Allowed

Ramakanth Inani v. State Bank of India

DRT23 Jan 2026APPEAL/1/2022

Case brief

AI extract

What is this about?

This appeal concerned restitution for third-party auction purchasers whose sale was set aside due to concealed litigation. The Tribunal allowed the appeal, modifying the recovery officer's order to direct the bank to refund the bid amount, poundage fee, and verified security/legal expenses with 12% annual interest.

What did the court decide?

Refund of bid amount Rs.82 lakh, poundage Rs.82,000, and security/legal expenses with 12% p.a. simple interest from dates of deposit on refundable amounts.

Ramakanth Inani versus State Bank of India — Income Tax | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL AT HYDERABAD

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DATED THIS THE 23RD DAY OF JANUARY, 2026

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PRESENT: SH. RAMESHWAR KOTHE,B.Com, L.LB.(Hons.), M.A. PRESIDING OFFICER

¶4

Recovery Appeal No.01 of 2022 In R.P.No.72B of 2018 In OA.No.123 of 1997

¶5

Ramakanth Inani S/o Venugopal Inani Aged about 58 years, Occ:Business

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Smt.Champadevi Inani, W/o Lakshmikanth Inani Aged about 58 years, Occ:Housewife

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Smt.Anuradha Inani, W/o Vishnukanth Inani Aged about 45 years, Occ:Housewife

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All R/o G-15, Raghava Ratna Towers Chirag Ali Lane, Hyderabad)

¶9

....Appellant

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Versus

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State Bank of India Agri-Busines Branch, Hyderabad

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M/s Auriferious Aqua Farms Limited, Hyderabad

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M. Sreedhar, Hyderabad

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G. Gopal Reddy, Hyderabad

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Madhukar R. Bhangay, Hyderabad

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(R-2 to 5 are not necessary parties to the present case) .......Respondents

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Counsel for the Appellant : Mr. Sharad Sanghi

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Counsel for the Respondent No.7 : Mr. G. Sanieeva Reddy

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.:M-B:-

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This Recovery Appeal is filed under Section 30(1) of the Recovery^of Debts and Bankruptcy Act, 1993^("RDB Act" in short) by the applicantsⁱⁿ M.P.No.29412018 in RP No.728120L8 in OA No.1231L997 to^{set asidethe}

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ffiot>v

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2olTL

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RA N1.O1/2O22^{in RPNo.728/2018in O.A-123/1997}

¶24

order dated 02.O2.2o22(partly)^{passed by the learnedRecovery Offlcer} and consequently^{grant interest @18o/o p.a. instead of 5 500/oon Rs'8282} lakhs from the date of^{payment by the appellant, Rs.58.56 lakhstowards} expenditure incurred on^{deploymentof security togetherwith interest} @18o/o^{and Rs.3 lakhstowards constructlonof watchman rooms and Rs 3} lakhs towards legal^{expenses with interest @18o/o p.a. thereon'}

¶25

Respondent bank filed counter^{resisting the Appeal.}

¶26

Heard learned counsel^{for the appellantsand learned counsel for the} respondent bank. Perused^{the writtensubmlssionsfiled for the appellants} as well as for the^{respondent bank and the material records.}

