Allowed

Mrs Nidamanuri Swaroop Rani v. Axis Bank

DRT27 Oct 2025SA/239/2025

Case brief

AI extract

What is this about?

The Tribunal held that classifying a joint loan account as NPA based on a separate default by a co-borrower, when the joint account is regular and security interests are different, is illegal. Consequently, enforcement measures were quashed.

What did the court decide?

Quashing of all measures under the Act; direction to remit specific outstanding amount; direction to return original title documents upon payment.

Mrs Nidamanuri Swaroop Rani versus Axis Bank — Banking and Recovery | DRT (2025)

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IN THE DEBTS RE( ar xvfevnTJ#TBUNAL^{- rr}

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DATED THrs fHE 27rH DAy oF ocroBER, 2025

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PRESENT: SH. RAMESHWAR I ,*.rrorl?Trris.com.,^{L.LB. (Hons.),M.A.}

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SECURITISATIoN APPLICATIoN No.239 oF 2025

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Mrs. Nidamanuri Swaroopa Rani W/o Late Mr. Sudhakar iao Aged 62, Occ:Housewife H.No.8-2-293l82,J-III/ 784 Jubilee Hills Cooperative House Building Society Limited Road No.75, Jubilee Hills, Hyderabad

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.....Applicant.

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Versus

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The Authorized Officer AXIS Bank No.5-2- 183/184 Modi Square, III Floor, R.P, Road Secunderabad 500003

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....Respondent.

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Counsel for Applicant : Mr.P.S.N. Ravindra

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Counsel for Respondent Bank

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: Mr. N.B. Sudarshan

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-:9-B-qEB:-

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The Applicant filed^{the present Securitisation Application} uls.77 of the Securitization^{and Reconstruction of Financial Assets} and Enforcement^{of Security Interest Act, 2Oo2 (hereinafterreferred} to as "Act,^{ZOO2") lo declare all the proceedingsinitiatedby the} respondent bank under^{Secs.13(2),13(4) and 14 of the Act,as} contrary to^{law, illegal,arbitraryand void ab initio and consequently} to set aside the^{same and direct the respondent bank to hand over} the original title^{deed pertaininoto aoDlicationschedule property to} //v'---'., the applicant. t,/ A*9''

t,/ A*9''

Zot^Lz

SA^No.239/202s

The '^{avermentsof the application'shortly' are:-} tfl""t'".';Hl

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..^rn " a^{p pr ican t a n d. h-e r} :'^"jff [ T :"T:-.1r. own the^{aPPlicationscn} ilonnun"^{over the} .same oa;r'."r'JJ[l-:oiil; ':::,'"'i Rs.2.79,40,000/-^(A/c ;";;'t't'"^{;'"*""oent uanr on t4 '02'2012' since then'} the applicant^{has been paylng the EMI of Rs 3'13'193/-} regularly^{without any default' Only four instalments} during^{moratorium granted on accountof Covid-19} ;;;;;*i;^{;"r"not pald so far' a total amount of} qs.3,g7,o2,a}sl- has been^{paid in158 monthly} instalments^{and the accountis regular even as on today'}

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b. The brother of^{applicant,Sabbineni Surendraalso} avalled another loan of^{Rs.5.85 crores (A/c} No. PHOOSO 100173061)^{for purchase of houseand} applicant has nothlng^{to do with that loan account.}

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c. While so, the respondent bank issued notice^under Sec.13(2) on 22.04.2027 calling upon the^{applicant to} pay outstanding amount of Rs.7,74,44,0821- within sixty days statlng that the loan A/c No. PH0080100173061 became NPA on 30.12.2019 along with loan A/c No. PH000800436430 citing "Master Circular of RBI on Prudential Norms on Income, Asset Classification and Provision Pertaining to Advances".

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d. The respondent bank also issued possession notice dated 18.10.2021 on the same ground. However, the possession notice was not served on the applicant and affixed and published as per Rutes 8(1) and 8(2) of the Security Interest (Enforcement) Rules, 2002 ('.Rules,, hereinafter).

