Dismissed

Katta Raj Vinay Kumar v. State Bank of India

DRT12 Dec 2025SA/256/2023

Case brief

AI extract

What is this about?

In a secured application under Section 17 of the SARFAESI Act, the court dismissed the challenge to the bank's auction notice. The bank demonstrated compliance with statutory notice requirements. The proceeds from the corporate insolvency resolution of the borrower were recognized, justifying action against the mortgagor's property for residual dues.

What did the court decide?

The Securitization Application filed under Section 17 of the SARFAESI Act was dismissed; all pending interlocutory applications stood disposed of.

Katta Raj Vinay Kumar versus State Bank of India — Cheque Dishonour | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL. I AT HYDERABAD

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DATED THISTHE 1 2TH DAY oF DECEMBER, 2C/25

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PRESENT: GUMMADI GoPIcHAND, PRESIDING oFFICER

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sA.No.256,/2c.23

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Between:

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Katta Raj Vinaya Kumar S/o. K. Asservadam, Aged about Z2 years, MaJe, Occ: Business, H.No. l1-60, Sepoypet, Main Road, Chirala, prakasam-Disi_S-Ze t SS

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Applicant

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Tersus

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State Bank of India SARB, Koti, 2"d Floor, TSRTC Commuter, Amenity Centre, Bus Terminal Complex, Koti, Hyderabad-SOO095 Rep by its Authorized Officer

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Mls. Hindustan Magnesium products pvt. Ltd Having its Registered Officet at Plot no.98/ 1,^phase II, IDA, Cherlapalli, Hyderabad-500051 , Rep by its Director, Mr. Venkata Ratna prasad Konudula, S/o. Kondula Bala Krishna Murthy, Aged about 68 years, Occ: Business, R/o.H.No. 50- 52- IS / T, N.E Layout, Near Shirdisai Temple, Seethammadhara, Ward No.9 Visakhapatnam Urban p & T Colony (VM), Visakhapatnam-S3OO I 3, A.p

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Respondents Counsel for the Sri. V.V.Ramana Counsel for Sri. C. Prabhakar Counsel for, Si B. Rauindra Reddg 1? fiif, :nc 07.11.2025 12.12.2025 12.12.2025

SA.No.2s6/2O23

.:ORDERi

The Applicant Iiled the present Securitization Application under section 17 of the SARFAESI Act, challenging the auction Sale Notice dated 21.06.2023 issued by the l"t Respondent Bank fixing the auction of the application schedule property on 2g.07.2023 including all the measures taken by the lst Respondent Bank u/sec. 13(2) and l3(4) of the SARFAESI Act.

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The averments made by the Applicant in the application, in brief, are as under:-

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i. The Applicant is the owner and possessor of the application schedule property. The 2"d Respondent Company, which is engaged in manufacturing of Magnesium products, availed the Term Loan limit of Rs.1.10Crs, Cash Credit (Hypothecation) limit of Rs. l.00Cr and Bank Guaranty limit of Rs.0.90Crs. The Applicant offered his property mentioned in the schedule property as collateral security for repayment of roan facilities availed by the 2"d Respondent. The 2"d Respondent obtained signatures on several blank proforma forms and so sarne are not legally enforceable against borrowers. During COVID_19 Lockdown i.e., in the month of March 2o2o, the l"t Respondent Bank released the loan Rs. 10,00,000/- to the 2nd Respondent but, the suspended Managing Director of the 2"d Respondent wit-hout .he consent of the Applicant got released the said amount of Rs. 1O,00,000/_ on 22.O4.2O2O basing on the forged signatures of the Applicant. Hence the Guarantee Agreement dated, 22.04.2020 is not legally enforceable in law fastening the liability on the Applicant.

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One Mr.K. has filed application u/sec.7 of

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the I^No.2258l2OO7 IHDB/2O21 on 25.07 * f:;ffi."m LT, Bench-I, Hyderabad, against the S"po4*qgglafois^tnh the 2"a Respondent defaulted in ,f'bf&ll.gea debt of RS rlq' and the NCLT Hyderabad,

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\S-*EW

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SA.No.256/2023

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while admitting the said application declared moratorium for the purposes referred to sec.l4 ofthe IBC.

