Dismissed

Ms Pyramid Infra Services v. Karur Vysya Bank

DRT27 Mar 2026SA/179/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal, Hyderabad disposed of an application filed by borrowers challenging an auction sale notice and sale conducted by Karur Vysya Bank. The court dismissed the securities application, holding that the bank duly followed statutory procedures and that no fundamental procedural error or fraud tainted the sale process.

What did the court decide?

SECURITIZATION APPLICATION DISMISSED; INTERLOCUTORY APPLICATIONS DISPOSED OF.

Ms Pyramid Infra Services versus Karur Vysya Bank — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERYTRIBUNAL- IAT HYDERABAD

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DATED THIS THE 27TH DAY OF MARCH, 2025

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PRESENT: GUMMADI GOPICHAND, PRESIDING oFFICER

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sA.No.179/2022

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M/s $rramid Infra Services Rep. by its Managing partner Sri Kasarla Nitin Reddy, Flat NO.4-44 12O3,

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Mohan Sharada complex, Street NO.8, Opp.NGRI Bus Stop, Habsiguda, Hyderabad-500 007

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Sri Kasarla Nitin Reddy, S/o Sri K.Thirupathi Reddy,

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Aged 44 years, Occ:business, R/o flat No.201, 2"d floor,

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Green Space West Square Apartment, Block-A, Gate No.2, Dollar Hiils Colony, PUppalaguda, Manikonda, Hyderabad-500 039.

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Smt. Kondapally Kavitha Reddy, W/o Sri Late K.Venkata Reddy, Aged 48 years, Occ:business, R/o flat No.201,2"d floor,

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Green Space West Square Apartment, Block-A, Gate No.2, Dollar Hills Colony, PUppalaguda, Manikonda, Hyderabad-500 039.

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... . Applicants

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Versus

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Karur Vysya Bank Asset Recovery Branch, D.No.5-8-356 to 362, 3.d floor, Chirag Ali lane, Abids, Hyderabad-SO0 00 1 Rep. by its Authorized officer

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Mr.Maduri Ranjeeth Kumar, S/o Maduri Sampath Kumar, R/o H.No.S-12-81, PNB Lane, JPN Road, Pinnavari Street, Warangal-506 002.

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2 7 r'!AR 2S20

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Mr.Maduri Rajesh Kumar, S/o Mduri Sampath Kumar R/o H.No.8-12-81, PNB Lane, JPN Road, Pinnavari Street, Warangal-506 002

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(Respondents No.2 & 3 are impleaded as per orders in 1.A.165124 dt.24.OT .20241 . . Respondents

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Counsel for the Applicants Si B. Sanjay Kumar Counselfor the 1,t Respondent Bank Sri G. Kishna Chaitanya Counsel for Respondents No.2&3 M/ s G.K. Lanu Associates Reserued on 27.02.2026 Pronounced on 27.03.2026 Uploaded to the u.tebsite on :3O.03.2O26

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-.ORDER:-

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This application is filed by the Applicants u/s. 17 of the SARFAESI Act, 2002, challenging the auction conducted by the 1st Respondent Bank on 29.O3.2022 in respect of the A schedule property pursuant to the Sale Notice dt.09.03.2022 and to set aside the same.

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The averments made in the application, in brief, are that:

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(i) Applicant No. 1 is a partnership firm engaged in several electrical contract works and the Applicants availed various credit facilities from the l.t Respondent Bank in the year 2O11 by creating mortgage against two of the schedule properties and thereafter the said facilities were enhanced to Rs. 130 lakhs and plicants were forced to mortgage two more properties as and thus, the Applicants have mortgaged four * in favour of the 1st Respondent Bank in the year 20 15. disputes with the principal contractors and 27HtB ?!we lg payments, the Applicants could not pay some nts and the 1.t Respondent Bank declared the loan