¶27

It is contended^by the^{learned counselfor the appellantsthat they} are third^{parties who were declared as successful bidders in the auction} held on 09.01.2003 in^{respect of the property bearing P/otNo.623/3} admeasuring 1593 Sq.Yds situated^{at Road No.34,)ubilee Hills,} Hyderabad for a total sale^{consideration of Rs.82lakhs.The learned} Recovery Officer issued a^Proclamation of^{Sale under Rule 52(2),} Schedule-II of the I.T. Act and^{published,pursuant to whichappellants} participated in the auction sale. They deposited 250lo of the^{bid amount} vlde demand drafts dated 08.01.2003^{for Rs.20.50 lakhs and dated} 09.01.2003 for Rs.1.32 lakhs.^{Thereafter, on vlsit they found a hoarding} .in^{the subject property claiming that the District Collector,Hyderabadwas} the owner of the^property and the^{same was the subject matterof LOC} No.1 of 2002 before the Land Grabbing Court.^{The Land GrabbingCase} No.1 of 2003 was filed by the^Revenue Authorities of^{the State} Government between issuance of^{Proclamationof Sale on 27.11.2020 and} auction sale on 09.01.2003.^{Madhukar Bhangay/guarantor submitteda} letter dated 04.01.2003 to the learned Recovery Officer asking him^to stay the auction sale in view of the^pendency of the land^grabbing case. However, the auction was conducted by concealing the^litigation. Thereupon appellants approached the Recovery Offix*:o extended / l )-''.-.r. ,1-/'t}"'

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RA No.01/2022 in RP No.728/2018 in O.A.123/1997

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time with due consent of the respondent bank ti||16.10.2003 to^pay the balance consideration of Rs.61.50 lakhs and the appellants deposited the same by 13.10.2003. With the orders of Recovery Officer dated 23.06.2004, appellants made security arrangements at the property at their own cost. However, the entire sale proceeding was set aside by order dated 23.12.2009 in M No.3/2009 filed by Madhukar R. Bhangaymortgagor. The matter was carried to Hon'ble Supreme Court by filing SLP (C) No.5433 of 2018 which was dismissed on 17.05.2018^granting liberty to the appellants to approach the Recovery Officer for refund of the amount with interest. A total claim laid before the Recovery Officer was Rs.1,53,34,999/- which included bid amount, poundage fee, taxes, electricity charges, security expenses, legal expenses that were borne by the appellants. Appellants came back to the Recovery Officer, filed MP No.29412018 seeking refund of amounts, Learned Recovery Officer granted refund of bid amount of Rs.82 lakhs with simple interest @5.5% p.E., property tax and electricity charges but rejected claim over poundage fee, legal expenses, security deployment expenses.

¶31

It is further contended that the despite his own version that it was for the appellants to put security, learned Recovery Officer did not take into consideration the security had been kept as^per the orders dated 23.06.2004 of the Recovery Officer. He did not assign any reason for granting interest @5.5olo and not allowing expenses. The appellants are entitled to interest @ 18o/o p.a. Learned counsel relied on the^following judgements in support of his submission:-

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i. Hon'ble Supreme Court in Mathew Varghese vs.^M. Amritha Kumar^& Others, 2014 (5) SCC 610;

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ii. Hon'ble High Court of Andhra Pradesh in Mandava Krishna^Chaitanya vs. UCO Bank, 2018 SCC OnLine Hyd 196;

¶34

iii. Hon'ble High Court of Judicature, Telangana &^{AndhraPradesh in} Polisetty Haranadh Muralidhar^vs. Authorized Officer,^{Indian Overseas} Bank,2O16 (6) ALD 409 (DB);

¶35

iv. Hon'bte High Court of Judicature, Telangana &^{AndhraPradesh in} Laxmi Priya Rice Mill, Guntur District vs' State^{bank of India, 2016} (6) ALD 23s (DB);

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Q$o$

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4of11

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RA No.07/2022 in RP No.728/2018^{in O.A.123/1997}

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v. Hon'ble Supreme Court in Vasu^{P. Shetty vs. M/s Hotel Vandana} Palace, 2014 AIR SCW 2488;

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vi. Hon'ble High Court of Judicature,^{Telangana & AndhraPradesh in V'} Ravi Kumar vs. UCO Bank, MANU/AP/0398/2018;

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vii. Hon'bte High Court of Andhra^Pradesh at^{Amaravatiin Mandava} Srinivasu vs. State Bank of India^{& Others, 202iSCC OnLineAP} 1301.

