A Securitization Application filed under Section 17 of the SARFAESI Act challenging the bank's NPA classification and subsequent possession and sale notices. The Tribunal held that the bank acted in accordance with the Act and rules, dismissed the application.
The Securitization Application is dismissed; pending interlocutory applications are disposed of.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE DEBTS RECOVERY TRIBUNAL. I AT HYDERABAD
DATED THIS THE 3OTII DAY OF JUNE, 2026
PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER
sA.No.438./2024
Also at:
D.No.8/ 101, Main Bazar, Tadipatri, Andhra Pradesh-S 154 I 1 .
Also at:
D.No.l I 2 I 17 to 23 I 4O7, Flat No.407, 4th Floor, Kiran Complex, Kalasiguda, SD Road, Secunderabad-3.
Tadipatri, Andhra Pradesh-S 15 4 1 1.
Also at:
Flat No.407, 4th Floor, Kiran Complex, Kalasiguda, SD Road, Secunderabad-3.
W/o. Sri Ambati Rama D.No.8/ 101, Main Bazar, Tadipatri, Andhra Pradesh 16+rr. Applicants.
Versus
State Bank of India,
SARB, Koti Brartch.
Rep. by its Authorized Officer. Respondent.
Counsel for the Applicants Counsel for the Respondent : Sn G. Prabhakar Sarma.
SA.No.438/2024
| Reseruedon | 07.05.2026 |
|---|---|
| Pronouncedon | 30.06.2026 |
| Uploaded totheWebsite on | o7-07-2026 |
-:ORDER:-
- The Applicants filed the present Securitization Application under section 17 of the SARFAESI Act, challenging the Rule 8(6) Notice dt.18.1O.2O24, issued by the Respondent Bank, proposing to conduct auction of the application schedule properties on 15.12.2024.
SA.No.438/2024
remain persisted. In the said context the Respondent Bank has rejected the representation of the Applicants. The Applicants in order to get cleared the ambiguity, again sent a representation dt.O2.O4.2O24 and requested the Respondent Bank to reconsider their representation. On the very same day, the Respondent Bank had issued the Possession Notice dt.O2.O4.2O24 uls.13(4) of the SARFAESI Act. To the said Possession Notice, the Applicants again sent a representation dt.16.05.2024, which had also gone in the deaf ears of the Respondent Bank.
ii) The Respondent Bank had gone ahead in issuing the Rule 8(6) Notice dt.18.1O.2O24 claiming an amount of Rs.4.98 crores as outstanding dues and stated that they are proposing to hold auction of the application schedule properties on 05.12.2024. The said Rule 8(6) notice is neither affixed on the scheduleproperty nor published in the newspapers. The Respondent Bank has not given clear 30 days' time for redemption of mortgage. The Respondent Bank has not obtained valuation of the properties from registered valuers before fixing the reserve price. Thepresent SARFAESI proceedings initiated by the Respondent Bank basing on the Demand Notice dt.24.O1.2024 are untenable. Hence theSA.
SA.No.4i8/2024
and created mortgage over the application schedulepropertiesin favour of the Respondent Bank as security. After availing theloan facilities, the Applicants committed default in the repayment ofthe outstanding loan amounts, which resulted in the classificationof the loan account as NPA on 23.0L.2024. The City Centre Branchof the Respondent Bank, initiated SARFAESI proceedings by issuing Demand Notice u/s.13(2) on 24.01.2024. The Applicants, after receipt of the said Demand Notice, sent a reply dt.08.03.2O24 and the City Centre Branch of the Respondent Bank sent its Reply dt.15.03.2024. The Applicants once again sent a letter dt.2O.O3.2O24 and the City Centre Branch of the Respondent Bank sent its reply dt.22.O3.2O24. Even after receipt of the said notice and replies issued by the Bank, the Applicants failed to repay the outstanding dues. So, the loan accounts of the Applicants got migrated from City Centre Branch to Respondent Bank branch on administrative grounds and for further follow-up of the loan accounts. After transfer of the loan accounts, the Applicants once again submitted letter dt.O2.O4.2024 and the Respondent Bank sent its reply dt.03.04.2O24. Even after availing sufficient time, the Applicants have failed to repay the outstanding dues.
