Dismissed

Ms Hkb Trading Co. and Others v. Karnataka Bank Limited

DRT30 Jan 2026SA/264/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal-II dismissed the Securitization Application filed by borrowers challenging the Section 14 order passed by the Chief Judicial Magistrate under the SARFAESI Act. The court held that the bank had strictly complied with statutory procedures regarding notice issuance and service, and the allegations regarding loan structuring and COVID-19 relief lacked evidentiary support.

What did the court decide?

The Securitization Application No.264 of 2024 was dismissed and all pending Instant Applications were closed.

Ms Hkb Trading Co. and Others versus Karnataka… — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL-II, BANGALORE

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Dated of 30^th day of January, 2026

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PRESENT: SHRI T. RAJESH Hon’ble Presiding Officer

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S.A.No.264 of 2024

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M/s.HKB Trading Co., (Borrower), Rep: By its Prop : Mr.Ehtesham Ui Huq HK.

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Mr. Ehtesham Ui Huq HK, (Prop./Borrower).

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Kuthiaja Mohammedi (Co-Borrower).

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Both are residing at #No.2646, Sy.No.285, Abdul Nazeer Sab Road, Gundlupet, Chamarajnagara District. PIN – 571 111.

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. . . Applicants.

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Versus

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The Authorised Officer, Karnataka Bank Ltd., Reg. Head Office: #599, Mahaveer Circle, Kankandy, Mangaluru – 575 002. . . . Respondent.

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Ld. Counsels on record/appeared :-

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Counsel for Applicants :- Sri M.A.Rajendra. Counsel for Respondent :- Sri K.V.Shyamaprasada. (CAVEAT)

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SA No. 264/2024

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: - O R D E R - :

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The Securitization Application, SA is filed under section 17 of the Securitization And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act; herein after been referred to as SARFAESI Act or

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the Act, as the case be challenging the measures leading to the procurement of Section 14 orders by the respondent in Crl.Misc. No.74/2024 dt.04.10.2024 passed by Hon’ble Chief Judicial Magistrate, Mysuru.

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The 2^nd Applicant is a proprietor of 1^st applicant firm and 3^rd applicant is a co-borrower. The firm is engaged in the business of wholesale dealers in vegetables. It is contended that the applicants approached the respondent bank for Overdraft of Rs.55.00 lakhs and Rs.49.00 lakhs & Rs.14.44 lakhs in Housing Loan facilities and offered four properties as collateral security out of which one residential property is also there which is the subject matter of this SA. It is also contended that instead of sanctioning both OD loan and Housing Loan, the respondent bank sanctioned a Term Loan of Rs.1,25,19,951.49 to meet the working capital and to construct their house and also collected premium for Life Group Protect Scheme loans. The borrowers were regular in their repayments but they had suffered heavy loss in their business due to COVID-19

SA No. 264/2024

disasters and hence the loan account of the applicants was classified as Non Performing Assets on 30.11.2021. The Applicants case is that the respondent initiated further measures by issuance of demand notices u/s.13(2) of the Act on 08.04.2022 and 25.04.2022 pertaining to loan account of 2^nd applicant and also the possession notice u/s.13(4) of the Act which the applicant claimed is not served on the applicants. It is further contended that the respondent bank has also issued auction sale notice dt.11.07.2023 and 06.01.2024. It is the case of the applicants that the respondent ought to have registered the security interest created over the property with the Central Registry, the respondent issued possession notice dt.23.03.2023 based on the two demand notices dt.08.04.2022 and 25.04.2022. It is also the case of the applicants that the respondent failed to serve copy of demand notice as well as possession notice to all the borrowers and failed in following the affixture and publication of the same in two leading newspapers. It is also the case of the applicants that though they are eligible for the benefits extended with regard to COVID relief package scheme released by Reserve Bank of India, the same is not extended to the applicants. In the grounds to the SA the applicants are reiterating the contentions as stated above and

SA No. 264/2024

prayed to set aside the impugned Section 14 order procured by the respondent.

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Along with SA, the Applicants had produced the following documents:

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i) Copy of the impugned order dt.04.10.2024 and the petition copy of the respondent bank.

