Dismissed

V Ajay Pratap v. Union Bank of India (Andhra Bank)

DRT4 Jul 2025SA/246/2022

Case brief

AI extract

What is this about?

In a securitization application under Section 17 of the SARFAESI Act, the applicants challenged the bank's recovery measures including auction notices. The Tribunal dismissed the application finding that the bank followed due procedure and the auction did not materialize, making the application infructuous and devoid of merits.

What did the court decide?

The Securitization Application was dismissed and interlocutory pending applications were closed.

V Ajay Pratap versus Union Bank of India (Andhra… — Contract and Commercial Disputes | DRT (2025)

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

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DATED THIS THE O4TH DAY OF^JULY,2025

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PRESENT: SH. MMESHWAR^{KOTHE,B.COM, L.LB.(HONS.), M.A.} PRESIDING OFNCER

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Securitization Application^{No.246 OF 2022}

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V. Vijay Pratap S/o Late V. Anjaneyulu^Naidu Aged 55 years, Occ: Business D,No.23-10-74 Royal^Nagar

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Near R.C. Road, Tirupati-517^{501, A'P'}

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V. Vijay Dundi S/o Late V. Anjaneyulu^Naidu Aged 55^years, Occ: Business R/o H.No.203-2/3 Annamaiah Nagar Near Bairagipatteda Tirupati-217501, A.P.

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.......APPlicants.

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Versus

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Union Bank of India S.V.U. CamPus Branch AB Buildings, S.V.U, CamPus Tirupati, Chittoor District A.P. Rep by its Authorized^Omcer

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M/s Sundaramoorthy^{Auto Care} Rep by its Proprietor:V.^{Sundara Moorthy} Opp: Mahati Stadium^(Auditorium) Alipiri Road, Tirupati-517501,^{ChittoorDist.}

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V. Sundara^Moorthy S/o V. Venkatachalam H.No. 15-4-215, GM^{UttaramadaVeedhi} Near Govindaraiulu^TemPle Tirupati - 517 501

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,...Res7ondents.

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Counsel for the Applicants : Mr.Ch' Srinivasa^Raju Counsel for 1"t^{Respondent Bank: Mr.v,Raghu} Respondent Nos.2 & 3 , -'- ,^nY-t*., ' U '"'*'-

PaCe 2 ol7

SA No.24612022

-: CL-B-D-ER:-

The Applicants flled the^present Securitisation^{Application u/s} 17 of the Securitization and^{Reconstruction} of^{Financial Assetsand} Enforcement of Security Interest^{Act, 2002 (hereinafter referred to as} "the Act") to set aside all the measures^{takenby the respondent bank} under the SARFAESI Act, including the auction^{sale noticedated} 04.lO.2OZZ and all consequential^{proceedings inrespect of} application schedule ProPerty.

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The case of the applicants, in brief,^is that the^{loansavailed by} respondent no.2 represented by its^{proprietor respondent no.3 are} secured by the^{personal guarantors} of^{themselves, hypothecationof} good and collateral security of^properties belonging to the applicants' The respondent bank extended the^{Bank GuaranteeFacillty without} consent of the applicants noT were they^{put one notice} at^{the time of} lnvocation of BG of HPcL. The whereabouts of 3rd^{respondent are still} not known and therefore it is a^question at^{whose request BG was} extended. The demand notlce dated 30.06.2022^{wasnot served on} applicants. After allowing HPCL to take^possession of^{the movable} properties lying ln the petrol pump failed to get compensation. The applicants recently came to know about^publication of^possession notice dated 27.O9.2022. In spite of collating^{Fixed Deposits worth} Rs.32 lakhs, respondent bank initiated Securitization^{proceedingsfor} recovery of an exorbitant and illegal claim.^{Auctionproceedingshave} been initiated without serving any notice. Hence this SA.

