Allowed

M S Vasudeva Milk Foods Pvt. Ltd. v. State Bank of India

DRT15 Oct 2025SA/61/2023

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal allowed an application challenging recovery measures under the SARFAESI Act. The Bank was found to have violated Sec. 13(3A) by ignoring objections to NPA classification and failed to prove compliance with possession notice rules. All recovery measures were set aside.

What did the court decide?

All measures initiated by the Respondent Bank under the SARFAESI Act against the application schedule property set aside. Pending interlocutory applications disposed of.

M S Vasudeva Milk Foods Pvt. Ltd. versus State Bank of India — Banking and Recovery | DRT (2025)

¶1

IN THE DEBTS RECOVERYTRIBUNAL.IAT HYDERABAD

¶2

DATED THIS THE 14TH DAY OF OCTOBER

¶3

PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

¶4

sA.No.61./2023

¶5

Between:

¶6

M/s. Vasudeva Milk Foods Pvt. Ltd Office at 12-6-ll/4, Bagayanagar Complex Opp: BJP Office, Kukatpally, Hyderabad, Telangana Represented by its Managing Director Sri Kommaraju Satish, S/o. Sri S. Krishna Rao Rlo. HIG-72,3rd Phase, Opp: Water Tank, Kukatpally, Hyderabad

¶7

Sri Kommaraju Satish, S/o. Sri S. Krishna Rao, Age:. 44, Male, Occ: Business, D.No.59- 13-34/2A, Ground Floor, Gayathrinagar, Vij ayawada, Krishna District.

¶8

...Applicants

¶9

Versus

¶10

State Bank of India Stressed Assets Recovery Branch (SARB) 2"d Floor, TSRTC Bustand Complex, Koti, Hyderabad, Telangala State, Represented by its Authorized Officer.

¶11

...Respondent

¶12

Counsel for the Ch- Laksfuni Clnga
Counsel for the G. PrabLakar Sarma
z6* -W
Reserued on NE 12.O9.2025
Pronounced on 14.10.2025
* 1qo[T'rfi :
Uploaded on U 14.10.2025
r<l
R$*--,
The Applicants filApplicants filfil tization Application u/s. 17 of the
SARFAESI Act, challenging the measures initiated by the Respondent Bank
under the Securitization Application right from classification of the loan

¶13

The Applicants filApplicants filfil

¶14

2 SA.No.61/2023

¶15

accounts of the Applicants as N.P.A, including the sale notice dated 09.O1.2023, fixing the auction of the schedule properties on 24.O2.2023 as illegal, arbitrary, highhanded and in violation of the principles of natural justice.

¶16

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

¶17

The Applicant No.l is an MSME unit with GST registration engaged in the activity of manufacturing and distribution of milk and milk based products. The Respondent Bank officials of Narsapur X Roads Branch induced the Applicant no.1 to take over a sick dairy unit viz., M/s. Madhura Dairy Pvt. Ltd., at Guntur by promising sanction of credit facilities up to Rs.10.00 crores to Applicant no. 1 and additional facilities to M/s. Amaravathi Milk Foods Pvt. Ltd., for procurement of milk. Based on the assurances given by the Respondent Bank, the Applicants purchased the factory land and building of M/s. Madhura Dairy Pvt., Ltd., for a sale consideration of Rs.4,63,75,000/- and incurred additional cost of Rs.40,00,000/- towards stamp duty and registration fee. The Applicants further invested an amount of Rs.3.50 Crores towards purchase of plant and machinery of the dairy unit. The Respondent Bank at Narsapur Cross Road Branch had sanctioned Cash Credit facility of Rs.2.00 crores and Term Loan limit of Rs.3.00 crores only towards purchase of the factory land. As per the terms and condition of the sanction letter dated 05.08.2017, the Bank had undertaken to ensure that it would extinguish the existing n the sick industry i.e., M/s.Madhura Dairy Pvt. Ltd., and ed undertaking from Applicant no.2 that the other unit i.e., M/s. Amaravathi Milk Foods would not avail

