Partly allowed

M Latha v. State Bank of India

DRT3 Sept 2025SA/211/2023

Case brief

AI extract

What is this about?

Debt Recovery Tribunal allowed a partially by setting aside an impugned Sale Notice issued by a bank for auctioning mortgage property due to procedural flaws regarding the redemption period. The Tribunal held the earlier Possession Notice was valid.

What did the court decide?

Set aside the Sale Notice dated 10.05.2023; upheld the Possession Notice dated 15.04.2023; directed the Bank to follow statutory procedure for fresh auction.

M Latha versus State Bank of India — Landlord and Tenant | DRT (2025)

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IN THE DEBTS RECOVERYTRIBUNAL- IAT HYDERABAD

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DATED THIS THE. 3RD DAY OF SEPTEMBER, 2025

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PRESENT: GUMMADI GOPICHAND, PRESIDING oFFICER

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sA.No.211/2023

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Smt.Mamidi Latha W/o Mamidi Gajanand Reddy, Aged 52 years, Occ:business, R/o villa No.22O, Avenue No. 15, Splendid Aparna Palm Meadows, Kompally, Telangana-5000 1 4.

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...Applicant

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Versus

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l.State Bank of India

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Stressed assets Recovery branch(SAMB-ll), 1"t floor, D.No.3-4-101/A, 1st floor CAC, TSRTC Bus Station, Kachiguda, Hyderabad.

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Rep. by its Authorized Officer

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State Bank of India,

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SME, Nizamabad branch, Nizamabad.

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Rep. by its Authorized officer

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... Respondents

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Counsel for the Applicartt C ouns e I fo r R e sp ondents

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Ms.m. Sri Haini Reddy Sri M.V.Janaki Ram

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:ORDER..

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This Secr-rritization application is filecl by the Applicant u/s.17 of the SARFAESI Act,2OO2 ch-EJlengpg-rhe possession Notice dt. 15.04.2023 and Auction Sale issued by the Respondent Bank

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for conducting perty and to declare the same

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as null and '2. 'lhe

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ef, are as undcr,-

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!-i 4. -Li .-t:l^{,= ,,'} i' :. it;3b1'1,:,.,4::,.,-::':' '

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SA.No,211/23

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The Applicant along with one M.Ram Reddy is the absorute owner and possessor of the schedule property which is an agricultural land. M/s MBR Exims P.Ltd. availed cash credit facility of Rs.22 crores from the Respondent No.2 whereas the Applicant stood as one of the guarantors and created mortgage in respect of the schedule property. The l"t Respondent bank published the Sale Notice dt. 1o.o s.2023 for conducting auction of the schedule property on 26.06.2023 without issuing any prior notice to the Applicant. On enquiry, the Applicant came to know that the Respondents classified the loan account of the borrower as NpA on oa'1o '2022 and issued demand notice u/s 13(2) of the SARFAESI Act'; 2oo2 dt.2s.rr.2022. Thereafter, the lst Respondent issued possession notice dt. 15.04.2023 but without serving the said notice on the Applicant, the Respondent bank took symbolic possession of the schedule property. Thereafter the Respondent Bank issued the impugned sale Notice dt. 1o.0s.2023 for conducting auction of the schedule property on 26.06.2023 but the said sale notice was not affixed on the schedule property and not served on the Applicant. The schedule property is agricultural land and as such, exempted under Section 3 r (i) of the SARFAESI Act, 2O02. Hence the SA.

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The Respondents filed their Reply denying all the adverse allegations made in the SA and the contentions of the Respondent Bank, in brief, are as under-

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M/s MBR Exims P.Ltd. availed loan facilities from the Respondent No.2 whereas the Applicant along with others stood as guarantor and created mortgage in respect of the schedule property. All the Directors of MBR Exims P'Ltd. and the guarantors are from the same fam y. The schedure property belongs to the Applicant and one Sri Mamidi Ram Reddy and the said Ram Reddy has not been included in the present SA and therefore, t!.9;.S,+*t$Bssq non-joinder of necessary parties. As the the loan dues, the loan account was Bank issued demand notice dr.25. Act,2OO2 to the borrower and and the notice sent to the

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SA.No.211/23 -

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Applicant was returned with endorsement 'refused'. The Respondent Bank also published the said demand notice in two leading newspapers. Thereafter, the Respondent bank issued possession notice dt.15.04.2023 under Section 13(4) of the SARFAESI Act, 2OO2 and sent the said notice to the borrower and the Applicant and the said possession notice was published in two daily newspapers and affixed on the schedule property. Thereafter, the Bank issued Sale Notice dt.IO.O5.2023 to the borrower and the Applicant and the said notice was published in two leading newspapers and the same was affixed on the schedule property. The schedule property is a commercial property and not an agricultural property as contended by the Applicant. Accordingly, the Respondent Bank prayed to dismiss the SA.

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Heard Ld. Counsel for the Applicant and Ld. Counsel for the Respondents.

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Now, the points that arise for consideration are,-

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i) whether the Applicant has established ana ualid grounds for challenging the Possession Notice dt.15.04.202s issued bg *Le Respondent Bank?

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ii) wlrctlrcr the Applicant has established ana ualid ground.s for challenging the sale Notice dt. i0.0s.202s issued by the Respond.eryt Bankfor conducting auction of the scLedule propertg ?

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iit) To what relief?

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Points No.lil:&fiil-

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During the course of arguments, Ld. counsel for the Applicant and Ld. Counsel for the Respondents reiterated their respective versions as stated supra.

