51.49 lakh in new loan account, thus, making the total loan amount of Rs. 79.62 lakh. The respondent bank submitted that the appellants disputed its claim only to avoid the loan repayment. As the dues were still pending, the bank did not release the original property documents.
The bank had referred the matter to arbitration, and since the appellants failed to appear, despite the arbitrator sending a notice in that regard, an award was passed on 24-5-2010. Thereafter, Section 13(2) demand notice was issued and properly served
The principal issue before the Tribunal is whether the respondent bank has validly served the mandatory Section 13(2) Demand Notice and complied with the statutory requirements under Section 14 of the SARFAESI Act, specifically the filing of the 9-point affidavit by the Authorised Officer.
Analysis and Decision:
The Tribunal noted that CCFIL has sent a notice dated 25-7-2012 informing about both the loans to the appellants, but no acknowledgement was produced for the proof of service of the said notice. The track consignment report did not prove the service of notice as the tracking report that was produced contained no delivery details; the delivery column was left blank, and the postal receipt reveal that the notice was dispatched to an incorrect pin code. As a result, there was no evidence of personal service.
The Tribunal further observed that even in the petition filed before the District Magistrate, the appellants produced only postal receipt and copy of paper publication. Proof of service of personal notice was not produced. Thus, clearly showing that respondent bank failed to prove the service of Section 13(2) Demand Notice on the appellants. The Tribunal stated that personal service of Section 13(2) Demand notice on the appellants is necessary for initiating measures under Section 13(4) of SARFAESI Act. In the present case, there is no effort made to prove the service of Personal Demand Notice. Thus, when respondent bank failed to prove personal service of Demand Notice, all other consequential acts necessarily fail.
Further, the Tribunal considered the appellants’ objection regarding the respondent’s failure to file the mandatory 9-point affidavit required under the amended Section 14 of the SARFAESI Act. Relying on the Bombay High Court decision in Masscorpon. Ltd. v. Cosmos Cooperative Bank Ltd., 2018 SCC OnLine Bom 2579, the Tribunal noted that the District Magistrate is required to satisfy himself with the contents of the affidavit before passing final order. Since the respondent bank had not filed the said affidavit before the District Magistrate for him to satisfy and pass order, the impugned order cannot be sustained.
Thus, the Tribunal set aside the order passed under Section 14 of the SARFAESI Act by the District Magistrate on the ground that the respondent bank failed to prove the personal service of Section 13(2) demand notice and filing of affidavit under Section 14. Accordingly, the appeal was allowed, with liberty granted to the respondent bank to initiate fresh proceedings strictly in accordance with law.
[Mohammed Hanif Syed v. Kotak Mahindra Bank Ltd., 2025 SCC OnLine DRAT 468, decided on 15-9-2025]
Advocates who appeared in this case:
For Appellant: Anita Castilano, Counsel
For Respondent: Sanjay Anabhawane, Counsel