Dismissed

D Anjaiah v. Smfg India Home Finance Co. Ltd.

DRT20 Jul 2026SA/165/2024

Case brief

AI extract

What is this about?

In a securitization application under Section 7 of the SARFAESI Act, the applicants challenged possession notices issued by a home finance company, arguing the loan dues should have been adjusted against a repudiated insurance claim. The court held that the pendency or rejection of the insurance claim did not render the recovery proceedings illegal, finding statutory compliance by the respondents

What did the court decide?

The Securitisation Application filed under Section 7 of the SARFAESI Act was dismissed. The stay granted vide earlier order is vacated.

D Anjaiah versus Smfg India Home Finance Co. Ltd. — Banking and Recovery | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL - II AT HYDERABAD

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DATED THIS THE 2OTH DAY OF ]ULY, 2026

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PRESENT: SH. RAMESHWAR KOTHE, B.Com, L,LB. (HoNS.), M.A.

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PRESIDING OFFICER

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Securltization Application No. 165 OF 2024

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Dommata Anjaiah

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S/o, Mr. Samaiah

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Aged 65 years, R/o, D.No.2-3-2/I/3, Chinacherlapally, Ghatkesar,

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Pedda Charlapally

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Post, K V Ranga Reddy District

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Mr. Dominall"a Abala Krishna

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S/o, Mr. Dommata Anjaiah Aged 46 years, R/o, D.No.2-3-2/L/3, Chinacherlapally, Ghatkesar, Pedda Charlapally Post, K V Ranga Reddy District

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3, Mr. Donrmata Balram

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S/o Mr. Dommata Anjaiah Aged 41 years, R/o, D.No.2-3-2/l/3, Chinacherlapally, Ghatkesar, Pedda Charlapally

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Post, K V Ranga Reddy District

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Mrs. Dubbaka Vanaja

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D/o, Mr. Dommata Anjaiah

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Aged 37 years, R/o, D.No.2-3-2/1/3, Chinacherlapally, Ghatkesar, Pedda Charlapally Post, K V Ranga Reddy District

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Mrs. Vinodha Alivada

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D/o. Mr. Dommata Anjaiah

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Aged 35 years, R/o, D.No.2-3-2/113, Chinacherlapally, Ghatkesar, Pedda Charlapally Post, K V Ranga Reddy District

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...........Applicants

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Versus

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The Authorized Ofiicer, SMFG India Home Finance Co Ltd, Megh Towers, 3rd Floor, Old No. 307, New No.165

(-)//fu-,,r

Page 2 of 7

SA No. 16sl2024

Poonamalle High Road, Chennai _ 600 095

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SMFG India Finance Co Ltd, 503 and 504, 5th Floor, G Block, Inspire BKC, BKC Main Road, Bandra Kurla Complex Bandra (E), Mumbai - 400 061

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I9l9l Lombard generat Insurance Company Ltd ICICI Lombard House, 4!4,Veer Savarkar'Marg N-ear.Siddhi Vinayak Temple, prabhadevi, Mumbai - 400025

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.....Respondent

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Counsel.fgr the Applicants : Mr. Abhay Singh Counsel for Respondent No.1 & 2: Mr. G. edrian kiran Aaj Counsel for Respondent No.3 : Ex-parte

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-:ORDER:-

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The present securitization Apprication is fired by the Appricants u/s.r7 of the securitisation and Reconstruction of Financiar Assets and Enforcement of Security Interest Act, 2002 (..Act,, hereinafter for short) to set aside ail the measures initiated by the 1st respondent under the Act, incruding the possession notice dated 22.02.2024 in respect of the SA Schedule property.

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The averments of the application, briefly, are that applicants being the legal heirs of late Mrs. Dommata Lalitha, they have filed the present SA challenging the possession notice dated 22.02.2024 issued under Section 13(4) of the SARFAESI Act, 2002. The applicants contend that the deceased borrower had avaired a housing loan from the 2nd respondent by creating security over the subject property and, at the time of sanction of the loan, the respondent bank obtained a rife insurance poricy through Respondent No.3 with an assurance that, in the event of the borrower,s death, the outstanding loan liability wourd be discharged from the insurance proceeds. They further aver that, foilowing the death of the borrower

/fu'.tot

Page 3 of7

SA No. 165/2024

on 29.05.2021, they submitted the insurance claim along wlth all requisite documents, but the insurer rejected the claim without assigning any reasons, despite the policy being in force. The applicants allege that, instead of^pursuing the lnsuTance claim, the respondent bank illegally initiated proceedlngs under the SARFAESI Act and classified the loan account as NPA without first securing the insurance^proceeds. They further contend that the respondent failed to comply with the mandatory^provisions of the Security Interest (Enforcement) Rules, 2002, by not issulng a valid demand notice under Rule 3, not serving or affixing the^possession notice in accordance with Rule 8(1), and not^publishing the same as required under Rule 8(2). They also assert that the respondent falled to comply with the requirements of Section 26D of the SARFAESI Act before initiating enforcement measures. Hence, Applicants^{pray for} setting aside the measures initiated by the respondent against the SA Schedule Property.