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account of the Applicant No.1 as NPA on 30.O5.2016 and issued Demand notice dt.22.06.2016.ltem No.2 of the schedule property mentioned in the impugned demand notice dt.22.O6.2O16 is actually owned by Sri Kondapally Venkat Reddy who is one of the guarantors/mortgagors to the loan transaction of the Applicant No.1 and he died on 05.06.2U,6 and the bank issued the alleged demand notice dt.22.O6.2O16 in the name of a dead person. The 1"t Respondent bank failed to serve the impugned demand notice to the legal heirs of the deceased guarantor which is mandatory and on this ground alone, the issuance of demand notice dt.22.06.2016 is null and void. Thereafter, the 1"t Respondent Bank issued possession notice dt.17.08.2017 and the said notice was not served to the legal heirs of the deceased guarantor/mortgageor and the said notice was not published in two leading newspapers and also not affixed on the schedule properties and the 1st Respondent bank has not followed Rule 8(2A) of the Rules, 2OO2 which speaks that all the notices may also be served upon the borrowers/guarantors/mortgagors through electronic mode of service.

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(ii) Thereafter, the Applicants requested the bank to release two residential properties and they sold the said properties to 3.d parties and paid the entire sale considerations received out of the sale of the said properties to the Bank in theyear 2018 and got released the said two residential properties. Thereafter, the Applicants requested the bank for OTS vide letter dt.03.06.2022. .^{.. ., :-::rri.,:.:l+.,;Riteof giving reply, the Bankwith a wrongintention issued} .,,. .. .-., i,';apgS"dated letter on 13.05.2022 but the same has been posted ,li: ";--'.'- " ..-.. 2022 i.e. after the receipt of the letter issued by the ,+i:::"i.i^";ry i-ir"'^?rt- ;ii' Applicats dt.03.06.2o22 wherein it is stated that the property ii : 2 7^{$14fl ?ffen. na+e of Smt. Kondapally Kavita, ApplicantNo.2 was sotd} i'A on^{p,g,fi|'.ZOZZ} and a sum of Rs. 1,23,00,000/ - has been ---*f..yi1:; ".i{a. r.r. ' ' f,' 'ⁱ '-,,F"gb-gy".e$d^{and out of the sale proceeds realized, a sum of Rs. 1.23} _ . . ,-:;.11.,... ,i,p, .../:,ill'{ -,-.;-." 3

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crores is duly appropriated towards the loan account and the Bank directed the Applicants to remit the remaining amount of Rs.2.33 crores as on 13.O5.2022.

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(iii) The 1st Respondent Bank issued the impugned Sale Notice dt.09.03.2022 by fixing the auction on 29.O3.2O22 and the said notice was not served on the Applicants/guarantors/mortgagors or published in two leading newspapers. Before issuing the said impugned sale notice, the 1"t Respondent failed to serve notice u/r 8(6) of Rules, 2OO2 to the Applicants/mortgagors and thereby vitiated the right of redemption available to the Applicants. The 1"t Respondent Bank also failed to follow Rule 8(5) of Security Interest (Enforcement) Rules,2OO2 by not obtaining valuation of the property from an approved valuer before Iixing the reserve price of the schedule property and the reserve price fixed against A schedule property is very low. The 1st Respondent Bank failed to affix the sale notice on the schedule property and thereby violated Rule 8(7) of Rules, 2OO2. The Bank has not mentioned the details of the auction purchaser or the auction details in the letter dt. 13.05. 2022 and also not mentioned anything with regard to the Application B schedule property. The 1st Respondent bank sold the schedule A property which was valued at Rs.271 lakhs at the time of sanction and renewal in the year 2015 as per the valuation dt.24.IO.2O 15, to a meagre amount of Rs.123 lakhs on 29.03.2022 which, is totally against the principles of natural justice.

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':^.r., Hencg.^ th'e by the lst Respondent Bank on 29.03.2022 iq. in respect of &.pfredule''{! ''g ,,^, pr ,operty is liable to be set aside. Hence, the to: 27HlRm a ,rl' .1 3. The, 1"t Respondent counter in the IA and adopted the same as Reply in SAi denyir the adverse allegations made in the SA. It is

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contended that Applicant No.1 is a partnership Iirm represented by their partners i.e. applicants No.2&3 who availed credit facilities from the l"t Respondent Bank.