ii) The Respondent Bank issued Possession Notice dt.13.O8.2O24
u/s.13(a) of the SARFAESI Act and served the same on the
Applicants. The Possession Notice was also affixed on the schedule
properties and thereafter published in 'Financial Express' and
Andhra Prabha' daily newspapers dt.16.10.2024. Thereafter, on
18.IO.2O24, the Respondent Bank issued Rule 8(6) Notice fixing
,fl-I.: ;.t HttUon of the schedule properties on O5.t2.2O24. The said
- ',,R..tiffioti". was affixed on the schedule properties and
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;. llublish$i'ni"ancial Express' and 'Andhra Prabha' newspapers
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il=Z 3 A ,,:$,fl.f*ro 2q2r As the Applicants obtained conditional stay orders
i ,i from this 'Tribunal and complied the orders, the Respondent Bank
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SA.No.4i8/2024
did not proceed further for auction of the schedule properties. The Respondent Bank duly followed the procedure laid down under the SARFAESI Act and the Rules made thereunder. The present SA, which is filed challenging the Sale Notice dt.18.lO.2024, fixing the auction of the schedule properties on 05.12.2024, has become in fructuousand hence same may be dismissed.
Point No.(i):-
SA.No.438/202a
the City Centre Branch of the Respondent Bank, claiming an amountof Rs.4.46 crores as outstanding dues, the Applicants have sent their representation dt.08.03.2O24 uls.13(3A) of the SARFAESI Act, tothe said branch of the Respondent Bank seeking clarification asto how their loan account came to be classified as NPA. The Applicants intheir pleadings have stated that the City Centre Branch of the Respondent Bank has sent reply to the said representation of the Applicants dt.08.03.2O24, on 22.03.2024 without assigning any properjustification. Whereas, from the pleadings and documents filed by the Respondent Bank, it is seen that the said branch of the Respondent Bank has sent its reply to the representation of the Applicants dt.08.03.2o24, on 15.03.2024 itself (as is evident from document No.28 of the material documents filed by the Respondent Bank along with its Reply).
SA-No.438/2O24
has miserably failed. The Bank's replies dt. 15.03.2024 and, 22.03.2O24 to the representations of the Applicants are mechanical reproductions of circular text without reasoning and data and hence there is no valid disposal of u/s. 13(3A) of the Act. The proceeding u/s. 13(4) by the Bank arises only whe there is a reasoned disposal u/s. 13(3A) and the Possession Notice dt. 13.Oa.2O24 is premature. Ld. Counsel also contended that, the Authorized Officer has to obtain valuation of the secured assets from an approved valuer before possession/ sale of secured assets, which the Respondent Bank has failed to do so. The loans were sanctioned and security was held by the City Centre Branch of the Respondent Bank and without any prior notice or intimation to the Applicants, the account has been transferred to the Respondent Bank, which is illegal. Even though, Ld. Counsel for the Applicants hasplaced his reliance on followiongjudgments to substantiate his contentions,-
SA.No.4i8/2024
failed tot6ute the 6\rHness transact i ons through the loan accounts and 3 0 JUr Zm[
SA.No.438/2024
also failed to submit the stock statements and financial data from time to time and therefore the said accounts became out of order and classified as NPA on 23.0L.2O24 as per the RBI guidelines. It is further contended by the Ld. Counsel that the Respondent Bank has sent suitable replies to the representations sent by the Applicants u/s.13(3A) of the SARFAESI Act, while rejecting their representations. Ld. Counsel further contended that, after disposal of the representations of the Applicants by the City Centre Branch of the Applicant, the accounts of the Applicants were transferred to the Respondent Bank on administrative grounds and further follow-up of the loan accounts and after transfer of the loan accounts, the Applicants once again submitted letter dt.O2.O4.2024, to which the Respondent Bank has sent a suitable reply dt.03.04.2024. Ld. Counsel further submitted that, since even after granting of sufficient time the Applicants failed to discharge their liability, the Respondent Bank proceeded further under the provisions of the Act and the Rules, 2OO2 to recover the outstanding dues. Ld. Counsel for the Respondent Bank finally submitted that the Applicants have not come-up before this Tribunal with clean hands and prayed for the dismissal of the SA.