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The Respondent No.1 and 2 filed reply statement along^with documents. The averments thereof, briefly, are that late^Smt. Dommata Lalitha had availed a housing loan of i15,00,000 by mortgaging the secured asset and had also obtained a^{loan insurance} policy from Respondent No.3. They submit that, upon the death of the borrower on 29.05.2021, the applicants, being her legal^heirs, failed to discharge the outstanding loan liability, necessitating^the initiation of recovery^proceedings under Sections 13(2) and 13(4)^of the Act, 2002. The respondents further contend that the^repudiation of the insurance claim is a dispute exclusively^between the^applicants and the insurer, and that the respondent finance^{companyhas no role} in the insurer's decision to admit or reject the claim. They^deny having compelled the borrower to obtain the^{insurancepolicyor} having acted arbitrarily, and assert that the measqles under^the

,/ff'otu

page 4 of 7

sA No. 165/2024

SARFAESI Act were initiated stricuy in accordance with the statutory provisions. It is further contended that the applicants cannot evade repayment of the outstanding loan on the strength of the pending insurance dispute and, being the legal heirs of the deceased borrower, are liable to discharge the outstanding dues. failing which the secured asset is liable to be sold for recovery of the debt. 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.

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Heard learned counsel for the applicants and learned counsel for 1't and 2nd respondent. perused the written arguments filed by the respondent and also perused the material brought on record.

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During the course of arguments, the learned counsel for the applicants reiterated the averments made in the Securitisation Application and contended that the respondent bank failed to serve the demand notice under Section 13(2) of the SARFAESI Act and the possession notice in accordance with law, besides not complying with the mandatory requirements of Rules g(1) and 8(2) of the Security Interest (Enforcement) Rules, 2002. It was further contended that the outstanding loan liability ought to have been adjusted against the insurance claim amount instead of initiating recovery proceedings against the applicants. In support of the said contention, reliance was placed on the judgment of the Hon,ble High Court for the State of Telangana in W.p. N}.B76O of 2O1g and W.p. No.1j176 of 2020, Mrs. B. Madhavi v. SBI Life Insurance Company L/-rnlted, wherein it was held that an insurance claim cannot be rejected on mere technical grounds, as such rejection would result in grave injustice to the insured borrower. On the aforesaid grounds, the learned counsel

CY*'$

Page 5 of7

sA No. 165/2024

prayed for setting aside the measures initiated by the respondent under the SARFAESI Act in respect of the schedule^property.

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Pq contra, learned counsel for the Respondent Company, in the written arguments, denied the averments made by the Applicants, reiterated the contents of the reply statement, and^placed reliance on the 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), 13(a) and 1a of the SARFAESI Act, 2002 read with Rules 8(1) and 8(2) of the Rules, 2002 were initiated after strict compliance with the statutory provisions. Accordingly, learned counsel prayed for dlsmissal of the qA

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The points for consideration are as follows : -

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i) Whether the Applicants made out any valid^ground to quashing of the possession notice dated 22.02.2024 under section 13(4) of the Act 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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One of the^principal contentions urged by the applicants^is that the outstanding loan liability ought to have been adjusted against the insurance claim amount. Prima facie, it is evident that Respondent No.3 has repudiated the insurance claim. If the applicants^are aggrieved by such repudiation, it is open to them to seek appropriate remedy before the competent forum in accordance with law.^As matters stand, the outstanding loan dues remaln unpaid^and, thererore, Respondent Nos.1 and 2 are entifled ,.yE\tr;"^"

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Page 6 of7

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sA No. 16sl2024

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by initiating proceedings under the SARFAESI Act, 2002. In such circumstances, the measures initiated by Respondent Nos.1 and 2 cannot, at this stage, be held to be illegal or irregular merely on account of the pendency or rejection of the insurance claim.

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The Respondent Company filed material documents along with reply statement as proof of compliance of due procedure of law. Pages 1 to 7 of the material paper filed separately are the photostat copies of postal receipts, track report and publication of the same tn English and Telugu (vernacular language) newspapers on 20.12.2023 proving service of demand notice. Similarly, pages B to 17 are the Photostat copies of postal receipt of possession Notice dated 20-71.2023, photographs as proof of affixture on secured assets and publication of the same in English and Telugu (vernacular language) newspapers on 28.02.2024. In view of sufficient proof place on record, I find no infraction of section 13(2) & 13(4) of the Act and Rules 3, 8(1) & 8(2) of the Rules, 2002. As a secured creditor the Respondent Company initiated the SARFESI proceedings, which cannot be categorized as illegal or arbitrary.

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In view of the above observations, it is concluded that the Applicants have 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 liable to be dismissed.

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Point No.(ii't:

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In the result, the Securitisation Application fails and is herebv dism issed. N'**'

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Page 7 of 7

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SA No. 155/2024

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Consequently, stay granted vide order dated 02.04.2024 in IA.No.1013 of 2024 in the SA stands vacated and 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., corrccted, signed ond pronounced by me in the open court on this the 2oth doy ot'.July, 2026).

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*iu.''urrt' SHWAR KOTHE) PRESIDING OFFICER

D Anjaiah v. Smfg India Home Finance Co. Ltd.

Case brief

What is this about?

What did the court decide?

D Anjaiah v. Smfg India Home Finance Co. Ltd.

Case brief

What is this about?

What did the court decide?

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