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e. The applicant received a notice dated 20.05.2025 from advocate commissioneT in pursuance of order dated 29.04.2025 in Crl.tvtp No.250/25, to hand over the physical possession of the application schedule property within 15 days. Jrrg-,,..9

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sA No.239l202s

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f. As per affidavit filed under Sec.14, the claim of respondent bank was mentioned as RS.6,OO,94,OO8/whereas it is Rs.l,7 4,44,000/- as per demand notice. The claim is respondent bank is false.

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s. The account of applicant is a standard and performing account and the respondent bank cannot initiate Securitization proceedings against the application schedule property. Hence the SA.

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The respondent bank filed reply statement. The submissions,

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briefly are, that:-

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a. The applicant is co-borrower of the loan availed by Surendra Sabbineni. The loan account became NpA on 30.72.2079 due to default in repayment. Securitization proceedings came to be initiated by issuing demand notice dated 22.04.2021 u/s 73(2) and no objections were raised by the applicant. As no payment was received the respondent bank issued possession notice dated 18.10.2021, sent to applicant and her brothers, published in English and Telugu newspapers on 27.10.2021 and got affixed the same on secured asset. Thereafter respondent bank filed Sec.14 application to take physical possession oF the property.

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b. As per RBI'S lYaster Circular on Prudential Norms on Income Recognition Assets Classification and Provisioning Pertaining to Advances, asset classification has to be done borrower-wise and not facility-wise. Since the account of Sabbineni Surendra was classified as NPA, the loan account in which applicant and Sabbineni Surendra are borroweT and co-borrower also became NPA based on Customer ID No.30064801 created as per RBI norms to ensure all exposures are linked to one customer through a single ID.

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c. The account of applicant has been irregular before^and after the Covid moratorium^period. The applicant^is conveniently hiding the defaults committed in^A/c No. PH0080100173061. She also suppressed^the , YWvn .z rG n '-lr '\v'

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SA No.239l2025

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materlal fact that^{the principal borrowerM/s Coastal} Projects Private^{Limited represented by Sabbineni} Surendra availed^{toan of Rs'6,26,89,905/-vide A/c} No.PHOO8O1O0173061^{has been declared as insolvent} by the Hon'ble^{NCLT,Kotkata on 05'01'2018'}

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d. The respondent^{bank has followed the RBI Master} Circular^{whiledeclaringthe subiectaccountsas NPA and} also followed^{due procedure as contemplated under the} provisions of the Act, 2002^{and Rules framed} thereunder.^{Hence the SA is liableto be dismissed'}

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Heard learned^{counsel appearing for the applicant as wellas} the learned counsel^{appearingfor the respondent bank'Perusedthe} written arguments filed^{for the applicantalong wlth the material} brought on record.

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It is contended by^{the learned counsel for the applicant that} the applicant is^{now way connected to the loan account availedby} her brother Sabbineni Surendra^{separately.She along with} Sabbinenl Surendra availed^{loan of Rs.z,79,4O,O00l-and paid158} instalments out of 185^{instalmentsthereby made a substantial} repayment of Rs.4,97 ,02,465/-.^{The applicant isdue only} Rs,73,1A,575/-^plus interest which arrives to a^{total of} Rs.84,56,211l- minus Rs.30,00,000/-^paid towards^{compliance of} conditional order. Even without having^knowledge of^{issuance of} demand notice, the applicant paid the said instalments and^the respondent bank has been accepting the same without any objections. Under such circumstances, the account of applicant cannot become NPA. Learned counsel referred to the statement of account as at^pages 53 to 76 annexed to the applicatioz ff2i"9 ' ,'./ ->1

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SA No.23912025

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Learned counsel further contended that because the account of Sabbineni Surendra became NpA and it does not mean the account of applicant which is regular also became NpA. The respondent bank cannot force the liability of another account on the applicant. The respondent bank is misleading the Tribunal by usinq the word'principal borrower' where there is no such term used in RBI guidelines nor is it found in the loan documents including the sanction letter. The applicant signed the documents as^.borrower, on ly.

