Dismissed

Karre Radha v. LIC Housing Finance Ltd.

DRT27 Apr 2026SA/471/2024

Case brief

AI extract

What is this about?

Application under SARFAESI Act sought setting aside recovery measures including possession notice and vacate order. Tribunal held applicant failed to prove fraud was grounds for intervention; mortgage via title deed deposit binds property, leaving private disputes for civil/criminal courts.

What did the court decide?

Securitisation Application dismissed; interlocutory applications closed; no order as to costs.

Karre Radha versus LIC Housing Finance Ltd. — Banking and Recovery | DRT (2026)

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IN THE DEBTS RECOVERY TRIBUNAL - II AT HYDERABAD

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DATED THIS THE 27th DAY OF APRIL, 2026

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PRESENT: SH. RAMESHWAR KOTHE, B.Com, L.LB.^(Hons.),M.A. PRESIDING OFFICER

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Securitization Application No. 471 OF 2024

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Smt. Karre Radha W/o. Balaiah Goud Aged 39 years, Occ: Housewife, R/o, H.NO.2-2-r43/tA, Ward No,2, Block No.2, Shaipur, New Brilliant School, Tandur Municipality, Tandur, Vikarabad District, Telangana

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.......Applicant

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Versus

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The Authorized Officer, LIC Housing Finance Limited #2Ol,2nd floor, Krishe Saphire Building, Near Image Hospital, Hitech City Main Road, Madhapur, Hyderabad- 500081

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Mr. Satyanand Kumar S/o. Late Vittalappa, Aged 46 years, Occ: Pvt. Employee, R/o. H.No 5-7-42, Indira Chowk, Tandur, Vikarabad District Telangana

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. ..... Respondents

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: Mr.Hari Krishna Counsel for the Applicant Counsel for Respondent No.7: Mr. Hari Prasad Podila Counsel for Respondent No.2: No Representation

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-:(!_u_B:-

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The present Securitization Application is filed by the applicant u/s.17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("Act" hereinafter for short) to set aside all the measure initiated by the Bespondent Company /1fr.n*r (-

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Page 2 of8

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SA No. 47712024

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under section 13(4) & 14 of the Act,^{includingthe vacate notice dated} 76.77.2024 in respect of the SA Schedule Property as illegal^and arbitrary.

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The case of applicant in brief is that the Applicant^{purchased a} residential house bearing H.No.2-2-l43llA situated at Shaipur^Village, Tandur, Vikarabad District, from Respondent No.2 in 2023^after conducting due dlligence, including^verification of title^documentsand encumbrance certificates, which showed no subsisting charge or mortgage over the property. Respondent No.2 represented that the property was free from all encumbrances and, despite failing to hand over the original titie deed on the^plea that it was "misplaced," induced the Applicant to complete the sale transaction by^paying the entire consideration. The sale was duly registered, mutatlon was effected in the Applicant's favour, and she thereafter remained in^peaceful possession. However, in December 2023, the Applicant was served with a notice disclosing that Respondent No.2 had, as early as 2017, availed a housing loan from Respondent No.1^(hereinafter "Respondent Company" for short) by creating a charge over the very same^property and had defaulted in repayment, leading to initiation of recovery proceedings under the SARFAESI Act. On confronting Respondent No.2, the Applicant received no clarification or discharge of the liability; instead, she alleges that Respondent No.2 and his family threatened her, forcing her to lodge a criminal complaint,^which resulted in an FIR and a charge sheet being filed against^them. Subsequently, the Applicant approached^{Respondent No.1 seekingto} clear the outstanding dues, but was denied access to^{requisiteloan} details and assurance of release of title^{documents.In the meantime,} Respondent Company^proceeded with coercive^{recoverymeasures,} including issuance of a^{possession notice,publication,and securing} orders from the District^{Magistrateunder Section 14 of theSARFAESI}