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There is no dispute regarding the fact that M/s MBR Exims p.Ltd availed loan from the 2"a Re.spondcnt whereas the Appricant along with one Ram neaav@alongwithothersandcreatedmortgagein ,rrpffi6r,r,J^grr,",i"rq$igperty. Thereafter, the borrower committed li

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'* in&3,,m rhfr provftll of SARFAESI Act,2002. -: ll

:-.-t / I

{: ,tL-^'r

SA.No.277/23

The specific contention of the Applicant is that the Respondent bank has not followed the procedure prescribed under the provisions of SARFAESI Act,2OO2 and Rules made thereunder in issuing the statutory notices to the Applicant. The bank straightaway issued the impugned sale notice without issuing any demand notice and possession notice to the Applicant who is mortgagor and the schedule property being agricultural property, the bank cannot proceed against the same under the provisions of Section 31(i) of the SARFAESI Act, 2OO2 so, the said sale notice is not legal and liable to be set aside.

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Per contra, Respondent bank contended that the Bank has duly followed the prescribed procedure contemplated under the provisions o{ SARFAESI Act, 2OO2 and Rules made thereunder in issuing all the relevant notices to the Applicant.

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In order to establish their contention, the Bank enclosed relevant material documents along with the Reply filed by them. As per the said material documents, it is clear that the Respondent bank issued demand notice dt.25. ll.2022 to the borrower and the Applicant. The said notice sent to the Applicant was returned with endorsement 'party refused'. So there is deemed service of demand notice on the Applicant. In fact, the said notice was also published in Telugu and English daily newspapers.. Thereafter, the bank issued possession notice dt.15.04.2023 and the same was received by the Applicant as evidenced by the postal acknowledgements filed by the Bank. The said possession notice was affixed on the schedule property as depicted in the copies of photographs filed by the bank and the said notice was published in Telugu and English daily newspapers as evidenced by the copies of paper publication filed by the Bank. Thus the Respondent bank has duly followed the procedure as c o n te m p I a ted,-p.:e^{Qt$ ity Interest (Enforcement) Rules, b.r.r notice to the Applicant.

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\rrt^{i,that the schedule propertyis} agriculturai prdel$8Prtffi, it i* lexempted under Section 31(i) of the !,

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SARFAES, ' n% 2oo2 and acco.fifl,Erv, the bank cannot proceed against . r. :;{:.^.".?. n **{^r"t

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the said p..op,gj ntended that the schedule property is

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SA.No.217/23

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commercial property and so, it is not exempted under the provisions of SARFAESI Act,2OO2. When the Applicant is contending that the schedule property is agricultural propert5r, the burden lies on the Applicant to prove the same by filing necessary material documents in support of her contention. But the Applicant has not produced any material documents to prove that the schedule property is agricultural property and the same is used for cultivation purpose. So, the contention of the Applicant that the schedule property is agricultural property is not tenable.

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After issuing possession notice, the Respondent Bank obtained two valuation reports for fixing reserve price of the schedule property. Beforq issuing sale notice, the Respondent Bank is expected to issue notice u/r 8(6) of Security Interest (Enforcement) Rules,2OO2 by giving thirty days time to the borrower/mortgagor for redeeming the schedule property by paying the entire outstanding dues. In the instant case, the Respondent bank issued Sale Notice dt.1O.O5.2O23 u/r 8(6) of Rules, 2OO2 by fixing the date of auction on 26.06.2023. It is pertinent to note that the said sale notice is published in daily newspapers on 15.05.2023 and the date of auction is fixed on 26.06.2023. As per the amended provisions of Section 13(8) of SARFAESI Act, 2OO2, the borrower/mortgagor is having right to redeem the mortgaged property by paying the entire dues to the secured creditor before the date of publication of notice for public auction. So, when the moment, the sale notice is published by the secured creditor in the newspapers, the borrower/mortgagor looses his right to redeem the mortgaged property. In the instant case, the sale notice u/r 8(6) of Rules, 2OO2 is issued on 1O.O5.2O23 whereas th; publication in newspapers is made on 15.05.2023. So in view of thii publication of the sale notice by the Respondent bank on 15.05 .2023 in newspape.", th:-+&-_*p{ryllost her valuable right to redeem the schedule property. ..Q,?1. Notice dt.10.05.2023 lixing auction of the without giving clear thirty days time to the asset is bad in law and it was issued ut**u(6)^3F Interest (Enforcement) Rules, 2002. accordingly.

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SA.No.211/23

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Point No liiil

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In the result, SA 2 1 I 12023 is partly allowed by setting aside the impugned Sale Notice dt. 10.05.2023 issued by the Respondent Bank for conducting auction of the schedule property on 26.06.2023 whereas the impugned possession notice dt. 15.04.2023 is concerned, it is valid and legal and binding on the Applicant as the Bank has duly followed Rule 8( 1)&(2) of Security Interest (Enforcement) Rules, 2002 in taking symboiic possession of the schedule propert5r. The Respondent Bank is directed to strictly follow the procedure contemplated under the provisions of SARFAESI Act, 2OO2 and Rules made thereunder in taking fresh steps for conducting auction of the schedule property.

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Consequently, the Interlocutory Applications, pending if any, shall stand disposed of. No order as to costs.

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Communicate a copy of this Order to the parties concerned.

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(Dictated to the P.5., transcibed bg her, conected, signed and pronounced bg me in the open court on this the 3d daA of September, 2025).

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sdl(G. GOPTCHAND) PRESIDING OFFICER

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-t
., 0 3 stP 20fr
W**W

M Latha v. State Bank of India

Case brief

What is this about?

What did the court decide?

M Latha v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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