Dismissed

Mr S Padmanabha Rao and Other v. Sir M Visvesvaraya Co. Operative Bank Ltd.

DRT31 Oct 2025SA/287/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a Securitization Application challenging the legality of a sale notice issued under the SARFAESI Act. The Tribunal rejected claims regarding defective service of notice, alleged undervaluation of the security property, and procedural irregularity concerning the auction purchaser's payment timeline, holding that the challenge was limited to the sale notice lega

What did the court decide?

Sale notice set aside application dismissed; sale proceedings upheld; costs borne by parties.

Mr S Padmanabha Rao and Other versus Sir M Visvesvaraya Co… — Banking and Recovery | DRT (2025)

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SA 287/2023

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IN THE DEBTS RECOVERY TRIBUNAL-II, BANGALORE

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Dated this 31^st day of October, 2025

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PRESENT: SHRI T. RAJESH Hon’ble Presiding Officer

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S.A.No.287 of 2023

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Mr.S.Padmanabha Rao.

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Mrs.Jayanthi. P.

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Both residing at No.68, 1^st floor, 2^nd Cross Amarjyothinagar, Vijayanagar, Bangalore - 560 040.

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… Applicants .

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Versus

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Authoirzed Officer Sir.M.Vishveshvaraya Co-operative Bank, No. 109, Shankar Mutt Road, Shankar Puram, Bangalore - 560 004.

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M/s. Trident Automobiles Pvt. Ltd., No.1, Lower Palace Orchards, Sankey Road, Bangalore – 560 003.

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… Respondents.

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Ld. Counsels on record/appeared :-

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Counsel for Applicants :- Mr.M.A.Rajendra. Counsel for 1^st Respondent :-Mr.K.V.Lokesh. Counsel for 2^nd Respondent :- Mr.R.Prasanna.

SA 287/2023

: - O R D E R - :

The Securitization Application, in short this SA is filed under section 17 of the Securitization And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act; herein after been referred to as SARFAESI Act with a prayer to set aside sale notice 02.11.2023 published in New Indian Express on 03.11.2023.

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The applicants though are not specifically admitting the availing of credit facility is admitting the issuance and receipt of demand notice. The applicants further contend that there is no valid and legal Security agreement in respect of the schedule property. The applicants admitting the receipt of possession notice by the 1^st applicant and contends that possession notice is not served on the 2^nd applicant. The applicants are also disputing the affixture of possession notice and is putting forward the contention that there is no registration of security interest with the Central Registry at the time of initiation of measures under the Act or thereafter.

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Apart from the above, the applicants are alleging the violation of Rule 8 and 9 of the Security Interest (Enforcement) rules. It is also specifically contended that Reserve price fixed is too low, against the actual value of the property which the applicant’s claims is more than Rs.10 crores. The

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SA 287/2023

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next contention taken by the applicants are that there is no proper

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service or affixture of the sale notice and further that the 1^st respondent to upload the same in the official web-site.

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Along with the SA, the applicants had produced the following documents.

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1. Copy of Demand Notice dated 23.12.2022.

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1. Copy of Possession Notice dated 13.03.2023.

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1. Copy of Sale notice dated 02.11.2023 and copy of the same

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published in the New Indian Express Newspaper on 03.11.2023.

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1. Copy of the Gazette Notification.

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The applicants had subsequently produced a document which they claimed as the valuation taken at the time of sanctioning and disbursement and also the Gazette Notification.

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The 1^st respondent had filed their statement of objections contending interalia that the applicants are not entitled for any reliefs as sought for in the SA. It is also contended that the present proceedings are initiated and continued in accordance with the statute. It is further stated that the

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applicants had approached the 1^st respondent and got disbursed a mortgage loan for Rs.3,18,67,000/-. It is also stated that the measures

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are initiated as the borrower had defaulted the repayments resulting the account had been classified as NPA on 09.11.2015. The 1^st respondent

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SA 287/2023

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had also issued a demand notice and since no repayment was forthcoming, the possession notice was issued and published as mandated by the statute.

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It is also the case of the 1^st respondent that the pre-sale notice was issued on 21.09.2023 and had also published the same. Since no sale could be conducted in pursuant to the 1^st sale notice, second sale notice dated 02.11.2023 was issued and published. It is also contended that sale

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notice was affixed at the premises. The 1^st respondent had also given a para wise rebuttal of the statement of facts as put forth in the SA.

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Along with the objection, the 1^st respondent had produced the following documents.

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Pre-sale notice dated 20.09.2023 along with paper publication

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Copy of the sale notice dated 02.11.2023 along with acknowledgment, newspaper publication, affixation photographs and Valuation Report.

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Sale confirmation letter and statement of accounts.

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The 1^st respondent had also produced the following documents along

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with another statement of objection on 07.03.2025

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Memorandum of deposit of title deeds dt.21.10.2014.

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Notice dated 23.12.2022 u/s.13(2)

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SA 287/2023

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Copy of the pre-sale statutory notice 30 days dt.02.11.2023

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along with paper publication.