¶42

The auction was held on 09.01.2003,^{the appellants immediatelyon} 15.01.2003 came to know about^{land grabbingcase and reported to the} learned Recovery Officer whereupon^{he grantedtime till 16.10'2003 vide} order dated 18.09.2003 with an observation that^{confirmationwill be} issued soon after the matter is disposed^{in the Special Coutt underA.P.} Land Grabbing^{(Prohibition)} Act. Said order^{was passed based on the} Memo filed by the bank. Permission to^{keep security was also granted by} the learned Recovery Officer^{vide order dated 23.06.2004.}

¶43

Learned counsel further submitted that initially the^{MP No.11 of} 2006 filed by guarantor to set aside the auction^{was dismissedby} Recovery Officer on 05.06.2009 as time barred.^Aggrieved by the^order filed RA 3/2009 which erroneously came to be allowed by the^Tribunalon 23.12.2009. The Misc. Appeal No.130/2010 filed by the bank^was dismissed by Hon'ble DRAT, Chennai. Against order dated^23.L2.2009, the appellants filed Misc. Appeal No.t42/2010 heard at Mumbai due^to administrative reasons, said Appeal was rejected, thereupon appellants moved Hon'ble High Court by filing WP No.26383 of 2013 which was dismissed on 19.01.2018 and thereafter appellants filed SLP which was also dismissed on 17.05.2018 by the Hon'ble Supreme Court. With the liberty granted in SLP, appellants filed MP No.294/20L8 before the Recovery Officer which was partly allowed without considering the payments made against demands and substantiated by receipts. With these contentions, learned counsel sought to set aside the order dated 02.02.2022 and award costs, expenditure together wi!1 interest @18o/o p.a. iM.ty* (-r' '2

¶44

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¶45

RA No.01/2O22 in RP No.728/2018 in O.A-123/1997

¶46

The learned counsel for the respondent bank would submit that yde docket proceedings dated 18.09.2003 learned Recovery Officer explained the existing factual position about the property. The appellants availed all legal remedies and failed before all the legal forums. Hon'ble Supreme Court without expressing any opinion on interest left it to the Recovery Officer. Poundage fee cannot be refunded since appellants failed to deposit the balance sale consideration within mandatory period of 15 days as provided under the ROB Act. As regards other expenditure incurred towards construction of watchmen rooms, compound wall, deploying security personnel etc., the appellants failed to substantiate their entitlement. Recovery Officer or any authority never permitted the appellants to avail services to safeguard the property. As rightly observed by the Recovery Offlcer he was not empowered to decide the claim of interest, costs and expenses but same were within the domain of competent civil court. The order of the Recovery Officer does not suffer from any illegality or irregularity hence interference of the Tribunal is not warranted. With these submissions, learned counsel sought for dismlssal of the Appeal with exemplary costs.

¶47

Now, the point that arises for adjudication is:-

¶48

Whether the appellants are entitled to complete restitution including reasonable interest and consequential expenses, upon setting aside of the auction sale?

¶49

The appellants are third-party auction purchasers who participated in the auction conducted by the Recovery OFficer on 09.01.2003^pursuant to a Proclamation of Sale issued under Rule 52(2) of Schedule-II of the Income-tax Act as applicable to^proceedings under the RDB Act. The appellants deposited the entire sale consideration of Rs.82.82 lakhs including 1Vo poundage fee, within the time extended by the Recovery Officer with the express consent of the respondent bank. It^{is an} undisputed fact that^prior to the auction, litigation relating to title of^the property in the form of Land Grabbing Case- No.1 of 2003 was already

¶50

/rys\L\

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¶52

RANo-01/2O22^{in RP No 728/2018in O.A 123/1997}

¶53

pending, and the same was not disclosed in the^{sale proclamation.The} auction^{purchasers came} to^{know of the said litigation only after} participating in the auction. Despite a written^{requestby the guarantor} dated 04.01.2003 to stay the auction,^{the sale was proceeded with.} Ultimately, the entire auction^{sale was set aside by orderdated} 23.72.2009 in RA No.3/2009,^{whlch attained finality.The Hon'ble} Supreme Court, while^{dismissing SLP (C) No.5433of 2018, expressly} granted liberty to the appellants to approach the^{RecoveryOfficer for} refund of amount. The operative^part of^{the order is reproduced as} hereu nder:-