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The 1"t Respondent Bank had never forced the Applicants to mortgage their properties. As the Applicants requested for enhancement of SOD facilities, the Bank sanctioned the same and to secure the said enhanced facilities, the Applicants created mortgage in respect of two other properties. In view of the default committed by the Applicants, the loan account was classified as NPA. The Respondent bank had not been informed about the death of late Sri K.Venkat Reddy who died on 05.05.2016 but not on 05.06.2016 who is none other than the husband of the Applicant No.3 and acted as one of the guarantors of the Applicnt partnership firm. Neither the Applicants have submitted any letter nor death certificate been submitted to the Bank even till filing of this application and so, the l"t Respondent Bank has issued the demand notice dt.22.O6.2O16 and the same was duly acknowledged by the Applicants on 27.06.2016 including the deceased late K.Venkat Reddy. The Applicants have signed the postal receipt of demand notice on behalf of the deceased and acknowiedged the demand notice sent to them. Moreover, Applicant No.3-wife and Anjali Reddy-daughter, are the only legal heirs of the deceased Sri Late K.Venkat Reddy to the knowledge of the Bank. Thereafter, the 1st Respondent Bank issued Possession notice dt.I7.O8.2O17 and the said notice was sent to the Applicants through Regd. Post and the said notice was published in two daily newspapers and also affixed on the schedule properties. It is further contended that serving through electronic mode is only directional and not mandatory. Thereafter the 1"t Respondent bank issued several pre-sale notices u/r 8(6) of Security Interest (Enforcement) Rules, 2OO2 on 19.09.2017 , O7.O2.2O18 and 07.03.2019 and the said notices were sent to the Applicants through Regd.Po-st. Thereafter, the 1st Respondent Bank ISS tice dt.O9.O3.2O22 and sent the said notice to the the same in Financial Expires and Nava on 10.03.2022 in accordance with Rule

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9(1)&8(6) of Rules, 2OO2 and the said notice was also affixed on the schedule properties. The 1"t Respondent Bank had duly obtained valuation of the schedule property as per Rule 8(5) of Rules, 2OO2 and conducted e auction on 29.03.2022 in respect of A schedule property and later conducted auction on 18.05.2022 in respect of B Schedule property pursuant to the sale notice dt.30.04.2o22. However, the previous auctions were failed due to lack of bidders and higher reserve prices. As such, the reserve price for the schedule properties was fixed according to the latest valuation reports and no arbitrary values are taken as alleged by the Applicants. After conducting auction of the schedule property, the lst Respondent bank issued letter dt.13.05.2022 to the Applicants intimating about the sale of one of the schedule properties and outstanding dues and as such, it was not a reply issued by the Bank to the Applicants' letter dt.03.O6.2O22. The Bank also furnished details of the purchasers by filing counter in I.A.879 122. In the said auctions conducted on 29.O3.2022 and 18.O5.2022, Respondents No.2&3 became successful bidders and they paid the entire sale consideration and subsequently, sale certificates were registered vide Doc.No. 12325 1 22 dt.28.O4.2O22 and Doc.No. 18277 1 22 dt. 15.07.2022 before the SRO, Warangal and the said auction purchasers are in possession of the schedule properties. Thus, the 1"t Respondent Bank has followed the procedure prescribed under the provisions of SARFAESI Act, 2OO2 and Rules made thereunder in conducting auction of the schedule A property and so, there are no merits in the SA. Accordingly, 1"t Respondent Bank prayed to dismiss the SA.

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Ld.counsel for the Respondents No.2&3 filed memo adopting the Reply filed by the l"t Respondent Bank anil assailed the version of the l"t Respondent Bank,as

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Heard the nts, Ld. Counsel for 1st Respondent Bank and Ld.7Ti[Af"Xftr Re3pondents No.2&3. Perused the material brought T-ffo'o $ sii/i

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Now, the points that arise for consideration are,-

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Whether the Applicants haue established ang ualid grounds for challenging the auction conducted bg the l.t Respondent Bank in respect of the schedule properties on 29.03.2022 & 18.5.2022 pursuant to the Sale Notices dt.O9.03.2022 & 30.04.2022?

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it To what relieft

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Point No.(i):-

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During the course of arguments, Ld. Counsel for the Applicants, Ld. counsel for the lst Respondent Bank and Ld. counsel for the Respondents No.2&3 reiterated their respective versions as stated supra.

