Dismissed

Challani Ranka Jewellery v. Indian Overseas Bank

DRT24 Jul 2026SA/152/2023

Case brief

AI extract

What is this about?

This DRT Application challenges the bank's possession notice and NPA classification. The court examined compliance with SARFAESI Act procedures, service of notices, and publication requirements, rejecting the applicant's claims of procedural lapses.

What did the court decide?

Application dismissed; Section 13(2) Demand notice dated 05.09.2022 and Section 13(4) possession notice dated 10.01.2023 upheld as valid; interim order, if any, vacated.

Challani Ranka Jewellery versus Indian Overseas Bank — Company and Corporate | DRT (2026)

SA No.152/2023

24.07.2026

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 24^th day of July, 2026

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SA No. 152 of 2023

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M/s Challani Ranka Jewellery, Rep by Mr. R.J.Anandmul, No.119, NSC Bose road, First floor, Sowcarpet, Chennai- 600 079

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Mr. R.J.Anandmul, No.2, Ritherdon road, 2^nd street, Ritherdon avenue, Vepary, Chennai- 600 007

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Mr. SumthiaChallani, S/o Mr. R.J.Anandmul, No.2, Ritherdon road, 2^nd street, Ritherdon avenue, Vepary, Chennai- 600 007 …Applicants -Vs-

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The Authorised Officer, Indian Overseas Bank, Asset Recovery Management Branch, 3^rd floor, Annexe building, Central office building, 763, Anna salai, Chennai – 600 002 …Respondent

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Counsels on record / appeared:

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Counsel for Applicant : M/s J. Prince Counsel for Respondent : M/s M.L. Ganesh

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ORDER ON SA 152/2023

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The present Securitization Application [SA] is filed under sub section [1] of S.17 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging

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the action and the measure taken by the secured creditor under the Security Interest Enforcement Rules, 2002 [for short the Rules].

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The applicant has challenged the Possession notice dated 10.01.2023 and the outstanding amount due as per Possession notice is Rs.13,86,06,669/-

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The 1^st applicant is engaged in the business of jewelry availed a cash credit facility in 2011 which was increased from Rs.300 lakhs to the present limits. The applicant has serviced the loan account without any default, however due to demonetization of GST, Covid-19 Pandemic, the business of the applicants was disturbed, hence the applicant could not service the facility.

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The applicant approached the respondent bank to sell one of the mortgaged properties to bring down the liability, however the respondent bank did not respond to the request made by the applicant.

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The respondent bank had issued demand notice intimating that the applicant’s account became NPA on 22.06.2021. On receipt of the demand notice, applicant vide letters dated 23.02.2022, 28.03.2022 & 20.05.2022 requested to release one of the properties against the repayment of the facility, to which the bank has not replied as per SARFAESI Act.

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It is submitted that without withdrawing and not responding to the earlier demand notice dated 31.07.2021, the respondent bank had issued a fresh demand notice dated 05.09.2022, mentioning the date of the NPA as 30.09.2020 contrary to the date of NPA as 22.06.2021 as per the

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SA No.152/2023

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3 24.07.2026

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earlier demand notice. The outstanding due mentioned in the demand notice is incorrect and the date mentioned as NPA is against the guidelines of the RBI. The applicant account was never been doubtful or loss account hence the classification of account as NPA is contrary which is liable to be set aside. The respondent bank had issued impugned possession notice dated 10.01.2023 without considering the request for the settlement of the account.

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In the grounds, it is contented that the respondent bank has classified the applicant’s account as NPA which is against the guidelines of the RBI when there has been no default in the repayment of the loan and payments made have been deliberately made inactive by the bank.

