Dismissed

Ms Sadhana Constructions and another v. Karnataka Bank Limited

DRT13 Oct 2025SA/213/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed an application challenging physical possession proceedings. Relying on a Telangana High Court precedent, the court held that principal borrowers cannot challenge possession actions against property belonging to the owner who created the security interest, especially when the owner has not challenged the measures.

What did the court decide?

Application dismissed; interlocutory applications disposed of; no order on costs.

Ms Sadhana Constructions and another versus Karnataka Bank… — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERYTRIBUNAL-I AT HYDERABAD

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DATEDTHISTHE ] 3TH DAYOF OCTOBER, 2025

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PRESENT: GUMMADI GoPICHAND, PRESIDING oFFICER

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SA.No.2t3/20.29

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l. M/s. Sadhana Constructions, Partnership firm, Office at

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17 -42 I I, Srinagar Colony, Dilsukhnagar, Hyderabad.

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Rep. by its Partner, Sri p. Narsi Reddy.

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Sri P. Narsi Reddy,

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S/o. Sri P. Sathi Reddy, Aged about 54 years, Occ: Business, R/o. Flat No.204, Samrajya Laxmi Towers, H.No.3-6-125l204, St. No. 18, Himayathnagar, Hyderabad.

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Applicants.

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Versus

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Karnataka Bank Limited, Asset Recovery Management Branch, 1O5, 3'a Floor, Mohan Mansion, Kasturba Road, Bangalore - 560 001.

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M/s. Phonex ARC Private Limited, (Acting in its capacity s the trustee of Phonex Trust FY 18-5), having its Registered ollice at Dani Corporation Park, Sft Floor, 158, CST Road, Ka-lina, Sntacruz (E), Mumbi-400098. Rep. by its Authorized Officer.

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Respondents.

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Counsel for the Applicants Si D. Raghauulu. Respondent No. Ex-parte.

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Counsel for Si V. Sethu Madhaua Rao. 12.09.2025 on130CI 2025,^* s.10.2025 13.10.2025 'ft#trv"a"won .gj{U 4;'b",.- ---haliS)i/

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SA.No.213/ 2023

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.:ORDERi

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The present application is filed by the Applicants u/ s. 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Securit5r Interest Act, 2OO2, challenging the action of Respondent No.2 to take physical possession of the application schedule property in pursuance of the Advocate Commissioner,s Notice dt.0S.O6.2023, issued in Crl.M.P.No.3Z2 /2023 on the file of the Ld. Chief Metropolitan Magistrate, Nampally, Hyderabad, pursuant to ttre possession Notice dt.24.O2.2o2t, issued u/s.13(a) of the SARFAESI Act.

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.) The averments made by the Applicants in the application, in brief, are as under:-

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The Applicant No.l is a partnership frrm, engaged in the activity of earthworks etc., at various places and the 2na Applicant is its Managing Partner. The Applicant No.l entered into a sub_contract agreement dt.r1.o2.2oog with M/s. sushee Hi_Tech constructions Pvt. Ltd., for execution of earthworks of a contract awarded to the said Company by Ap Rajiv Swagruha Corporation Ltd., for the work of site development for the "ADRAJA" Township including site levelling, road formations, construction of CD works and retaining wall at Yendada (V), Visakhapatnam Rural (M), Visakhapatnam.

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ii) The Applicant No. I availed OD facility of Rs.200.00 lakhs and Cash Credit facility of Rs.60.00 lakhs from the l"t Respondent Bank and the said credit facilities are secured by 7 immovable properties belonging to Applicant No.2, his father Sri p. Sathi Reddy arld wife Smt Anita Reddy. After availing the said loans, the Applicant No. I paid the interest into the loan account time to time "".1 _^{, .r,,r:,]yTer} :i r^{..subsequently, due to bifurcation} Lrurr urof the Lne A .p.f . State and .:a,t::t"tiqf ,tpplicant^{No.1 suffered heavy losses,} did not receive the 6r ,Stiyo.t" executed and as such could not service the loan lo/* off ""ro'j:at^{,rps '-} i Si ,ssl i*ttfP

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SA.No.213/ 2023

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accounts. The 1"t Respondent Balk classified the loan account as NPA and issued Demard Notice dt.11.06.2013, calling upon the Applicants to pay Rs.03,06,07,169.39ps., within 60 days. The Applicants got issued objections to the said notice but, the l"t Respondent Barlk failed to consider the same and issued the Possession Notice dt.10.10.20f3 u/s.13(4) ofthe SARFAESI Act.

