Allowed

A K Enterprises v. State Bank of India

DRT30 Jan 2026SA/264/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application seeking to quash demand and possession notices for defective compliance with the SARFAESI Act. The court held the demand notice violated Section 13(3) due to lack of detailed breakdown and allowed the application to restore possession and award compensation.

What did the court decide?

Restoration of possession of secured assets to the mortgagor and compensation of Rs. 10,000 per month until actual restoration.

A K Enterprises versus State Bank of India — Banking and Recovery | DRT (2026)

SA 264 of 2024 (J)

DRT,PATNA

DEBTS RECOVERY TRIBUNAL PATNA

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Presiding Officer: Shri Kaushalendra Yadav

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SA- 264 of 2024

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A.K. Enterprises, through its Proprietor – Mr. Alamatab Khan (Borrower). R/o Mubarak Lane, Mahmood Chowk, Sri Nandan Path, Jitendra Ji Ka Hata,Chapra, District – Saran, Bihar – 841301.

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Mr. Alamatab Khan (Borrower), S/o Yakub Khan,R/o Mohalla – Dahiyawan, Ward No. 19, Mubarak Lane,P.O. – Chapra, P.S. – Chapra Town, District – Saran, Bihar – 842301.

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Mrs. Rafat Praween (Guarantor-cum-Mortgagor), W/o Alamatab Khan,R/o Mohalla – Dahiyawan, Ward No. 19, Mubarak Lane. P.O. Chapra, P.S. – Chapra Town, District – Saran, Bihar – 842301 .

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

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Versus

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The Authorised Officer-cum-Chief Manager, State Bank of India (SBI), SARB, Main Branch Patna,2nd Floor, West Gandhi Maidan. Patna – 800001 .

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The Branch Manager, SME Chapra Branch (10081), State Bank of India, Bhagwanpur Bazar, Chapra, Bihar – 841301

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................ Respondents

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Presents;

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For the Applicants : Sh Brajesh Kumar Jha, Advocate For the Respondent Bank : Sh A.K. Sharan, Advocate

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Dated: 30.01.2026

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JUDGMENT

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The present application has been filed seeking to quash the demand notices dated 16.11.2023 and 15.04.2024 and the possession notice dated 07.08.2024, to restore possession of the secured asset to the applicant, and to grant compensation in terms of Section 19 of the Act.

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2 During the pendency of the SA, the applicant filed two interlocutory applications: IA 198/2025, seeking to restrain the bank from selling the property pursuant to the sale notice dated 13.02.2025 and to maintain the status quo, and IA 454/2025. also seeking to maintain the status quo.

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3 The brief facts of the case are as follows: The applicant availed a cash credit loan of ?75 lakhs from the respondent bar+ in the year 2018, which was

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SA 264 of 2024 (J)

DRT.PATNA

subsequently enhanced to ?!30 lakhs in the year 2019 at the request of the applicant. and thereafter in the year 2020 the applicant further availed a GECL loan of ?25 lakhs from the respondent bank; to secure the said loan facilities, the applicant created an equitable mortgage in favour of the respondent bank by depositing the title deeds of the mortgaged property. however. due to default in repayment. the loan account was classified as a Non-Performing Asset on 29.10.2023, pursuant to which the respondent bank issued a demand notice under Section 13(2) of the SARFAESI Act dated 15.04.2024, against which the applicant submitted objections under Section 13(3 A) of the Act on 22.05.2024. which were replied to by the respondent bank vide letter dated 07.06.2024. and thereafter the respondent bank issued a possession notice under Section 13(4) of the SARFAESI Act dated 07.08.2024; being aggrieved by the said possession notice, the applicant has filed the present application. 4. The learned counsel for the applicants submitted that the applicants had filed objections dated 22.05.2024 under Section 13(3 A) of the SARFAESI Act against the demand notice dated 15.04.2024, which were replied to by the respondent bank vide letter dated 07.06.2024; however, the issues raised therein were not properly addressed by the respondent bank. It is further submitted that the possession notice dated 07.08.2024 was neither published in newspapers nor affixed upon the mortgaged property and was not in conformity with Appendix IV as mandated by law. It is also submitted that the property details in the demand notice as well as the possession notice were incomplete. It is further submitted that the respondent bank capitalized penal interest and charged a higher rate of interest contrary to the agreement between the parties. It is also submitted that the applicants had insurance policies with SBI Life and LIC, the total maturity amount of which was ?35,85,754/-, which could have been adjusted towards the cash credit account; however, instead, the respondent bank adjusted only ?7,12,628.31 towards the GECL loan account and ?1,79,827/- towards the cash credit account. It is further submitted that the respondent bank has also filed an Original Application being OA No. 394/2024 before this Hon’ble Tribunal. It is also submitted that the mortgaged property is not registered with CERS Al and that despite repeated requests for restoration of the loan account, the respondent bank failed to pay any heed.

