Dismissed

Sri Mohan Babu Vuppu v. Union Bank of India

DRT25 Mar 2025SA/145/2024

Case brief

AI extract

What is this about?

In a securitization application, the applicant sought quashing of a possession notice alleging clubbed housing and credit card debt violated SARFAESI norms. The tribunal rejected the claim, holding borrower-wise NPA classification justified and the possession notice valid.

What did the court decide?

The securitization application is dismissed; the possession notice dated 12.03.2024 is upheld as valid.

Sri Mohan Babu Vuppu versus Union Bank of India — Consumer Protection | DRT (2025)

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IN THE DEBTS^{RECOVERY TRIBUNAL} -^{II AT HYDEMBAD}

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DATED THIS THE^{TWENTYFIFTH DAY OF MARCH2025}

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PRESENT: SH. RAMESHWAR^{KOTHE, B.COM.,L.LB.(HONS'),M.A.} PRESIDING OFFICER

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Securitisation Application^{No.145 OF 2024}

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Sri Mohan Babtt^VuPPu S/o Ramachandra^{Naidu VuPPu} Aged: 50^years, D.No.2-734l5 Shanthi Nagar^{ColonY, Chittoor} Chittoor District-5^{17 002.} Applicant.

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Versus

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The Authorised Officer Union Bank of India Darga Junction^Branch Kaverei Cross,^{RamnagarColcnY} Chittoor, Chittoor^{Dist.517 002} Andhra Pradesh. Respondent.

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Counsel fcr the Applicant : Mr' Gundewar Srinivas' Counsel for the Respondent : Mr. V' Raghu.

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-:8P-E-B:-

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The present Sccurir:izatibn^{Application is filed by the Applicant} u/s. L7 of the Securitisation^{and Reconstruction of Financial} Assets and Enforcement of^{SecurityInterest Act, 2002 assailing} the Possession Notice^{issuedby the RespondentBank agalnst} the a pplication schedule^property.

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The case of the Applicant,^{in brief,is that, ihe Applicantavailed} a Housins Loan of^{Rs.20,00,000/-t*_i} H,ffp,Jg"nt Bank 9u

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SANo,745/2024

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against the security of application schedule property on 22.L2,2O14. Applicant has been regular in payment of loan instalments in terms of loan agreement without interruption, However, respondent bank issued demand notice u/s of the SARFAESI Act dated 04.Lt.2023. Appticant submitted a representation vehemently opposing the issuance of demand notice u/s 13(2) of the SARFAESI Act and classification of loan

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account as NPA. In response, respondent bank vide letter daled O2.O2.2O24 informed that the securitisation steps are due to non-payment of overdue amount in the Credit Card account which was categorised as back as 1S.03.2021. Applicant was further informed that migration of customer lds of credit card facility and housing loan account led to classification as NpA on f7.1O.2O23, followed by further measures under the SARFAESI Act. The credit card is not having link to the house loan account of Rs.20,00,000/-. Clubbing of secured loan with unsecured loan violates SARFAESI Act. Firs y, the respondent bank issued a possession notice on 12,02.2024 and thereafter another possession notice dated t2.O3.2024 by withdrawing the previous one. The outstanding amount shown in the demand notice dated 04.77.2023 was Rs.13,57,484.80ps, whereas the outstanding amount mentioned in the possession notice dated 72.02.2024 was Rs.13,82,469.78ps and the possession notice dated 72.03.2024 was Rs.13,O3,4OO.O7ps respectively. Variation in the amount demand under different notices is a clear violation and deviation of SARFAESI Act. Applicant deposited Rs. 1,00,000/- between 12.02.2024 and L2.O3.2024 to^prove his bonafides.

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The Respondent Bank flled reply statement. The submissions in the reply statement, in brief are, that the averment of applicant llrt--,r'Lc')^{- -}