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The respondent bank is not entitled to invoke SARFAESI action as all the borrowers have not been served with the demand notice under section 13(2) which is essential under the SARFAESI Act as mandated in 2010 (1) DRTV 489 (A.P)

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The respondent bank deliberately not replied to section 13(2) Demand notice which is a defective. The possession notice dated 10.01.2023 issued is against the provisions of the SARFAESI Act and also not in accordance with Rule 8(1) of SIE Rules, since publication is not made in leading newspapers within 7 days as mandated under Rule 8(1) of SIE Rules and neither affixed on the properties nor delivered to all the borrowers which is liable to be set aside.

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The outstanding shown in the sale (sic, Possession) notice is imaginary and respondent also charged penal interest to the main loan account which is against the law of principal justice. The possession notice dated 10.01.2023 does not disclose the date of service of the demand notice which is said to been issued under Section 13(2) of the act which would establish that no demand notice was served.

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The alleged possession notice dated 10.01.2023 is against the settled legal principles laid down by the Hon’ble Supreme court in the Case of Mardia Chemicals and Transcore and the decision of the Hon’ble Madras High court in Lakshmi Shankar Mills. On these grounds, the applicants prays to set aside the Section 13(4) Possession Notice dated 10.01.2023.

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The respondent bank has filed a detailed counter inter alia contending that the applicant had suppressed many facts for the purpose of advancing the case in their favor. The applicant was servicing interest to the loan amount, the statutory auditor after observing the poor business operations and cancellation of GST registration had recorded that the account ought to hve been classified as NPA. The account was classified as NPA on 30.09.2020 in terms of RBI guidelines and the housing loan account was re-structured under Covid-19 Moratorium till May 2023 as per RBI guidelines.

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The secured property is also extended for Cash Credit facility and the 2^nd and 3^rd applicants were engaged in wholesale and retail trade of

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silver articles. The 2^nd applicant and his brother Mr. A. Mahender A Challani were the partners of 1^st applicant firm, subsequently Mr. A. Mahender A Challani retired from the partnership business. Presently, the 1^st applicant firm was represented by 2^nd and 3^rd applicants who was inducted into partnership business on 17.05.2014.

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The first applicant had availed Cash Credit facility for its business operation and the third applicant had availed term loan - housing loan facility from the Respondent bank to purchase secured property and the details are as follows.

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Nature Of The	Date Of	Amount	Execution Of
Facility	Sanction	Sanctioned	Loan Security Documents
Cash credit facility	11.03.2010	Rs.300lakhs	12.03.2010
Cash credit facility	-	Rs.300 lakhs	05.07.2010
Cash credit facility	07.10.2010	Rs.375 lakhs	07.10.2010
Cash credit facility	-	Rs.450 lakhs	07.06.2011
Cash credit facility	21.10.2011	Rs.550 lakhs	27.10.2011
Term loan facility	28.05.2012	Rs.200 Lakhs	06.06.2012
Cash credit facility	05.02.2013	Rs.625 lakhs	05.02.2013
Cash credit facility	07.03.2013	Rs.1000 Lakhs	-
Cash credit facility	17.05.2014	Rs.1000 Lakhs	17.05.2014
Cash credit facility	23.07.2014	Rs.1080 Lakhs	23.07.2014

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Cash credit facility	29.12.2014	Rs.1000 lakhs	-
Cash credit facility	-	Rs.1000 lakhs	08.01.2015
Cash credit facility	23.03.2015	Rs.1100 lakhs	23.05.2015
Cash credit facility	29.10.2015	Rs.1200 lakhs	30.10.2015. 02.11.2015, 03.11.2015, 26.02.2016
Cash credit facility	-	Rs.1200 lakhs	06.06.2016
Cash credit facility	06.06.2016	Rs.1400 lakhs	27.07.2016
	31.01.2017	Rs.1200 lakhs	01.02.2017 & 02.02.2017
Term loan	-	Rs.200 lakhs	31.01.2018
Cash credit facility	-	Rs. 12000 lakhs	29.06.2017
Cash credit facility	-	Rs. 9,16,25,000	30.09.2020
Cash credit facility	-	Rs.9,16,25,000	05.10.2020
Term loan	-	Rs.200 lakhs	04.01.2021
Cash credit facility	-	-	29.01.2021

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Further, the 3^rd applicant had created equitable mortgage over the secured property and extended to security to the credit limits extended to the 1^st applicant.