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5 The learned counsel for the respondent bank submitted that due to default in repayment, the loan account was classified as NPA on 29.10.2023. Thereafter, the bank issued a demand notice under Section 13(2) of the Act dated 16.11.2023, which was subsequently withdrawn and replaced with a fresh

/d\

SA 264 of 2024 (J)

DRT,PATN A

demand notice dated 15.04.2024, duly served upon the applicants. Against this, the applicants filed an objection under Section 13(3 A) dated 22.05.2024, which was replied to by the bank via letter dated 07.06.2024. The bank then issued a possession notice dated 07.08.2024 under Section 13(4) of the Act, which was duly served, published in two newspapers, and affixed to the secured asset, followed by an individual notice of the right to redemption dated 28.08.2024. As the applicants failed to pay the dues, the bank issued a sale notice dated 13.02.2025, fixing the auction for 25.03.2025, which was also duly served, published in two newspapers, and affixed to the secured asset. It was further submitted that the mortgaged property was registered under CERS AI, the interest charged and the adjustment of the insurance amount to the CC and GECL accounts were in accordance with the rules. and the loan was not restructured as it was ineligible for restructuring.

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I have heard the learned counsels of both the parties and gone through the records.

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It is alleged by the applicants that the possession notice dated 07.08.2024 was neither published in newspapers nor affixed upon the mortgaged property and was not in conformity with Appendix IV. It is also alleged that the property details in both the demand notice and the possession notice were incomplete. It is further alleged that the respondent bank capitalized penal interest and charged a higher rate of interest contrary to the agreement between the parties. It is also alleged that the mortgaged property is not registered with CERS Al.

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Upon perusal of the record, it is found that the possession notice dated 07.08.2024 was sent to the applicants on 09.08.2024 by post and was duly delivered, as evident from the copies of the postal receipt and tracking report annexed at pages 67–70 of the counter affidavit. The said notice was also affixed on the secured asset, as evident from Armexure R/4 series annexed at pages 59–61 of the counter affidavit, and was published in two newspapers, namely The Indian Express and Dainik Jagr au, on 10.08.2024, as evident from pages 71–72 of the counter affidavit. The possession notice is in accordance with Appendix IV, as evident from the copy of the possession notice annexed at page 64 of the counter affidavit

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9 As regards the allegation relating to the description of the mortgaged property, it is found that the property details mentioned in the demand notice as well as the possession notice are correct and are consistent with the other documents on record, including the Memorandum of Creation of Mortgage annexed at pages 25–28 of the counter affidavit. The specific allegation of the applicants pertains only to the omission of “G+3:’ in the description of the property;

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SA 264 of 2024 (J)

DRT,PATN A

however, the mere omission of “G+3” does not cause any loss or prejudice to the applicants. particularly when no sale has taken place. This is evident from the copies of the demand notice annexed as Annexure R/2 at page 30 of the counter affidavit and the possession notice annexed at page 64 of the counter affidavit.

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As far as the allegation regarding CERS Al registration is concerned. the respondent bank has annexed the CERSAI report at pages 29–29/4 of the counter affidavit, which establishes that the mortgaged property was duly registered with CERSAI.

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As regards the allegation concerning capitalization of penal interest and levy of higher rate of interest, upon perusal of the record it is found that the applicant has annexed Annexure A/9 at pages 40–43 of the SA annexures. A bare perusal of the same shows that penal interest has been capitalized. With respect to the allegation of charging a higher rate of interest, it is noted that the said issue was also raised by the applicant in the objection filed under Section 13(3 A) of the Act, to which the respondent bank replied that the rate of interest was charged in accordance with the terms of the loan agreement. However, it is pertinent to note that neither the applicant nor the respondent bank has annexed the sanction letter or the loan agreement. In the absence of the same, determination of the exact rate of interest applicable at the time of sanction becomes difficult.

