Allowed

M S Sri Varalakshmi Seed Processing Plant v. State Bank of India

DRT20 Jul 2026SA/34/2023

Case brief

AI extract

What is this about?

Application under Section 17 SARFAESI Act challenging Sale Notice and possession proceedings. Court held bank violated mandatory Section 13(3A) by failing to reply to applicant's representation. Subsequent proceedings quashed.

What did the court decide?

Application allowed; Sale Notice set aside; Subsequent possession proceedings quashed; Bank permitted to initiate fresh proceedings after following due procedure.

M S Sri Varalakshmi Seed Processing Plant versus… — Contract and Commercial Disputes | DRT (2026)

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IN THE DEBTS RECOVERYTRIBUNAL - 1 AT HYDERABAD DATED THIS THE 2OTH DAY OF JULY. 2026

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PRESENT: SRI GUMMADI GOPICHAND, PRESIDING OFFICER

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sA.No.34,/2023

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M/s Sri Varalakshmi Seed Processing Plant, Rep.by its Managing patner Sri Gattu Mailaiah, S/o Narsaiah, aged 39 years, Occ:business, R/o 10-1-36/18, Ramnagar, Karimnagar-SO55O 1

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... Applicant

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Versus

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State Bank of India, Rep.by its Authorized Officer Stressed Assets Recovery Branch(SARB), 2ND floo, TSRTC Commuter Amenity Centre, Bus Terminal Complex, Koti, Hyderabad-SOO 095. .. . Respondent

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Counsel for the Applicant : Sri T.Sidhar Reddg Counsel for Respondent : Si P.V. Saty anaray ana

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Reserued on : 07.07.2026 Pronounced on : 20.O7.2026 Uploaded on : 20.07.2O26

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ORDER

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This application is filed by the Applicant u/s. 17 of the SARFAESI Act, 2002, challenging the Sale Notice dt. 13.01.2023 issued by the Respondent Bank for conducting auction of the schedule propert5r and aiso the procee-dlrgq;inilialed by the Respondent for taking physical

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possession...6f i0.""r"..,9ffi* @,'9.ffir$b\property^{-ffi.,.,-soffi.rt.,} pursuant K".ir.,.,agar to and the orders also theof i-prgr,.i.rliotice dt.E5.o6.2o2f#i[ 8(6) of Rules, 2oo2 and.to declare the same i ur.&"i1"lU-'3ffi : 'il . ?t t! ,r{ .t).1$. -s€rs 2. rh. "',,..-"n$,.{lfi{:flfi,!}W"ation, in brier, are that:

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The Applicant is a^{partnership Iirm and availed Overdraftfacilityof} Rs.1.25 crores^{and GECL limit of Rs'25lakhs' Due to Covid-19' the} Applicant sustained^{loss in the businessand could not pay some} instalments.^{The Applicant requestedthe Bank to regularize the loan} account by^{receiving the overdueamountbut without consideringthe} same, the^{Bank issueddemand notice dt'02'05'2o22and in response} to the said^{notice, the Applicant submittedarepresentation} dt.28.O5.2022^{but the Bank failed to give any reply to the same' While} the matter stood thus,^{on 25.01} '2023,^{somepersons came to the} schedule^{property and demandedthe Applicant to vacate the same and} they served^{sale notice dt. 13.01.2023 for conductingauctionof the} schedule property^{ort' 24.O2.2O23withoutobtaining valuation report} and without^{serving Rule 8(6) notice'During the pendency of the SA'} Without serving^{possessionnoticeto the Applicant'the Respondent} proceeded further u/^{s 14 of the SARFAESI Act,2OO2 for taking physical} possession of schedule^{propertypursuant to the orders of Ld'Collector} & District Magistrate,^{Karimnagarand so, the said proceedings are not} legal and valid.^{The impugnedpossessionnotice was not published in} two daily newspapers^{and also not afhxedon the schedule propertyas} contemplated u/r^{S(1)&(2)of SecurityInterest(Enforcement)Rules'} 2002. Hence^{the SA.}

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The Respondent^{Bank filed their Replyand Additional Replydenying all} the adverse allegations^{made in the SA and contended that Eaga Gattu} Mallaiah who^{was the Managingpartner of M/s Sri Varlakshmi Seed} vailed various credit^{facilities from State Bank of} branch, Karimnagar^{for businesspurpose'} reafter e App committed default^{in repayingthe loandues} classified as^{NPA on 01'05.2022 and so,} Hi.i:jll$!"i6"". d notice dt.O2.O5.2O22^{u/s 13(2) of the} I Act, the said notice^{was admittedlyserved on the} bank issued^{possession noticedt'25'1O '2022} was published in^{two daily newspapers and also}

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affixed on the schedule property. Thereafter, the Respondent Bank issued E Auction saie Notice dt.l3.Ol.2}23 fixing the auction of the secured asset on 24.02.2023 and the said notice was duly served on the Applicant and the same was affixed on the schedule property and also published in two leading newspapers. Before Iixing the auction, the Bank obtained valuation report from the approved valuer and accordingly fixed the reserve price against the schedule property. However, the proposed auction was not materialized in view of the stay granted by this Tribunal. Thereafter, the bank proceeded u/s 14 of the SARFAESI Act, 2OO2 for taking physical possession of the schedule property pursuant to the orders of Ld. Collector and District Magistrate, Karimnagar by duly following the procedure. Thus there are no violations. Accordingly, Respondent prayed to dismiss the SA.

