Allowed

Goduguchintha Srihari Babu v. Canara Bank

DRT19 Feb 2026SA/320/2022

Case brief

AI extract

What is this about?

Applicant challenged auction sale of secured property alleging procedural violations and undervaluation. Tribunal set aside sale due to failure to file approved valuation report under Rule 8(5) and lack of proof for notice affixture, directing bank to refund deposit and re-auction.

What did the court decide?

Auction sale set aside; bank directed to refund bid amount with interest; take back possession if delivered; re-issue sale notice complying with Act and Rules.

Goduguchintha Srihari Babu versus Canara Bank — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL - II AT HYDEMBAD

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DATED THIS THE 19th DAY OF FEBRUARY, 2026

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PRESENT: SH. RAMESHIII^IOIH_E] B.Com, L.LB. (Hons.), M.A. PRESIDING OFFICER

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Securitization Application No. 320 OF ZO22

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Goduguchintha Srihari Babu, S/o, G. Venkata Muni, Aged about 41 years, !9c^:. !e_dl9a^{t SatesRepresentative,} R/o L/t543/A, Gandhi Nagar, Emmiganuru, Kurnool.

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.......Applicant.

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Versus

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Canara Bank, Recovery Section, Regional Office,

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R/o. 15-2-11Bto L22,

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Sri Govinda Raju Swamy Temple, South Mada Street, Tirupati_517201. Represented by its Authorised officer.

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K. Vijay Vardhan, S/o. Chalapathi, Rep by its Branch Manager in Srikalahasthi Canara Bank Aged about 35 years, Occ: Manager, R/o. Canara Bank near Vijay Lakshmi Theater, Srikalahasthi,

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Ponnepalli Venkatachalapathi Aged About 45 years, Occ; Business, R/o. M.G. Street, Near Court, Srikalahasthi

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. .... Respondents

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Counsel for the Applicants : Mr. T. Vijay Kumar Counsel for Respondent No.7 : Mr.Bachina Hanumath Rao Counsel for Respondent No.2 : Ex-parte Counsel for Respondent No.3 : Mr. Gn Bhupesh u/'k&\

PaBe 2 of⁶

sA No.^320/2022

-:g-B-D-LB:-

1.^{The present SecuritizationApplication is filed by the Applicant} tJls.l7 of the^{Securitisationand Reconstructionof FinancialAssets} andEnforcementofSecuritylnterestAct,2oo2(..Act,,hereinafterfor short) to^{set aside all measuresinitiatedby the RespondentBank} under Section^{13(4) of the Act, includingthe saleconductedon} Z8.OI.2OZZ^{and registeredon Zt,'fO '2022 in respect of the SA} Schedule^ProPerty.

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The averments^{of the application,briefly' are that the Applicant} availed a^{housingloan of Rs'19 Lakhsfrom RespondentNo'1} (hereinafter referred^{to as the RespondentBank) The Applicantwas} regular in^{repayment of the loan up to December2021' however' due} to unavoidable^{circumstances,coutd not service the loan} thereafter.^{Consequently,the Respondent Bankissued a demand} notice dated^{06-12-2027 under Section13(2) of the Act' callingupon} the Applicant^{to pay Rs.19 Lakhsalongwith interest and costs'} Despite the^{Applicant's efforts to settle the matter,the Respondent} Bank^{proceeded to issue a sale noticedated 01 11 2022' scheduling} the auction fot^{O7.Og.2022 with a reserve price of Rs 27'10} Lakhs. The said^{auction was concluded successfully,and the Schedule} Property was knocked^{down in favour of RespondentNo 2The} Applicant contends that^{the Respondent Bank has realized excess sale} proceeds; moreover, the Respondent^{Bank has failed to issue} possession notice and sale notice, in^{clearviolationof Section 13(4)} of the Act read with^Rules 8(1), 8(2),^{8(6) and 9(1) of the Security} Interest (Enforcement) Rules, 2002^{("Rules"hereinafterfor} short). The Applicant further alleges that the^{Schedule Propertywas} sold at^grossly undervalued^price collusively,^{in violatlon} of^{Rule 8(5)} of the said Rules. Hence the action of respon ryi\fr.y is.liable to be set aside as the proceedings. (J/^(1.\l''n

(J/^(1.\l''n

PaSe 3 of5

sA No. 32Ol2O2Z

Respondent No.2 was set ex-parte on 27.71.2022 as called absent and no representation. Whereas, the right of R3 to file reply statement was forfeited on 73.72.2024, after affording ample opportunity.

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The Respondent Bank adopted its counter in I.A. No. 1404 of 2022 as the reply statement in the main SA. The averments therein, briefly, are that the Applicants availed a housing loan facility of Rs.20 Lakhs from the Respondent Bank in the^yeat 2077. Due to default in servicing the loan, the Respondent Bank issued demand notice dated 06.72.2021 under Section 13(2) of the Act. Applicants' failure to clear the liability led to issuance of^possession notice dated 28.02.2022 under Section 13(4) of the Act, which was^published in Sakshiand Hans India newspapers on 04.03.2022. Thereafter, having obtained the valuation report, the Respondent Bank issued sale notice dated 01.09.2022 under Rule 8(6) of the Rules, fixing^the auction for 28.09.2022, thereby duly complying with the^mandatory provisions of Rules 8(5), 8(6) and 9(1) of the said Rules. Having scrupulously adhered to all statutory requirements under the Act and Rules, the present Securitization Application deserves dismissal.