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Copy of Sale Notice dated 03.11.2023.

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Possession Notice dated 13.03.2023.

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Auction confirmation letter dt.23.11.2023.

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Letter dated 28.12.2023 issued by the respondent to the auction purchaser.

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Letter dated 07.12.2023 by the Auction Purchaser to the Bank.

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Letter dated 24.01.2024 by Auction Purchaser to Bank.

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Sale certificate dated 28.02.2024 in favour of Auction Purchaser.

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The 1^st respondent had also produced the valuation report obtained at the time of sanctioning of the loan.

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The 2^nd respondent had filed their objection inter-alia contending that the measures taken and continued by the 1^st respondent is in accordance with statute. The 2^nd respondent had also reiterated the sequence of events, which led to the issuance of sale notice and conduct of sale. The 2^nd respondent had also taken the contention that the challenge as to the service of demand notice and possession notice is barred by limitation.

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Along with their statement of the 2^nd respondent had produced the following documents.

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SA 287/2023

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1. Memorandum of deposit of tittle deeds dt.21.10.2014

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1. Notice dated 23.12.2022 u/s.13(2)

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1. Copy of the pre-sale statutory notice 30 days dt.02.11.2023 along with paper publication.

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1. Copy of Sale Notice dated 03.11.2023.

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1. Possession Notice dated 13.03.2023.

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1. Auction confirmation letter dt.23.11.2023.

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1. Letter dated 28.12.2023 issued by the respondent to the auction purchaser.

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1. Letter dated 07.12.2023 by R2 to the Bank.

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1. Letter dated 24.01.2024 by R2 to Bank.

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1. Sale certificate dated 28.02.2024 in favour of R2.

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Even though the applicants had filed an application in IA No.739 of 2024

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seeking amendment of the SA incorporating a prayer to set aside the entire sale proceedings held on 23.11.2023 in pursuant to the sale notice which is impugned in the present SA and also for incorporating another prayer as to cancellation of sale certificate. The petition seeking said amendment was dismissed by the order dated 21.04.2025.

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Heard the Ld. counsel for the applicants and the respondents. Gone into

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the contention raised by all parties in the light of pleadings and evidence

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SA 287/2023

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available in the matter. The only issue that is to be gone into and decided

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in this matter is as to the legality of measures leading to the sale notice.

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The first and foremost contention of the applicants is that the respondent is not entitled to initiate and continue the measures as there exist no valid security agreement and that document evidencing creation of mortgage if any, is not sufficiently stamped. In reply to the same, the respondent had produced the Memorandum of Deposit of Title Deeds which evidences the creation of Security Interest by deposit of title deeds.

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The next contention of the applicants as to the alleged non-registration

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of security interest with the Central registry is also rebutted by the 1^st respondent had produced the copy of the CERSAI registration though belatedly, which was allowed to be produced on terms. Even though the applicants tried to assail the report so produced contending that from the report it is clear that the same is not approved by checker, this Tribunal is of the view that the report so produced proves substantial compliance of Section 26D of the Act.

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The Ld. counsel for the applicants contend that the respondent had failed to prove the compliance of Rule 3. In this regard it is to be noted that the receipt of demand notice and possession notice by the 1^st applicant is admitted in the SA. At the same time, the service of above notices on 2^nd

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SA 287/2023

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applicant is disputed. In the above position as admitted this Tribunal is

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of the view that the challenge as made by the applicants about the mode of service of demand notice and possession notice cannot be entertained at this stage as admittedly one of the applicants were served with the possession notice and demand notice. In view of clear admission of the applicants that the 1^st applicant had been served with the possession notice, this Tribunal is of the view that having received the possession notice the applicants failed to challenge the same. Now the person who admitted to have received the possession notice and failed to challenge the same at appropriate time, cannot join the other person and contends that the service of possession notice is not proper. Hence this Tribunal is of the view that the claim of the applicants as to the service of possession notice is time barred.

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The next contention taken by the applicants is that though the NPA classification was done on 09.11.2015, the demand notice was issued after several years on 23.12.2022. This Tribunal is of the view that there is no merit in the said contention as long as the claim of Secured Creditor is within limitation and the lapse of time, if any between NPA classification and issuance of demand notice will not invalidate the proceedings.

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SA 287/2023

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The next contention put forth by the applicants is as to the alleged under valuation of the property and alleged failure in fixing the Reserve price in consultation with the Secured Creditor. The applicants are also contending that when the valuation is made in the year 2014, the property was valued at Rs.5.83 crores, that too when calculated considering as agricultural properties. The applicants in support of the said contention had produced the valuation which they claimed have been taken at the time of sanctioning of the loan. The respondent is not disputing the genuineness of said valuation report as produced by the applicants.