¶54

"We see no teas.rn to^{inErterewith the impugnedorder.} However, having regard to^{the facts and circumstancesof the} case, the^petitioner is^given libefty^{to approach the Recovery} officer for refund of the amount'^{He also wants to makea} request for grant of reasonable^{interest, This shallbe} aonsidered by the Recovery Officer^on iE^{own merits,}

¶55

It is made clear that this Court^has not^expressedanY opinion insofar as^payment of interest^{is concerned.}

¶56

With the aforesaid observations, the special^leave petition is dismissed."

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(Emphasis suPPlied)

¶58

In spite of aforesaid speclfic observation of Hon'ble Supreme Court that the SLP^petitioner would approach the Recovery Officer for^refund of the amount and also with regard to interest, learned Recovery Officerⁱⁿ his order dated 02.02.2022 stated, on one hand that he had no^power to decide the claim of interest/ costs, expenses etc., and even stated perhaps the jurisdiction would lie with civil court; and on the other hand, granted 5.50o/o interest plus statutory expenses of property tax, electricity charges and denied to grant refund of poundage fee, watch and ward expenditure and legal expenses. Secondly, No justification could be seen in the order while granting 5.5olo interest on the bid amount., X!>a.rf, ' 'itv'-

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7 of Ll

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RA No.O1/2022 ih RP No.72a/2018 in O.A.123/1997

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I am astonished to notice from the order of the learned Recovery Offlcer that he was not able to order refund of poundage fee of Rs.82,000/- ln view of the fact that the auction sale was cancelled due to failure on the part of the petitioners in depositing the sale amount within the mandatory period of 15 days whereas, the facts on record speak otherwise, that the learned Recovery Officer himself granted time till 16.10.2003 vide order dated 18.09.2003 and indisputably the appellants herein deposited the balance consideration on 13.10.2003. Recovery Officer also issued a receipt on 13.10.2003 stating inter-alia that the amount was being accepted subject to the outcome of the Land Grabbing Case No.1 of 2003. Although the^g ua ra ntor/m ortgagor brought to the knowledge of Recovery Officer on 04.01.2003 itselF by submitting a letter i.e., between the dates of proclamation of sale and auction date, the auction was proceeded with. Vide memo dated 01.08.2003, the respondent bank while inter-alia stating that it had nothing to do with the land grabbing case, requested to cancel the auction for non-payment of balance consideration. Even at that stage auction was not cancelled. The purpose of reckoning these dates is to conclude that the auction was conducted by concealing the Land Grabbing Case and appellants^paid the balance consideration with the^permission of the learned Recovery Offlcer, with or without provision under law. Application or otherwise of any provision of law could have been searched before granting extension of time and absence of such^provisions can in no case be attributable to^a third party purchaser or outsider. Hence, learned Recovery Officer^was incorrect in observing that^poundage fee could not be^refunded due^to failure of appellants in^payment of balance consideration^{within time.}

¶62

The appellants having^paid the entire sale consideration took^steps to safeguard the property,^perhaps ln the fond hope of^gettingit confirmed in their favour albeit subject to^{Land Grabbing Case.Vide order} dated 23.06.2004, the learned Recovery Officer^permitted the^appellants to keep security at their own expenditure. *ry-m j"."i.^mentionedin

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,///t".1'ot-"

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¶65

PA N,.O1/2O22 in RP No.728/2O18^{in O.A.12j/1997}

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the docket order dated^{20.07.2009 passed by the then learnedPresiding} Officer. The appellants^{placed on recordthe detailsof expenditure} incurred towards^{construction of securityroomsand watch and ward of} the^{purchasedproperty. Whereas, the onus fell on the secured creditor} after the property had been attached^{and auctioned. Appellantsfiled} every record^pertaining to^{such expenditure. So, I find no hesitation to} find that the appellants^{incurred expenditure towards safeguardingthe} property with the permission of the learned^{Recovery Officerand hence} they are entitled for reimbursement^{of the same. Having keptqulet while} Recovery Officer^permitted them to^{put security, the respondent bank} cannot be^permltted to argue that^{security rooms were constructed at the} whims and fancies of the^purchaser.

