Dismissed

P K Mallanna and Bros v. Karnataka Bank Limited

DRT7 Nov 2024SA/248/2022

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed a Securitization Application filed under Section 17 of the SARFAESI Act. The court held that applicants failed to substantiate claims regarding non-RBI guideline compliance and that service of demand and possession notices was regularized.

What did the court decide?

The Securitization Application filed to set aside measures against scheduled assets is dismissed and interlocutory applications are closed.

P K Mallanna and Bros versus Karnataka Bank Limited — Contract and Commercial Disputes | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL -^II AT HYDEMBAD

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DATED THIS THE OTTH DAY OF^{NOVEMBER,2024}

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PRESENT: SH. MI\4ESHWAR KOTHE,^{B.COM, L.LB.(HONS.), M.A.} PRESIDING OFFICER

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Securitization Application No.^{248 of 2022}

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M/s P.K. Mallanna &^Bros

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Commission Agents Represented by its Partners Mr.Veereshappa^P.K. Gowdown No.8, APMC^MarketYard Adoni, Kurnool District, A.P.518 301

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lvl r. Veereshapa P.K. S/o Mr. Siddalingappa R/o H.No.21-230C, Mandigiri^Street Adoni, Kurnool District,^{A.P. 518301}

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Mr. Vishwanath P S/o Mr. Siddaramappa^P.K. R/o H.No.21-230C. Mandigiri street Adoni, Kurnool District,^{A'P. 518301}

. "...AP icants.

Versus

Karnataka Bank Ltd

Asset Recovery Management^Branch Rep by its Authorized Officer Plot No.50, Srinagar Colony Road No.3, Banjara^Hills HYderabad-soo 073

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..,..Respondent.

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Counsel for the Applicants^: Sri V. Murali Manohar Counsel for the Respondent^: Sri N.Rama^Rao

O!Y,*

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sA No.24812022

-:ORDER:-

The Applicants filed the present Application u/s.17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) to set aside all the measures of the respondent bank against the SA schedule properties including the auction sale notice dated 08.09.2022 fixing auction on 20.70.2022.

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The case of the Applicants, in brief, is that 1st applicant is a lvlSME unit being commission agents for sale of cotton, groundnut, sunflower etc. The applicants initially availed overdraft limit of Rs.200 lakhs vide sanction letter dated 30.03.2016 and further enhanced to Rs.2.50 crores and to Rs.3 crores vide sanction letters dated 21.06.2018 and 26.09.2079 respectively. The 1st applicant advanced more than Rs.2 crores to farmers and due to outbreak of Covid-19, they sustained huge losses and failed to pay sale proceeds of produce. The respondent bank failed to extend emergency Covid loan as announced by the Central Government/Reserve Bank of India and classified the loan account as NPA on 31.03.2021 with effect from 30.04.2020 in vlolation of RBI guidelines and direction of Hon'ble Apex Court in WP No.825/2020 and batch. Had the respondent bank sanctioned Credit Guarantee Limits, the account of applicants would have been standard/performing asset. As held by Hon'ble High Court of Telangana in RKI Builders Pvt Ltd vs. union of India in wP No.35063 0f 2022 that the violations of RBI Circulars and correctness of declaration of account as NPA should also be looked into by the DRT. The respondent bank failed to give the benefit of restructuring or implement Debt Restructuring Mechanism for the applicant's MS14E unit as per RBI Circulars dated 17.03.2016, 24.07.2077, 77.02.2020, 06.08.2020 and 05.05.202. Exorbitant rate of interest is charged against RBI directives. The resAtrndent bank failed to /^r"'/ "^ /// 'i''rt'-' (,,/

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sA No'248/2022

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follow mandatory^{provisionsunderSec 13(2) and Rules 8(1)' 8(2)'} 8(5), 8(6),^{8(7) and 9(1) of Securitv Interest(Enforcement)Rules'} 2OO2^{("Rules" hereinafter). Hence all the measuresof the respondent} bank against^{the SA scheduleproperties are liableto be set aside'}

