Debts Recovery Tribunal-I, Chandigarh dismissed the applicant's Securitization Application challenging the bank's recovery proceedings. The court rejected claims of improper service of the demand notice and holding that the NPA classification remained valid citing lack of restructuring compliance.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
SA No. 211 of 2025
DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
SA No. 211 of 2025
M/s Swarraj International CA
Versus
State Bank of India
Dated: 27.05.2026
Item No. 12
Argued by: Mr.Ankush Verma, Counsel for the Applicant.
Mr.Dinesh Chatrath, Counsel for Respondent Bank.
M/s Swarraj International CA, through its proprietor Ms.Usha Kanwar (Applicant) has filed this Securitization Application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), against SBI (Respondent).
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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
favorable conditions, prompted the Applicant to consider their offer seriously. It is alleged that on the assurances of SBI, Applicant refused to take the presanctioned facilities from the Bank of Baroda and applied for the financial assistance of Rs. 13 crores in the nature of Agriculture Loan for setting-up a cold storage having total capacity of 1000 MT i.e. 100 trucks for total 4 chambers under the name and style of M/s Swarraj International CA. After detailed discussions, SBI agreed to sanction and advance the aforesaid loan amount to the Applicant. SBI also assured them of suitable moratorium period to ease the financial burden during the initial setup phase. This moratorium was intended to allow the Applicant sufficient time to complete construction, procure necessary equipment and commence operations before the repayment obligations began. It is alleged that Applicant had sought agriculture loan of Rs. 13 crores. In order to secure the aforementioned loan, Applicant agreed to mortgage the following properties with SBI, as primary and collateral security valued at around Rs.8 crores each:-
| i. | Property comprised in Khewat/ | Khataun | i No | . 15 |
|---|---|---|---|---|
| min/16 min, Khasra No. 312/12 | , measur | ing | 2-11 | |
| bighas, situated at Mauza / Mo | hal Up-S | amp | ada, | |
| Jagela, Hadbast No. 49/1, | Tehsil | Rajg | arh, | |
| District Sirmour (H.Р.), | ||||
| ii. | Property comprised in Khewat/ min/191 min, Khasra No. 42, me |
Khatauni asuring |
No. 00-0 |
110 4-08 |
| hectare, alongwith the bu |
ilding | exis | ting | |
| thereupon, !iii. Property |
compri | sed | in | |
| Khewat/Khatauni No. 110/193, | Khasra | No. | 41, | |
| measuring 00-02-10 hectare | along | with | the | |
| building existing thereupon |
iv. |
Prop | erty | |
| comprised in Khewat / Khatau | ni No. | 110 | min | |
| /191 min, Khasra No. 40, me | asuring | 00-0 | 1-42 | |
| hectare alongwith the bu |
ilding | exis | ting | |
| thereupon, situated at Mauza / | Mohal | Amb | ota, | |
| Hadbast No. 952, Sub-Tehsil | Kasauli, | Dis | trict | |
| Solan (H.P.). |
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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
was sanctioned under SME category, though, the Applicant had sought agriculture loan. When the Applicant sought the clarification, the Bank assured the Applicant that the loan facilities would be provided in two stages with Rs. 6.90 crores sanctioned in first phase and rest in the second phase. SBI further assured the Applicant not to worry as the facilities carried the moratorium period till April 2025 (Annexure A-4). It is alleged that relying on the advice and assurance of the SBI, Applicant followed the instructions. However, despite the staged loan approval process, SBI mortgaged the entire property of the Applicant, valued at more than Rs.16,00,00,000/-, which was far in excess of the sanctioned limit. Further, the Regional Manager of the Bank, namely Prince Arora, Chief SME Branch, Parwanoo, Mr. Rahul Siri, along with his team forced the Applicant to buy the unnecessary insurance policy and to pay first premium of at least Rs. 14,00,000/- per annum to fulfill their targets, otherwise they will not enhance the required financial assistance to the Applicant, which put huge burden on the Applicant. It is alleged that despite the Respondent Bank's failure to sanction the promised additional/enhanced financial facilities, the Applicant, in order to ensure the successful implementation of the horticultural project, made an independent investment of Rs. 1.25 crores by arranging funds from her friends and