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The sale notice produced by the respondent evidences that the reserve price is fixed at Rs.3,90,00,000/-. Even the valuation report produced in support of the said valuation the present market value is fixed at Rs.4.3 crores. It is also evident from the valuation report that the realizable value is fixed at Rs.3.9 crores and the distress value at Rs.3.4 crores. However, in the report the valuer had given a report as to the marketability of the property in head no.9(iii) that the “There are several commercial building along the Bangalore-Mysore highway, and demand for the kind of subject property is available in the primary market”.

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SA 287/2023

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Even though this Tribunal cannot substitute its wisdom with that of the approved valuer, this Tribunal is of the view that there is no justification for the secured creditor not to attempt to sell the secured asset at market value. This view is taken especially as the bid is fixed at Rs.3,93,90,000/which is also lower than the market value of the property.

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In this regard it is pertinent to note that in our country, fixing the saleable value of property is against the market value is not a standard process but rather practice of determining an accurate and justified asking price. Hence an arriving at saleable value it is necessary to carry out research on to the same. However, going by the parameters as stated in the valuation the valuer had given very positive response as to the nature of the property’. Hence taking into consideration the valuation procured at the time of disbursement of the credit facility wherein the same property when valued on 15.07.2014 that too in the presence of Bank’s representative at Rs.5,83,15,500/-. It is evident that there is some force in the contention of the applicants as to the alleged under valuation.

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Hence on consideration of the above, this Tribunal is of the view that there is substantial force in the contention of the applicants that the reserve price is fixed by reducing the value of property. However, this issue is to be viewed in the light of the fact that the impugned sale notice

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SA 287/2023

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is not the first one as no sale could take place in pursuant to earlier sale

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notice dated 21.09.2023. Therefore, in view of the above fact this Tribunal is of the view that the proceedings need not be interfered with on that ground alone. The contention of the applicants that no fresh valuation is taken after the failure of 1^st sale attempt does not have any merit as the valuation taken on 09.08.2023 and the sale was conducted on 23.11.2023.

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The Ld. counsel for the applicants further contends that the auction purchaser failed to pay the 75% of bid amount even during the maximum permissible extended period. It is the case of the applicants that by the action of the bank in extending more time than what had been provided under statute establishes “fraud’ and collusion and the sale needs to struck down on that ground. The Ld. counsels for the 2^nd respondent, the auction purchaser contends that the only issue before this Tribunal is as to the legality of the sale notice and not the conduct of sale. The Ld. Counsel for the 2^nd respondent placing reliance on the judgment of the Hon’ble Supreme Court. In “IDBI bank Ltd, V/s. Ramaswaroop Daliya and another” where in the Hon’ble Supreme Court held that the reason for non-issuance of sale certificate is solely attributable to the Bank and there were no latches on the part of the purchaser, the auction is bound

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SA 287/2023

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to be upheld even when the balance amount is not paid within the stipulated period. The said decision has no application in the present case as the case in hand, by the balance bid amount of 75% was deposited well beyond the time stipulated under the statute and the same can only be termed as procedural irregularity which goes to the legality of sale.

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In view of the finding entered as to the procedural irregularity of the sale conducted the question is to be answered is whether this Tribunal can grant relief to the applicants on that ground, the answer can only be in negative, for two reasons, one that the only lis before this Tribunal in the SA is as to the legality of the sale notice and not the conduct of sale. The second reason is that any sale by auction or other public procurement method once already confirmed or concluded ought not to be set aside or interfered lightly except on grounds that go to the core of such sale proceeds.

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Even though this Tribunal is in agreement with the legal proposition put forth by the applicant’s counsel that this Tribunal have jurisdiction to interfere with the action taken by the Secured Creditor after the stage contemplated under section 13(4) of the Act as declared by the Hon’ble Apex court in “Authorized officer, Indian Overseas Bank and Another v/s M /s Ashok Sawn Mill’ reported in AIR 2009(SC) 2420, this

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SA 287/2023

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Tribunal being the creation of statute cannot traverse beyond the scope of the ‘lis’ in the subject matter which is limited to the legality of the sale notice. In the absence of any challenge as to the conduct of sale other than by a belated attempt to amend the SA, which was rejected by dismissal of IA No.739 of 2024, this Tribunal cannot come in aid of the person who had been sleeping over his right and this Tribunal cannot interfere with the sale, though the balance bid amount is paid beyond the time prescribed under the statute.

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In the result SA No.218 of 2023 stands dismissed. All pending IA’s stands

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closed. The parties to bear their respective costs. Issue copies in accordance with rule 16 of the Debt Recovery Tribunal (procedure) rule.

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( Dictated to PS, transcribed by him, corrected, signed and pronounced by me in the Open Court, this 31^st day of October, 2025 )

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Sd./- (T. RAJESH) Hon’ble Presiding Officer DRT-II- BANGALORE

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Mr S Padmanabha Rao and Other v. Sir M Visvesvaraya Co. Operative Bank Ltd.

Case brief

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Mr S Padmanabha Rao and Other v. Sir M Visvesvaraya Co. Operative Bank Ltd.

Case brief

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