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Amount secured	Date of creation & Extension of EM
Rs.300 lakhs – CC	12.03.2010
Rs.330 lakhs - CC	05.07.2010
Rs.375 lakhs - CC	12.10.2010
Rs.550 lakhs - CC	27.10.2011
Rs.200 lakhs-TL	04.07.2012
Rs.625 lakhs- CC	05.02.2013
Rs.1000 lakhs -CC	09.03.2013
Rs.1000 lakhs -CC	17.05.2014
Rs.1080 lakhs –CC	23.07.2014
Rs. 1000 lakhs -CC	08.01.2015
Rs.1100 lakhs-CC	24.03.2015
Rs. 1200 lakhs -CC	02.11.2015
Rs.1200 lakhs -CC	05.06.2016
Rs.200 lakhs-TL	31.01.2018

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16. The 3rd applicant had executed MODT and supplemental MODT to

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secure the credit limits over the secured property in terms of Section 58(f) of Transfer of Property Act.

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Date	Document no	Property	Amount secured
29.03.2010	461/2010 SRO-Joint- I, Chinglepet	No.129, GST road, Chingelpet	Rs.90 lakhs
31.12.2010	163/2011 SRO-Joint- I, Chinglepet	Do	Rs.375 lakhs
24.05.2012	957/2012 SRO-Joint- I, Chinglepet	Do	Rs. 550 lakhs
10.12.2013	2690/2013 SRO- Joint-I, Chinglepet	Do	Rs.1500 lakhs

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It is submitted that 2^nd and 3^rd applicants are the guarantors to the repayment of loan availed by the 1^st application in terms of section 128 and 129 of Indian Contract Act and also executed revival letters on 29.01.2021 in terms of Section 18 of Limitation Act 1963, thus the applicants are aware of the outstanding loan amount.

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The first applicant was engaged in business operation from 12.03.2010 which is seen from the security loan documents and the statement made in Para Nos. 2 and 3 are totally imaginary and incorrect. The first applicant had also availed an extended credit facilities from Rs.300 lakhs to Rs.1200 lakhs, when the business was not operating the applicant must disclose the purposes of credit facilities which were utilized.

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Further, the 1^st applicant failed to service the principal and interest, hence the loan account had become NPA on 30.09.2020. The Respondent

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bank had issued demand notice earlier on 31.07.2021 to the applicants but the same was withdrawn due to inadvertent error.

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The respondent bank had issued a fresh demand notice on 05.09.2022 to the applicants calling upon them to repay the outstanding loan due which was acknowledged by the applicant on 07.09.2022 and the Respondent bank had mentioned the date of classification of NPA on 30.09.2020 in terms of statutory auditor’s observation and RBI guidelines. The applicant has acknowledged the demand notice and failed to raise any objections.

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The respondent bank has issued impugned possession notice dated 10.01.2023 under Section 13(4) to the applicants and also taken possession of the secured property as evidenced by the affixture of possession notice on 10.01.2023. The possession notice was duly acknowledged by the applicants on 12.01.2023 and also published in the Tamil and English dailies on 14.01.2023 within 7 days in terms of SIE Rules.

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The respondent further states that the applicant had given OTS letters on 01.02.2023 and 11.03.2023 which was declined as the offer amount was low and the rejection letters were duly served to the applicants. Further, the respondent bank denies the allegations mentioned in the grounds of appeal such as the classification of NPA, Non serving of the demand notice, Non- affixture of possession notice, non- publication

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of possession notice in the vernacular language within 7 days as

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mandated under Rule 8(1) of the SIE Rules which are false. Hence, the respondent bank prays for dismissal of the present SA.

