Allowed

Encore Asset Reconstruction Company Pvt. Ltd. v. Ms Biomed I Health Care Pvt. Ltd.

DRAT7 Aug 2025REGULAR APPEAL/111/2022

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal allowed an appeal against a DRT order that had allowed a securitization application. The Tribunal set aside the lower court's decision because the DRT decided the case based solely on an alleged wrong NPA classification without addressing other pleaded issues. The matter was remanded for a fresh decision, including an opportunity to lead rebuttal evidence.

What did the court decide?

Impugned order dated 20.08.2022 set aside; matter remanded to DRT for fresh decision after evidence filing and hearing.

Encore Asset Reconstruction Company Pvt. Ltd. versus Ms… — Banking and Recovery | DRAT (2025)

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Reportable / not reportable

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL - KOLKATA HON'BLE Justice Anil Kumar Srivastava, Chairperson

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REGULAR APPEAL No. 111 of 2022 (Arising out of S.A. No. 373 of 2021 – DRT- Vishakhapatnam)

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07.08.2025

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Encore Asset Reconstruction Company Pvt Ltd having Registered Office At Caddie Commercial Tower, Regus Business Centre, 5th Floor, Aerocity (Dial), New Delhi – 110037.

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Authorised Officer, Encore Asset Reconstruction Company Pvt Ltd at Caddie Commercial Tower, Regus Business Centre, 5th Floor, Aerocity (Dial), New Delhi - 110037

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... Appellants

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--Vs--

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Ms Biomed (I) Health Care Pvt Ltd Having Office At flat No 102, door No 59-6-16 Kanchukota (NK Habitat) kanchkotayari Street, Ramachand Nagar, Vijayawada - 520008

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Dasari Raj Kumari, residing at Flat No. 302, Anjaneya Residency, Dornakal Road, Vijaywada and also at Plot No. N- 37, R T C Colony, Road No. 2, Near Saibaba Temple, Vijayawada.

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Kamineni Bharathi residing at Flat No. 302, Anjaneya Residency, Dornakal Road, Vijaywada and also at Plot No. N. 37, R T C Colony, Road No. 2, Near Saibaba Temple, Vijayawada.

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Dasari Lavanya Latha residing at Flat No. 302, Anjaneya Residency, Dornakal Road, Vijaywada and also at Plot No. N. 37, R T C Colony, Road No. 2, Near Saibaba Temple, Vijayawada.

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Dasari Anuradha residing at Flat No. 302, Anjaneya Residency, Dornakal Road, Vijaywada and also at Plot No. N. 37, R T C Colony, Road No. 2, Near Saibaba Temple, Vijayawada.

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Dasari Anuradha residing at Flat No. 302, Anjaneya Residency, Dornakal Road, Vijaywada and also at Plot No. N. 37, R T C Colony, Road No. 2, Near Saibaba Temple, Vijayawada.

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...... Respondents.

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The Authorised Officer Indian Bank, Office at Suryaraopet Branch, Vijayawada, Andhra Pradesh.

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The Branch Manager, Indian Bank, office at Mangalagiri

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Branch, Guntur, Andhra Pradesh

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... Proforma Respondents

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For Appellant : Mr. A. K. Dhandhania, Ld. Sr. Adv. Mr. Jayathi Chowdhury, ld. Adv.

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For Respondent: Mr. Nemani Srinivas, ld. adv.

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The Appellate Tribunal

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Instant appeal has arisen against the judgement and order

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dated 20.08.2022 passed by the learned DRT- Visakhapatnam in

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S.A. No. 373 of 2021 (M/s. Biomed (I) Health Care Pvt. Ltd. Vs.

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The AO, Encore Asset Reconstruction Co. Ltd. & Ors.) whereby

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learned DRT allowed the securitization application filed by the respondents herein.

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As per pleadings of the parties, facts of the matter are that

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respondent herein M/s Biomed (I) Health Care Pvt. Ltd. filed the securitization application challenging the E-auction sale notice dated 18.09.2021 and the E-auction conducted on 27.10.2021. Respondent is a company engaged in the business of pharmaceuticals. Financial assistance was sought from the

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respondent bank, which was sanctioned by the secured creditor

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against collateral security of the property of Mr. Desari Subhash

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Chandra Bose and Mr. Kolluru Ramesh. Mr. Kolluru Ramesh was

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inducted as Director in the respondent company on 28.02.2012

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and he voluntarily resigned on 30.12.2016, which was duly intimated to the bank as well as Registrar of Companies.