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SA-No.745/2024

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being regular in payment of housing loan instalments is not correct. The Housing Loan account of the applicant was classified as NPA on 17.10.2023 due to Credit Card facility becoming NPA on 15.03.2021. This aspect has been brought to the notice of the applicant vide letter dated 02.02.2024 to his representation dated 25.07.2024. Therefore, no irregularity can be attributed in the classification of Housing Loan account as NPA. The classification of applicant's loan account as NpA is in accordance with Clause 4.2.7.1 of the RBI Master CircularPrudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances dated 01.10.2021. As per this clause, all the facilities granted by a Bank to the borrower have to be treated as NPA and not a particular facility or^part thereof which has become irregular, Once breach of contractual terms takes place even in one loan account of a borrower. there is no bar to proceed for recovery of dues in both the accounts separately. Thus, the classification of loan account has to be customer-wise but not account-wise. Therefore, there is no irregularity or violation of the provisions of the SARFAESI Act or the Rules thereunder. The credit card dues and the housing loan dues have not been clubbed as alleged by the applicant. On noticing some discrepancies in the possession notice dated L2.O2.2O24, the same has been replaced by a fresh notice dated 12.03.2024 and there is no bar in doing so. The impugned SARFAESI proceedings are in respect of the dues under the Housing Loan account and this aspect reflects both in the demand notice as well as the Dossession notice. fw*y.'-.s.

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sa.No.745/2024

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Heard^{Ld. Counsel appearing for both sides and perused the} written^{arguments filed by the respondentbank and the} material^{brought on record} '

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Learned^{counsel appearingfor the applicant contendsthat the} respondent^{bank is not justified in initiatingsecuritisation} measures^{against the security interest pertainingto the} Housing^{Loan account whenthe EMIs were being regularlyand} thattheCreditCardaccountisnothingtodowiththeHousing Loan account.

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Per contra,^{learned counsel for the respondentbank submits} that the^{respondent bank has taken steps as per the RBI} guidelines' According^{to RBI guidelines'NPAclassification is on} the basis^{of borrower-wise but not account-wise'Since the} applicant^{defaulted in Credit Card loan' respondentbank} enforced^{security interestof the housing loanaccount' This fact} hasbeeninformedtotheapplicantvidereplytoobjectionsto the demand^{notice dated O2'O2'2O24' Applicanthas not} disputed^{default in payment of dues under the Credit Card} account'^{Therefore, applicant's contentionof both accounts} being independent^{of each otherdoes not hold good in view of} the RBI^{guidelines citedsuPra'}

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Now, the^{points that arise for considerationare'-}

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Whether^{the Applicanthas made out any valid} iirr* f*^{qi^hingtle PossessionNotice u/s} ii.os.zdza^{issuedtt/s.13(4) of the SAMAESI} i"i, zooz,^{by theRespondentagainsttl'e} appl ic^{ationsclu dule} ProPertY?

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TowhatrelieJ? ,4ryr, (-/'p

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SA.No.745/2024

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Point No.^(il :-

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The one and only issue raised by the applicant all through the SA averments is that the respondent bank classifled the Housing Loan account as NPA in spite there being no irregularity in payment of EMIs. Per contra, respondent bank justified its action of proceeding against housing loan due to default in payment of dues of Credit Card account citing^para 4.2.7 of RBI Master Circular dated 01.10.2021 which reads as under:-

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4.2.7 Asset ClassiJication to be borrower-wise and not facility-wise

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4.2.7.1 h is dfficult to envisage a situation when only one facility to a borrowertone investment in any of the securities issuerl. by the borrower becomes a problem credit/ investment and not others. Therefore, all the facilities granted by a bank to a borrower and investment in all the securities issued by the borrov'er will have to be treated as NPA/NPI and not the particulor

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facility/investment^{or part thereofwhich has} become irregular. "

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A reading of the above RBI circular leaves no room for ambiguity on the classification of Housing Loan account of the applicant as NPA taking into account the default in payment of dues relating to the Credit Card account. The applicant has not disputed default in payment Credit Card dues. Under such facts and circumstances, classification of Housing Loan account as NPA cannot be faulted. As regards the contention with respect to variation in the outstanding amount mentioned in different notices, applicant has not produced any material to contradict the figures claimed by the respondent. Further, applicant deposited some amounts even during the interregnum period of possession notices. Therefore, Respon$Fnt,s action in taking ,v,w*, //,/ '*t't' ( _,.

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SA.No.145/2A4

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measures against the security interest is to be held valid in accordance with the provisions of SARFAESI Act and the Rules, 2002. Thus, the issue of NpA classification cannot be a ground for quashing the possession notice dated 12.03.2024, unless proved otherwise.

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In view of the above, I find that the Applicant has faited to make out any valid ground for quashing the possession Notice dated 12.03.2024 issued by the Respondent against the application schedule property. Accordingly, I hotd that the present Securitization Application fails and same is liable to be dismissed.

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Point No.(iit:-

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