¶18

)t casfi-credit from other banks for procurement of milk. As a 1 Ae80htfflzStrre licants offered factory land and building at and Gram Panchyat, Dachapalaai Mandal,

¶19

Commercial Residential Plot in Manikonda Village

¶20

Unguturu Mandal, Krishna District and Commercial

¶21

sn.No.ot)zozs

¶22

Plot admeasuring 2.o8 cents in vijayawada in favour of the Respondent Bank Narsapur cross Road Branch. However, the Respondent Bank at Narsapur Cross Road Branch failed to extinguish the charges and release the securities of promoters of M/s. Madhura Dairy as promised, due to which the said promoters repeatedly visited the factory and disturbed the operations of the Applicant no.1 unit which affected the business of Appticant no.1 and further the Bank has failed to release the additional facilities as promised to Applicant no.1 and M/s. Amaravathi Milk Foods due to which the Applicants were unable to achieve the original targets.

¶23

ii)

¶24

The Applicant no.l account was renewed and an additional cash Credit facility of Rs. 1.00 Crores was sanctioned for migration of limits from corporation bank vide sanction letter dated 27.o3.2o1g and the entire cash credit limit of Rs.3.00 Crores was extended for a period of one year i.e., up to 26.03.2019. Due to demonization and introduction of G.s.T, the entire economy more particularly dairy industry was severely affected. However, the Applicant no.1 has been managing to serve the instalments in Term Loan accounts and was within its sanctioned limits with respect to Cash Credit account. Further, the Term Loan facility is repayable up to 2022.

¶25

iii) while things stood thus, the Respondent Bank at Narsapur cross Road Branch declared the accounts of Applicant no.l as N.p.A on 31.01 .2019 and issued Demand Notice u/s.13(2) of the SARFAESI Act on 0L.o2.2o19. The Applicant no.1, after receipt.of the said notice, has raised objections vide letter dated o4.o3.2o19 and requested the t Bank to implement the R.B.I Circular dated 01.01 .2OIg

¶26

6t^{-- --# toT} the existing loan accounts. The Respondent Bank has Y ,&i,,.a id objections but tailed to either respond or act in

¶27

1 4 &gfffice S\b^{,r." same. rhe action of the RespondentBank in} accounts as N.P.A when its cash credit

¶28

;]","',i;r.- i. "^/1,:', l)- l 'c,-\r a,..^'al r.,u.ii^facility {*;l-a the Applicants had been regularly paying :.I":.',.l-^-. :'t'r\ \a if: Loan account and further, inaction on \-* v i''

¶29

sa.uo.at)zozz

¶30

the part of the Bank in implementing the R.B.I Circular dated 01.01 .2019, when the Applicants'unit is a running and viable unit is illegal, arbitrary, highhanded and violative of R.B.I circular dated 01.01.2019. The Respondent Bank Narsapur cross Road Branch issued notice dated 08.04.2019 informing the Applicants that the loan accounts are migrated to Respondent Bank i.e., stressed Assets Management Branch, Koti and the Respondent Bank in the month of May 2019 has taken possession of the factory premises and seized the plant and machinery. The Applicant has visited Respondent Bank on various occasions and requested for rehabilitation/restructuring of the loan accounts by giving a representation dated 27.o3.2oLg. However, the Respondent Bank had not acted in accordance with the same.

¶31

iv) The Respondent Bank has published notice of sale dated 01.03.2020 in Sakshi Newspaper on 16.03.2020 bringing Applicants,mortgaged properties for sale on 20.O4.2O2O. The Respondent Bank has failed to fix the reserye price of the properties as per the market value and undervalued the properties. The Respondent Bank has failed to follow the mandatory provisions of Rules 8(1), 8(2), s(6), s(z) and 9(1) of the security Interest (Enforcement) Rules, 2oo2. Hence the s.A.