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The respondent bank filed reply statement denying^{the adverse} averments in the application. Initially, the 2nd respondent^represented by the 3d respondent and late V.^{Anjaneyulu Naidu, father of the} applicants, was running the business of sale of fuel on retain^basis who availed credit facilities from erstwhile^Andhra bank now^Union / zAYry1-,--,!L/ou,!^,

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PaEe 3 ot 7

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sA No.24612022

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Bank of India. The Bank Guarantee^{Facilityof Rs.65lakhs provlded to} M/s HPcL being licensing authority^{to supply fuel to 2nd respondent} for sale on retain basis came to^{be renewed/enhancedon application} from the borrower/applicants. Originally^{equitable mortgagein} respect of SA schedule^{property was createdby Mrs.V. Lakshmamma} and V. Anjaneyulu^{Naidu, paternal grandmotherand fatherof the} applicants respectively and^{subsequentlythe property was devolved} upon the applicant who^{partitioned the same. Thereafter,the} applicants extended the mortgage^{by depositingthe original Will} dated 21.05.2015 executed by their^{father late Anjaneyulu Naidu} along with death certificate^{dated 17.05.2019,registeredpartition} deed No.1535 0f 2021 dated^{24.02.2027 and other link documents as} security for the facilities vide^{registered Memorandumof Deposit of} Title Deeds Doc.No.5546/2021m dated 0A.L2,2027.^{M/s HPCL} invoked the BGs dated 07,07.2022 on^{the ground of non-adherence} of running the^petrol outlet as^{per norms and as per guaranteegiven,} the respondent bank honoured the demand and^paid amounts^{to M/s} HPCL. Further; respondents 2 and 3 handed over^{physicalpossession} of the petrol outlet to the authorized officer of M/s HPCL under a Panchanama. The invocation of BGs was duly informed to the applicants, respondents 2 and 3 vide letter dated 22.03.2022. Tl'e respondent bank also exercised lien on term deposits^and appropriated a total sum of Rs.32.5 lakhs towards 4^{BG accounts.} The account was classified as NPA on 20.06.2022 followed^by initiation of Securitization measures by issuing demand^{notice dated} 30.06.2022 and with no^payment made as^per demand,^possession notice dated 27,09.2022 was issued. The^possession notice^{was sent} to borrower/applicants, affixed on the secured asset and^{published in} 'New Indian Express'and 'Andhra Jyothi' newspapers on 30.09.2022 as per Rules. As on 20.06.2022, an amount of^{Rs.98,92,129l-nl/as}

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PaEe 4 of 7

SANo.24612022

outstanding^{in the account for which the respondent bank filed OASR} 25/2023. Hence the SA is^liable to^{be dismissed.}

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Heard learned counsel for the^{applicantsand learned counsel} for the respondent bank.^Perused the^{written argumentsfiled for the} respondent bank and the^{materialdocumentsbrought on record.}

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Learned counsel for the applicants^{would contend that due to} personal and health reasons, appllcants^reside out^of Tirupati town, they recently came^{to know about demand notice} issued u/s 13(2) by the respondent bank^{for Rs.98,92,129l-plus} interest which was not served on the^{applicant thereby deprived of} opportunity of raising objections to^{the notice. The alleged} outstanding amount^{arising out of invocation of Bank Guarantee ('BG'} in short) is illegal and^{baseless.The applicantsnever gave their} consent for extension of^BGs to^{M/s HPCL and without theirconsent} the respondent bank^{extended freshBG facility. Such extensionis} also^{questionableparticularly for the reason that the whereabouts of} the 3'd respondent are^{still not known. The respondent bank never} informed the applicants^{either at the time of extensionor invocation} of BGs. Learned^{counsel would furtherpoint out that the respondent} bank allowed M/s^{HPCL to take possessionof all the movable} properties etc., lying in the leased^{property but failed to get} compensation and adjust the^{proceeds out of hypothecatedassets'} Thouqh the bank^{forcibly withheldRs.32 lakhs, initiated Securitization} proceedings against the immovable^properties.