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The undisputed facts of the case are that the Applicant No.l is a partnership firm represented by Applicants No.2&3 and availed credit facilities from the 1"t Respondent Bank for business purpose by creating mortgage against the schedule properties and thereafter, the Applicants committed default in repaying the loan dues and the loan account was classified as NPA. Later, two schedule properties were released by the Bank and they were sold by the Applicants and sale proceeds were deposited with the 1"t Respondent Bank. There is no dispute regarding the fact that one guarantor sri K.Venkat Reddy was died on 05.05.2016 who is none other than the husband of the Applicant No.3.

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The specific contention of thb Applicants is that the 1st Respondent Bank, isprled.Cill_F{d notice in the name of a dead person i.e. Late r vepf:ri.E;dTriqffi the said demand notice is not tegat and valid . and "" "r"{;tn. ""&h\ent proceedings initiated by the Bank against ,1. "fFH5i yffi.rtie& liincluding the auction conducted against the sbhedule A property isSple to be quashed. The other contention is that ,^{' 'i],,} 7 ^r$rj.# 'r, ..' -..:iii;!-;:r '' - ... ;.:1,:.. - ::+ :-t' .-'r.-,?,'r'^jj.:;aj;i/ _.. :.j:-.. ..-.-.. :::frr.

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the Bank conducted auction in respect the schedule A property without following the procedure prescribed under the provisions of SARFAESI Act, 2OO2 and Rules made thereunder and the reserve price fixed is very low.

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In support of his contentions, Ld. Counsel for the Applicants placed his reliance on the decisions of

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(i) Hon'ble Debts Recouery Appellate Tribunal, Kolko;ta betuteen The Authorized Officer, Canara Bqnk & Anr. Vs. Sree Vijaga.sri Lakshmi Traders and Ors. in Appel No.3/2025

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(ii) Hon'ble High Court for the State of Telangqna in Sri Sai Annad.atha Polgmers and Anr. Vs.The Canara Bank rep. bg its Branch Manager.

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Per contra, 1st Respondent Bank contended that the Bank has scrupulously followed the procedure laid down under the provisions of SARFAESI Act, 2OO2 and Rules made thereunder in issuing all the statutory notices to the Applicants and also in conducting auction of the schedule properties and there are no violations.

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As per the material documents filed by the 1st Respondent Bank, it is clear that the lst Respondent Bank issued demand notice to the Applicants on 22.06.2oL6uls 13(2) of the SARFAESI Act, 2OO2 and the said notice was sent to the Applicants and guarantors including one K.Venkat Reddy through Regd. Post. But the Bank contended that the said fact of death of K.Venkat Reddy was not informed to the lst ' " :^.,..!,_ k and death certificate was also not submitted to the In fact, the said demand notice dt.22.O6.2016 was half of the deceased guarantor by the Applicants

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P#ilmfiffi.dY postal acknowledgment was sent to the Bank.

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Moreover, Applicant No.3 herein is the wife of the late K.Venkat Reddy and all the statutory notices issued by the Bank under the provisions of SARFAESI Act, 2OO2 were issued to the Applicant No.3 who is one of the legal heir of the deceased K.Venkat Reddy and so, service of the notices on one of the legal heirs is sufficient.

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In this connection, Ld. counsel for the 1"t Respondent Bank relied on the decision of Hon'ble High Court for the State of Telangana 1n W.P.No.13793/16 wherein it is held that:

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*SigniJicantlg, the finding of this Court rendered as long back as on O2.02.2006 in W.P.No.2OO7 oJ 2006 to the elJect that the legal heirs o.f late Konda Veeresh Murhty were lacking in bonafides a;nd ho,d come to the Court uith uncledn hands has attained Jinality and. cannot be bntshed. aside nou. Further having dragged on the rnatter since 2006, it is too late in the dag for the petitioner proprietary agencg or the legal heirs oJ late Konda Veeresh Murthg to set at naught all such proceedings bg resorting to the plea that the proceedings uere initiated against a dead person. Theg cannot be perrnitted to turn back the clock to suit their outn conaenience'

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Another contention of the Applicants is that the Bank has not followed the procedure contemplated under Rule 8(5)(6)(7)&9(1) of Security Interest (Enforcement) Rules, 2OO2 in conducting auction of the schedule A property.