¶32

The Respondent Bank filed its Reply Statement denying all the adverse allegations made in the Application. The contentions of the Respondent Bank, in brief, are as under:-

¶33

The Applicant no.1 compafly, in which Applicant no.2 and his wife ommaraju sravani are the Directors, has availed cash credit s.3.0o crores and rerm Loan limit of Rs.3.00 crores from .#q Road Branch of Respondent Bank by executing necessarv and security documents from time to time. The 4 0r[p?m,,,; 2 and his wife Smt. Kommaraju Sravani stood as the due repayment of said loan facilities. As security, &.u- ,, ts have extended the equitable mortgage over their

¶34

5 5A.No.612023

¶35

respective immovable properties described in the S.A. schedule. The Applicant No.l Company has hypothecated plant & machinery, stocks, current assets, book debts, receivables etc. After availing the said loan facilities, the Applicant no. 1 Company committed irregularities in operating the loan accounts and failed to repay the outstanding loan amounts as agreed. The Applicant No.1 Company also failed to pay the interest accrued to the loan accounts from time to time. The Applicant no. 1 company also failed to route business transactions through the loan accounts and also failed to submit the stock statements and financial data from time to time. On inspecting the unit of the Applicant no. 1 Company it was found that the Applicant no. 1 Company stopped functioning in 2O18. As the unit became defunct, the Respondent bank had no alternative except to classify the accounts as N.P.A in accordance with the R.B.I guidelines. Thereafter, the Narsapur Cross Road Branch of the Respondent Bank initiated recovery proceedings under the provisions of the SARFAESI Act, 2OO2 and issued Demand Notice dated Ol.O2.2Ol9 calling upon the applicants and Smt. Kommaraju Sravani to repay the outstanding loan amount of Rs.5,91,15,964.61ps as on 31.01.2019 together with interest and costs within 60 days and the said notice was served on the Applicants. As regards the contention of the Applicants that the Respondent Bank had not issued any reply to the letter dated 04.03.2O19 issued by the Applicants is concerned, in the said letter, the Applicants have not raised any technical or procedural objections but has merely requested the Bank for turing of debt. The Applicants are ineligible for restructuring - B.l Circular as the Applicants' unit was defunct in 2018. //6-times the Bank had offered for settlement by way of rtu .t. but, e-{{RRlicants have failed to settle their dues. n 14 0[I^7tl25 aⁱⁱ⁾ As the failed to repay the outstanding loan amount even L5 d$. tt .a.* / f after-roEqipt;i5f Demand Notice, the loan accounts of the Applicants Nrh ^^{, r.-J. .1 ,a>." .j/} t+qdybtfE1il ^igrated from Narsapur Cross Road Branch to the t Bank i.e., Stressed Assets Recovery Branch (SARB) Koti,

¶36

¶37

5A.No.612023

¶38

Hyderabad on administrative grounds for further follow up of the loan amounts. After migration of the loan accounts, the Respondent Bank got issued legal notice dated 15.10.2019 calling upon the Applicants and another to repay the outstanding loan account together with interests. As the Applicants failed to liquidate their liability, the Respondent Bank filed oA.No.T4z l2ol9 before this Tribunal for the recovery of sum of Rs.6,54,35,258.g2ps together with interest and the said OA was decreed ex-pa-rte ot lZ.O2.2O2O.

¶39

iii) As the Applicants failed to repay the outstanding loan amounts together with interest, the Respondent Bank continued the SARAFESI proceedings by issuing notices from time to time and on Il.O3.2O2O issued Sale Notice fixing auction of the secured assets on 2O.O4.2O2O, challenging which the Applicants filed W.p.No.6 S4g /2O2O before the Hon'ble High Court of Telangana at Hyderabad. In pursuance of the interim orders in the said Writ Petition, the auction of the properties was not conducted. Thereafter, at the request of the Applicants herein the Honble High Court dismissed the said Writ petition as withdrawn vide order d,ated 22.09.2022. After the dismissal of the Writ petition, and as the Applicaats have not settled the loan accounts, the Respondent Bank continued the recovery proceedings under the SARAFESI Act,2OO2 and issued sale notice dated 09.01.2023 fixing the auction on 24.O2.2O23. However, the auction did not materialize on the said date for want of bidders. The Respondent Bank once again issued sale notice dated 16.09.2023 fixing auction on lZ.lO.2O23.