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iii. The I^st Respondent Bank, SME, Saifabad Branch issued notice dated 18.04.2002 u/sec. 13(2) of the SARFAESI Act, stating that the loan account of the Borrower was classified as Non_ Performing Asset (NpA) and claimed an amount of Rs. 1,79,01,357.25ps. The said notice was not served properly to all the parties/guarantors. The Applicant received letter from the l"t Respondent Bank claiming that the loan account of the 2.d Respondent maintained in the SME, Saifabad Branch is migrated to them on 24.06.2022 for minority control and to initiate all steps to recover the loan immediately even though there is a moratorium period existing against the 2od Respondent. The 1"t Respondent Bank issued possession Notices on OL.O8.2O22 and 23.09.2022 to ttre Applicant as well as to t}re 2nd Respondent which is null and void. The lst Respondent Bank has not issued any notices to the Resolution professional appointed by the Hon'ble NCLT with respect to the 2nd Respondent. The lst Respondent, without exhausting the remedy against the hypothecated and pledged machinery which is worth more than Rs.2.OOCrs, is proceeding against the application schedule property, which is barred under the provision of Section. 141 of the Transfer of^property Act.

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iv. The 1st Respondent Bank, frled OA.No.324 12022 for the recovery of a sum of Rs. 1,96,23 ,O42/_ against the guarantors only without making the 2"d Respondent as a party to the said O.A and also without c ted machinery of the 2nd

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frf.4*

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,'#, *

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v. The lst ndeflt Sale Notice dated 1g.1L.2O22 under Rgld,8(fi) of the Securiry$ (Enforcement) Rules, 2002,

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frxing ther.if . at.' of "r"tion.gf-&V- ,"r"s 2.2022 by fixing reserve price at , . '1-\a:/l

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S'A.No.256/2023

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Rs. 1,fS,OO,OOO/- for one of secured property belonging to Mr.N.Subhacharan while fixing the reserve price at Rs.2,54,21,0OO l- for the application schedule property. Assailing the same the Applicant along with Mr.A.Subhacharan filed SA.No.334/2O252 before this Tribunal. However, the auction of the schedule property was not fruitful.

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vl. The Hon'ble NCLT, Hyderabad, vide order dated LZ.O2.2O2g approved the Resolution^plan submitted by the 2"d Respondent on certain conditions and the moratorium shall seize to have effect from 77.02.2023. The l.t Respondent Bank received an amount of Rs.53,58,500/- being financial creditor and therefore the l"t Respondent Bank has to close the loan account for that amount.

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vll. The Applicant upon the advice of the officials of the lst Respondent Bank approached the lst Respondent Bank for release of the application schedule property and withdrawn the SA.No.334l2O22 on 13.02.2O23. The l"t Respondent bank closed two accounts but not closed the Account No.339201905361 by showing the balance as Rs.81,82,979.66ps and subsequently the lst Respondent Bank took U-turn by claiming as amount of Rs.g6,77,926/_ in ttre impugned Sale Notice.

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vI1t. The Demand Notice dated 18.04.2022, possession Notices dated O1.O8.2O22 and 23.09.2022 and Sa_le Notice dated,2l.06.2023 are not in accordance with the provisions of the Act and Rules, 2002. The said Notices issued by the 1st Respondent Bank are indiscrete, onerous, arbitratory and abuse of Bank has not credited the

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the sale as well as the amounts

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or/,2 ?;i ";-"{{..bitant rate of interest. rhe lst

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Re s$;lent 1 J;i*'t,ffi ;",i reserve price of the schedule

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o.oo8"i|, rty At ,t their whi hi:rp ,S, fancies without obtaining proper st Respondent Bank has not issued

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SA.No.256/2023

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proper and valid notices under Rule 8(6) prior to publication of second Sale Notice. The l"t Respondent Bank has failed to affix the Sale Notices on the schedule property as contemplated under Rule 8(7) of the Rules 2OO2. Th.e l"t Respondent Bank has also not issued proper and valid publication of the Sale Notices as contemplated under Rule 9(1) of the Rules, 2002. Hence the S.A.

