Dismissed

M/s. Ayurda Buildcon Rep. by Managing Partner Mr. Kalikiri Sriniketh Reddy v. Union Bank of India

DRT13 Aug 2025SA/256/2024

Case brief

AI extract

What is this about?

This is a Securitization Application challenging the NPA classification of a loan account and the issuance of a possession notice by a bank. The Debts Recovery Tribunal dismissed the application, finding no merit in the contention of illegal NPA classification and no procedural defect regarding the possession notice.

What did the court decide?

Securitization Application dismissed; Interlocutory Applications stayed/closed; No order as to costs.

M/s. Ayurda Buildcon Rep. by Managing Partner Mr… — Insolvency and Bankruptcy | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL - II AT^HYDEMBAD

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DATED THIS THE 13TH DAY OF AUGUST,²⁰²⁵

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

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Securitization Application No.256 OF 2024

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M/s Ayurda Buildcon

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Rep. by its Managing Partner Mr. Kalikiri Sriniketh Reddy R/o Plot No.60, D.No.12-4-65, Vidyuth Nagar Newtown, Anantpur, Andhra Pradesh 515001

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Mr.Kalikiri Sriniketh Reddy S/o Mr.K. Siva Sankar Reddy Aged about 36^years, Occ:Managing^Partner R/o D.No.12-4-65. Plot No.60, Vidyuth Nagar Newtown, Anantpur.

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......,Applicants.

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Versus

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Union Bank of India New Town Branch^(038511) Rep. by its Authorized Officer &^Others Court Road, New Town^{Anantapur, AnantaurDist} Andhra Pradesh 515005

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Mr. Venugopala Reddy Siddapa^Reddy S/o S. Raveendra^Reddy Aged about 47 Yeats,^{Occ: Business} R/o D.No.1-47, Kommalapudi^Village Manubolu Mandal,^{NelloreDist.524405}

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Mrs Kalikirl Madhubala,^{W/o K. Siva Sankara Reddy} Aged about 58 Years,^{Occ: Business} R/o D.No.2-1787-2,^{LBSRoad, Pileru} ChiBoor District-517214

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Mrs. Siddapareddy Srivani,^{W/o S. Venu GopalReddy} Aged about 46 Years,^Occ:Business R^/o D.No.1-47, Kommalapudi^Village Manubolu Mandal,^{NelloreDist.524405}

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Mr.K. Siva Sankar^{Reddy (Mortgagor)} S/o Late K. Gangi^Reddy Aged about 62,^Occ:Retd R/o D.No.2-1787-2,^{LBS Road, Pileru}

Av*..-.9 // / ,xr

PaEe2ofT

sA No.256/2024

....Respondents.

Chittoor District-517214

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Counsel for the Applicants M/s Sucharitha Law Chambers Counsel for Respondent Bank M rs. Ta ra ng in i Pisipati

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-:g_B_D_E_B:-

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The Applicants filed the present Securitisation Application u/s 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the Act") to set aside the^possession notice dated 06.06.2024 issued by the respondent bank agalnst the application schedule property.

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The case of the applicants, in brief, is that they availed OD facility of Rs.1 crore from erstwhile Andhra Bank, now Union Bank of India against mortgage of application schedule property. They also availed Covid loan:UGECL and Car Loan. The OD account can be treated as 'out of order'as per para 2.2 of the RBI Circular, if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days which is not the case of applicants, account. The very classification of loan account as on 24.01.2024 is illegal and against the RBI directives. No communication was issued prior to NPA classification. After receipt of demand notice dated 05.02.2024, applicants approached the respondent bank and were informed that due to internal audit objections accounts had to be classified as NPA. Though the COVID loan and car loan accounts have been cleared the respondent bank has not issued clearance certificate citing non-closure of OD account. Hence this SA to set aside the notices and consequently direct the respondent bank to issue closure certificates in respect of Covid loan and card-loan and accept payments in the oD account. /4ry<Y' //',,"

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Page 3 of7

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SA No'255/2024

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The^{respondentbank Rled replystatement alongwith} documents.^{The submissions,briefly, are that despiteseveral} communications^{the applicants faited to produce documentsrequired} for renewal of^{OD facility.vide letter dated 11 04 2023' the} respondent bank^{categorically mentioned that there were no salesin} lhe FYs 2027-22^{and 2022-23 and hence the total limits would be} recalled within 14 days^{and again communicatedthe sameon} 06.05.2023.^{The applicants exceptadmittingno sales and seeking} time to submit^{documents,failed to make any paymentsand} consequentty^{the loan was recalled and declaredas NPA followed by} issuance of^{demandnotice u/s 13(2) of the Act' Classification of NPA} is borrower^{specific and not facility specific' The alleged quarter-wise} payment is tabulated^{concealing that the whole limlts were recalled} and account was^{classifiedas NPA The very filing of SA regarding} NPA classification^{is against the SARFAESIAct provisionsand the} jurisdiction of the Tribunal is^{restrlcted to enquire proceedings} subsequent to^{initiation of the provisionsof the Act and not prior to} that. The^{possessionnotlcewas affixed on secured asset and} published in the newspapers.^{TheSA is liable to be dismissed'}

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Heard learned^{counsel for the applicantsas well as the 1st} respondent bank.^{Perusedthe writtenarguments filed for the} applicants^{and the material brought on record'}

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Learned counsel^{for the applicants while reiteratingthe} contents of^{the applicantwould furthercontendthat therewas} neither default^{nor were the accounts NPA within the definition of} Sec.2(j)(i)^{and 2(o) of the Act, 2002 entitlingthe respondent bank to} proceed under Sec.13^of the^{Act. The respondent bank classified the} accounts as^{NPA against the RBI Master Cilgplar-Pruentialnorms on} ,y' ,,{.h,trt1"z^q..>j'^-o'"-