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L4. As stated supra, had the Recovery^{Officer cancelled the auctionas} requested by the respondent bank^pursuant to its^requestdated 01.08.2023, the litigation^{would have been avoided by the appellants.For} no fault, they had to run^pillar to^post for^{refund of bid amountand} reimbursement of expenses. Hence, in my^{considered view, appellants} deserve reimbursement of legal expenses.

¶68

As regards claim of the appellants inasmuch^interest @18o/o^{p.a. is} concerned, the appellants were thus not defaulting^purchasers, but^bona fide third parties who were deprived of the^property and^{parted with} money, due to defects attributable to the sale^process itself. The^{law is} well settled that auction purchasers cannot be made to suffer for faults of the secured creditor.

¶69

\n Mathew Varghese v. M. Amritha Kumar the Hon'ble Supreme Court held that strict compliance with statutory requirements governing auction sales is mandatory and any deviation vitiates the sale, and consequential restitution must follow. In Vasu P. Shetty v. Hotel Vandana Palace, the Hon'ble Supreme Court categorically held that where a sale is set aside for no fault of the auction qftrchaser, refund

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L-u , '/-/'/' '-\r't|

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¶72

RA No.07/2022 in Rp No.72a/2018 in O.A. 123/1997

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must carry appropriate interest so as to place the purchaser in the same position. The Hon'ble Division Bench of High Court of Telangana & Andhra Pradesh in Polisetty Haranadh Muralidhar v, Authorized Officer, IOB, and Laxmi Priya Rice Mill v. SBI, held that denial of interest would amount to unjust enrichment of the bank, particularly where the purchaser's money remained with the creditor for several years. In Mandava Krishna Chaitanya v. UCO Bank, and V. Ravi Kumar v, UCO Bank, it was held that interest must be realistic and compensatory, and not illusory, especially when funds are retained for long durations. In Mandava Srinivasu v, SBI, the Hon,ble High Court reiterated that auction purchasers are entitled to refund of all consequential expenses reasonably incurred, including security and preservation expenses, when the sale fails for reasons not attributable to them.

¶74

Though the appellants relied on the same judgements before the learned Recovery Officer, he simply being carried by the argument of respondent bank held that citations pertained to provisions of the SARFAESI Act and hence not relevant. While observing so, learned Recovery Officer disregarded the generic characteristic of the petitioners as'purchasers', either it is under the RDB Act or the SARFAESI Act. Thus such observation was made without application of mind.

¶75

In the present case, the appellants'funds remained blocked from January 2003 till refund ordered in 2022, fot nearly 19 years. Grant of interest at 5.5olo per annum is wholly arbitrary, unsupported by any reasoning or following citations of Hon'ble Apex Court and Hon'ble High Courts, and fails to compensate the appellants for deprivation of use of money. In most of cited judgements relied by the appellants, Hon'ble High Courts granted 18o/o interest taking cue from the judgement of Hon'ble Supreme Court in Mathew varghese case. However, in .2nrrl,l- -, (9'/>"r'*"

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¶77

RA No'01/2022^{inRPNo 728/2018in O A 123/1997}

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Mandava^{Srinivasu v. SBI, Hon'ble High Court of Andhra Pradesh} granted 129o interest^{with the following observations:-}