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Learned counsel for the applicant further contended that the properties mortgaged in both the loan accounts are totally different. The applicant is 500/0 share holder in the property mortgaged in A/c No. PH000800436430 and regularly paying the instalments. He referred to the RBI Master Circular dated 0t.07.20L7 with specific reference to pata 2.2.2 "Treatment of NPAS - Borrower-wise and not Facility-wise" and said that Sabbineni Surendra and the applicant are^joint borrowers in loan A/c No. PH000800436430 and the E14Is are regularly paid. The A/c no.PH0080100173061 is the loan account of Surendra Sabbineni wherein the applicant is neither borrower nor guarantor and the mortgaged property is other than the one mortgaged in A/c No. PH000800436430. Hence the respondent bank cannot club both the accounts and declare as NPA under the guise of following RBI N4aster Circular. The RBI Circular is silent on 2"d borrower who is not common to multiple facilities.^The purpose of Unique Customer ldentification Code (UCIC) is to track multiple accounts and^profile only and not to declare the accounts as NPA. The SA Nos.188, 189 and 190 of 2020 are^not filed by^the applicant. Wlth these submissions, learned coursel for the applicant sought to allow the SA. ,/.Mj<t*

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SA No'239/2025

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Learned counsel^{for the respondentbank would submit that} the reliefs^{sought by the applicantare liableto be rejectedas the} respondent bank^{has followedthe guidelines of ReserveBank of} India as well^as Provisions^{of the SARFAESIAct TheTribunalhas no} jurisdiction to change the^{NPA declarationor UCIC notificationThe} UCIC of Surendra^{Sabbineniis 30064801in accordancewith RBI} norms to ensure^{all exposures are linked to one customer' The} petltioner and her brother^{executednecessaryloan documentsand} created an equitable^{mortgage over the application schedule} property as security for the^{loan facility. The companyrepresented} by Surendra Sabbineni^{went into liquidatlon'He also filedSA} 2l8l2OZL besides filing^{SAs 188,189 and 190 of 2020 to stall the} proceedings of the bank. Both^{the applicant and Surendra Sabbineni} were not regular in making the^{paymentsand wilfullydefaulted} resulting the loan account being^{declaredas NPA. The asset} classification^has to^{be done borrower-wiseand not facility-wiseas} per RBI'S Master Circular dated 01.07.2014. Accordingly as^the account of Surendra Sabbineni^{became NPA, theA/c} No. PHO00800436430 also became^NPA.

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Learned counsel further submitted that the^{respondentbank} has strictly followed due^procedure in serving demand^notice, possession notice, and aFfixture and publication of^possession notice. As per Sec.14 of the Act, 2002, the respondent^bank approached learned CMM for taking^{physicalpossession} of^the schedule^property. With the above submissions,^{learned counselfor} respondent bank sought for dismissal of the SA.

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Now, the points that arise for consideration are: -

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i) what is the definition of NPA under the SARFAESI Act and whether the Tribunal has^jurisdiction to deal with NPA classificittion, fu<ro.g"'' J/

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SA No.23912025

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ii) Whether the respondent bank rightly classified the joint loan account of applicant and Surendra Sabbineni as NPA as per RBI Master Circular?

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iii) Whether the applicant made out valid ground to set aside the measures of the respondent bank against the application schedule property, as prayed for?

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iv) Whether direction can be passed to return the original title deeds upon clearance of the outstanding amount in A/c No.PH000800436430

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v) To what relief?

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Point No.(i):-

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The entire dispute in this SA revolves around two loan accounts i.e., (i) Alc No. PHo0801000173061 and^(li) PH ROOO8O043643O, which are referred to hereinafter as 1't loan and 2nd loan for convenience sake. The 1tt loan is in the name of Surendra Sabbineni and it appears lY/s Coastal Projects^Private Limited stood as guarantor. The said company is in liquidation and claim of the respondent bank^(Axis Bank) has been admitted as^per documents^placed on record. The 2nd loan was^{jointly availed by the} applicant Smt.Nidamanuri Swaroopa^Rani and^{SurendraSabbineni,} they are brother and sister, and they^mortgaged their^jointly-held application schedule^property as security^{for the2nd loan.}

