Allowed

Smt Leelavathi v. Karnataka Bank Limited

DRT22 Aug 2025SA/380/2022

Case brief

AI extract

What is this about?

The Tribunal an application challenging a sale notice issued under the SARFAESI Act. It held that proceeding to sell property after the borrower's death is ab initio void. The notice and consequential sale were set aside, and the auction deposit was ordered to be returned with interest.

What did the court decide?

Sale notice dated 02.08.2022, consequential sale, and sale certificate set aside; bank to return deposit with 8% interest.

Smt Leelavathi versus Karnataka Bank Limited — Contract and Commercial Disputes | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU

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Dated this 22^nd Day of August, 2025

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Present: Sri. T. RAJESH Presiding Officer SA.No.380/2022

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BETWEEN:

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Smt. Leelavathi Wife of Late Kariyappa, Aged aboput 55 years, No. 18, Khizar Pasha Layout, Indira Nagar, Bidadi Own & Hobli, Ramanagara Taluk & Dist- 562 109.

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…APPLICANT

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AND:

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Karnataka Bank Ltd., Assets Recovery management Branch, 1^st Floor, FKCCI Building, Kempegowda Road, Bengaluru- 560 009. Represented by Authorised Officer.

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Branch Head, Karnataka Bank Limited, Bidadi Branch, No. 1607/837, Ground Floor, Nelligudde Tank Road, Bidadi- 562019, Ramanagar Taluk & Dist.

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Mrs. Suma S.B, W/o Mr. Umashankar K.S, R/at No. 40, Renuka Nilaya, Kenchanakuppe, Bidadi, Ramanagara

...RESPONDENTS

SA 380/2022

Counsel on record/appeared for:

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Applicant : B.V. Krishnappa & Associates Respondent No.1 & 2 : M/s. Sunil Legal Associates Respondent No.3 : Tanuja V.J

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FINAL ORDER

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This Securitization Application, in short S.A is filed under sub section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002, herein after referred to as “SARFEASI Act” or “The ACT”. The Sale notice issued by the 1^st respondent is under challenged in this SA by the applicant. The case of the applicant as put forth in the SA can be summarized as follows.

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The applicant is the legally wedded wife of Kariyappa, who along with his two children availed credit facility/ mortgage loan from the respondent No.1. It is also admitted that one Shivarudramma and Devamma who are elder sisters of Kariyappa along with one of his relative namely Gantappa stood as guarantors for the respect of the mortgage loan.

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It is also stated that Kariyappa expired on 24.11.2021 and the EMI amount was well available in the SB Account with the bank. It is also stated that the applicant was not aware as to when the loan account was considered as a stressed account till the bank affixed the possession notice on the property and only on 02.08.2022 the

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SA 380/2022

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applicant came to know about the measures. It is specifically contended that exorbitant amounts were demanded without properly giving credit to the remittances to the loan account. It is also the case of the applicant after the demise of Kariyappa the property devolve upon the applicant herein, who is also class I legal heir of her husband and is entitled to have a share in the schedule property. In the grounds to the SA, apart from reiterating the contentions as taken in facts of the case the applicant is contending that the respondent had failed in following the procedure as contemplated in the Rules in their measures leading to the Impugned Sale Notice. The documents produced by the applicant are annexed at the end of this order.

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Since the property was already been assigned in favour of the auction purchaser, the auction purchaser is made a party as additional third respondent. The auction purchaser had entered appearance through counsel by filing vakalath but has not filed any objections.

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The first respondent had filed their objections contending as follows, the applicant is not entitled for relief sought for in the S.A. The contention of the applicant as to the availment of the credit facility by applicant’s husband along with their two children were admitted by the applicant. It is also contended that credit facility was not promptly repaid resulting the classification of the loan

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SA 380/2022

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account as NPA on 30.08.2019 and issued the demand notice n 24.02.2021. It is specifically stated in the objections that the demand notice issued to Kariyappa has been returned “Unclaimed” and hence the same was published in two newspapers.

