Allowed

Shanti Ornaments Private Limited v. State Bank of India

DRT21 Apr 2026SA/40/2022

Case brief

AI extract

What is this about?

The DT allowed the Securitisation Application, holding the bank's NPA classification illegal as it occurred while a Supreme Court stay remained operative. Subsequent SARFAESI proceedings were quashed, and possession was directed to be restored.

What did the court decide?

Securitisation Application allowed; NPA classification quashed; SARFAESI proceedings quashed; possession of property restored to applicants; bank directed to restore possession immediately.

Shanti Ornaments Private Limited versus State Bank of India — Banking and Recovery | DRT (2026)

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Presented on : 17.12.2021 Registered on : 05.02.2022 Decided on : 21.04.2026 Duration : Y M D 04-02-04

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IN THE DEBTS RECOVERY TRIBUNAL AT AURANGABAD

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SECURITISATION APPLICATION NO.40 OF 2022

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Shanti Ornaments Pvt. Ltd., Through its Director, Shri Champalal Babulalji Soni, Age : 64 years, Occu. Business, R/o 57, Survey No.428/2, Ganpati Nagar, Jalgaon, Tq. & Dist. Jalgaon

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Ishwarlal Babulal Soni, Age : 58 years, Occu. Business, S.No.428/2, Plot No.57 (Part), Shanti Bungalow, Ganpati Nagar, Jalgaon, Tq. & Dist. Jalgaon .. Applicants

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Versus

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State Bank of India Through the Authorised Officer/ Chief Manager, S.M.E. Branch Jalgaon, Plot No.7/2, Ajanta Road, Jalgaon, Tq. & Dist. Jalgaon

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[N. Jahagirdar] [S.A.No.40/2022] Page 1 of 21

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The State Bank of India, Through its Assistant General Manager, Stressed Assets Recovery Branch, Administrative Office-II, Plot No.1, Town Centre, CIDCO, Aurangabad …. Respondents

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APPEARANCE :

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Applicant : Mr. P.S. Gaikwad, Advocate

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Respondents/Bank : Mr. S.V. Adwant, Advocate

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CORAM: DR. J.R. CHAUHAN, PRESIDING OFFICER

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JUDGMENT

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(Pronounced on : 21.04.2026)

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Both the applicants have filed present Securitisation Application

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(S.A.) under Section 17 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”) for the following reliefs:

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“ (i) The possession notice dated 17.11.2021, issued by the respondents/bank may be quashed and set aside and further the respondents/bank may be directed to handover the possession of the property to the applicants.

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[N. Jahagirdar] [S.A.No.40/2022] Page 2 of 21

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(ii) The order dated 06.01.2022, passed by the District Magistrate, Jalgaon under Section 14 of the SARFAESI Act may be quashed and set aside

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(iii) It may be declared that the District Magistrate, Jalgaon has no authority in law to pass any order under Section 14 of the SARFAESI Act as the subject matter is subjudice before the Civil Court at Jalgaon.

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(iv) Any other suitable and equitable relief may be granted in favour of the applicants.”

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The brief facts as set up by the applicants in the amended memo of this Securitisation Application (S.A.) are that the present applicant No.1 is a registered company under the provisions of the Companies Act and dealing in the business of sale and purchase of gold ornaments and fine gold and having gold and silver jeweller showroom. The applicant company was established in the year 2004. Initially, Shri Rajkesh Champalal Soni was the director of applicant No.1; however, later on, he has given resignation and on his place, Nilimdevi Champalal Soni was inducted/appointed as a director of applicant No.1 company. The applicant approached the

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[N. Jahagirdar] [S.A.No.40/2022] Page 3 of 21

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respondents/bank and enquired about the scheme of State Bank of India i.e. “Metal Gold Loan” and the said scheme was applicable to the gold businessmen. As per the said scheme, the rate of interest

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was 4% and the tenure of the said loan was for 180 days. Accordingly, respondent No.1 bank had initially sanctioned loan and upto 2018, the same was enhanced upto Rs.3 Crores.

