Remanded

State Bank of India v. Manugolu Madhusudan Rao

DRAT10 Jan 2025REGULAR APPEAL/77/2024

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed two appeals challenging a DRT order that set aside an e-auction sale conducted under the SARFAESI Act. Due to a request for additional documents from the bank govia belated application and the presence of fundamental procedural defects in the auction process, the Tribunal remanded the matter to the DRT for a fresh hearing and decision after considering the new docume

What did the court decide?

Both appeals allowed; impugned judgment and order set aside; matter remanded to DRT-II Hyderabad for fresh decision after admitting additional documents and hearing parties.

State Bank of India versus Manugolu Madhusudan Rao — Execution and Attachment | DRAT (2025)

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Reportable / Non-reportable

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

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10.01.2025

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Appl. No 31 of 2024.

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(Arising out of S.A. 134 of 2020 DRT-II Hyderabad

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Mrs R. Vamshi Neelima having office at Villa No.2 Empire Insignia, Peram Cheruvu, Bandlauda Jagir Ranga Reddy District, Hyderabad 500086.

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... Appellant

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--Vs--

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Munugolu Madhusudan Rao R /o 20-2-47/ A2 Maruthi Nagar,Korlagunta, Tirupathi,Chitoor District Andhra Pradesh 517501.

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2.STATE BANK OF INDIA at H.NO. 1-8-563/1, 1ST FLOOR, OPPOSITE SANDHYA THEATRE, RTC X ROADS. CHIKKADPALLY, HYDERABAD 500020.

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3.MS SUJANA RAO residing at S.NO. 216/4, PACHIKAPALLAM VILLAGE, VEDURUKUPPAM(M) CHITOOR DISTRICT 517201.

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... Respondents

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Appeal No. 77 of 2024

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(Arising out of S.A. 134 of 2020 DRT-II Hyderabad)

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STATE BANK OF INDIA having office at STRESSED ASSETS RECOVERY BRANCH 2, H No 1-8 -563/1, 1ST FLOOR, OPP SANDHYA THEATRE, RTC X ROADS, CHIKKADPALLY HYDERABAD 500020.

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... Appellant

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--Vs--

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MANUGOLU MADHUSUDAN RAO having R/O 20-2 -478/A2 MARUTHI NAGAR, KORLAGUNTA, TIRUPATHI, CHITTOR DISTRICT, AP 517501

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2.M/S SUJANA RAO FILING STATION S NO 216/4 PACHIKAPALLAM VILLAGE, VEDURUKUPPAM (M) CHITTOR DISTRICT 517501

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3.MRS R VAMSI NEELIMA D O VENU GOPALA KRISHNA Villa No.2, Empire Insignia, Peram Cheruva, Bandlaguda Jagir, R.R. Dist. Hyderabad 500086.

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... Respondents

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For Appellant : Mr. Souvik Kundu, ld. Adv. in appeal 31 of 2024 Mr. Soumava Mukherjee, ld. Adv. Mr. Soudip Pal Chowdhury, ld. Adv. in appeal 77 of 2024

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For Respondent: Mr. Soudip Pal Chowdhury, ld. Adv. in appeal 31 of 2024

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The Appellate Tribunal

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Both the appeals being no. 31 of 2024 and 77 of 2024 have

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arisen against one judgement and order dated 29.12.2023 passed by learned DRT-II Hyderabad in S.A. No. 134 of 2020 (Manugolu Madhusudan Rao Vs. State Bank of India & Ors.),hence, both the appeals are taken up together and are being disposed of by a common judgement.

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Appeal No. 77 of 2024 is filed by the secured creditor State

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Bank of India while Appeal No. 31 of 2024 is filed by Smt. R. Vamshi Neelima, the successful auction purchaser.

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As per pleadings of the parties, SARFAESI applicant Manugolu Madhusudan Rao had availed housing loan of Rs.19.00

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lakhs from the secured creditor State Bank of India in 2006 and

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mortgaged was created which was subsequently extended.

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Respondent no.2 namely M/s Sujana Rao Filling Station represented by Smt. M Sujana Rao, who is the wife of the applicantManugolu Madhusudan Rao, also created security interest over another property to secure the loan.

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Demand notice was issued on 31.07.2015. SARFAESI applicant’s liability was to the extent of Rs.25.00 lakhs and not for renewed limit of Rs.60.00 lakhs. Applicant earlier filed S.A. 483 of 2015 challenging possession notice which was dismissed in default. Sale notice was published on 23.07.2019 fixing auction sale date on 26.08.2019. Applicant could not remit Rs.10.00 lakhs as per direction of the Hon’ble High Court in W.P. No. 10822 of 2019. Auction sale was concluded in favour of appellant in appeal no. 31 of 2024. It is alleged that there was illegality and irregularity committed by the secured creditor bank in conducting the auction sale. Secured assets were sold undervalue. Writ Petition No. 23494 of 2022 filed before the Hon’ble High Court for the State of Telangana was dismissed on 02.08.2022.