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Page 4 of 7

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SANo.2S6l2024

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Income Recognition, Asset crassification and provisioning pertaining to Advances. There was no continuous g0 days defaurt to decrare the account as NpA as per paragraphs 2.L2 and 2.2 of the said Circular. He referred to the taburation in the written arguments to support the contention that there was no default for the e1 to e3 during Fy 2023-24. Likewise, the other term loan and car roan were arso never overdue continuousry for g0 days. Learned counser reried upon the judgements of (i) Hon'bte Madras High coutt in signats Apparets pvt. Ltd. v. canara Bank [MANU/TN/1018/2010] ; (ii) Hon'bre Apex court in sardar Associates v. Punjab & Sind Bank [MANU/SC/1351/2009; (iii) Mardia Chemicats Ltd. vs. Union of India (2004) 4 scc 311 and (iv) Hon,ble catcutta High court in The Fabworth Promoters^private Limited and Ors vs. Reserve Bank of India and others [MANU/WB/0676/2021] in support the contentions that the respondent bank is bound to fo,ow the RBI circurar whereas the respondent bank without following the guidelines arbitrarily classified the account as NPA and therefore the issuance of sec.13(2) at the threshord lever is bad in raw and the borrower deserves fair adjudication. with these contentions, learned counsel sought to allow the SA.

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Learned counsel for the respondent bank, at the very outset stated that the SoD account became irregurar which is evident from the communication from the respondent bank as weil as retters issued by the applicants seeking time to provide requisite documents for renewar of the rimits. She reried upon the documents fired arong with the reply statement. After giving a lot of opportunity the account was classified as NpA on 24.01.2024 and the quarterly payments mentioned in the taburation is creverry shown onry for the Fy 2023-24 so that the earlier irregularity is not reflected. Despite receipt of demand notice, the applicants faired to repay the amount and hence possession notice was issued on 06.06.2024 which was pubrished in English and Telugu newspapers besides its afiture. Leqrned counsel

Uffip>h

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sa No'256/2024

would^{also contend that the SA is not filed to challengethe SARFAESI} measures^{but regarding classification of NPAand hence SA is liableto} be dismissed^{as not maintainable The accounts were classifiedas} NPA, borrower-wise^{and not facility-wiseThe remedy available to the} applicants^{is under Banking Ombudsman Scheme and not by filing} the SA.^{while referring to the documentsannexed to the reply} statement^{as proof of compliance of due procedure'learnedcounsel} sought^{for dismissal of the SA'}

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Now, the^{points that arise for consideration are :-}

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(i) Whether^{theNPAclassificationwas in accordancewith law?}

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(iii) Whether the^{possessionnoticedated06'06'2024is liableto} be set aside?

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(iii) To what^relief?

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Point No.(i):

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The main^{contention of the applicantsis that respondentbank} illegally^{classifiedthe SOD account as NPA on 24'01'2024' The} upjti.unt.^{relied upon four judgementsin supportof the contention} that the^{securedcreditoris bound to follow the RBI guidelineswhile} classifying^{the accountsas NPA and theSARFAESImeasuresbasing} onillegalNPAclassificationarevitiated.Theapplicantswhilereferring to the tabulation^{showing the quarterlypayments for the financial} year 2023-24^{in order to provethat payment was not due for more} than 90^{days and hence account was not NPA'However' the letters} dated 31.12.2022^{and o1'02'2023 filed by the respondent bank} amply^{prove that the applicants failed to submit the required papers} for renewal^{ofSOD account Letters dated 11 04'2023 and} 06.05.2023arerecallnoticesreferringtotheearliertwoletters. Letters dated^I5.O4 '2023^{and 27 'rz'2023 and 21'02 2024 are the} letters^{issued by the apPlicantsrequesting the respondent bank to} round that^some renew^{the SODaccount and to extend time on} * ,/ <-\j

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Page 6 ol7

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sa No'2s612024

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regar issue going on for r€ ralization of huge amounts pending From chintamani constructions renewar documents, wirrins;t: t"'ll:Yil: :il:::ffi:J,J days. These letters along with composite agreement a.eir"o ov tn" authorized officer under a r reason to dou bt the,"n"..,;;:';: ;::J.:#:;li, iJ;iI J :i,i :: the applicants that they provided the requisite do.r."nta fo.."n"*"t of account in spite of repeated letters. No such proof i, nfud OV ,r,u applicants. The applicants tt n 2023-24, have not ,..':'#":.t'l:t;1#T"J.rJ:llil: :"j default prior to 2023-24, which is the bank,s contention. Under such circumstances, I do not flnd any merit in the contention that the account was ilregarty oecrarel cited judeements are not herprur to the appricants," ,rJ ::.l:i--ti: ) grven circumstances of the case.

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I find no viotation of Rutes 8 (1) and 8(2) of the Security Interest (Enforcement) Rures,2oo2 with regard to possession notice. However, there is no procedural defect pointed ort OV tn"lp-pri.untr.

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With regard to contention on .rlhhih^ clubbing of two other roans with NpA account and non_issuancen t'"utunt" certificate' the applicants may take up the issue ,arot mecha n ism ror redressa * n,.,"tL"" j::::i::":"fl : ol ffi ,tl; Scheme. It does not warrant interFerence of this Tribunal. 11. In view of the above ol raired to make out any vario erl::l::T:r::": :[:ll.":ffi::; the respondent bank against the SA schedule property ,r0".,n" provisions of the Act and Rules otAoo2..Accordingty sA is liable to be dismissed. ,//X\,/. Lg U^€o"*

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sA No.256/2024

Point No.(ii):