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demand notice, possession notice, the lst Respondent Bank

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issued ;^sale^notices as^{supra,however the} auctions^proposed Bank were not materialized. Finally, the Bank

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dtlg$,at.oe.os^{.2022 for conducting auction of the A}

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on 29.O3.2022 and the said sale notice was sent to the

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?0t8

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Applicants through Regd.Post and the same was returned as unclaimed. As per the material documents filed by the Bank, it is ciear that thereafter the l"t Respondent Bank, published the said notice in two daily newspapers and the said sale notice was also affixed on the schedule property as depicted in the photographs filed by the l"t Respondent Bank. Thus the 1"t Respondent Bank has followed the 3(6)(7)&9(1) of Seurity Interest (Enforcement) Rules, 2OO2 in conducting auction of the schedule property.

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Before issuing the said sale notice, the Bank obtained fresh valuation report in respect of the schedule A property from the approved valuer of the Bank on 10.01.2022 in which, the valuer assessed the realizable value of the A schedule property as Rs. 1 ,2 1 ,96,800/ - and Distress value of the propert5r as Rs. 1,06,72,000/- In the auction conducted by the 1"t Respondent Bank on 29.O3.2O22 in respect of the A schedule property, Respondents No.2&3 became the successful bidders for a saie consideration of Rs. 1,23,OO,0OO/- and they paid the entire bid amount and a sale certificate dL.28.O4.2022 was issued in their favour. The said sale certiiicate was also registered before the concerned SRO as evidenced from the copy of the sale certificate filed by the lst Respondent Bank. Thereafter, the Bank conducted auction in respect of the B schedule property pursuant to the sale notice dt.30.O4.2022 and the said notice was sent to the Applicants but the same was returned as unclaimed and the said notice was published in two newspapers and also aflixed on the scheduie property. Respondents No.2&3 became the successful bidders in the auction conducted on 28.05.2022 in respect of B schedule property and they paid the entire sale consideration and sale certificate was registered ot 15.07.2022 in respect of B schedule property. However, the said sale the auction in respect of B schedule property was not pplicants in the present SA. 16. .2 .|"rfi[.'fi#, t& filed by the Applicants or 75.07.2022 nging the Sale Noticfidt .O3.2022 whereas the auction in respect

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$',,*"r'*frls

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of the A schedule propert5r was conducted on 29.03.2022 and^{the sale} certificate was registered on 28.04.2022 and so, SA is filed beyond⁴⁵ days and no delay petition is filed.

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t7. In all the circumstances, the applicants^{have miserablyfailed to establish} any valid ground for setting aside the auction^{conductedby the l"t} Respondent Bank on 29.03 .2022 in^{respect of the schedule A property.}

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In a recent^judgement of the^{Apex Court in Celir LLP Vs. Mr.Sumati} Prasad Bafna in Contempt^{Petition (C) NOS.158-15912024in Civil} Appeal Nos.5542 -554312023,^{the Honble Supreme Court heldas follows:}

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278:^,,Ang sale bg auction or^{otherpublic proa,Lrement methods} once alread.y confirmed or concluded^{ought not to be set aside} or interfered" utith tightlg^{excepton groundsthat go the core of} such sale process, such^{as eitherbeingcollusiue,} fraudulent^or uitiated" by inadequate^{pricing or underbidding.Mere irregularityor} d"euiation from a ntle which^{does nothaue any} fundamental procedural error d"oes not take^{auaA the} foundation^{of authoity} for^{such proceeding. In suchcases, courts in partianlarshould be} mindful to refrain entertaining^{ang ground} for^{challenging an} auction which either could^{haue been takenearlier beforetlrc sale} uas conducted. and" confirmed^{or utttere no substantial injury has} been caused on account^{of such irregulaity".}

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So, considering all the circumstances,^{I hold that the 1"t Respondent} Bank has followed the^{prescribedprocedurecontemplatedunder the} provisions of SARFAESI Act, 2002^{and Rules made thereunderin} tion of the schedule^{properties and there are no merits}

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,,S*tn rdingly, this point is answered^{in favour of the}

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';i#. Res inst the Applicants. 2 7^ililB 2028^* ?

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"-I , LL

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Point No.(iil:-

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In the result, the present Securitization Application is dismissed. consequently, the Interlocutory Applications, pending if any, shall stand disposed of. No order as to costs.

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