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It is also stated that the borrowers namely Kariyappa and others failed to respond to the demand notice resulting in the issuance of the possession notice dated 27.10.2021 and the same was also published and affixed as required under the statute. It is also specifically contended that the son of Kariyappa had requested the bank vide letter dated 10.06.2022 intimating the death of the borrower Kariyappa on 24.11.2021 and sought 15 days time to set right the dues. It is admitted that the bank has deferred the sale based on the above representation and as no payment was forth coming the bank had proceeded to issued the sale notice dated 02.08.2022 which was issued, published and affixed as required under the statute.

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It is also stated that the auction purchased had deposited 25% of the bid amount as per the terms of the auction and the applicant has failed to exercise her right of redemption of the property and if at all any right is there the same is lost by virtue of S.13(8) of the Act. It is also pointed out that the right of redemption is only available before the publication of the sale notice and not later. The 1^st respondent in their objection has specifically denied all the

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SA 380/2022

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contentions of the applicant and have produced the documents as Annexure R-1 to R-16 and vide memo dated 15.02.2023 has produced 4 extra documents Annexure R-17 to R-20 which are also enlisted at the end of this order.

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Heard the counsel for both sides.

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The only issue arise for consideration is this matter is as to legality of the measures leading to the issuance of sale notice and consequential sale if any conducted in pursuant to the same.

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Though the applicant has taken the contention as to the legality of the procedure followed by the 1^st respondent and contend that the 1^st respondent had failed to issue the pre classification notices to the borrower and guarantors, this Tribunal in not going into the said issue as the applicant is neither a borrower nor a guarantor. Similarly the contention as to the alleged failure of the bank in properly giving credit to the repayments made to the account is also not available to the applicant who is neither a borrower nor a guarantor.

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Now the pivotal question that needs to be looked into is as to the legality of the measures continued by the 1^st respondent despite the death of the borrower. Along with the SA the applicant has produced the death certificate of Principal Borrower namely Kariyappa which evidences the date of death as 24.11.2021. The demand notice is issued on 24.02.2021, hence as on the date of

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SA 380/2022

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issuance of demand notice the deceased borrower was well alive. The 1^st respondent had produced the proof as to the compliance of Rule 3 of Security Interest Enforcement Rules and the applicant contention in that regard is liable to be declined.

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However it is seen that the possession notice is issued on 27.10.2021 that too at a time that deceased borrower was alive, the proof as to the compliance of Rule 8(1) & (2) of Security Interest Enforcement Rules are also forth coming as the 1^st respondent has produced the proof as to the dispatch, publication and affixture of the possession notice. Even going by the statement of objections filed by the 1^st respondent it is evident that the sale notice is dated 02.08.2022 which was published on 04.08.2022 and affixed on 02.08.2022 all are subsequent to the date of death of the deceased borrower.

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In this regard it is contended by the counsel for the 1^st respondent that, the legal heirs of the deceased borrower including the applicant had never intimated the 1^st respondent about the demise of the deceased borrower till a letter dated 10.06.2022 which was issued by one of the Co-borrowers, that too seeking 15 days time to pay off the liability. This Tribunal is not inclined to accept the said contention for two reason:1) Legal representatives including the applicant is under no legal obligation to intimate the respondent bank about the death of the deceased

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SA 380/2022

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borrower and it is bounded duty of the bank officials to find out the status of the borrower especially when they have already initiated measures under the Act. 2) Another reason which this contention cannot be accepted is that even the 1^st respondent admits that on 10.06.2022 the letter was issued by one of the Co-borrower intimating the death of the principal borrower on 24.11.2021 and issuance of subsequent sale notice on 02.08.2022 having knowledge about the death of the borrower at least on 10.06.2022 cannot be justified for whatever reasons.

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Hence admittedly the sale notice was issued and proceedings were conducted against the dead person which is Ab-Initio-void and cannot sustain in the eye of law. Transfer of a secured assets cannot be made, that too without intention of the court, as provided under the Act, without informing the owner of the property. Admittedly after the death of the mortgagor, the legal representatives including the applicant became the owner of the property and the sale conducted through these is liable to be set aside.