6ry"*'r

Page 3 of8

5A No. 47112024

Act for taking^{physicalpossession,} culminating^{in a vacationnotlce} dated 16-11-2024. Upon^{obtainingrecordsfrom the District Collector's} oFfice, the Applicant discovered^{that the statutorynotices under} Section 13(2) and the^{possessionnoticeswere issued by wrongly} describing the^property as^{an open plot instead of the constructed} house, and that they were^{not effectivelyserved. The Applicant} contends that the entire^{processadopted by Respondent Companyis} vitiated by non-compliance with^{the mandatory provisions of the} SARFAESI Act,^{improper identlfication of the securedasset, violationof} principles of natural^justice, and^failure to^{registerthe charge withthe} Sub Registrar, thereby^{prejudicingthe rights of a bona fidepurchaser} for value. She further^{asserts that the proposeddispossesslonis} arbitrary, violative of^{Artlcle3OOAof the Constitution of India,and that} Respondent Company's^{refusal to accept payment and release the} property is illegal, warranting^judicial intervention^{and settingasideof} the impugned notices and orders.^{With these contentions,applicant} prays for setting aside of the impugned SARFESI^{measuresagainst the} SA Schedule Properties.

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Respondent Company filed^{reply statement. The submissions of} the Respondent Company, in^{brief, are: althoughthe Applicant} allegedly^purchased the^{propedy from Respondent No.2 by a} registered sale Deed dated 09-05-2023^{(DocumentNo. 744012023),} the said^property had^{alreadybeenmortgagedin 2017 by Respondent} No.2 to Respondent Company^{by depositof the original title deedsas} security for a housing^{loan. The loan accountsubsequentlyturnedinto} a NPA, enabling Respondent^{Companyto issue a Demand Noticeunder} section 13(2) of the^{SARFAESIAct dated 77 -o7-2023, followed bv its} publication in newspapers, and thereafter a^{PossessionNotice dated} 21-lO-2023, which was also^{publlshed as required. Respondenthas} strongly opposed the application,^{contendlng that it is not maintainable} either in raw or on facts.^{rt submits ,nu, ,n";ffiK(asedthe}

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Page 4 of8

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SA No. 47112024

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mortgaged property in 2023 with full knowledge that the original tiue deeds were already deposited with the Bank and that the equitable mortgage was subsisting; therefore, according to Respondent Company, the sale in favour of the Applicant is illegal and void. The Bank further argues that the Applicant, being a mere third-party purchaser and not a party to the loan transaction, has no locus standi to challenge the SARFAESI proceedings initiated by the secured creditor. Respondent No.1 submits that it has scrupulously followed due process under the SARFAESI Act, including issuance and publication of the demand and possession notices, and that the Applicant has suppressed material facts in the application. The Respondent accordingly prays for dismissal of the Securitization Application and liberty to continue with the recovery measures.

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No representation of Respondent No.2 despite service of notice.

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The learned counsel for the Applicant submitted written arguments instead of oral arguments. Heard the learned counsel for the Respondent Company. Perused the written arguments filed by the applicant and also perused the material brought on record.

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The learned counsel for the applicant, vide his written arguments, while reiterating the contents of the SA further contentded that the Applicant purchased residenual house from R2 in 2023 with due diligence (clear title/Ec); R2 warranted encu m bra n ce-free, induced completion sans original tiue deed (,,misplaced,,). Registered sale, mutation, peaceful possession ensued. Served notice Dec.2O23 revealing Rz's 2017 housing loan from R1/Co. secured thereon, default/SARFAESI initiated. Confronted R2 (threats, FiR/charge sheet); R1 denied loan details/discharge. Rl issued possession n otice/pu blication, s.14 DM order, vacate notice 16.11.2024; notices ,/4v--.,.."\L U^'s'u"

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Page 5 of 8

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SA No. 47112024

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wrongly termed^property as^{"open plot," ineffective service,} unregistered charge. Contends^{vitiated SARFAESI(mandatory} provisions/non-com plia nce, violation of^principles of^{natural justice} violation, Art.300A etc.). Accordingly^{prays to set aside measures} against SA Schedule ProPerty.

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In support of these contentions,^{applicantplaced on the following} judicia I precedents, such as:

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a. Harshad Govardhan Sondagar v.^{InternationalAssets} Reconstruction Co. Ltd.^(2014), MANU/SC/0377/2014^the Supreme Court holding that a^person in lawful^possession cannot be dispossessed without following due^{process of} law.

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b. Vishal N. Kalsaria v. Bank of India^(2016), MANU/SC/0061/2016 wherein it was held that the SARFAESI Act does not override the rights of third-party occupantsⁱⁿ lawful possession.