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!2. Coming to the^question whether the applicant's^{and her} brother's^joint loan account, is^NPA or not,^{it is pertinentto extract} the definition of Non-performing^{Asset as given in Sec.2 of the Act,} 2002 which is as hereunder:-

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"(o)^{"non-performing} asset"^{meansan asset or account of a} borrower, which has been^{classified by a bank or financial} institution as sub-standard, doubtful^{or loss asset,-}

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SA No.239l2025

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(a) in case such bank or^{financial institutionis} administered or regulated by^{any authority or} body estabtished, constituted^{or appointedby any} law for the time being^{in force, in accordancewith} the directions or^{guidelines relatingto assets} classifications issued by^{such authority or body;}

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(b) in any other case, in accordance with the directions or^guidelines relating to^{assetsclassifications} issued bY the Reserve Bank"

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It is well settled law that^{a valid classification of NPA is a pre-} condition to invoke Sec.13^{measuresand Debt Recovery Tribunal's} scrutiny in Sec.17 application^{includes verifying whether statutory} preconditions have been satisfied.

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Point No.(iil:-

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The statement of account relied on by the^{respondentbank} reflects that it accepted all the EMIs as on^{date. Admittedly, the 2nd} loan has never been independently declared as^NPA till^clubbingwith the 1't loan for NPA^purpose based on RBI Circular on^Asset Classification. Having accepted the^payments and keeping^quite without classification of 2nd loan at the time of actual defaults^if any, the respondent bank's^present contention that there were defaults earlier cannot be countenanced.

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Admittedly, the respondent bank classified the 2nd loan as NPA based on RBI Master Circular 01.07.20LL/ot.07.2014 on "Income Recognition, Asset Classification, Provisioning and Other Related Matters". The contention of the applicant is that she is not party to the 1"t loan and the 2nd loan is a standard asset hence it cannot be clubbed with an NPA account and further the mortgaged propedy is different. Parc 2.2.2 of RBI'S Master Circular dated q1.07.2011 deals /ft\e..*Lq (Y'f^"

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SA No.23912025

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with Treatment of NpAs _ wise,, and it reads as n"."rr;jlltr"*er-wise

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and not Facirity-

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,,(i) In respect of a, borrower having more than one facitity with a bant facilities granted by the bank wi, n"nu ,ori-u".the treated as NPA and not the particutar facility orbe part thereof which has become irregular".

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The subsequent Master Circular dated 01.07.2014 on the same subject, in para 4.2.7 issued guidelines on Asset Classification to be borrower_wise and not facility_wise. The relevant clause (i) reads as hereunder:_

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"(i) It is difficutt to envisage a situation when onty one facility to a borrower/one investment in any of the securities issued 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 borrower will have to be treated as NpA/NpI and not the particular facility/investment or part thereof which has become irregular".

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The above guidelines do not describe the situation where the borrower of one account is also a borrower in another account along with second-borrower of no connection with NPA account, and where security interest is not common. In the case on hand, the property mortgaged in the 1't loan and the 2nd loan is different altogether. Even though Sabbineni Surendra is a defaulter of 1st loan account and mortgage has been enforced, the immovable property in the 2nd loan does not entirely belongs to Sabbineni Surendra, but it also belongs to the applicant and the^{2nd loan} account is regular. Hence neither the borrower/applicant (Smt.Nidmanuri Swaroopa Rani) nor the security interest is common in both the loan accounts, The RBI Master Clrcular is silent^{as to} $6 -'"',cr

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10 of¹²

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SA^No.239/2025

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whether^{the bank candeclarea borrower who is regularlypaying} the^{instalmentssimply because another borrowerof thesame} account^{(2nd loan A/c No PHRooo8oo43643O)being borrowerin} another^{account (1't loan A/cNo'PHOO8O1000173061)which} became^{NPA and that too' wheresecurity interestis not common'} Thus,^{there is no ambiguity to find that respondent bank exceeded} its^{jurisdiction while classifyingthe 2nd loan account as NPA'}