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iii)

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At the request of the Applicants, the lst Respondent Bank on 12.02.2014 accepted the OTS proposal, according to which, the Applicants are required to pay Rs. 1.00 crore immediately and another sum of Rs. 1.gg crores before 2O.O3.2O|4. The Applicant paid Rs.1.00 crores on 12.O2.2O14. However, the Applicants could not pay the remaining amount of Rs. l gg crores within time due to non-release of payments by the Government in view of the State bifurcation issue and the said fact was brought to t,.e notice of the lst Respondent Bank but, the lst Respondent Barrk in an arbitrary and hurried manner published ttre Sale Notice dt. 1 1.0 g.2ol4 in the newspapers fixing auction of all the 7 properties on 20.O9.2014. Challenging the sarne, the Applicarts filed SA.No.636/2O14 (New SA.No.306/20 t7l on the fite of DMJI, Hyderabad and the said SA ended in dismissal. During the pendency of the said SA, the 1st Respondent Bank assigned the debt of the Applicants to Respondent No.2 herein.

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iv) The 2"d Respondent without serving any notice to the Applicants and other guarantors, without withdrawing the earlier possession Notice, once again issued possession Notice dt.24.0 2.2021, basing .r/:,1,.;^':-*{l.t e Demand llemand Notice dt. 11.06.2013 issued by lst Respondent /#- ./:r;+ i'3l.."pect^{g$ il?q. ;'";;;} of one of the^{;..:#';:_;,"::""::::::::-;} properties situated at Saroornagar 'l the =.i{\ n.one.V pursuant to the orders obtained in i: 8 1 3 0[l dffir,r.p.trns 6/2 0o 2 0 o.,n on rha nr^ the file ^r of Ld. r r ^r,r.CMM, R.R. District. The 2,0 also obtained orders of appointment of Advocate

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SA.No.213/ 2023

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Commissioners in Crl.M.p.No.96l2O2I and, 126 /2021 for taking physical possession of the properties situated at Mansoorabad village and Gaddiannaram respectively. The 2nd Respondent is proceeding against the secured assets by wrongly claiming the debt due as Rs.6,L2,26,969/- as on 2I.O8.2O19 and also without considering the payment of Rs. l.0O crore made by the Applicants under OTS.

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F\rther, the 2"d Respondent obtained orders from Ld. CMM, Nampally, Hyderabad in Crl.M.p.No.3Z2/2023 for taking physical possession of the application schedule property and the Advocate Commissioner appointed in the said proceedings issued notice dt.05.06.2o23 to the Applicants for vacating the schedule property, which is the residential property of the Applicants.

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vi) The Demand Notice was not served on the Applicants. possession Notice dt.24.02.2O2L was also not served on the Applicants, not affixed on the schedule property and was also not published in two leading newspapers. Hence, the SA.

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o. The l"t Respondent Bank remained ex_parte.

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The 2"d Respondent filed its Reply Statement denying all the adverse allegations made in the application. The contentions of the 2.d Respondent, in brief, are as under:_

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The Applicants availed credit facilities from the lst Respondent The l"t Respondent Barrk has classified the loan of the Applicants as NpA and initiated proceedings under Act. Thereafter, the lst Respondent Bank assigned of the Applicants with underlying securities to 2nd vide Assignment Agreement dt.2Z.Og.2OLZ. Tne 2nd

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SA.No.213/ 2023

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Respondent being an assrgnee stepped into the shoes of 1st Respondent Bank and continued the SARFAESI proceedings to recover the debt.

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ii)

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The Applicants neither have ary right, title and interest nor have created any securit5z interest in respect of subject propert5r of the present SA and it is an admitted fact that Mrs. Anitha Reddy, who is the owner of the said property, created security interest over the said property and she has not challenged the action initiated by the 2od Respondent and she is deemed to have waived her right to challenge the measures initiated by 2.d Respondent against the SA schedule property. The Applicants cannot be called as ,aggrieued persons' under the provisions to challenge the proceedings initiated by the 2"d Respondent under the SARFAESI Act against the application schedule property.

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iii) The Applicants never responded to Sec.l3(2) notice issued by lst Respondent Bank. The Applicants filed SA.No.306/2OLZ (new) on the file of DRT-II, Hyderabad, challenging the SARFAESI action initiated by the lst Respondent Bank against the secured assets and the Tribunal while dismissing the said SA vide order dt.08.08.2019 has given a finding that, no proof has been filed by the Applicants towards submission of objections by them to tJle Demand Notice dt.1 1.06.2013 and further observed that no defect was found in the said Demand Notice and in the possession Notice dt.10.10.2013, issued by the 1st Respondent Bank.