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In view of the discussions as held above the only conclusion the Tribunal can arrive at is that the sale notice is issued and proceeded to sell the property of a deceased person cannot sustain in the eye of law especially as the 1^st respondent bank is themselves admitting that as on 10.06.2022 they came to know

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SA 380/2022

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about the death of the principal borrower which in turn oblige them to initiate fresh measures rather than continue the measures already initiated. Hence, apparently there is procedural flaws in the measures leading to the issuance of the impugned sale notice and consequentially the same is to be set-aside.

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The Property is already auctioned in pursuant to the impugned sale notice which is already found to be not in accordance with the statute. The question regarding to the validity of sale is only academic in nature in view of the fact that the impugned sale notice leading to the sale is not sustainable.

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Hence this Tribunal on consideration of the above facts the SA

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is liable to be allowed on following terms:

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S.A No. 380/2022 stands allowed.

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The sale notice dated 02.08.2022 and consequential sale held in pursuant to the same are set aside and the consequential sale certificate issued the 1^st respondent bank in favour of the auction purchaser is also set aside.

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The bank is liable to return the amount deposited by the Auction purchaser with 8% (Simple) from the date of payment of entire sale consideration.

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Interim order, if any granted and subsisting till this day stands vacated.

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Pending I.A’s if any are all disposed of in terms of this Order.

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SA 380/2022

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No order as to cost.

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Issue copy to all parties concerned.

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[Dictated to the Stenographer (AJ), transcribed by her, corrected and signed and pronounced by me in

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the Open Court, this the 22^nd Day of August, 2025].

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Sd/- (T. RAJESH) PRESIDING OFFICER

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ANNEXURES

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DOCUMENTS FILED BY APPLICANT

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List of Documents
ANNEXURE-A-1:Original Sale notice of immovable property dated 02.08.2022
ANNEXURE-A-2: Copy of the Aadhar Card pertains to appellant Smt. Lilavathi
ANNEXURE-A-3: Copy of the death certificate of Shri. Kariyappa, the husband of the appellant
ANNEXURE-A-4: Copy of the bank statement pertains to the husband of appellant i.e, Shri. Kariyappa
ANNEXURE-A-5: Copy of another bank statement of husband of the appellant i.e, Shri. Kariyappa

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DOCUMENTS FILED BY 1^ST RESPONDENT

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Annexure R1- attested copy of demand notice dated 24.02.2021 issued u/s 13(2) of SARFEASI Act 2002	Annexure R12- news paper publication of sale notice
Annexure R2- attested copy of postal receipt for having sent the demand notice dated 24.02.20201	Annexure R13- Copy postal receipt for having sent sale notice and postal covers addressed to the respondents
Annexure R3- attested copy of the un-claimed postal covers addressed to the respondents and postal acknowledgement	Annexure R14- photographs for having affixed sale notice
Annexure R4- attested copy of the postal track	Annexure R15- Valuation report

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SA 380/2022

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Annexure R5&R6- attested copy of the paper publication of 13(2) notice	Annexure R16- Copy of the CERSAI search report
Annexure R7- attested copy of the possession notice dated 27.10.2021	Annexure R17- Copy of the letter dated 10.06.2022 issued by Sri. Kiran son of late kariyappa
Annexure R8- Copy of postal receipt 7 acknowledgement for having served the possession notice dated 27.10.2021	Annexure R18- Copy of the E- auction proceedings
Annexure R9 & R10- Copy of the newspaper publication dated 30.10.2021 publishing the possession notice dated 30.10.2021	Annexure R19- Confirmation of auction dated 7.9.2022
Annexure R11- Copy of the photographs for affixing the possession notice	Annexure R20- Sale certificate dated 5.11.2022

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Sd/- (T. RAJESH) PRESIDING OFFICER

Smt Leelavathi v. Karnataka Bank Limited

Case brief

What is this about?

What did the court decide?

Smt Leelavathi v. Karnataka Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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