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At the same time it is also relevant to mention that the respondent has not furnished the details of the amount demanded in notice under Section 13(2) of SARFAESI Act the details have also not been given despite the representation. As such the Demand Notice does not conform to Section 13(3) of the SARFAESI Act. The provision is reproduced here under:

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”13(3). The notice re.ferI'ed to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower."

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Hon’ble Justice Vikram Nath the then CJ ofHon'ble High Court of Gujarat, in the matter of Punjab National Bank vs M/S Mithilanchal Industries Pvt. Ltd. on 17 August. 2020 observed as under-

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Inso.far as the fIrst part is concerned i.e. regarding the amount

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payable by the borrowers, if the intention of the Legislature was onIY to provide ttte total outstanding amount or the aggregate unloun{ outstanding cmd payable by the borrowers, the language would have

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SA 264 of 2024 (J)

DRT,PATN A

been different. It would not have been necessary to incorporate SubSection (3) in Section 13 of the SARFAESI Act. In Sub-Section (2) of Section 13 of- the SARFAESI AcT, it is also mentioned that the Secured Creditor may require the borrower by notice in writing to discharge in full his liabilities to the Secured Creditor. The said liabilities would be mentioned in view of the provisions of Sub-Section (2) itself. But. consciously, Sub-Section (3) \'as incorporated so as to enstwc 1IICIt the details of the amount payable are provided in the notice. Such details would include the relevant calculations made by the Bank under difjkrent heads which had become due and payable at the end of the borl'o\,er

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There is another reason for incorporating Sub-Section (3). SubSection 3(A) gives the right to the borrower to make a representation or raise an objection against the notice under Sub-Section (2). Unless the borrower has the details of- the amounts found due and pa\’able bv the Secured Creditor and being demanded as such under a notice under Sub- Section (2), the borrower would not be in a position TO make cm)’ representation or raise any objection. It is only b'hen the alnounts under different heads are provided to the borrower that it could raise an objection under any of the heads \'here the hctl'rtnrer finds that the amount quantified is not correct. Without there bci11g tIny details mentioned in the notice, the very purpose of Sub-Section 3(A) \tc)utd also be lost to a large extent.

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From a perusal of the material on record and as also discussed not only by lhe Tribunal but also the learned Single Judge there was an issue raised earlier and pending between the parties regarding the rate of interest at \which the Secured Creditor was calculating. According to The borrower, the rate of interest \vas higher as was being applied by the Secured Creditor than what actually it could claim under the agreement. The learned Single Judge had ref-erred to such facts in paragraphs 5.1 to 6.1 of the judgment. The learned Single Judge had also placed reliance upon the view taken by the Patma High Court as also the High Coru't of Calcutta white interpreting the provisions o.f’ Sub-Sections (2) and (3) o.f Section 13 of the SARFAESI ,4c/

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In view of the above discussion it is clear that the respondent has failed to discharge the onus to rebut the allegation of charging the interest against q \

SA 264 of 2024 (J)

DRT.PATNA

agreed terms. As such the present SA succeeds. The measures under challenge are liable to be set aside. The Possession of the applicants can be restored with order for compensation.

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ORDER

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The application SA 264 of 2024 filed by A.K. Enterprises & Ors., is Allowed with costs. The respondent is directed to restore the possession of secured assets to the mortgager and also pay the compensation of Rs.10000

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IDn/

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per month till actual restoration of possession.

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[KaushalendraYadav]

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Presiding Officer

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Debts Recovery Tribunal. Patna

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Judgment signed, sealed, dated and pronounced in the open court on this 30TH Day of January. 2026.

-/ N ;{\&

[KaushalendraYadav]

Presiding Officer

Debts Recovery Tribunal, Patna

A K Enterprises v. State Bank of India

Case brief

What is this about?

What did the court decide?

A K Enterprises v. State Bank of India

Case brief

What is this about?

What did the court decide?

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