Dismissed

D Sree Devi and Others v. Canara Bank

DRT25 Apr 2025SA/14/2022

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed the Securitisation Application filed by applicants claiming encroachment of their land mortgaged by a borrower. The Tribunal held the application was devoid of merit as applicants failed to prove the secured asset exceeded the mortgaged acreage and quashed it as the auction had failed, rendering the application infructuous.

What did the court decide?

The Securitisation Application (SA) is dismissed as it fails and is infructuous due to the failed auction.

D Sree Devi and Others versus Canara Bank — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL - II AT HYDERABAD

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DATED THIS THE 25TH DAY OF APRIL, 2025

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PRESENT: SH. RAMESHWAR KOTHE, B.Com., L.LB. (Hons.), M.A. PRESIDING OFFICER

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SECURITISATION APPLICATION No. L4 OF 2022

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Between:

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D. Sree Devi W/o E. China Raga Reddy Aged 52 years, Flat No.201 3'" Floor, Veera palace Beside Union Bank of India Secundera bad_ S0O03B.

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E. Raghavendra Reddy S/o Late E. Venkat Rami Reddy Aged 54 years, Flat No.201 3" Floor, Veera palace Beside Union Bank of India Secundera bad _500038.

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E. Rajeswara Reddy S/o Late E. Venkat Rami Reddy Aged 52 years, Flat No.201 3'" Floor, Veera palace Beside Union Bank of India Secundera bad-S)1O3B. .. . . . . .Applica nts.

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And

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Canara Bank, Represented by Authorised Officer A R M Branch, Circle Office MCHNo. 10-3-163 Plot No.85, Sy. No. 628 Beside Rail Nilayam Secundera bad-500026.

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Canara Bank, Represented by Chief Manager, HI Tech Branch Abids, Hydera bad - 50000 1.

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) Jai Kishan Cold Storage Rep by its Managing Partner Smt. Susheela Reddy W/o Mr. E. P. Ranga Reddy Major, Sy. No, 563/C Pylakurthy Village Kondumur Mandal, Kurnool Dist. . . . . Respondents.

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Counsel for the Applicants : Mr. Abhay Singh. Counsel for Respondents 7 &2 : Mr. Manav Gecil Thomas.

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-:ORDER:-

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Applicants filed the present Securitisation Application u/s.17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act 2002") assailing the E-auction notice dated 07.01.2022 for sale of SA schedule "A" property and possession notice dated 06.08.2021 to the extent of SA schedule^{..8,,, ,.C,,} and "D" properties admeasuring to Ac.0.39 cents.

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The case of the appricants as per the averments of securitisation application, in brief, is that the auction of SA "A,, schedule property pursuant to sale notice dated 07.01.2022 issued by respondents 1 and 2 bank would cause grave prejudice to the applicants for the reason that the property notified under the impugned notice includes 39 cents of land belonging to applicants and encroached by 3'd respondent at the time of construction of its cord storage Unit. In fact, the 3.d respondent

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?W'u"*

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sA 14/2022

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is the owner of one acre of land purchased during 2Ot4 abutting SA "8" to^.'D,, schedule properties belonging to the applicants. The 3'd defendant took advantage of the said position and encroached 39 cents of land belonging to the applicants while constructing the Cold Storage Unit. The 3ro respondent mortgaged the SA '.A,, schedule property to the 2nd respondent for availing loan and later on defaulted in repayment. Respondent No,2 filed OA 359 of 2019 before the DRT_II and the OA was allowed on 29.08.2019. On coming to know of 1st respondent bank issuing possession notice, applicants filed a Suit bearing No.OS.1577 of 2019 before the Court of Hon,ble 1st Additional Junior Civil Judge, Kurnool for mandatory injunction, handing over the encroached portion of the property and for consequential permanent injunction. Respondent No.1 bank has also been impleaded as a party to the suit proceedings, which is pending adjudication, Appllcants moved an IA in the Suit for appointment of an Advocate Commissioner to note down the physical features of the Suit property with reference to the document of tiiles. The same could not be heard due to Covid.2019^pandemic. Applicants are taking steps for consideration of the IA. In case the respondent bank succeeds in selling the subject "A" property without excluding 39 cents of land belonging to applicants, leading to third party interest, applicants would be put to grave injustice. Applicants addressed a representation dated 24.08.2011 to the respondents 1 and 2 bank requesting them to exclude the encroached land from the holding of the 3'd respondent before initiating any proceedings under the SARFAESI Act. The respondent bank rejected the request on the ground of the matter bglng subjudice. The /_/ffi;*''"'

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respondent^{bankis not entitled to enforce security interestover} theencroachedpartofthepropertybelongingtotheapplicants.

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2 The respondents^{bankfiled reply statement' The averments in} the reply^{statement,in brief, are that the adjudicating authority} for a title^{disputeis only a civil suit' Applicants havealready} filed a^{Civil Suit. Mere filing of Suit wouldnot proveanything'} The suit^{is postedfor framing of issues'Issues raised before the} Civil Court^{cannot be raised before this Tribunal' The applicants} have not^{producedany document to show or prove that they are} in possession^{of the SA schedule property,whereasrespondent} No.3hasmortgagedtheSchedulepropertyWithaSuper structure^{of Cold Storageunit' The securitisationproceedings} aretheresultofdefaultinrepaymentofloanbythe3,d respondent^{borrower'Had the applicantsmade out a prima} facie case,^{the Hon'ble CivilCourt would have granted injunction} over the^{propertyas soughtfor by the applicantstherein in} OS.t577/2019.^{Nothing prevented the applicants from seekinga} survey by^{a competent authority in place of a private agency'} Survey, demarcation^{and boundaryissues cannot be decided by} this Tribunal.^{No causeof action arose for the applicantsto file} the^{presentcasewhen a civil case with similar disputeis already} pending adjudication.