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It is further stated that from 2004 to 2018, the loan account of the applicant was regular and it was also enhanced from time to time. In the month of February, 2019, at the time of renewal of the loan facility, the respondent bank, without any terms in the contract, demanded 10% margin money from the applicants first time and the applicant pointed out that from the year 2004, no such 10% margin money was demanded by the respondents/bank and the said demand

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was not legal and proper. In the month of August, 2019, the respondent bank refused to renew the loan facility on the ground that the applicant has to deposit 10% margin money and then only, the bank will renew the loan facility. The applicant time to time

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[N. Jahagirdar] [S.A.No.40/2022] Page 4 of 21

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requested the respondent bank to renew the said loan facility, however, the bank has not considered the said request. In order to

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save the loan account from being classified as Non-Performing Asset (NPA), the applicant has deposited an amount of Rs.68,70,000/- during the period from 13.12.2019 to 23.12.2019 and requested the respondent bank to renew the loan account and to deliver the gold. The respondent bank has given assurance that after deposit of the amount within one week, the bank will renew the account and deliver the gold. But the bank did not renew the loan account, nor delivered the gold to the applicant.

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It is further averred that in the month of March, 2020, there was sudden outbreak of COVID-19 pandemic and the entire country faced nationwide lockdown and therefore, the Central Government and RBI directed the financial institutions to sanction 20% additional loans of their existing loans to the borrowers. However, the respondent bank did not follow the said mandatory directions and did not sanction additional loan, though the applicant

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[N. Jahagirdar] [S.A.No.40/2022] Page 5 of 21

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was entitled for sanction of Rs.30,00,000/-. Due to the COVID-19 pandemic, the Hon’ble Supreme Court of India directed the financial institutions not to classify the accounts as NPAs, which were regular upto 31^st August, 2020, till further orders. Despite these directions, the respondent bank classified the loan account of the applicant as NPA on 28.01.2021. Thereafter, on 06.04.2021, the respondent bank issued a demand notice under Section 13(2) of the SARFAESI Act, directing the applicant to pay a sum of Rs.3,77,50,545/- within a period of 60 days from the date of receipt of the said notice. The applicant, immediately on receipt of the notice, submitted reply/objections on 02.06.2021 to the said demand notice. The respondent bank, on 14.06.2021, replied to the objections and submitted a vague reply without dealing with the objections raised by the applicant. Thereafter, the respondent bank issued a letter on 14.06.2021 to the applicant stating therein that the account of the applicant has been transferred to the Stressed Asset Recovery Branch (SARB), Aurangabad. Thereafter, on 17.06.2021,

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[N. Jahagirdar] [S.A.No.40/2022] Page 6 of 21

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again the applicant issued notice to the bank pointing out that the action of the respondent bank initiated under the SARFAESI Act is not in accordance with the mandate of the said Act and in violation with the directions issued by the RBI and the interim orders passed by the Hon’ble Supreme Court of India and requested the bank to withdraw the said notice. Thereafter, the respondent bank, without dealing with the contentions raised in the said notice, directed the applicant to pay the dues and did not consider the points raised by the applicant in the said notice. The applicant, on 17.08.2021, has also given reply to the action of the respondent bank in transferring the loan account to the respondent No.2. Despite all these facts, the respondent bank has taken the symbolic possession of the property on 17.11.2021. Due to the breach of contract on the part of respondent bank,, the applicant has suffered huge losses in the business and therefore, they filed a Civil Suit for compensation and damages and for declaration thereby claiming the compensation of Rs.6,57,00,000/- against the respondent bank in the Court of Civil

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[N. Jahagirdar] [S.A.No.40/2022] Page 7 of 21

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Judge Senior Division/ Commercial Court at Jalgaon. Despite all these facts, the respondent bank has, on 08.12.2021, filed an application before the District Magistrate, Jalgaon under Section 14 of the SARFAESI Act, suppressing all the material facts and pendency of the civil proceedings before the competent Civil Court and obtained the order under Section 14 of the SARFAESI Act on 06.01.2022, by which physical possession of the properties of the applicants was directed to be taken. The action of the respondent bank in taking possession under the provisions of the SARFAESI Act is illegal and bad in law and all the proceedings are liable to be set aside on the grounds set out in para 5.36 of the S.A. and prayed for allowing the S.A.