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ii) Copy of the Sanction Letter and the copy of the scheme. iii) Copy of the possession notice dt.23.03.2023.

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The respondent filed their statement of objection admitting the

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availment of Term Loan and Housing Loans by applicants and the properties mortgaged by them but denied their contentions that the said loans are covered by life group protection scheme. The respondent denies the allegation of the applicants that the respondent bank erred in sanctioning the mortgage loan of Rs.1,00,00,000/- towards the working

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capital and contended that the respondent bank has sanctioned the loan as required by the applicant from time to time. The respondent also

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denied the allegation of the applicants that instead of sanctioning overdraft loan, a term loan was sanctioned. The respondent had denied the contentions of the applicants that they suffered heavy loss due to COVID-19 and that COVID-19 relief package scheme and benefits under the said scheme are not extended to them. It is contended that the benefit

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accrued to the eligible borrower were granted as per the guidelines of

SA No. 264/2024

RBI. The respondent further denied the contentions of the applicants that the security interest was not registered. The respondent contended that the applicants are intentional defaulters and not repaying the loan amount and the respondent with an intention to recover its dues initiated the recovery proceedings as per law and also followed all the procedures as required under the SARFAESI Act before seeking an order u/s.14 of the SARFAESI Act. The respondent also contended that they acted within the scope of law and prayed for dismissing the SA.

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Along with objection, the respondent had produced the following documents:

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i) Demand Notice issued by the respondent bank to applicant. ii) Postal Receipts. iii) Served postal acknowledgements. iv) Possession Notice issued by the respondent bank to applicant.

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v) Postal Receipts. vi) Served and unserved postal acknowledgements. vii) Possession Notice published in Prajavani, Kannada Newspaper.

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viii) Possession Notice published in Deccan Herald, English Newspaper.

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ix) Photographs of Affixture of possession notice on the schedule property.

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Heard the Ld. counsel for both sides.

SA No. 264/2024

The only issue that arises for consideration is as to the legality of measures initiated and continued leading to the procurement of section 14 orders.

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The applicant is having no dispute as to the availment of the credit facility, creation of Security Interest in lieu of the security and is also admitting the defaults occurred in the account though the same is attributed to Covid 19. The applicant though is contending that the respondent failed to extent the RBI directions as to the Covid-19, which mandates reschedulment of credit facilities, no such directives by RBI is produced by the applicant evidencing their entitlement for the above claim. In view of the above, this Tribunal is not inclined to accept the contention of the applicant in this regard.

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The next contention taken by the applicant is that there is no service of demand notice and possession notice. This contention is successfully countered by the respondent as the proof as to the despatch and service of demand notice and possession notice were produced. In view of the production of the proof as to the service of notices, there is no force in the contention of the applicant that there is no service of demand notice and possession notice on the applicant.

SA No. 264/2024

The next contention of the applicant as to the issuance of two demand notice is also to be negated as the respondent is justified as there is no illegality in issuance of separate demand notices in respect of different accounts.

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The compliance as to rule 8(1) and 8(2) of Security Interest (Enforcement) Rules is produced by the respondent as the proof of dispatch, affixture and publication as to the possession notice is produced by the respondent. Even otherwise the issuance of possession notice is not sinequanon for initiation of section 14 measures.

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Hence on consideration of the discussions as held in aforementioned paragraphs and findings therein, this Tribunal is satisfied that the measures initiated and continued by the Authorised officer is in accordance with statute. The applicant had failed in putting forward any valid challenges against the measures and hence this SA is liable to be dismissed.

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In the result,

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i) SA.No.264 of 2024 stands dismissed ii) All pending IA’s stands closed.

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iii) No orders as to cost.

SA No. 264/2024

Issue copies in accordance with rule 16 of the Debt Recovery Tribunal

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(procedure) rule.

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( Dictated to PS, transcribed by him, corrected, signed and pronounced by me in the Open Court, this 30^th day of January, 2026 )

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Sd./- (T. RAJESH) PRESIDING OFFICER

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Ms Hkb Trading Co. and Others v. Karnataka Bank Limited

Case brief

What is this about?

What did the court decide?

Ms Hkb Trading Co. and Others v. Karnataka Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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