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Account of the securitization applicant was classified as NPA on 31.12.2016, which was not in accordance with RBI guidelines and relevant rules. Demand notice dated 09.01.2017 was issued

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by registered post on 11.01.2017 which was received by the securitization applicant on 12.10.2017. But the same was not received by the guarantor, namely Mr. Desari Subhash Chandra Bose, who died on 02.06.2021. Representation against the demand notice was made, which was replied without any reasoning. Account was classified NPA against the RBI

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guidelines.

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Possession notice was issued by the bank which was not served upon the guarantors. Sale notice dated 18.09.2021 was issued fixing the auction date on 27.10.2021. Sale notice was not served upon the guarantors. One of the guarantors namely,

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Desari Subhash Chandra Bose died on 02.06.2021, but the sale

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notice was not served upon his legal representatives, despite the fact that intimation of death was given to the secured creditor.

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Sale notice dated 18.09.2021 was not enforceable upon a dead person.

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Valuation of the property fixed was under-valued.

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Accordingly, securitization application was filed challenging the

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sale notice dated 18.09.2021 and e-auction conducted on

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27.10.2021.

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Reply was filed by the bank stating that factum of availing financial assistance from the secured creditor by the securitization applicant is not in dispute. There was default in repayment and account was classified NPA on 31.12.2016. Demand notice dated 09.01.2017 was sent by registered post on 11.01.2017 which was received on 12.01.2017. In the representation dated 03.03.2017 against the demand notice, borrowers themselves have requested

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for withdrawal of the demand notice dated 09.01.2017. Account

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was classified NPA as per RBI guidelines. Representation made by

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the securitization applicant was duly replied on 14.03.2017.

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Possession notice was issued on 09.05.2017 which was affixed on a conspicuous part of the secured asset and also published in two

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newspapers. Assignment of account was duly notified to the securitization applicant vide letter dated 09.04.2018. Legal

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notice dated 22.08.2018 was also issued against the borrower

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and guarantors which was not replied. Sale notice dated 18.09.2021 was sent to the borrower and guarantors which was also published in the newspapers as per law. Intimation of death of the guarantor, Desari Subhash Chandra Bose, was never given to the secured creditor. Although demand notice was duly served

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upon Desari Subhash Chandra Bose when he was alive. Valuation

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was fixed in accordance with law after obtaining report of the approved valuer. No amount was paid by the securitization applicant. No securitization application was filed either by guarantor, Desari Subhash Chandra Bose, or his legal representatives. Accordingly, borrower and guarantors does not have any locus standi to challenge the e-auction sale.

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O.A. 1082 of 2018 was filed against the borrower and

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guarantors which was allowed by the learned DRT and recovery certificate was issued. Recovery proceedings are pending. Judgement and order passed in O.A. is not challenged in appeal. SA. is liable to be dismissed.

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Learned DRT after hearing the learned counsel for the

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parties and perusing records decided the S.A. mainly on the point

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as to whether the account was classified as NPA in accordance

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with law or not? Consequently, learned DRT recorded a finding

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that account was wrongly classified as NPA. Accordingly, all the actions taken by the secured creditor are bad in law. Securitization application was allowed.

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Feeling aggrieved by the impugned judgement and order, secured creditor preferred the appeal.

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I have heard the learned counsel for the parties and perused the records.

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Main contention of the securitization applicants is that classification of the account as NPA was against the RBI guidelines coupled with the other grounds which the securitization applicant has also taken. Although at this stage we are not referring or recording any finding about the maintainability of these grounds or any finding regarding violation of the provisions of the SARFAESI Act, 2002, but at the same time it is to be observed that it appears that learned DRT was persuaded only by the fact that account was wrongly classified as NPA and allowed

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the securitization application.

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At this stage it would relevant to place reliance upon the judgement of Hon’ble Apex Court in Sukhbiri Devi & Others -

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vs- Union of India & Others (2022 SCC OnLine SC 1322).