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The respondents/bank filed reply/say (Exhibit-7) and contested the S.A., on the grounds that this S.A. is not maintainable. It is stated that the applicants raised loan from the bank and mortgaged the secured asset in favour of the bank and the S.A. is misconceived, misplaced and misdirected and the same is not

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[N. Jahagirdar] [S.A.No.40/2022] Page 8 of 21

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maintainable and sustainable in the eye of law. The applicants have admitted that they applied for grant of loan, which was sanctioned and they executed loan documents, guarantee documents and created security interest of the bank over their properties and applicant No.1 has availed the loan facilities. The applicant did not adhere to the terms of the sanction letter and the account of the applicant No.1 was classified as NPA on 28.01.2021. The secured creditor bank issued demand notice under Section 13(2) of the SARFAESI Act to the applicant. The applicant has raised objections to the demand notice under Section 13(3A) of the SARFAESI Act on 02.04.2021 and the respondents/bank have replied the objections raised by the applicants vide letter dated 14.06.2021. It was also informed to the applicants on 14.06.2021 that their loan account has been transferred to SARB, Aurangabad on 11.06.2021 for recovery of dues. The applicants have also issued notice to the respondent bank on 17.06.2021, raising irrelevant claims and contentions that the said notice was replied

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[N. Jahagirdar] [S.A.No.40/2022] Page 9 of 21

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by the respondents on 14.07.2021. The applicant has filed Commercial Suit No.2/2021 before the Commercial Court, Jalgaon along with Temporary Injunction Application in October, 2021. The applicants failed to pay their liability of Rs.3,77,50,545/- and thereafter, the respondents have taken measures under Section 13(4) of the SARFAESI Act and taken symbolic possession of the secured assets on 17.11.2021 and possession notice was published in newspapers. The respondent bank has also filed Original Application (Diary) No. 364/2021 against the applicants for recovery of Rs.3,95,51,912.00 on 15.09.2021 before the Debts Recovery Tribunal, Aurangabad, which is still pending. On 08.12.2021, the respondent bank filed proceeding under Section 14 of the SARFAESI Act against the applicants before the District Magistrate, Jalgaon for taking possession of the secured assets and the District Magistrate, Jalgaon, vide order dated 06.01.2022, directed the Tahsildar, Jalgaon to handover the possession of the mortgaged property of the applicants to the respondent bank. The

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[N. Jahagirdar] [S.A.No.40/2022] Page 10 of 21

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Commercial Court, Jalgaon, on 06.04.2022, has dismissed the Temporary Injunction Application of the applicants. The respondent bank is proceeding against the applicants by filing proceedings under the provisions of the SARFAESI Act and the Rules made thereunder. There is no sub-delegation of power in this

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case. The respondent bank has not violated the judgment of the Hon’ble Supreme Court of India delivered in Writ Petition (Civil) PIL No.945/2020 and the respondents have followed the norms laid down by the RBI while classifying the loan account as NPA.

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There is no illegality or inconsistency in the measures taken by the respondent bank while proceeding with the matter. The respondent bank denied all other allegations of the S.A. and prayed for dismissal of the same with costs.

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The applicants have produced on record following documents as per list of documents (Exhibit-4).

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Sr.	Particulars of the document	Exhibit
No.
1	Copy of status of ROC website	A-1
	regardingresignation issued by

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[N. Jahagirdar] [S.A.No.40/2022] Page 11 of 21

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	RakeshSoni
2	Copy of interim order passed by theHon’ble Supreme Court of India	A-2
3	Copy of demand notice dated 06.04.2021 issued by the respondent bank	A-3
4	Copy of reply/objection dated 02.06.2021 issued by applicant through their advocate	A-4
5	Copy of reply dated 14.06.2021 issued byrespondent bank	A-5
6	Copy of notice dated 17.06.2021 issued by the applicant	A-6
7	Copy of reply dated 14.07.2021 issued by therespondent bank	A-7
8	Copy of the reply dated 17.08.2021 filed by the Advocate of the applicants against letter of the bank dated 14.06.2021	A-8
9	Copies of possession notices dated 17.11.2021 issued by the respondent bank	A-9
10	Copy of memo of Commercial suit filed on 14.10.2021 by the applicant in the CivilCourt, Jalgaon	A-10
11	Copy of the order dated 06.01.2022 passed by the District Magistrate, Jalgaonu/s14ofthe Securitisation Act	A-11

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The respondents/ have not filed any document on record, but

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has referred the documents submitted by the applicants.