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Heard both sides of the Counsels and perused the records of the case.

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The records of the case reflects that the applicant had availed various loans which are not disputed by the applicant and to secure the repayments of the 1^st applicant, the 3^rd applicant has created equitable mortgage and the 3^rd applicant had availed credit facilities and also created equitable mortgage and extended over the secured property which is not disputed by the applicants herein.

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Due to default in the repayment, the loan account was classified as NPA 30.09.2020. The applicant contended that the date of the NPA in demand notice dated 31.07.2021 is 22.06.2021, whereas the 2^nd demand notice dated 05.09.2022 reflects that date of NPA as 30.09.2020 which is clarified by the respondent bank as the applicants has not routing the sale proceeds of business and failed to service the principal, interest and due to cancellation of GST Registration, the loan account was classified as NPA on 30.09.2020 as per the Memorandum of Change proposed by the Statutory Auditors of 30.06.2021. Further, the respondent bank has initially issued a demand notice dated 31.07.2021 which was withdrawn due to inadvertent error crept in.

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The applicant contention that the borrowers have not been served with demand notice under section 13(2) which is not sustainable as the respondent bank has issued section 13(2) demand notice on 05.09.2022

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which was sent through RPAD and the acknowledgement cards and postal tracking reports produced at Page no.6-10 of the respondent counter which reflects that the notice was served to the applicants. Hence the contention of the applicant with regard to the issuance of demand notice fails.

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The applicants have raised another contention that the respondent bank had neither issued the possession notice dated 10.01.2023 to the borrowers and failed to affix on the properties is contrary to records as the respondent bank has duly issued the possession notice on 10.01.2023 to the applicants through RPAD which is to the 1^st applicant firm represented by 2^nd and 3^rd applicants as per the acknowledgement cards produced in the Page no.16 and 17 of the respondent’s counter. The possession notice was duly affixed on the schedule property as per Rule 8(1) of SIE Rules and affixture of the possession notice produced in page no.18-20. Hence, the contention of the applicant with regard to the issuance and affixture of the Possession notice fails.

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The applicant has raised a specific contention that the respondent bank has failed to publish the Possession notice dated 10.01.2023 within a period of 7 days is not sustainable as the respondent bank has duly published the Possession notice in two Newspapers, one in “Dinamani” (Tamil) and another in “The New Indian Express” (English) both dated on 14.01.2023 under Rule 8(2) of SIE Rules which is evident from the paper publications produced at Page No.21 and 22 of respondent’s counter. Hence, the respondent bank has published the Possession Notice dated

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10.01.2023 within period of 7 days and the contention of the applicant fails.

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The applicant’s OTS proposal was not considered by the bank as the offer amount was very low, hence the rejection letter was sent through RPAD, as is evident from page No.23 to 27 of the respondent bank’s counter. Further consideration of OTS is discretion and wisdom of the bank which the Tribunal cannot interfere.

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On perusal of the records, it is seen that the respondent bank as a secured creditor has classified the loan accounts as NPA on 30.09.2020 and proceeded to issue Demand Notice 05.09.2022 which is admittedly received by the applicant. In spite of receipt of Section 13(2) Demand notice, the applicant failed to liquidate the liability within 60 days nor raised any objections to the demand made.

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The respondent proceeded further in issuing the Possession notice dated 10.01.2023 which is duly served to the applicants herein as per the acknowledgement cards produced by the respondent, affixed on the conspicuous part of the property, published in two Newspapers as mandated under the Act. Thus, the respondent bank has established the compliance of procedures in initiating the measure under the Act.

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For the forgoing reasons, the present SA is only to be dismissed upholding the Section 13(2) Demand notice dated 05.09.2022 and Section 13(4) possession notice dated 10.01.2023 as valid notices.

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Resultantly the present SA is dismissed. Interim Order granted, if any stands vacated, pending IAs are disposed of in terms of this final order. No order as to cost.