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Heard the learned counsel appearing for the applicant^whereas learned counsel for the respondent no.1 & 3 reported order^may be passed on record, Perused the written arguments filed by the learned counsel for the applicant and also^perused the material brought^on record,

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During the course of arguments, the learned counsel for the Applicant reiterated the averments in the Securitization Application^to the effect that no^possession notice was issued^prior to the^sale notice and that the Schedule Property was sold at^grossly undervalued^price. Relying upon the^{judgments^9f.} the^l-ton'ble ';OK-t

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Page 4 of 6

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SA No. 320/2022

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Supreme Court in Neerja Realtors Pvt. Ltd. v. langlu (2018) and State of Madhya Pradesh v. Hiralal (1996), it was submitted that failure to eFfect proper service of notices constitutes a grave violation of the principles of natural justice. To substantiate the contention of undervaluation, the Applicant highlighted that the Respondent Bank had fixed the reserve price of the Schedule Property at Rs.27,00,0001-, whereas the valuation as per the SRO report stood at Rs.73,00,000/-. In support thereof, reliance was placed on the judgment of the Debt Recovery Appellate Tribunal, Chennai in V. Mathivanan & Ors. v. Authorised Officer, Indian Overseas Bank & Ors. [RA (SA) No.9 of 2024], wherein lt was held that sale of the Schedule Property at an undervalued price renders the sale certificate illegal and unsustainable in law.

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The points for consideration are as follows : -

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i) Whether the applicant made out any valid ground to quash the measures initiated by the respondent against the SA schedule property as prayed for?

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ii) To what relieP

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Point No.(i):

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The contention of the applicant is non-compliance of section 13(2) & 13(4) of the Act and Rules 3, 8(1), 8(2) & 8(6) of the Rutes, 2002. The Respondent Bank has relied upon copies of documents annexed to its counter in I.A. No. t404 of 2022. A perusal of the record confirms that the demand notice, possession notice and sale notice were dispatched through registered post but were returned with the remark "Not in Town"; consequently, the said notices were published in English and Telugu dailies. photographs on record further corroborate affixture of the possession notice at a soicuous Dlace h9l..r-! rl!-

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page 5 of 6

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SA No. 320/2022

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on the Schedule Property. These documents unequivocally establish due compliance by the Respondent Bank with the mandatory provisions of Sections 13(2) and 13(a) of the Act read with Rules 8( 1), 8(2) and 8(6) of the Rules.

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However, one of the principal contentions advanced by the Applicant, which the Respondent Bank has failed to effectively controvert, pertains to the sale of the Schedule Property at a grossly undervalued rate. In support thereof, reliance has been placed on the valuation report issued by the office of Sub-Registrar, Srikalahasthi daled 14.11.2022 annexed to the Securitization Application, wherein the market value of the Schedule Property has been assessed at Rs.73,00,000/-. Although the Respondent Bank has refused the contention by denying its veracity, it has failed to place on record its own valuation report to rebut the allegation of undervaluation. It is settled law that a secured creditor is bound to obtain valuation report as required under Rule 8(5) before effecting sale notice and fix the reserve price. With no valuation report from approved valuer available on record, the action of fixing reserve price lacked transparency and strengthened the contention of undervaluation of the^property. Upon further scrutiny/ it is also observed that^the Respondent Bank has also not filed any^proof of affixture of^{the sale} notice at a conspicuous^place on the^{ScheduleProperty.In the} absence of any contradicting materlal,^{valuation reportor proof of} compliance, it is concluded that the^{mandatoryrequirement under} Rules 8(5), 8(6) and 8(7) of the^{Rules, 2002 has not been adheredto} by the respondent bank.

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In view of the above^{observations,it is held that the applicant} established a valid^ground to^{set aside the auctionsale held on} 28.0s.2022 in respect of^{sA schedute} ,r"ffN#fr)ce^of

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Page 6 of 6

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sA No.320/2022

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auction sale notice dated 01.09.2022. Accordingly, SA deserves to be a llowed.

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Point No.(ii):

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In the result, the Securitization Application is allowed by setting aside the auction sale held in respect of schedule property on 28.09.2022 pursuant to the auction sale notice dated 01.09.2022.

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Consequently, the 1't respondent bank is directed to refund the bid amounts deposited by the 3'd respondent with interest @60lo p.a. simple from the respective dates of deposit till the date of final payment.

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The Respondent Bank is directed to take back possession of the SA Schedule Property if already delivered to the auction purchaser.

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t4. The Respondent Bank is at riberty to issue fresh auction sare notice by strictly the relevant provisions of the Act and Rules ot 2002.

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Consequently, the 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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flied,^{to y,_d:totionby thepS, corrected, signedand pronounced} by me in the open court on this the 19" doy of February, 2026).

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firy"*x (RAHCSHWAR KOTHE) PRESIDING OFFICEd

Goduguchintha Srihari Babu v. Canara Bank

Case brief

What is this about?

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Goduguchintha Srihari Babu v. Canara Bank

Case brief

What is this about?

What did the court decide?

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