relatives. This substantial investment was made solely on the strength of the project's merits and with the intention to avoid delays. It is alleged that the SBI had promised the Applicant to approve another loan of Rs. 7 crores as Working Capital in the month of August 2024 which was later delayed by saying that a fresh detailed project report would be required for the same. However, when the fresh detailed project report was submitted, the request of the Applicant was turned down by saying that more collateral security of extra property would be required without appreciating that the Bank was already holding additional property much more than the value of the loan. It is alleged that out of the total CC Limit of Rs. 1.90 crores sanctioned by the Respondent Bank, Rs. 1 crore was earmarked for the purchase of crates, a fixed asset, while only Rs. 90 lacs was sanctioned towards working capital for procurement of apple stock. In fact, the sanctioned amount of Rs. 90 lacs for stock was grossly insufficient to run the entire project, especially considering the substantial fixed costs involved, including high electricity charges and machinery operation expenses, which could not be met with such limited stock procurement. Applicant has alleged that the chambers could not be operated unless they were filled to at least 50% of their capacity, as nitrogen must be filled in the entire chamber and then sealed from the outside atmosphere. However, the Applicant was unable to do so as the loan amount was not disbursed in a timely manner,
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preventing them from procuring apples as planned. Furthermore, the remaining loan amount required for the project's completion was never sanctioned. As a result, the stock perished and could not be sold in the market, leading to substantial financial losses to the Applicant. This negligence on the part of the Bank directly caused loss of approximately Rs. 2 crores to the Applicant. It is alleged that SBI had mandatorily insured the project by charging a premium of Rs. 14 lacs. After the apple stock in the controlled atmosphere chambers began to perish due to non-operation caused by delayed fund disbursal, Applicant in November 2024, repeatedly requested the Bank to conduct an inspection and process the insurance claim. However, the Bank appointed a surveyor only on 25.03.2025, by which time the stock had already decomposed. Due to pollution control norms, the perished apples had to be disposed of and could not be retained for inspection, rendering the insurance claim ineffective and compounding the Applicant's financial loss. It is alleged that the Bank continued to demand stock statements from the Applicant but failed to take any constructive action, including enhancement of the financial facility, which was crucial for the operation of the project. Despite this, the Applicant regularly submitted the stock statement, detailed project report and other relevant documents, as required by the Bank. However, the Bank did not pay any heed to these submissions and persisted with routine demands for stock statements, even after the apple stock had already perished. It is alleged that as a result of these wrongful, illegal and misleading acts, Applicant started facing severe hardships in running the cold storage business, which was not only a national asset but also a project that could provide employment opportunities to several individuals in the area. The refusal to sanction the remaining loan amount caused substantial financial losses, harassment and humiliation to the Applicant. Moreover, despite the project being incomplete, the Applicant continued to bear the burden of ongoing expenses and interest payments to the Bank, further worsening its financial condition. It is alleged that Applicant approached the Bank multiple times, submitting numerous written communications, requesting either an enhancement of the loan amount to match the actual cost of the project, as per the project report, or the release of its mortgaged property, which was provided in excess of the loan amount sanctioned. Despite these repeated and justified requests, SBI neither granted the necessary financial assistance nor released the excess mortgaged property, causing severe financial distress to the Applicant and further obstructing the successful completion and operation of their project (Copy of the letter dated 26.12.2024 is Annexure A-6). Applicant states that vide email dated 24.02.2025, Bank intimated the Applicant to service the interest amount of Rs.