¶79

"23) However,^{interestrateskeep ftuctuating' theyare not static} and they^{depend on market condition'ThisCourtcannot directly} award interest^{at 24o/oas prayed for' No clear proofis filed for} this rate of^{interest' The respondentBank did not exPresslydeny} orcontestthisctaimforinterest.Apersondeprivedoftheuseof his money is^{entitled to compensation/interest /damages by} whatevernameitiscatted(IrrigationDeptt.,Govt.ofOrissau' G.C. RoyG).^{The ratio of this caseis appticable to this Writ also' At} thesametimethiscourtnoticesthatnoproofisfiledaboutthe. contemPoraneous^{interestrates'This duty has to be discharged.} by a^{party claiming interest' However' when such proof is not} forthcoming^{and thl Court finds that the Petitioner is not guilty of} any default^{etc.,rules of iustices /equity will allow the Court to} grant reasonabte^{rate of interest' Consideringthe fact that this is} a public^{sate of commercialproperty by a Bank which is in the} business of^{lending moneyaward of interest at the rate of 72o/o} p.a. is deemed to^{be reasonabtein the circumstances"'}

¶80

(emPhasis suPPlied)

¶81

Similarly,^{in the absence of contemporaneous rates of interest} through these^{long years in the present cdse,18o/o interest cannotbe} granted, but being^{guided more by the judgementin Mandava Srinivasu} case^{(supra),simpleinterest of \2o/o p'a' is felt reasonable rate of} interest considering^{the circumstancesof the case'}

¶82

20,TheexpenditureincurredtowardsdeploymentofSecuritypersonnel and construction of^{watchmanrooms, were undertaken pursuantto} orders dated^{23.06.2004of the Recoveryofficer permitting protection of} the property. Once^{such permissionwas granted, the RecoveryOfficer} could not subsequently^{deny reimbursement on the ground of lack of} authority. The^{finding of the Recovery officerthat he lacked jurisdiction to} grant interest and expenses is^{patently erroneous, as such powersare} inherent in restitution^{proceedingsarising from setting asideof an auction} under the RDB^Act. (fu'o*

¶83

L1- of lL

¶84

RA No.O1/2O22 in RP No.728/2018 in O.A.123/1997

¶85

2L. In the light of the above discussions, the Recovery Appeal No.t/2022 is hereby allowed by setting aside the impugned order dated 02.02.2022 to the extent of granting interest @5,5olo and non-granting of Rs.82,000/-, Rs.58,56,000/-, Rs.3,00,000/- and Rs.3,00,000/-. However, interest cannot be granted on poundage fee and expenditure being reimbursement in nature. Consequently, the operative portion of the order dated 02.02.2022 passed by the learned Recovery Officer in M.P.No.297/2018 in R.P.No.72Bl2019 in O.A.No.123l1997 shall stand modified as hereunder:-

¶86

"19. In the result, the petition is allowed. The respondent bank is directed to take steps to refund the total bid amount of Rs.82,00,000/- to the^petltioners together with simple interest @t2o/o p,a, thereon from the dates of deposit along with poundage fee of Rs.82,000/-, expenses of Rs.5,76,627/-, Rs.58,56,000/-, Rs.3,00,000/- and Rs.3,00,000/- incurred by the petitioners towards clearance of statutory dues, deployment of security^personnel, construction cost at the schedule property and legal expenses respectively. No interest granted on the reimbursement of expenditure. The difference of interest granted in this order and the accrued interest, along with expenditure^granted as above shall be debitable to the account of borrower."

¶87

Costs, easy in this Appeal.

¶88

Communicate copy of this order to the^parties concerned^and upload in the official website.

¶89

(Typed to my dictation by the PS, corrected, signed and pronounced bY me in the open court on this the 2!d day of lanuary,^2026).

¶90

,'/' ,.->Awr* -- Lt/'^i1fal'rttru (RAMESHWAR KOTHE) PRESIDING OFFICER

Ramakanth Inani v. State Bank of India

Case brief

What is this about?

What did the court decide?

Ramakanth Inani v. State Bank of India

Case brief

What is this about?

What did the court decide?

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