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c. Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2011), MANU/SC/1222/2011- Emphasizing the importance of registered transactions and^public notice.

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d. Mathew Varghese v. M. Amritha Kumar^(2014), MANU/SC/)114/2014 and J. Rajiv Subramaniyan v. Pandiyas (2014), MANU/SC/0207/2014, the Hon'ble Supreme Court held that strict compliance with SARFAESI^procedureis mandatory before taking possession.

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e. Canara Bank v. Debasis Das (2003), MANU/SC/0225/2003 - reiterated that principles of natural^justice must be followed in all actions affecting rights.

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f. Transcore v. Union of India^(2006), MANU/SC/5319/2006, emphasizing strict adherence to identification of secured assets.

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g. K.T. Plantation Pvt. Ltd. v. State of Karnataka (2011), MANU/SC/0914/2011, it was held that Afticle 300A^protects property from deprivation except by authority of law.

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h. A.V. Papayya Sastry v. Government of A.P.^(2007), MANU/SC/1214/2007, the Hon'ble Supreme Court held that fraud vitiates ail^judiciat acts.

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SANo.47Ll2O24

B. Per contra, Learned Counsel for the Respondent Company while reiterating the contents of its reply statement, submitted that the mortgage in respect of SA schedule property was created by 2no respondent in the year 2Ol7 by deposit of original tiue deed whereas the applicant's alleged purchase happened in 2023 during subsistence of valid mortgage. On account of default , recovery proceedings were initiated and that the demand notice and possession notice were duly served on 2nd respondent, the possession notice having been affixed on the secured property and published in accordance with the Rules, 2002. The SA challenging the vacate notice is out of limitation and not maintainable. For the fraud played on applicant, the remedy lies elsewhere and not before this Tribunal. With these contentions, learned counsel sought for dismissal of the SA with exemplary costs.

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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 any of 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 applicant's primary contention is that 2'd respondent committed fraud by concealing the subsisting mortgage over the schedule property in favour of 1st respondent. After realizing the fraud, applicant raised a criminal complaint against the 2nd respondent. It is pertinent that, though the applicant claims to be a bona fr?e purchaser claiming to have undertaken due diligence prior to purchase and found no apparent encumbrance, admittedly 2nd respondent did not hand over the original title deed of his vendor citing misplacement of the same. However, it is a settled position of law that issues relatinq to Nu"*

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Page 7 of 8

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SANo.47tl2o24

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fraud, misrepresentation or cheating between^{private partiesfall} outside the scope of these^{proceedings and are to be adjudicated by} competent civil or criminal courts.^{The criminal complaint initiatedby} the applicant against 2nd^{respondent will proceed independentlyin} accordance with law and does not directly^{have any bearing upon the} Securitization measures of the 1st respondent.

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As per the material available on record it is evident that the mortgage over the subject property was created in the year 20t7 by 2nd respondent in favour of 1st respondent by deposit of original title deeds, Admittedly the applicant purchased the property much later in the year 2023, during the subsistence of the said mortgage. It is trite law that a mortgage created by deposit of title deeds constitutes a valid and enforceable security interest, and such interest continues to bind the property irrespective of subsequent transFers. As observed supra, the 2nd respondent did not hand over the tiue deed (rink document) to the appricant and absence of originar tire deeds ought to have put the applicant on notice and prompted further inquiry. Failure to exercise such caution disentitres the appricant to seek protection as an innocent purchaser for value without notice. The cited judgments are not applicable in the case of applicant.

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L2. As regards the provisions, tne appricantaf:1H ;:;T:",rriance with statutory notices arong with parries to the ,oun ,l not deserve specific ransaction. Hence such contention is not acceptable.

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The contention re p es'r na'[ura jus'[ ce ;:i:::J*";:"^{"ii:ti ;:':i'::'::irinc} (Enrorcemenr) Rures, roll**'^{;" ";} ,#;:i,1[:::

U/^''r:','-

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SA N(

In view of the above discussion, it is concluded that the failed to establish any valid ground to set aside the measures initiated by^1tt respondent as illegal or arbitrary. Accordingly SA is liable to be dismissed.

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Point No.(ii):

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