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IINR. 2nd Respondent filed Crl.M.p.No.372/2o23 on the fite of Ld. l:x /-X"--'t?,p -#R\ d"-o-'td,,s^'.QnN^{CMM, Nampally u/s.14 of the SA} RFAEST^RFAESI Act for iakinotaking 4Y p'tY possession of the apprication schedule property a,,d in -qp ' .rt 4 1 n.r nn Rurr[nce vrof the Lrrs warw.Lr r ant ir-uL li ssue od ri n ffith e sa nd id proceedings, Advocate 1 I [fI IE.-'[f."" .. tl[[I^,rfi .f ,.t.:,^: corlllrlissioner issued notice dt.0s.o6.2o2s to the Appricants for ,'".,* .i \t:h,*r#{:,$9/ .edeiirg over the schedule property. The 2.d "."o";-;;; ''+l-overus-9ry

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SA.No.213/ 2023

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followed the procedure laid down under the SARFAESI Act and the SA is liable to be dismissed.

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Heard both sides.

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Now, the points that arise for consideration are,-

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Whether the Applicants have made any valid grounds for setting aside the action of the 2nd Respondent to take physical possession of the application schedule property?

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ii) To what relief?

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Polnt No.li)t

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There is no dispute with regard to the facts that the Applicants availed credit facilities from the lst Respondent Bank and the said credit facilities are secured by application schedule property and other properties. There is also no dispute regarding the fact that the Applicants have committed default in repayment of the loan outstanding and the l"t Respondent Bank has classified the roan accounts of the Applicants as NPA and issued Demand Notice dt. 11.06.2013 u/s.r3(2) and possession Notice dt. 10. 10.2013 u/s.13(4) of the SARFAESI Act. challenging the said action, the Applicants filed SA.No.3O6/2O|T (new) before DRT_II, Hyderabad and the said SA ended in dismissal. It is also not in dispute that the lst Respondent Bank has assigned the debt of the Applicants with underlyjng securities to the 2nd Respondent and the 2nd Respondent the assignee stepped into the shoes of the 1st Respondent Bank ued the SARFAESI proceedings against the secured assets to the debt. When the 2"d Respondent obtained orders u/s.14 of the Act in Crl.M.P.No.372/2023 on the file of Ld. IX Addl. CMM, 13 ocr26 , for taking^physical possession of the application schedule ,^{the Applicants} filed the present SA.

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SA.No.213/ 2023

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The contention of the Ld. Counsel for the Applicants is that, Demand Notice and Possession Notice were not served on them and that the Possession Notice was not affixed on the application schedule property and the said notice was not published in two leading newspapers. So, the Applicants contend that, the action of the 2"d Respondent for taking physical possession of the application schedule property is liable to be set-aside.

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At the very outset, Ld. Counsel for the 2"d Respondent contended that, the Applicants neither have any right, title and interest nor have created any security interest over the application schedule property in favour of the secured creditor and as such they cannot be called as 'aggrieued persons' to challenge the SARFAESI proceedings initiated by 2nd Respondent and that Mrs. Anitha Reddy, who is the actual owner and created security interest over the application schedule property did not choose to challenge the SARFAESI proceedings initiated by 2nd Respondent against the schedule property and she waived off her right to challenge. In this connection, Ld. Counsel for the 2'd Respondent placed his reliance on a decision of the Hon'ble High Court for the State of Telangana in WP.No.5685 of 2Ol9 - "M/s. Prince Corntgated Packaging and another Vs. Andhra Bank", decided on 26.O9.2019.

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I have gone through the said decision of the Honble High Court in "M/s. Prince Corrugated Packaging" (supa). The relevant portion is extracted

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below:-

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(10. .....When the octuol owner of the property brought to sale is not
''#S \rie
i si -Wffi ved ond does not come forword, it is not open to a third porty, even if he be
/' .r, # :," ;:;:;:;";:;;::: ;;;:: ;;Z' :ff';:; :';:;; ;":":;;:;,'';;,:;0,
!: . "-iigtpfintee, to maintoin o chollenge under Section 17 of the SARFAEST Act. ......"
i < .cl notqlt
',.'o 1 3 [}cl zus
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11. It is;ref,-y; from the above decision .lDl(Jll thLrr a ,'L, t, when w rrgrr the actual owner of the
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'.'.P' 'b..
\t' J,'tJi:'. 1.....i-.:!i:ffi;:-:::::':,:"."^'':::: creditor under the SARFAESI :'^::::::':-:'::iTi:::l:Act against the said property
"=#s

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SA.No.213/2023

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u/s.17 of the SARFAESI Act, a third party even if he be tJle principal borrower at whose behest the owner of such property created security interest in favour of the secured creditor cannot challenge the said action. In the present case, the Applicants No. I and 2, who are the principal borrower and Man"ging Partner respectively cannot challenge the action initiated by the 2"d Respondent against the application schedule property belonging to Mrs. Anitha Reddy, who created security interest over the said property in favour of the Respondent No.l/Respondent No.2, as per the ratio laid down by the Honble High court in the aforesaid decision. So, the present Securitization Application is not maintainable and same is riable to be dismissed. Accordingly, this point is answered against the Applicants and in favour of Respondent No.2.

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Point No.lill:-

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