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Learned counsel would^{also contend that the loanaccount} cannot be NPA.^{There is no causeof action to initiateSecuritization} proceedings and hence all the measures^{are liableto be set aside'} Av*t^- -. // ./ L-/..ir'>'Y /,_.,

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Page 5^of7

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sA N0.246/2022

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Per contra,^{learned counsel for the respondentbank would} submit that^{the applicantswere duly served with statutory notices'} He reiterated^{the versionas in the reply statementthat the applicants} executed^{the registered MOD towards extensionof the BG facility to} M/s HPCL.^{In fact at their request'BG facllity was extended'M/s} HPCL^{took overphysicalpossession of the assets in the petrolpump} after cancelling^{the license as per inter se agreementOn} f7.-:l.2O2L,^{the applicant sought for additionalBG for Rs'65 lakhs'} The respondent^{bank had to honour paymentto M/s HPCL being} beneficiary^{of BGs as per agreed terms' A consolidatedOA has been} flled before^{the Tribunal'}

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Learned counsel^{would also contend that the Tribunal can} declde^{issue of validity of measures taken by the Banks/Fls under the} ActasperdecisionreportedinAlR2oosMadraslsT[M/sLakshmi Shankar^{Mitls (P) Ltd. and Ors' vs' The Authorisedofficer/ChiefManager'} Indian Bank^{and ors.l and trivial procedurallapses cannotbe a ground to} nultify the^{Sarfaesi proceedingsof the secured creditoras held bY the} Hon'ble Supreme^{Court in M/s L& T HousingFinance Limited vs' Trishul} Developers &^{Anr. In Civil AppealNo'3413of 2O2O (Arising out of SLP(C)} No,18360 of^{2019 decided on 27'10'2020' Learnedcounsel would} further inform^{that the auction did not taken place and actual} possession was not taken.^{While referring to the documentsflled} during the^{proceedings,he would submit that the respondent bank} followed the due^{procedurecontemplated underthe Act' 2002 and} hence SA is liable to^{be dismissed'}

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The^points for^{consideration are as follows : -}

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i) Whether the^{appticantmade out any valid ground to} quash the me,t,"t^{initiatedby the respondent against} ihe SA schedute^{propertyas prayed for?} ?Dr".,>a

ii) To what retieP

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Page 5 of7

sA No.2/t5l2022

Point No.(i't:

Hon'ble High Court of Andhra pradesh at Amaravathi on being informed by the bank that the auction notice dated 11.03.2025 had been withdrawn, opined vide order dated 03.04.2025 that no further orders were required to be passed in Wp No.g55O of 2O2S and directed this Tribunal to dispose of the matter within a period of three (3) months. It is obvious that the auction impugned in this SA did not take place and it is also clarified by the respondent bank that the subsequent auction also did not take place and physical possession of secured asset was not taken. Thus, the SA becomes infructuous as far as auction sale and physical possession are concerned.

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The factual information given by the respondent bank is that the father of the applicants viz., V. Anjaneyulu Naidu was part of the fuel business of 2nd respondent. He and his mother Mrs.V. Lakshmamma created equitable mortgage in respect of SA schedule property to secure the loan facility granted by erstwhile Andhra Bank (now Union Bank of India). Subsequent to death of their father late V. Anjaneyulu Naidu, the appticants deposited original Will dated 21.05.2015, Death certificate dated 17.05.2019 and Registered Partition Deed No.1535 of 2021 dated 24.O2.2027 towards creation of security interest and they executed Registered Memorandum of Deposit of Tiue Deed No.5546 of 2021 dated 08.12.2021. The applicants deny their liability q) the ground that they did not give consent to extend the BG facility. However, respondent bank refutes the contention stating that the applicants vide their letter dated 08.12.2027 sought for additional limit of Rs.65 lakhs and they also undertook to deposit margin money of Rs.16.25 lakhs. Considering the request, respondent bank sanctioned renewed/enhanced BG limit on L0.12.202 against the charge on the ptedge of KTD and EMD and ,/Aw;.a

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Page^{7 of 7}

5ANo.24612022

the applicants^{agreedto all the terms of sanction as acknowledgedon} the sanction^{letter' It is also submittedthat the claimhas been raised} after^{adjusting the proceedsof the FDRS towards the dues under BG} facility'^{I find no reason to disbelievethe facts brought on record} under a^{verifled affidavitfiled by the Chief Manager/AO of the} respondent^{bank. It is not the case of the applicantsthat they} approached^{the respondentbank after admittedknowledgeof} demand^{noticeand no correspondenceis filed in that context'Hence} the contentions^{on liability and lack of knowledge of noticedo not} deserve^accePtance'