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18.^{As rlghtly pointedout by the learned counselfor the applicant} and also^{as per extractof RBI Circular on creation of ECIC'the} purpose of^{ECIC is to identifya customer' trackthe facilities availed'} monitor^{financial transactions in variousaccountsetc" and not to} use it as^{a tool for classifying any account as NPA' As the very} classification^{of 2nd loan account has not been validly done beyond} the^{guidelines of the RBI MasterCircular, all the measuresinitiated} against the^{applicationscheduleproperty are void ab initio'}

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Another contention^{of the applicantis that the contentsof} Sec.14 application^{and avermentsof replystatement wlthregardto} NPA account and claim^{amountare totally different.A perusal of the} Sec.14 application shows that^{the existenceof NPA accountof} Sabbineni Surendra does^{not find place and total claim as on} 23.01.2025 in A/c No.^PH R000800436430^{isshown as} Rs.6,00,94,008/- whereas the statement of account^{shows the} outstanding in the same loan account^{as Rs.73,18,575l-.I findno} hesitation to find that the respondent bank failed to^{present the} correct facts in the Sec.14 application.

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Point No.^(iii):-

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In view of the above discussion, it is concluded that the applicant has made out valid^grounds to set aside all the measures Av;^.g U

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sA No.239l2025

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initiated by the^{respondent bank against the applicationschedule} property and to direct the^{respondent bank to accept the future} instalments amount^{as arrived in the preceding paragraphand} return the original^{documents pertalningto the applicationschedule} property.

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Point No.(iv):-

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The next^{plea advanced by the applicantis to directthe} respondent bank to^{return the originaltitle documents pertainingto} 2nd loan account upon^{paymentof futurelnstalments(27 in no )} amount of Rs.54,56,21U-^{i.e., principalamount of Rs'73,18,5751-} ' interest of Rs.fi,37,6361-^{@11.55o/op.a' minus Rs'30,00,000/-} deposited towards^{compliance ofconditional order dated} 18.06.2025. Having^{taken into considerationthe statementof} account dated^{05.06 2025 filed by the respondentbank pertaining} to 2nd loan account^{No.PHOOO8O043643o showingRs'73,18,575/-as} outstanding amount^{and interest at 11.55o/0, and the applicant's} keenness to close the^{2nd loan account No PH000800436430and} facts and circumstances^{of the case, I deem it just and proper to} dlrect the respondent^{bank toacceptthe outstanding amount of} Rs.54,56,2f1/- i'e.,^{principalamount of Rs'73,L8,5751-,interest of} Rs.fl,37,6361- @11.55o/o^{p.a. minus Rs 30,00,000/-deposited} towards compliance of^{conditional order dated 18 06 2025;and} return the origlnal^{tltle deed immediatelyupon receipt of such} payment. The applicant is^{dlrected to remitthe aforesaid amount} within two^{weeks from the date of this order.,/fu,,,,o.*}

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SA No.23912025

Point No.^(v):

In the result, SA is allowed by quashing all the measures initiated by the respondent bank under the provisions of the Act, 2002, against the SA schedule property;

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Consequently, the applicant is directed to remit within fifteen (15) days from the date of this order, the future instalments amount of Rs. Rs.54,56,211/- i.e., principal amount of Rs.73,Lg,575/-, interest of Rs.11,37,636/- @11.55o/o p.a. mrnus Rs.30,OO,OOO/deposited towards compliance of conditional order dated 18.06.2025; and the respondent bank is also directed to return the original title document of the SA schedule property to the applicant immediately upon receipt of the aforesaid amounU

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Consequently, Interlocutory Applications pending if any, shall stand closed.

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No order as to costs.

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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 Steno, corrected, signed ond pronounced by me in the open court on this the 2/h doy of October, 2O2s).

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fu** (RAMESHWAR KOTHE) PRESIDING OFFICER RAMESHWAR KOTFIE Presiding Officer Govt. oi lndia Mlnistry of Financo DEBTS RECOVERY TRIBUNAL-2 Abids, Hyderabad-500 001.

Mrs Nidamanuri Swaroop Rani v. Axis Bank

Case brief

What is this about?

What did the court decide?

Mrs Nidamanuri Swaroop Rani v. Axis Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

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