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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
2.25 lacs towards the Cash Credit Limit, which was duly complied with by the Applicant. Despite the timely payment, the Bank proceeded to classify the account NPA. This was done during the period when the Term Loan component of the facility was still under moratorium and no installment payment was due. The declaration of the account as NPA under such circumstances was unjustified and contrary to the agreed moratorium terms. Applicant states that the Bank, without any prior intimation, unilaterally declared the account NPA and issued a legal notice dated 07.03.2025, containing incorrect and misleading facts. The legal notice demanded payment of the entire outstanding amount within 10 days, despite the Term Loan being under moratorium and no installments being due at that time. Applicant promptly submitted a detailed reply, clarifying the factual position and raising objections to the arbitrary declaration of NPA. However, the Bank failed to consider the response and took no corrective action, further aggravating the financial distress. Accordingly, it is stated that the action of the Bank was arbitrary and unsustainable. It is alleged that Applicant has now received a possession notice dated 02.07.2025 issued under Section 13(4) of the SARFAESI Act. Applicant was not served with any demand notice under Section 13(2) of the SARFAESI Act, as mandatorily required before initiating proceedings under Section 13(4). As a result, the Applicant was deprived of the statutory right to submit objections or representations within the prescribed 60 day period under Section 13(3A). In fact, the Applicant came to know about the alleged issuance of the demand notice only upon going through the possession notice itself. Further, the possession notice was pasted on the wrong property which was not mortgaged with the Bank. It is further alleged that Bank is adamant to take the physical possession of the mortgaged property and to put the same on sale at a throw away price. It is alleged that Applicant has mortgaged high-value properties and undertook a critical horticultural infrastructure project solely relying upon the express assurances by the Bank that sufficient financial support would be provided. However, the Bank later refused to enhance the sanctioned amount or disburse the remaining funds, despite earlier commitments and despite being fully secured with collateral exceeding Rs.16 crores. Applicant states that Bank classified the account NPA despite the fact that the Term Loan component was under moratorium till April 2025 and no EMI was due. Moreover, Applicant had duly serviced the interest on the Cash Credit facility. As per RBI's Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning, dated 01.07.2015, such classification must be based on factual defaults and not in disregard of agreed moratoriums. Accordingly, the NPA classification is bad
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in law and liable to be quashed. Further, the Bank did not serve the mandatory 60 days notice before taking any action under Section 13(4) of the SARFAESI Act. The failure to serve such notice upon the Applicant has effectively deprived her of the statutory right to file objections and representations under Section 13(3A). Reliance was placed on the judgment passed in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311 . Again, Bank mandated the Applicant to purchase an insurance policy of Rs.14 lacs and later failed to initiate timely survey or process the claim. The surveyor was appointed long after the stock had perished and had to be disposed of due to environmental regulations, defeating the very object of insurance. Applicant states that the Bank had initially advised the Applicant to apply for Rs. 6.90 crores with a clear assurance of enhancement to Rs.13 crores. Later, the Bank unjustly refused the enhancement, citing collateral insufficiency despite holding collateral worth more than Rs.16 crores. Such refusal, in breach of earlier assurances and against their own internal policy, is arbitrary. Again, it is alleged that Applicant had sought the loan under the agricultural category, wherein as per applicable norms, primary collateral is limited to the agricultural land on which the project is to be established, and secondary collateral cannot exceed 40% of the sanctioned loan amount. However, the Bank, without justification, sanctioned the loan under the SME category, thereby demanding excessive collateral security. The Bank took mortgage of properties worth Rs. 16 crores while sanctioning only Rs. 6.90 crores, causing undue financial burden, loss, and pressure on the Applicant. Applicant alleged that even after being informed of the perishing stock and losses suffered due to non-disbursal, the Bank continued to demand stock statements, without sanctioning the required enhancement or offering practical support. Again, in August 2024, Bank had promised to extend Rs.7 crore Working Capital facility, then unjustly demanded a fresh DPR which was duly supplied and additional collateral, even though the collateral already held was far in excess. This is indicative of shifting goalposts and breach of trust, which undermined the viability of the Applicant's ongoing enterprise. Further, the Bank sanctioned only Rs. 90 lakhs under the CC Limit for apple stock, which was grossly insufficient to run the CA storage unit or generate enough revenue to service the loan of Rs. 6.90 crores. The loan was given under MSME scheme. Accordingly, before declaring the account NPA, the Bank should have considered the restructuring of the Applicant. It is alleged that the action of the Bank is arbitrary and prayed that the SARFAESI action be set aside.
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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
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mortgaged property. The SARB Branch of SBI, v ide email dated 29.07.2025, intimated to the Applicant that the matter would be considered subject to the compliance of the terms and conditions as detailed in the email and asked to deposit the overdue amount by 31.07.2025. In another mail, it was reiterated to deposit the overdue amount. However, Applicant failed to submit comprehensive restructuring proposal and also failed to clear the overdue amount despite repeated reminders. It is stated that on 05.07.2025, Bank also filed OA No. 1111 of 2025, for the recovery of Rs. 7,74,66,315/- against the Applicant. The Bank alleged that despite receiving summons and clear restraint directions, Applicant and her husband, alongwith other persons have unauthorizedly started removing movable items i.e. hypothecated current assets, stocks, stores, plant and machinery and other movables, purchased out of Bank finance, from the secured asset. On 18.08.2025, Bank has also filed criminal complaint under BNS Act against the Applicant, her husband and other persons for unauthorized removal and destruction of secured asset. Copy of the complaint was also sent to the higher police officers. It is alleged that Applicant and her husband and other persons are still continuing in their said illegal acts. On visit it was found that they are continuing to remove the articles from the secured asset and causing damage to the immovable property. In substance, the Bank has denied the allegations of the Applicant and prayed that the SA be dismissed.