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Heard Ld. Counsel for the Applicant and Ld.Counsel for the Respondent. Perused the material brought on record.

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Now the points that arise for consideration are

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i. Whether the Applicant has established ang ualid ground s for challenging the sole notice dt.13. O 1 .2023 issued bg the Respondent

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for^{conducting auction of tLe} schedule^propertg?

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It. Wetler the Applicant has established any ualid grounds for challenging the proceedings initiated bg the Respondent for taking phgsical possession of the schedule propertg u/s 14 of tLte SARFAESIAcI, 2 002 through aduocote commissioner?

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iii.
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Points Ivo.(if&(ii):-

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During the course^{of arguments,Ld. Counselfor the Applicantand Ld'} Counsel for the^{Respondentreiterated theirrespectiveversions as stated} supra.

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T.TheundisputedfactsofthecasearethattheApplicantavailedcredit facilities from the^{Respondentagainst themortgageof the schedule} property and thereafter,^{committeddefault in repaying the loan dues and} so, the loan account^{was classified as NPA by the Respondent'} Subsequently, the^{Respondentinitiatedproceedings u/s14 of the} SARFAESI Act, 2OO2^{for taking physicalpossessionof the schedule} property and also for conducting^{auction of the scheduleproperty by} issuing sale notice dt.^13.01.2023.

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8.ThespecificcontentionoftheAppiicantisthattheRespondentwithout complying with^{Section13(3A) of the SARFAESI Act,2OO2and without} following Rule 8(1)&(2)^{of Rules, 2002, straightaway,issued the impugned} Sale Notice dt. 13.01.2023^{for conductingauction of the scheduled} property and during the^{pendencyof the SA, initiatedproceedingsfor} takingphysicalpossessionoftheschedulepropertythroughadvocate 4 of the SARFAESI^{Act,2OO2 without following the} id proceedings are null^{and void.}

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that admittedlv, the^{Applicantavailed} p6. 1--i"o[tfi,,H["flffia."i+[ttended lo'Ap fgcilities from $qtlfspondent^{againsr the mortgageof the schedule} p."|ff6r,.,.4q,p,g6e$ffiihe^{1oan, the Applicant committed defaultin} 'Olril**W as per the terms of the loan agreement and so, the

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. - ,d.*r...ir_;f

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Ioan account was classrlred^{as NPA as per the guidelines of RBI' Theteafter'} the Respondent issued^{all the mandatory notices to the Applicant by duly} following the^{procedure contemplatedunderthe provisionsof SARFAESI}

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Act, 2OO2 and Rules made thereunder and also in taking physical possession of the schedule property u/s 14 of the SARFAESI Act, 2002..

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To substantiate their contention, Respondent filed material documents along with the Reply filed by them. As per the material documents, it is clear that the Respondent issued demand notice dt.02.05.2o22 and the said notice was admittedly served on the Applicant. In response to the said demand notice, the Applicant sent a representation / letter dt.28.O5.2022 and sent the said letter to the Respondent which is evident by the postal track report filed by the Applicant. Though the Applicant specifically contended that the bank failed to give reply to the representation submitted by him in response to the demand notice, the bank has not filed any material proof to disprove the same. In view of the same, it is clear that the bank failed to comply with Section 13(3A) of the SARFAESI Act, 2OO2 which is mandatory and thereby, all subsequent proceedings initiated by the Bank under the provisions of SARFAESI Act, 2OO2 and Rules made thereunder against the secured asset become null and void and so, liable to be set aside. On this ground alone, the present SA is liable to be allowed and all the proceedings initiated by the Bank pursuant to the impugned demand notice are liable to be quashed. Accordingly, these points are answered in favour of the Applicant and against the Respondent bank.

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Point No.(iii):-

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In the result, SA34l2O23 is allowed by setting all the consequent notices purs.P@o: d notice dt.O2.O5.2O22 including the possession ;;tr4'59 ed by the Respondent Bank in respect of the sctrrdule ni$..ty the proceedings initiated by the .Bank for takin? efyfiJ n of the schedule property u/s 14 of the SARFA:ESI P.ii, ZbbZ. er, the auction proposed to be conducted in property pursuant to the Sale Notice

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dt. 13.01.2023 was not^{materializedand so, the said sale noticebecomes} infructuous. However, the^{Bank is at libertyto initiate freshproceedings} against the schedule^property by^{duly following the provisionsof} SARFAESI Act, 2OO2^{and Rules made thereunderfor recovery of their} dues.

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Consequently, the^{Interlocutory Applications, pendingif any, shall stand} disposed of. No order^{as to costs.}

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Communicate a copy of^{this order to the partiesconcerned.}

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(Dictated to the P.s, transcibed by her, corrected,^{signed and pronounced bg me in the open} court on this the 20th day of^{JulA, 2026)}

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dffi<br>; 21Jr,[7nT :
W1l

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sd/(G. GOPI CHAND) PRESIDING OFFICER

M S Sri Varalakshmi Seed Processing Plant v. State Bank of India

Case brief

What is this about?

What did the court decide?

M S Sri Varalakshmi Seed Processing Plant v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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