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Opposition was filed by the bank before the learned DRT

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stating that there was delay of 720 days in filing the S.A. It is

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stated that proprietor of respondent no.2 namely M/s Sujana Rao

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Filling Station was the wife of respondent no.1. Respondent no.2

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availed credit facility of Rs. 25.00 lakhs from the secured creditor

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bank wherein the SARFAESI applicant was guarantor and mortgaged schedule property as security and extended the same for the renewed credit facility. Due procedure was followed in conducting the auction sale and possession was taken u/s 14 of

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the SARFAESI Act 2002. Sale certificate was issued in

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accordance with law.

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6. Learned DRT has framed following two issues :

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(i) Whether the applicants made out any valid ground to set aside the measures of the 1^st respondent bank u/s 13(4) of the Act including taking physical possession and sale held on 31.12.2019 and consequential sale certificate dated 12.01.2020 issued in favour of 3^rd respondent in respect of the S.A. schedule immovable property?

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(ii) To what relief?

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On the issue of point no. (i), learned DRT has arrived at a

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conclusion that no proof of affixture of possession notice on the

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secured asset was filed by the respondent bank, which is violation

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of Rule 8(1) of the Security Interest (Enforcement) Rules,2002.

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There are discrepancies in the notice u/s 13(2) of the Act in respect of respondent no.2 M/s Sujana Rao Filling Station. E-

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auction sale notice without there being demand notice,

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possession notice and notice prior to sale under Rule 8(6) of the

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Rules is vitiated. There was also violation of Rule 8(5) of the Rules. Accordingly, learned DRT allowed the S.A. and quashed the e-auction sale.

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Pending appeal notice was issued to the borrower which was

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duly served, but none appeared for the borrower. Heard learned counsel for the secured creditor bank as well as learned counsel for the auction purchaser and perused the records.

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At the very outset learned counsel for the applicant bank in

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appeal no. 77 of 2024 submits that I.A. 177 of 2024 is filed

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seeking leave to produce additional documents relating to the loan transactions as well as auction sale process. It is stated that

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all the documents were in possession of the bank, but could not be filed at the appropriate stage before the learned DRT as the S.A. was filed by the borrower,Manugolu Madhusudan Rao,

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wherein M/s Sujana Rao Filling Stationrepresented by his wife Smt. M. Sujana Rao was impleaded as respondent no.2. Non-

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filing of the documents before the learned DRT was not

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intentional rather it was inadvertent mistake. All the documents

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are necessary and relevant for the just decision of the case.

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Having heard the learned counsel for the parties, I am of the view that the documents which are filed by the applicant bank in Appeal no. 77 of 2024 under Order 41 Rule 27 CPC are required to be taken on record. Accordingly, I.A. No. 177 of 2024 is

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allowed.

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Since the additional documents are taken on record which goes to the root of the matter, it would be appropriate to grant liberty to the parties to raise their respective claims and contentions before the learned DRT. Thereafter, learned DRT would be in a position to arrive at a conclusion in accordance with law. Accordingly, both the appeals are liable to allowed and matters are liable to be remanded back to learned DRT for just

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decision.

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O R D E R

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Appeal No. 31 of 2024 and Appeal No. 77 of 2024 are allowed. Impugned judgement and order dated 29.12.2023 passed by learned DRT-II Hyderabad in S.A. 134 of 2020 is set

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aside. Both appeals are remanded back to learned DRT-II Hyderabad to decide the matters afresh after affording

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opportunity of hearing to the parties and after considering the additional documents filed by the appellant bank in the application under Order 41 Rule 27 CPC. Appellant bank would be at liberty to file the documents before the learned DRT with copy to the opposite parties. Opposite parties should be given liberty to rebut the same and also to file opposition before the learned DRT. Thereafter, learned DRT should decide the matter

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in accordance with law. Costs easy.

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File be consigned to record room.

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Copy of the order be supplied to the appellant and the respondents and a copy be also forwarded to the concerned DRT. Copy of the judgement/Final Order be uploaded in the Tribunal’s website.

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Let a copy of this judgement be placed on the records of Appeal No. 77 of 2024.

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Order dictated, signed and pronounced by me in the open

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Court on this the 10^th day of January, 2025.

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(Anil Kumar Srivastava, J) Chairperson

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Dated :10.01.2024 /pkb

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