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Hon’ble Apex Court in Sukhbiri Devi (supra) has placed reliance upon a judgment in Nusli Neville Wadia -vs- Ibori Properties

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& Others [(2020) 6 SCC 557] wherein it was held that:

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“51. As per Order 14 Rule 1, issues arise when a material proposition of fact or law is affirmed by the one party and denied by the other. The issues are framed on the material proposition, denied by another party. There are issues of facts and issues of law. In case specific facts are admitted, and is the question of law arises which is dependent upon the outcome of admitted facts, it is open to the court to pronounce the judgment based on admitted facts and the preliminary question of law under the provisions of Order 14 Rule 2. In Order 14 Rule 2(1), the court may decide the case on a preliminary issue. It has to pronounce the judgment on all issues. Order 14 Rule 2(2) makes a departure and the court may decide the question of law as to jurisdiction of the court or a bar created to the suit by any law for the time being in force, such as under the Limitation Act.”

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13 . Order XIV Rule 2 C.P.C. reads as under : “[2. Court to pronounce judgment on all issues. -

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(1) Notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of sub-rule (2), pronounce judgment on all issues.

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(2) Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to

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(a) the jurisdiction of the Court, or (b) a bar to the suit created by any law for the time being in force, and for that purpose may, if it thinks fit, postpone the settlement of the other issues until after that issue has been determined, and may deal with the suit in accordance with the decision on that issue.]”

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14 . A case may be decided on a preliminary issue which may

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relate to jurisdiction of Court or a bar to the suit created by any

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law for the time being in force. If these two legal issues are

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raised in a suit they can be decided as preliminary issue without

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entering into the merit of the matter. But when all the issues are

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raised and framed then the Courts are bound to decide all the

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issues notwithstanding the fact that some issues may be decided

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in favour of the applicant or plaintiff and some may be decided in

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favour of defendant or opposite party. Ultimately, the net result

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will depend upon the whole appreciation of evidence by the Courts. It is also to be observed that judgment has to be written by the Tribunals in accordance with law. Although proceedings, under Section 17 of the Act, are summary in nature but the points for determination have to be discussed and decided by the

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Tribunals in accordance with law.

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Law is settled that Court is bound to decide all the issues

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raised in the pleadings except in cases where the matter can be disposed of on a preliminary legal issue. But if there are issues raised in the pleadings, the trial court should decide all the issues after recording its finding on all the issues, although the matter could have been decided on the basis of finding on a single issue.

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Learned DRT did not make any effort to record its finding on the other issues raised by the securitization applicants, but decide the

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case merely on the basis of wrong classification of the account as

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NPA. Accordingly, on this ground alone impugned judgement of

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learned DRT is liable to be set aside and matter is liable to be

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remanded back to learned DRT to decide the matter afresh in accordance with law.

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There is another facet of the matter wherein in the appeal

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an application under Oder 41 Rule 27 CPC is filed by the appellants for taking additional evidence on record which was allowed by the order dated 15.07.2025. Additional evidences in

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the form of certain letters and credit report are filed by the appellant in the appeal which was not filed before the learned DRT. All these evidences goes to the root of the matter which have to be considered by the learned DRT while deciding the securitization application finally. Opportunity of rebuttal is to be provided to the securitization applicants. Hence, on this ground also matter is liable to be remanded back to the learned DRT to

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decide the matter afresh.

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On the basis of the discussion made above, I am of the

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considered view that appeal is liable to be allowed. Matter is liable to be remanded back to learned DRT to decide it afresh in the light of the observation made in the body of the judgement. Needless to mention that learned DRT should give opportunity to file evidence on rebuttal by the securitization applicants and decide the securitization application after affording opportunity of hearing to the parties.

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O R D E R

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Appeal is allowed. Impugned judgement and order dated

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20.08.2022 is set aside. Matter is remanded back to learned DRT, Visakhapatnam to decide it afresh in accordance with law in the

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light of the observation made in the body of the judgement. Learned DRT should afford opportunity to file evidence on rebuttal by the securitization applicants. Learned DRT should decide the matter after affording opportunity of hearing to the parties in accordance with law. Since the securitization application is pending from 2021 it is expected that learned DRT

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should decide the matter expeditiously. Costs easy.

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File be consigned to record room.

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Copy of the judgement/Final Order be uploaded in the Tribunal’s website.

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Order dictated, signed and pronounced by me in the open Court on this the 7^th day of August, 2025.

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(Anil Kumar Srivastava, J) Chairperson

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Dated : 07.08.2025 - /pkb

Encore Asset Reconstruction Company Pvt. Ltd. v. Ms Biomed I Health Care Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Encore Asset Reconstruction Company Pvt. Ltd. v. Ms Biomed I Health Care Pvt. Ltd.

Case brief

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What did the court decide?

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