Dismissed

Gutha Prabhakar Reddy v. Ms Phoenix Arc Private Ltd. and Others

DRT21 Jul 2026SA/116/2023

Case brief

AI extract

What is this about?

In a securitization application challenging a sale notice and auction under the SARFAESI Act, the Tribunal held that the secured creditor complied with all statutory requirements including service of notices and valuation. Consequently, the application was dismissed.

What did the court decide?

The Securitization Application is dismissed and interlocutory applications pending are closed.

Gutha Prabhakar Reddy versus Ms Phoenix Arc… — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL - II AT HYDEMBAD

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DATED THIS THE 21ST DAY OF ]ULY, 2026

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

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Securitization Application No. 115 OF 2023

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Gutha Prabhakar Reddy, S/o Late Gutha Pitchi Reddy, Aged about 46 yearc, Occ: Business, Gender Male, R/o H.No 6-3-352, Vanasthalipuram, Sachivalayam Nagar, Hayathnagar, Ranga reddy

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...........Applicant

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Versus

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M/s Phoenix ARC Private Ltd. (Acting in its capacity as a trustee For Phoenix Trust FY 13-2) Reg. Omce at # 7th floor, Dani

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Corporate Park, C.S.T Road, Kalian, Santacruz^(E), Mumbai,

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Rep. by its authorized officer

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M/s. City Financial Consumer Finance India Limited (Formerly known as Associates India Financial Services Limited) Regd. Offlce at^{No.3, LocalShopping} Complex, Pushp Vihar, New^Delhi and^having branch office at Hyderabad,

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Rep. by its Power of Attorney Holder

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Geeda Srinivas Reddy S/o Geeda V reddy, Aged about 45^years,

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Occ: Business, Gender Male, R/o H. No.11- 14-83, lanapriya^gardens, Haripuri colony, LB Nagar, Hydera ba d^- 5000 74 .....Respondents

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: Mr. T. VUay Kumar Counsel for the Applicant Counsel for Respondent No.1 :^{Ms. B. Aruna} counsel for Respondent No.2 & 3:^Ex-parte (tfry"*

Page 2 of 7

sA No. 116/2023

-:ORDER:-

The present Securitization Apprication is fired by the Appricant u/s.17 of the securitisation and Reconstruction of Financial Assets and Enforcement of security Interest Act, 2002 ("Act,, hereinafter for short) assailing sare notice dated t2.o1.zols/ corrigendum dated 22.08.2015, fixing the auction on 23.09.2015 in respect of the SA Schedule Property.

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The averments of the application, briefly, are that the respondent No.2 had sanctioned a housing loan of Rs.10,00,000 by creating an equitable mortgage over the schedule property and thereafter unilaterally enhanced the monthly instalments and loan tenure without his consent, illegally classified the loan account as a NPA despite regular repayments, and issued the demand notice under Section 13(2) of the SARFAESI Act without efFecting proper service. The applicant further a[eges that, despite expressing wiilingness to regularise the account and setue the dues under a one Time Settlement, the respondent proceeded with coercive recovery measures. The applicant principally contends that the possession notice under section 13(4) was neither served upon the borrower nor affixed on the secured asset or pubrished in accordance with raw, and the mandatory requirements under Rules g(6), B(7) and 9(1), including service of the sale notice dated 12.0g.2015, the corrigendum dated 22.08.2015 postponing the auction, and the alleged Rule 8(6) notice dated r4.o7.2ols, were not compried with. It is further contended that the respondent falled to issue a fresh thirty days' notice after postponement of the auction and did not produce proof of service of the statutory notices despite directions of the Hon'ble High court. The appricant further aileges that the secured asset was grossly undervarued and sord for Rs. 45,oo,ooo despite its

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page 3 of7

SA No. 116/2023

market value being more than Rs. 80,00,000, that the reserve price was fixed without obtaining a proper valuation from an approved valuer, and that he was denied his statutory right of redemption. The applicant also alleges that the respondent failed to furnish the statement of account and details relating to interest and penal interest. It is further averred that, despite interim orders passed by the Hon'ble High Court after impleading the auction purchaser, the auction purchaser demolished the existing structure and proceeded with construction, compelling the applicant to initiate contempt proceedings. Hence, Applicant prays for setting aside the measures initiated by the respondent against the SA Schedule Property.

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The Respondent No.1 filed reply statement along with documents. The averments thereof, briefly, are that the applicant had availed a housing loan of Rs. 10,00,000 and a further additional loan of Rs. 5,75,000, but committed persistent defaults in repayment from February 2010 onwards, resulting in the loan account being classified as a NPA in accordance with the RBI quidelines. The respondent denies the applicant's contention that the loan account was a running account or that the monthly instalment was different from Rs. 24,662, placing reliance on the statement of account to establish the repayment defaults. It is further contended that all measures under the Act,2002 were initiated strictly in accordance with law, and that the demand notice dated 30.10.2013 issued under Section 13(2) was duly served upon the applicant through registered post, published in English and vernacular newspapers, and affixed on the secured asset. The respondent denies that any request for regularisation or One Time Settlement was ignored or that any assurance was given to regularise the account on part-payment, contending that, in terms of the RBI guidelines, an NPA account could be regularised only upon full discharge of the outstanding dues. The respondent further s3:o$