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Sd/- (S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

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(Dictated to Steno (Roshnee), transcribed by her, corrected, signed and pronounced by me on this the 24^th day of July,2026)

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ANNEXURES

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LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl. No.	Description of Documents	Document No.
1.	Application u/s 17(1) SARFAESI Act dated 27.02.2023	A-1
2.	Credit sanction advise dated 21.10.2011	A-2
3.	Demand notice dated 31.07.2021	A-3
4.	Letter from applicant to bank dated 23.02.2022	A-4
5.	Letter from applicant to bank dated 28.03.2022	A-5
6.	Letter from applicant to bank dated 20.05.2022	A-6
7.	Second demand notice dated 05.09.2022	A-7
8.	Impugned possession notice dated 10.01.2023	A-8
9.	OTS request by applicant to bank dated 01.02.2023	A-9
10.	Vakalat dated 27.02.2023	A-10

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDENTS

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Sl. No.	Description of Documents		Document No.
1.	Demand notice dated 05.09.2022		R-1
2.	Acknowledgement for demand notice 07.09.2022	dated	R-2
3.	Possession notice dated 10.01.2023		R-3
4.	Acknowledgement for possession notice	dated	R-4

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	12.01.2023
5.	Affixture of possession notice dated 10.01.2023	R-5
6.	Publication of possession notice in the Tamil&	R-6
	English dailies dated 14.01.2023
7.	OTS rejection letter dated 31.03.2023	R-7

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SCHEDULE OF MORTGAGED PROPERTY

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(Owned by Mr. Sumthia Challani)

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SCHEDULE-A

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All the piece and parcel of site including house building bearing Plot No.139/2 Old Door No.115, New Door No.129, G.S.T road, Chengalpattu town comprised in Old Survey No, 441/1A2 and New T.S. No. 441/1 revenue ward III, Block No.8A, Gundur village, Melamaiyur, Thimmarajakulam land measuring an extent of 12640sq.ft or 29 cents presently owned by Mr. Sumthi A Challani.

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North: Temple land

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South: House belonging to Om Prakash Malani East: Railway line

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West: G.S.T. Road

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SCHEDULE-B

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Residual value of 1150 sq.ft UDS of land with Flat no.1-B, first floor, VRITI apartments constructed over the below property measuring 2785sq.ft built up area (including common area) together with 2 car parking spaces. The details of the property is: All the piece and parcel of land admeasuring 3

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grounds and 1900 sq.ft situated at Door.No.13/5 (Old No.5), 3^rd cross street (previously 1^st street), Ormes road, Kilpauk, Chennai- 600010

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bearing O.S.No.277, R.S. No. 148/3at present R.S.No.148/13 C.C.No.2243 and 2244 Egmore village, Egmore Nungambakkam taluk, Chennai standing in the name of Sumathi A Challani.

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North: House bearing Door No.11 is Survey No.143/3

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South: Multi storey building

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East: Property belonging to Vinayagam pillai

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West: 3^rd cross street (old 1^st street)

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Common security in M/s Challani Ranka jewellery& housing loan of Sumthi A Challani

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SCHEDULE-C

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All the piece and parcel of land and building bearing sub division Plot No.

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G Old Door No.17, New Door No.8-A New Thandavarayan street Purasaiwakkam, Chennai- 600 007 comprised in R.S. No. 15385/1 and 1542/1, Block No.25, Purasaiwakkam village land measuring an extent of 1674 sq.ft undivided share in 3340 sq.ft of Plot No. G and 390sq.ft undivided share interest in the road area in all measuring 2064sq.ft out of 11 grounds and 1840 sq.ft (as per patta 25117sq.ft) together with Villa No.12, ground first and second floor on Plot No. G along with right to parking car space bounded on the

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North: Poonam first lane

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South: New Thandavarayan street

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East by: Mosque Street

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West by: TN slum clearance board quarters

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SA No.152/2023