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[N. Jahagirdar] [S.A.No.40/2022] Page 12 of 21

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I have heard the learned counsel for the parties and gone through the written notes submitted by the parties as well as the material filed on record thoroughly. My findings along with reasons are as under.

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Before proceeding further, it is worthwhile to mention here that Commercial Suit bearing No.2/2021 (Exh-A-10) filed by the applicants in the Court of Civil Judge, Jalgaon on 14.10.2021 against the bank was dismissed as withdrawn on 22.11.2022. It may also be noted that temporary injunction application moved by the applicants therein before the Commercial Court, Jalgaon was also rejected on 06.04.2022.

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The learned counsel for the applicants mainly argued that the respondent bank declared the loan account of the applicants as NPA on 28.01.2021 and further issued demand notice dated 06.04.2021 (Exh-A-3) in violation of the Hon’ble Supreme Court’s order passed on 03.09.2020 in the case of Gajendra Sharma Vs. Union

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of India & Anr in writ Petition (Civil) No.825 of 2020 , by which it

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[N. Jahagirdar] [S.A.No.40/2022] Page 13 of 21

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was ordered that “the accounts which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders” and this interim order was vacated by the Hon’ble Supreme Court on 23.03.2021 in its judgment delivered in the case of Small Scale Industrial Manufacturers Association (Regd.) Vs. Union of India and others; 2021 INSC 203 . It was further argued that the respondent bank issued possession notice dated 17.11.2021 (Exh-A9) and thereafter, even obtained order under Section 14 of the SARFAESI Act from the District Magistrate, Jalgaon on 06.01.2022 and hence, the respondent bank declared the loan account of the applicants as NPA, when the Hon’ble Supreme Court’s stay/interim order was in operation and declaration of NPA of the loan account of the applicants is illegal and the subsequent proceedings conducted by the respondent bank are also illegal and liable to be quashed and set aside.

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The learned counsel for the respondent bank submitted that the applicants maliciously contended that classification of their

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[N. Jahagirdar] [S.A.No.40/2022] Page 14 of 21

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account as NPA on 28.01.2021 is illegal on the ground that the interim stay was operative at that time and this contention is a result of selective reading of judicial proceeding and misinterpretation of the judgment delivered by the Hon’ble Supreme Court in Gajendra Sharma (supra) and Small Scale Industrial Manufacturers Association (Regd.) (supra). It was further submitted that if the judgment in Small Scale Industrial Manufacturers Association (Regd.) (supra) is appreciated, various Writ Petitions were filed by various persons/firms/companies for different reliefs and some reliefs were partly granted by the Hon’ble Supreme Court making different classifications of loans and even the concession of moratorium was restricted for small scale borrower below the amount of Rs.Two Crores and specifically dismissed the prayer for total interest waiver and permanent immunity from NPA norms. It was also submitted that the Hon’ble Supreme Court, in its final judgment dated 23.03.2021 explicitly directed that “interim relief granted earlier not to declare the accounts of respective borrowers

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[N. Jahagirdar] [S.A.No.40/2022] Page 15 of 21

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as NPA stands vacated”. He further submitted that it is settled legal principle that once the interim relief is vacated, the parties are relegated to the position they would have occupied had the interim order not been passed. The borrower cannot claim a vested right in a temporary stay that has been formally dissolved by the Hon’ble Supreme Court. The respondent bank has rightly declared the accounts of the applicants as NPA and proceeded further against the defaulter borrowers under the provisions of SARFAESI Act and the Rules made thereunder. The learned counsel for the respondent bank has also submitted that Writ Petition (Civil) No. 825/2020 was disposed of on 27.11.2020, whereafter the account was classified as NPA on 28.01.2021. He further submitted that present Securitisation Application is liable to be dismissed.