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SA No. 211 of 2025
DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
Bank to disburse the loan, the Applicant was prevented from procuring the necessary apple stock to operate the four-chamber cold storage unit, leading to the project remaining non-operational. Further, the Bank had mandatorily insured the project by charging premium of Rs. 14 lacs. The Bank declared the account NPA on 24.02.2025 in an arbitrary manner and against the RBI guidelines. Applicant continued to service the interest in CC account. Despite regular payment, Bank declared the account NPA. Mr.Verma submitted that there was moratorium in respect to term loan account upto 31.03.2025. Accordingly, the account could not be declared NPA on 24.02.2025. As far as CC account is concerned, Applicant had serviced the interest for the month of October, November and December, 2024 and January 2025. The was no ‘out of order’ status in the CC account. Despite that, on 27.02.2025, Bank issued the notice under Section 13(2) of the SARFAESI Act. Mr.Verma submitted that the demand notice was never served upon the Applicant. Mr. Verma submitted that mere ‘refusal’ without proper proof of tender by the postal authority, cannot be construed as valid service. The Bank has failed to prove effective service upon the Applicant. Mr.Verma submitted that due to nonservice of the demand notice, Applicant was deprived of her right to file objections. Reliance was placed on the judgment passed in Mardia Chemicals Limited versus Union of India (2004) 4 SCC 311. Further, the mortgaged property is worth Rs. 20 crores. Mr.Verma submitted that the primary purpose of the credit facility was to operational the CA cold storage unit. However, Bank failed to disburse the working capital in timely manner, which caused a direct loss to the Applicant of Rs. 10 crores, with a similar loss anticipated for the year 2025. Mr.Verma submitted that out of sanctioned CC limit of Rs. 1.90 crores, an amount of Rs. 1 crore was utilized for the purchase of crates, which is a fixed asset. This amount should have been structured as a Term Loan. Further, the Bank failed to consider and extend the facilities under CGTMSE scheme. Further, the Bank charged higher rate of interest. Mr. Verma submitted that though, Applicant had sought the loan under agriculture category, yet, SBI stationed the loan under SME category, thereby demanding excessive collateral security. The Bank mortgaged the property worth Rs. 20 crores and sanctioned the loan of Rs. 6.90 crores only. Mr.Verma submitted that after negotiations, the Bank offered option of balance transfer or settlement of the account. This shows that the account was capable of resolution. Mr. Verma submitted that the SARFAESI action taken by the Bank is illegal and liable to be set aside. Mr.Verma submitted that the SA be allowed and the Bank be directed to restructure the account and release the
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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
requisite working capital of Rs. 7crores to make the project operational, after conducting a fresh Techno-Economic Viability study.
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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
removed part of shed and electricity wire from the unit. Mr.Chatrath submitted that the act to the Applicant is highly condemnable. He further submitted that the Bank has already granted sufficient time to make the payment. However, Applicant has failed to liquidate the dues of the Bank and filed the present SA to stall the recovery by the Bank. Mr.Chatrath submitted that there is no merit in the present SA and the same be dismissed.
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SA No. 211 of 2025
DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH
Registrar is directed to send a copy of this order to all the parties, as per rule. Thereafter, file be consigned to record room after due compliance.
(A S Narang) Presiding Officer Pronounced in open court DRT-I, Chandigarh Dated: 27.05.2026 Manoj
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3 issues framed by the court
Whether the Debt Recovery Tribunal should admit the Securitization Application seeking quashing of the Section 13(4) possession notice.
Whether the issuance of the Section 13(2) demand notice was invalid due to alleged non-service of the notice.
Whether the account was wrongly classified as NPA despite the moratorium on the term loan component.
Colour shows how this judgement treated each authority
Mardia Chemicals Ltd. v. Union of IndiaReferred¶27
Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311 · Who else cites this
3 provisions across 1 enactments
M/s Swarraj International CA
State Bank of India
A S Narang
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