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Heard learned counsel^{appearing for the parties'Perused the} written arguments^{filed by the applicants and the material} placed on record.

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q Learnedcounselappearingfortheapplicants,whilereiterating the averments in the^{SA, would contenbglhatthe respondent} gt'$'ul9

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sA L4/2022

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bank cannot^proceed against the portion of land which is a subject matter of dispute in a Civil Suit. In fact, the respondent bank should exclude the disputed portion of land from the securitisation proceedings before putting the SA schedule property for auction in the interest of justice. Learned counsel relied on the judgement in Government of Andhra Pradesh v. Thummala Krishna Rao & Anr. AIR 1982 SC 1081 to^press his point that while genuine disputes relating to the title and possession of property is pending, one party cannot take summary possession of the property.

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Per contra, learned counsel appearing for the respondent bank submits that the applicants are a thlrd^party to the securitisation proceedings initiated against the secured asset mortgaged by 3'd respondent. Till date there is no order restraining the respondent bank from proceeding under SARFAESI Act against the^subject property. In fact, applicants unsuccessfully attempted to stall the securitisation^proceedings by filing Writ Petition^No.28817of 2021. The Cold Storage^plant was constructed in the^{year 2017} and since then it is in operation. Applicants admitted that the^3'd respondent acquired the land admeasuring l acre of land^for construction of Cold Storage Unit through a registered^saledeed bearing No. 922 of 2014 dated 29.05.2014. The area^{of land} mentioned in the sale deed,^possession notice and the^auction sale notice is 1.00 Acre only. The SA^is filed^{in collusion with 3'd} respondent to delay the recovery^{proceedingsunderthe} sARFAESt Act. ,'-,'.1,..^.^j ' :-

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sA L4/2022

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Now the points that arise for adjudication are: -

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i) Whether the Applicant made out any^{valid groundfor} quashing the securitisation proceedings against the SA"A" schedule^propefty under the^provisionsof Securitisation Act?

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ii) To what relief?

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Point No.(i):

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B. Respondent bank filed Memo dated^{15.12.2022 statingthatthe} impugned auction has failed and accordingly the SA^becomes infructuous. Applicants' main^grievance is that the^3'd respondent encroached 39 cents from out of 1,10 acres of^land belonging to applicants at the time of construction of a Cold Storage Unit in the year 2017 seeking mandatory^injunction, handing over of encroached portion of land. The said Suit is pending adjudication. Respondents bank has been impleaded as a party to the said Suit. In addition to filing of the Suit, applicants approached respondents bank by way of a representation dated 24.08.2021 to exclude the encroached land from the SARFAESI proceedings. However, respondent rejected the said representation citing^pendency of OS.L577 of 2019.

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The applicants have not produced any valid document to show that the Cold Storage constructed by the 3'd respondentmortgagor comprises more than one acre or say, 1.39 Acres as alleged by them. The 3'd respondent constructed the Cold Storage in the year 2017. Whereas the applicants filed OS.1577 in the year 2019. As on date, there is no order from any competent authority to prove that 3'd respondent constructed ,/)&2.o"e

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the Cold Storage Unit in more than one Acre area or 1.39^Acres for that matter.

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t-0. As per the material^placed on record, E. Venkat Rami^{Reddy, S/o} E. Keshava Reddy, sold one acre of land to^{M/s. Jai Kisan Cold} Storage, a^partnership firm, represented by^{his son E' P. Ranga} Reddy. E. Susheela Reddy, W/o E.P. Ranga Reddy is^the Managing Partner of M/s. Jai Kisan Cold Storage.^Respondent Bank filed OA.359/2019 and the same was decreed ex^parte.E' Laxmidevamma, W/o E. Venkata Rami Reddy and^{E. P. Ranga} Reddy are defendants 3 and 4 in the OA,35912019'^Similarly, applicants herein are also family members of E.^{Venkat Rami} Reddy. If that be the^position, it is evident that the^applicants herein and defendants in OA.359/2019 are^related to^{each other} in one way or the other. Be that as it^may, the^{applicantshave} failed to prove that the total area of secured asset^belongingto 3'd respondent is in excess of one acre and it^{includes 39 cents} of land belonging to applicants.^For the^sake of^undecided39 cents, the right of enforcement of^{respondentagainst one acre} secured asset cannot be deprived. The SA^{is devoidof any} merits and liable to be dismissed.

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As stated supra, the auction E-auction^{notice dated 07.0L.2022} fixing the date of auction tL.02.2022 in respect of the^property belonging to 3'd respondent,^{was not materialised.Hencethe SA} becomes infructuous to that extent and^{no order is required to} be passed on the impugned sate noticeifu:*#

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Point No.(ii):-

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