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It is undisputed fact that the applicant’s account was standard as on 31.08.2020. The Hon’ble Supreme Court of India, in Writ Petition (Civil) No.825/2020 in the case of Gajendra Sharma (supra), vide order dated 03.09.2020, directed that “the accounts

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[N. Jahagirdar] [S.A.No.40/2022] Page 16 of 21

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which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders”. Admittedly, the account of the applicant was classified as NPA on 28.01.2021. However, the Hon’ble Supreme Court had taken up Writ Petition (Civil) No.825/2020 along with several other Writ Petitions and Interlocutory Applications in Writ Petition (Civil) No.476/2020, titled Small Scale Industrial Manufacturers Association (Regd.) (supra). The order dated 27.11.2020 passed by the Hon’ble Supreme Court in Writ Petition (Civil) No.825/2020 did not expressly vacate the interim direction that “the accounts which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders”. The Hon’ble Supreme Court, vide judgment and order dated 23.03.2021 passed in Small Scale Industrial Manufacturers Association (Regd.) (supra), has recorded that “interim relief granted earlier not to declare the accounts of respective borrowers as NPA, stands vacated”. Unless express vacation of interim direction is there, the interim order continues to operate. Therefore, the classification of

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[N. Jahagirdar] [S.A.No.40/2022] Page 17 of 21

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the account of the applicant as NPA on 28.01.2021 is not legal and it was declared NPA during operation of stay order granted by the Hon’ble Supreme Court of India vide order dated 03.09.2020.

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When it is established on record that the account of the applicant was declared as NPA on 28.01.2021 i.e. during enforcement of the restraint order of the Hon’ble Supreme Court of India passed on 03.09.2020 in Writ Petition (Civil) No.825/2020 in the case of Gajendra Sharma (supra) and this interim stay was vacated by the Hon’ble Supreme Court of India on 23.03.2021 while finally disposing of Writ Petition (Civil) No.476/2020 Small Scale Industrial Manufacturers Association (Regd.) (supra) along with other Writ Petitions, the submission of learned counsel for the respondent bank that once the interim order is vacated, the parties are relegated to the position they would have occupied had the interim order not been passed, cannot be accepted. Once it is established that the account of the applicant was declared as NPA during operation of the interim direction of the Hon’ble Supreme

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[N. Jahagirdar] [S.A.No.40/2022] Page 18 of 21

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Court of India, then the action of the respondent bank, declaring the account of the applicant as NPA is illegal and subsequent proceedings conducted/initiated in view thereof also fall flat, particularly in view of the fact that declaration of the applicant’s account as NPA is contrary to the interim direction issued by the Hon’ble Supreme Court of India vide its order dated 03.09.2020 passed in Writ Petition (Civil) No.825/2020 in the case of Gajendra Sharma (supra). Therefore, the subsequent action of the respondent bank i.e. issuing demand notice dated 06.04.2021 (ExhA-3), symbolic possession notice dated 17.11.2021 (Exh-A-9) and order dated 06.01.2022 (Exh-A-11) passed by the District Magistrate and all other subsequent proceedings are illegal and liable to be quashed and set aside.

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For the foregoing reasons and my findings based on the evidence produced on record, the present Securitisation Application deserves to be allowed.

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In the result, I pass the following order:

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[N. Jahagirdar] [S.A.No.40/2022] Page 19 of 21

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ORDER

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(A) The Securitisation Application No.40 of 2022 is hereby

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allowed with no order as to costs.

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(B) It is hereby held that the action of the respondent bank in classifying the loan account of the applicant as NPA on 28.01.2021 is illegal and contrary to the order dated 03.09.2020 passed by the Hon’ble Supreme Court of India in Writ Petition (Civil) No.825/2020 in the case of Gajendra Sharma (supra) and hence, the subsequent proceedings initiated by the respondent bank being demand notice dated 06.04.2021, symbolic possession notice dated 17.11.2021 and order dated 06.01.2022 passed by the District Magistrate and all other subsequent proceedings are illegal and the same are hereby quashed and set aside.

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[N. Jahagirdar] [S.A.No.40/2022] Page 20 of 21

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(D) However, the respondent bank is at liberty to take appropriate action against the applicants/borrowers as per law as availment of loan has not been denied by the applicants/borrowers.

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