¶40

the auction failed for want of bidders. The Respondent bank in issued sale notice dated 01.02.2024 fixing auction on Again, the auction failed for warrt of bidders. The

¶41

bank fixed the reserve price of secured assets after

¶42

1 4 0Cbut$ring reports from its empanelled valuers. There are no merits application and the SA is liabte to be dismissed.

Counsels.

SA. No.61/2023

Now, the points that arise for consideration are,-

¶47

Whether the Applicants have made any valid grounds for setting aside the proceedings initiated by the Respondent Bank under the SARFAESI Act against the application schedule property?

¶48

ii) To what relief.2

¶49

Point No.lil*

¶50

6- There is no dispute regarding the fact that the Applicants availed credit facilities from the Respondent Bank by creating securit5r interest over the application schedule properties in favour of the Bank.

¶51

At the very outset, Ld. counser for the Appricants contended that, even when the Applicants were serving the instalments in Term Loan account and when the occ account was within sanctioned limits, the Respondent Bank has wrongly classified the loan accounts of the Applicants as NpA on 31.01.2019 and issued Demand Notice u/s.13(2) of the SARFAESI Act. Ld. counsel further contended that, after receipt of the said Demand Notice, the Applicant No. 1, vide letter dt.04.03.2019, has raised objections and requested ttre Respondent Bank to restructure the existing loan accounts of the Applicants by implementing RBI circular dt.01.01.2019 a,.d the Respondent Bank even after receipt of the said objections, did not consider the said representation/objections and give to same and thus, the Respondent Bank has violated Sec. 13(3,4) of the Act.

¶52

,(rnr g-

¶53

g- Counsel appearing for the Respondent Bank contended that, 1 4 0ffi.2flflplicant$.have^{failed to pay the interest} accrued to the loan account ,^{failed to route} the business transactions through the loan to submit the stock statements & financial data from time the Applicant No.l unit was defunct in the year 20lg and so, Espondent Bank has classified the loan accounts of the Applicants as

¶54

,o.*o.rriroy

¶55

NPA and issued the Demand Notice u/s.r3(2) of the SARFAESI Act,2oo2 on ol.o2.2oL9. Ld. counsel also contended that, the Applicants in the said letter dt.04.o3.2or9, the Appricants have not raised any technical or procedural 0bjections and they have merery requested the Bank for restructure of the debt. Ld. counsel further contended that t].e Applicants are not eligible for restructuring of the roan as the Applicant No. r unit was defunct in the year 20lg. Ld. counser for the Respondent Bank, therefore, contended that, there is no violation of Sec.13(3A) of the SARFAESI Act by the Respondent Bank.

¶56

I have perused the letter dt.04.03.2019 addressed by the Applicant to the Respondent Bank, after receipt of the Demand Notice by them. The Applicant No.l in paragraph 2 of the said letter has stated that they have been regularly paying the EMI and that Bank has declared the account as NPA and that as per the guidelines issued by the Finance Ministry and RBI, the declaration of their account as NpA is bad under law and they desist from taking any further action under the SARFAESI Act. The relevant portions in the said letter are extracted below for better appreciation of the facts:-

¶57

"Sub: Restructure of Loan account m/s. Vasudeua Milk Foods Put. Ltd as per RBI Circular dt.O1-O1-2O19 and objections do demond notice dt. O 1. 02. 2 O 1 9.

¶58

EEeil\ demonetization and GST utere a little bit irregular in of the dues. WV ith tout oreiudice to the aboue we taould. 14 0[r

¶59

¶60

SA.No.61/2023

¶61

uiable and desbt from takinq qnu further action under SARFAESI Act.