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3.Therespondentbankfiledreplystatementdenyingtheadverse averments^{of application.It is stated inter alia' that due to default} committed by^{applicantsin repayment the account wasclassifiedas} NPA on 31.03.2021^{with effect from3O'04'2020 as per RBI guidelines} astothelncomeRecognitionandPrudentialAccountlngNorms.The applicants^{never approachedthe respondent bank for any of the} benefitsasclaimedintheapplication.wheneverapplicantapproached the bank, they^{extended full co-operationin order to run thelrbusiness} smoothly.^{The respondent bank never violated the guidelinesissued by} the Government^{of India, Reserve Bank India or the directions of} Hon'ble^{Apex Court. The interest has been charged at contractualrate'} The demand^{notice dated 17 'Og'2021under Sec 13(2)issued and the} same was^{received by applicantAs there was no payment'possession} notice under^{Sec.13(4)was issued on o8 03'2022' the same was served} on applicants,^{published in'Prajasakthi' and'Indian Express' Telugu and} English^{newspaperson 13 03'2022besidesaffixture on secured assets'} The SA is^{liable to be dismissedwith exemplarycosts'}

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4.Learnedcounselforapplicantsreportedordersmaybepassedon merits.Heardlearnedcounselappearingfortherespondentbankand perused the material^{documentsfiled by the parties'}

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for the resPondent^{and Perusedthe} 5. Heard learned^counsel materia^{I broughton Tecord'} K"\

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SA No.248l2o2z

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During the course of arguments, the learned counsel for the respondent bank reiterated the version as in the reply statement. While relying on the documents filed along with reply statement as proof of compliance of relevant Rules under the SARFAESI Act, learned counsel sought for dismissal of the SA with costs.

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Now, the points that arise for consideration are: -

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i) Whether the Applicants have made out any valid

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grounds for grant of reliefs as prayed for in the p resent Secu ritizatio n App I icatio n ?

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ii) To what reliep

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It is an admitted fact that the applicants availed extended credit facility initiary to a tune of Rs.20o Iakhs from the respondent bank and committed default for reasons whatsoever. Hence classification of loan account as NpA cannot be questioned. There are averments in the application about non-extension of benefits such as Credit Guarantee Limits, debt restructuring etc. Having averred so, the applicants have not chosen to place on record any statement of account or judgement or Circular or guidelines and relevant correspondence thereof with the respondent bank for extending benefits as per entiuement so as to substantiate their pleas. Under such circumstances, none of the aforesaid averments cane be accepted.

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With regard to averments on non_compliance of provisions of the Act and Rules. the respondent bank filed documents along with reply statement evidencing service of demand notice dated 17.09.2021 vide pages 4 to 13. In the absence of any objections or reply to the demand notice, the appricants cannot be permitted to contend that interest rate ffil

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SANo.248lzg22

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charged is excessive. The possession notice dated 0g.03 .2022 was served, published and affixed on secured assets vide documents placed at pages t4 to 24 annexed to reply statement. In view of the sufficient proof, I find no infraction of provisions under Secs,13(2), 13(4) ofthe Act, 2002 and Rules B(1) and 8(2) of 2OO2 by the respondent bank. It was reported on 14.03.2024 that the auction scheduled on 20.t0.2e22 was not successful and therefore, none of the averments pertaining to auction sale notice dated 08,09.2022 need consideration.

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In view of the observations, I find that the applicant failed to make out any valid ground to set aside any of the measures taken by the respondent against the SA schedule properties under the provisions of the Act, 2002 and Rules framed thereunder and accordingly this application is liable to be dismissed.

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Point No.(ii):-

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In the result, the present Securitization Application fails and is hereby dismissed.

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L2. Consequently, the Interlocutory Applications, pending if any, shall stand closed. No order as to costs. Communicate a copy of this order to the parties concerned and upload in the official website.

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(Typed to my dictation by the PS, corrected, signed and pronounced by me in the open court on this the ?Vh day of November, 2024).

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ESHWAR KOTHE) PRESIDING OFFICER

P K Mallanna and Bros v. Karnataka Bank Limited

Case brief

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P K Mallanna and Bros v. Karnataka Bank Limited

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