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J- The l"t Respondent Bank liled its Reply denying a-ll the adverse allegations made in the Application. The contentions of the l^st Respondent Bank, in brief, are as under:-

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The 2"d Respondent being the borrower and the Applicant, 1.) Sri. Bala Anand jaldi, 2.) Smt.K.Sokhiba and 3.) N.Subhachandra being the guarantors and mortgagors availed various loan facilities form the l"t Respondent Bank. The 2nd Respondent was referred to Hon'ble NCLT Hyderabad, for corporate insolvency resolution process and the Hon'ble NCLT admitted the case and appointed Sri. V. Shankar as Interim Resolution Professional (IRP). Thereafter the l"t Respondent Bank has filed OA.No.324 12022 for the recovery of sum of Rs. 1,96,2 3,042 I - against the aforesaid guarantors and mortgagors only as the principle borrower was referred to Hon'ble NCLT.

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The l"t Respondent Bank issued Demand Notice dated L8.O4.2O22 u/sec. 13(2) of the SARFAESI Act, for the recovery of a sum of Rs. 1,79,01,357.25ps. The said Demand Notice was sent to all the parties and the Applicant has received the said notice as per the postal track consignment report dated 22.04.2022. As the Applicant and other mortgagors have not cleared the outstanding dueq\he I^st Respondent Bank issued Possession Notice dated Za.ffiZ u/sec.13(4) of the SARFAESI Act. The Applicant duly the receipt of the Possession Notice. The 1st

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l,::l &Sp.,& t Bank has affixed the Possession Notice on the property and published the said notice in two 27.09.2022. The l"t Respondent Bank obtained

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Reports from two valuers and basing on the same fixed

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S'A. No.256/2023

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the reserve price of the property. The auction of the schedule property fixed on 30.12.2022, pursuant to the Sale Notice dated 18.11.2022 did not materialize for want of bidders. The 1st Respondent issued the second Sale Notice dated 21.06.2023 under Rule 8(6) of the Rules 2002, fixing the date of auction on 28.07.2023 and the said notice was sent to all the parties. The Sale Notice was also affixed on the schedule propert5r as contemplated under Rule 8(7) and published in two newspapers dated 22.06.2023 under Rule 9(1) of the Rules 2002. As per the conditional order passed by this tribunal in the present SA, the Applicant paid sum of Rs.5,00,100/- on 27.O7.2O2A and Rs. 13,00,0O0/- on 29.08.2023 and the said amounts were duly appropriated towards the loan accounts on respective dates. The lst Respondent Bank has received a sum of Rs.6,74,0991- on O3.O3.2O23 through NCLT proceedings and the said amount was appropriated to the loan account on the respective date. In view of the stay granted by this Tribunal, the l.t Respondent Bank has not conducted the auction of the schedule propert5r on 2g.O2.2023. So the present S.A has become infructuous and same may be dismissed.

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s
lp

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The 2"4 Respondent filed their Reply contending that the 2"d Respondent company was admitted under Corporate Insolvency Resolution Process (CIRP) vide order dt. 17.02.2028 passed by the Hon'ble National Company Law Tribunal, Hyderabad Bench(NCLT). The Hon'lrle NCLT vide its order dt.l7.2)23 declared moratorium under Section 14 of the ICB Code and appointed an Interim Resolution professional(lRP) to conduct the CIRP of the 2"d Respondent company. t to the orders of the Hon'ble NCLT, the Successful t (SRA) paid the amounts as per the resolution plan the CoC and Hon'ble NCLT within the stipulated period. has taken over the Respondent No.2 company through CIRP, as ffi w, the SRA has nothing to do with the previous liabilities ent No.2 company including the acts of the previous

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S'A.No.2s6/2023

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board members or directors of the Respondent No.2 Company. Accordingly, the 2"4 Respondent prayed to dismiss the SA.

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Heard arguments. Ld. Counsel for the Applicant and Ld. Counsel for the lst Respondent Bank filed their respective Written Arguments.

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Now, the points that arise for consideration are,-

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Whether the Applicant has made out any valid grounds for setting aside the proceedings initiated by the 1st Respondent Bank under the SARFAESI Act against the application schedule property?