¶62

It is very clear from the aforesaid portions of the said letter dt.04.03.2019, issued by the Applicants to the Respondent Bank, after receipt of the Demand Notice issued u/s.13(2), that, the Applicants have objected the declaration of their loan account as NPA and asked the Bank to stop further action under the SARFAESI Act. The Applicants while objecting the declaration of their loan account as NPA, requested the Bank to restructure their loans as per the RBI Circular. The Respondent Bank has not denied the receipt of the said letter. The Respondent Bank ought to have considered the same and sent a suitable reply to the Applicants as contemplated u/s.13(3A) of the SARPAESI Act. Inaction on the part of the Respondent Bank to the said letter dt.04.03.2ol9, issued by the Applicants, is a violation of Sec.13(3A) of the SARFAESI Act.

¶63

The Applicants in their application (SA) have also contended that, the Respondent Bank has violated Rules g(1), (2), (s), (6) and 9(1) of the security Interest (Enforcement) Rules,2OO2. The Respondent did not bring on record the proof of service of Possession Notice, issued u/s.13(a), ofl the Applicants, affixture of Possession Notice on the secured asset and publication of Possession Notice in two newspapers. so, the Respondent Bank has failed to establish the compliance of Rule 8(1) & (2) of the Security L".Lgg",t^{(Enforcement) Rule s, 2OO2.}

¶64

d@-fuonoftheapp1icationschedu1epropertycontemplatedon

¶65

:! ,,1^N 2@!'-2o2s,fg\uant q'. P, \1 to Sale Notice dt.09.0t.2O23, has railed, it is of no i : I tffi"i,ft!".^toSlve into the issues whether the RespondentBank has '^:i, co-rflir1idfl*vith8r$es 8(5), 8(6), 8(7) and 9(1) or not. *i I

¶66

l:,'. ..'',1, ::l a.d

¶67

,^{i&,1I1 y:SX"FXFS,.;&resaid discussion,} hr" -r t I hold that the Respondent Bank has ._,^{.'i;.i lll.- -*:t1",/"1'}

¶68

: ... '^{]fajllrqqflibtr6ly} j-'.:\ F^{with Sec.13(3A) of the SARFAEST Act and failed} to establish '-;-]::----=5 ihnce of Rules 8(1) & (2) of the Security Interest (Enforcement) Rules,

¶69

se.no.elfzas

¶70

2oo2, w},ile issuing the Possession Notice u/s.13(a) of the SARFAESI Act. so, the present sA is liable to be allowed by setting aside all the measures initiated by the Respondent Bank under the SARFAESI Act against the application schedule property. Accordingly, this point is answered in favour of the Applicants and against the Respondent Bank.

¶71

Polnt No.llll:-

¶72

In the result, the present Securitization Application is allowed by setting aside all the measures initiated by the Respondent Bank under t.I.e SARFAESI Act against the application schedure property. consequently, the Interlocutory Applications, pending ifany, shall stand disposed of. No order as to costs.

¶73

Communicate a copy of this order to the parties concerned.

¶74

(Dictoted to the Pivote secretdry' trunsc bed by her, cor.ected, signed ond prcnounced by tne in the open coutt on thls the 73th doy ol october, 2025).

¶75

sdl(G. coPrcHANDl PRESIDING OFFICER

M S Vasudeva Milk Foods Pvt. Ltd. v. State Bank of India

Case brief

What is this about?

What did the court decide?

M S Vasudeva Milk Foods Pvt. Ltd. v. State Bank of India

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

Coram

Case details

Similar cases

Smt Kethe Swathi versus Development Credit Bank Ltd.

P Bala Rathnam versus Canara Bank

State Bank of India versus Mr. Ramireddy Nanda Kishore

Union Bank of India versus Mrs. Vaddalapu Srilatha

Smt. S.N. Vani Ram, and others versus Pridhvi Asset Reconstruction and Securitization Company Limited

kousar Sultahna versus Karnataka Bank Limited