SA.No.438/2024
10
Applicants to the Demand Notice dt.24.O1.2024,has cited reasons for classification of the loan accounts ofthe Applicantsas NPA. For better appreciation, I would like to extract the contents ofparagraph 2 (un- number) in the representation of the Applicants dt.08.03.2o24,which have been reiterated in their subsequent representationdt.20.03.2024 too, and same are as under:-
"To the aboue your DemandNotice, u)e are filingRepresentation u/s.13(3A) of SARFAESI Act, 2002 that, we are makingpagments regularlg since disbursement of aboue loan ref.1 to 5. But, our business is not well since 6 months due to slump in themarket. But, ute had faced manA times like this hard situationssince 30 Aearsin the businessmarket, so u)e are goingto ouercomethis hard situation shortlg and it utill be normal in upcoming 3 to4 months. In this situation, we are receiued gour Demand Notice u/ s 13(2) of SAREAESI Act, for payment of entire loan amount within 6O dags afier receipt of the Notice. But, tae haue giuen sulficient Seanritg to the loan accounts ref.l to 5, but, gour Demand Notice did not reueal the Non-Performance Asset details in accordance uith the directiue/ guidelines relating Income Recognition and Asset Classification (IRAC) norrns issued bg the Reserue Bank of India. So, u)e ere required the aboue Non-Performance Assets details before complg your Demand Notice. So, we are filing a Representation u/s 13(3A) o/ SRFAESI Act, 2002 to find the eligibility to enforce gour Demand Notice u/s 13(2) o/ SARFAESI Act."
t2. It is to be noted here that, the Applicant No.1 in its representation, has
not denied about the default in repayment of the loan amount committed
by it and it;.-hqs, only-, sought clarification/details/guidelines of the RBI
under:'lR$p., ;;a(.. !f. which its loan account has been classified as
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SA.No.438/2024
t4. Admittedly, after rejection of the first representation dt.08.03.2024, lhe Applicant No.1 sent another representation dt.2O.O3.2O24 reiterating the self-same issues as raised in its first representation. It is also notis dispute that the said City Centre Branch of the RespondentBanksent its reply df.22.O3.2O24 by mentioning the details asmentionedin its first reply and also classification of the account as Sub-standard.The Respondent Bank has further stated in the said reply dt.22.O3.2024 that "Therefore, in uieu of meticulous follolD-up of allthe guidelinesof IRAC norms and Asset Classification issued byRBI fromtime to time and instructions mentioned in SARFAESIAct, 2002, u€ are not considenng Aourre-representation ftlingdated 20.03.2024.We utill proceedas per iglelines o/SARFAESI Act 2OO2."
ting fact to be noted is that, the Respondent Bank inits .o3.2024 has stated that the irregularity in the subject
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SA.No.438/2024
accounts has been informed toApplicantNo.1on monthly basisthrough the irregularity notices dt.O1 .O8.2O23,O4.1O.2O23,06. 1 1 .2023, 23.11.2023, 02.12.2023 and 01.01.2024, whichwere servedupon the Applicants by registered post. The Applicants did not deny thesaid statement of the Respondent Bank in their re-representation dt.2O.O3.2O24 and they kept silent. From this also, it is very clearthat, the Applicants are aware that their loan account is irregular. Yet another interesting fact to be noted is that, the Applicants did not file any Certificate of Registration to establish that it is an MSME unit along with the SA nor there is any whisper in the SA about the status of Applicant No.1 as an MSME unit. Even after receipt of irregularity notices issued by the Respondent Bank as mentioned above, the Applicants did not file a single document to show that, they have represented to the Respondent Bank to reschedule/restructure their loan accounts as per the RBI circulars issued for MSME protections.
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l2
SA.No.4i8/2024
in 'Financial Express' and 'Andhra Prabha' newspapers dt. L6.LO.2O24. As the Applicants are not coming to discharge their liabilities, the Respondent Bank proceeded further for the sale of the secured assets by issuing Rule 8(6) Notice dt.18. 1O.2O24. The Applicants have also not denied the receipt of the said Rule 8(6) Notice. To controvert the allegation of the Applicants that Rule 8(6) Notice was not aflixed and published, the Respondent Bank in its material documents has filed copies of photographs depicting affixture of Rule 8(6) notice on the secured assets and publication of the said notice in 'Financial Express' and 'Andhra Prabha' newspapers. In view of the stay orders granted by this Tribunal, the Respondent Bank could not proceed for the sale of the secured assets.
Point No.(tl):-
',tronscribed by her, corrected,signed ondpronounced by me in the open court on this the 3oth doy of June,
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ii : 3 0 JlIr{
sd/(G. GOPTCHANDI PRESIDING OFFICER Aas{RedGrrrar DN?.I, *'YDEINASAD
2 issues framed by the court
Whether the Debts Recovery Tribunal has jurisdiction to adjudicate on the classification of a loan account as NPA by the bank.
Whether the bank duly complied with the procedural requirements under Section 13(3A) and Section 13(4) of the SARFAESI Act before seizing possession.
4 provisions across 2 enactments
M/s. APR Jewelers Pvt. Ltd.
Sri Ambati Rama Krishna Reddy
Smt Palagiri Usha Rani
State Bank of India
Gummadi Gopi Chand
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