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PaEe 4 ol7

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SA No. 116/2023

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submits that the possession notice dated 09.04.2014 was duly served, published and affixed in compliance with the Rules, 2002, and that physical possession of the secured asset was taken through an Advocate Commissioner appointed by the learned Chief lvletropolitan 14agistrate, Ranga Reddy District, in Crt.M.p.No.8OO of 2014. It is further contended that the sale notice dated 12.08.2015 was duly served, published and affixed, and though the e_auction was rescheduled to 23.09.2015, the same was duly communicated by way of a corrigendum published in newspapers and affixed on the secured asset. The respondent also asserts that the reserve price was fixed on the basis of a valuation report prepared by an approved valuer and that the auction was conducted stricuy in accordance with the provisions of the Act and the Rules, 2002, culminating in the issuance of a Sale Certificate and delivery of possession to the auction purchaser. Accordingly, the Respondent prays for dismissal of the SA with costs.

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Summons served on 3'd respondent and was set ex_parte on 30.04.2024 as called absent and no representation. While appticant itself has made an endorsement in the SA that Respondent No.2 is not a necessary party, the debt having already been assigned in favour of Respondent No.1. Hence, no action against the Respondent No.2.

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Learned counsel for the applicant reported no oral arguments. Heard learned counsel for the 1.t respondent. perused the material brought on record.

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Learned counsel for the Respondent Company, in the written arguments, denied the averments made by the Applicant, reiterated the contents of the reply statement, and placed reliance on the 1fu"**\

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Page 5 of 7

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SA No. U6l2023

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documents annexed thereto. It was contended that the loan account was rightly classified as a NPA in accordance with the RBI guidelines and that all measures under Sections 13(2) and 13(4) of the SARFAESI Act,2002 read with Rules B(1), 8(2) and 8(6) of the Rules, 2002 were initiated after strict compliance with the statutory provisions. Accordingly, learned counsel prayed for dismissal of the SA.

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The points for consideration are as follows : -

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i) Whether the Applicant made out any valid ground to quashing of the sale notice dated 12.08.2015/ corrigendum dated 22.08.2015, fixing the auction on 23.09.2015 in respect of the SA Schedule Property?

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ii) To what relief?

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Point No.(i):

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The applicant has contended that the SA schedule property was worth more than Rs. 80,00,000/-. However, no valuation report or other cogent material has been placed on record in support of the said contention. On the contrary, the respondent has produced the valuation report, which assesses the value of the secured asset at Rs. 25,03,800/-, and the Sale Certificate evidences that the property was sold for a consideration of Rs. 45,63,000/-. In the absence of any contrary evidence, the applicant's allegation of undervaluation remains unsubstantiated and is liable to be rejected.

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It is the case of the applicant that the respondent failed to comply with the mandatory provisions of the SARFAESI Act, 2OO2 and the Rules framed thereunder. In order to rebut the said contention, the respondent has placed on record documqntary evidence along lzTv^* O "r$'-'

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Page 6 of 7

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SA No. u6l2023

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with its reply statement demonstrating compliance with the statutory procedure. Pages 16 to 27 of the material papers comprise photocopies of the postal receipts, track reports and newspaper publications in English and Telugu dated 24.72.2073 evidencing service of the demand notice under Section 13(2) of the Act. Likewise, pages 28 to 34 contain photocopies of the postal receipts relating to the possession notice dated 09.04.2014, photographs evidenclng affixture of the possession notice on the secured asset, and publications thereof in English and Telugu newspapers dated 12.04.2074. Similarly, pages 48 to 66 comprise photocopies of the postal receipts relating to the sale notice dated 12.08.2015, the valuation report dated 06.06.2015, photographs evtdencing alfixture of the sale notice on the secured asset, newspaper publications in English and Telugu dated 22.0A.2015, and the Sale Certificate dated 07.10.2015 issued in favour of Respondent No.3. In view of the aforesaid documentary evidence, this Tribunal is sa sfied that the respondent has duly complied with the requirements of Sections 13(2) and 13(4) of the SARFAESI Act and Rules 3, 8(1), 8(2), 8(5), 8(6) and 9(1) of the Security Interest (Enforcement) Rutes, 2002. Accordingly, the measures initiated by the respondent, being a secured creditor, cannot be termed as illegal, arbitrary or in violation of the statutory provisions.

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In view of the above observations, it is concluded that the Applicant has failed to establish any valid ground to interdict the measures initiated by the Respondent Company under the provisions of the Act against the SA_schedule property. Accordingly, the SA is riabre to be disn'Bsed.OYv,t\

Page 7 of 7

SA No. 115/2023

Point No.(ii):

In the result, the Securitisation Application fails and is hereby dismissed.

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L2. Consequently, Interlocutory Applications pending, if any, shall stand closed.

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No order as to costs.

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

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(Typed to my dictotion by the Steno., corrected, signed ond pronounced by me. pen court on this the 21't doy of Juty,2026). ffirvr\ ESHWAR KOTHE) PRESIDING OFFICER

Gutha Prabhakar Reddy v. Ms Phoenix Arc Private Ltd. and Others

Case brief

What is this about?

What did the court decide?

Gutha Prabhakar Reddy v. Ms Phoenix Arc Private Ltd. and Others

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

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