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ii) To what relieP

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Potnt l,Io,(il:-

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There is no doubt regarding the fact that the Applicant has created securit5r interest over his immovable property described in application schedule in favour of the lst Respondent Bank to secure the loan availed by 2na Respondent Company. Admittedly one Mr. K. Venkata Ratna Prasad has liled an application vide Cp (IB) No.225l2OO7 |HDBl2O2L on 25.07.2OO u/sec.7 of IBC 2006, before the Hon'ble NCLT, Hyderabad, for Corporate Insolvency Resolution process and the same has been admitted by the Hon,ble NCLT and granted moratorium against the 2nd Respondent Corporate-debater for the purposes referred to u/sec. 14 of the IBC. Since, the Insolvency proceedings against 2"d Respondent company are pending before the !1.^{NCLT, thel stRespondentBank} herein has filed tl2o22^{for the recovery of outstandingdues from the} rtgagors only before this Tribunal, to which the l"t

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=Respondent is entitled to. Simultaneously, the lst Respondent

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:rr 12 0&flffi,""f, initiated proceedings under the SARFAESI Act, against to recover the outstanding dues. It is the contention

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that the lst Respondent cannot proceed against his

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property, which is admittedly a secured asset, without

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sA.No.2s6/212i

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' exhausting its claim against the hypothecated and pledged machinery of the 2"d Respondent company. The said contention ofthe Appricant is not tenable for the reason that the 2'd Respondent company is undergoing corporate insolvency resolution process before the NCLT and the lst Respondent Bank cannot proceed against the hypotheca of the 2"d Respondent. It is arso an admitted fact that the r"t Respondent bank has received an amount of Rs.6,74,099.00 through NCLT towards its share in respect of its claim against the 2od Respondent. so, the lst Respondent Bank is proceeding against Applicant being the mortgagor of the application schedule property to recover t].e residual dues. so, now the question arises is whether the l"t Respondent has duly followed the procedure laid down under the SARFAESI Act, while proceeding against application schedule property belonging to the Applicant being the secured asset.

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The l"t Respondent Bank in its materiar documents, Iiled along with its reply statement fired a copy of the Demand Notice dated, r8.o4.2o22 issued u/sec.r3(2) of the SARFAESI Act, to the borrowers/guarantors, including Applicant herein along with postal returned covers, postal acknowledgments and postal track reports. From a perusal of the postal track reports liled by the lst Respondent Bank it is clear that the said Demand Notice is dury delivered to the Applicant herein. The rst Respondent has also filed a copy of the possession Notice dated 23.09.2022 along with returned covers and acknowledgments. A perusal of the postal acknowledgment reveals that the Appricant has duly received the said possession Notice. The rst Respondent Bank has also liled a copy of the photograph depicting affixture of possession Notice on the schedure property and copies of publication of possession Notice<iq. the English and Telugu newspapers d,ated. 2Z .Og.2O22. So, from'*tg.\rve it is clear that the lst Respondent Bank has duly 13(2) while issuing Demand Notice to the Applicant $)^rlw Rule 8(1) and (2) of the Rules, 2OO2, while Notice against the application schedule property. The lst dent Bank has also filed valuation reports and copies of ce and Auction Notice dated 21.06.2023 frxing the auction

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SA.No,256/202i

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of the schedule propert5r on 28.07.2023 along with postal receipts, postal track reports etc., including affixture of Sale Notice on the schedule property and publication of Sale Notice in the newspaper. I am not delving into the issue whether the lst Respondent has followed due procedure laid down under the Act and Rules 2002, while issuing Sale/Auction Notice for the sale of the application schedule property since, it is reported by the lst Respondent Bank that the lst Respondent Bank has not proceed for the sale of the schedule property in view of the stay granted by this Tribunal and the Auction Notice dated 21.06.2023 issued by the l"t Respondent Bank for the sale of the application schedule property has become infructuous. So from the above it is clear that the lst Respondent has duly followed the procedure laid down under the Act and the Rules 2oo2, wl.ile issuing Demand Notice dated 18.04.2022 u/sec.l3(2) and possession Notice daled 23-09.2022 u/sec. 13(4) in respect of the application schedule property. The Applicant has failed to make out any valid ground for setting aside the proceedings initiated by the l"t Respondent Bank under the SARFAESI Act, against the schedule property. So, the present sA filed by the Applicant is liable to be dismissed. Accordingly this point is answered against the Applicant and in favour of the lst Respondent Bank.

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Polnt No.(lllt

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In the result, the present Securitization Application ls dismissed. 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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tronssibed by her, .offected, signed and pronounced W me in the open coutt on this the lln doy ol

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sd/(c. coPrcHAND) PRESIDING OTFICER

Katta Raj Vinay Kumar v. State Bank of India

Case brief

What is this about?

What did the court decide?

Katta Raj Vinay Kumar v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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