Dismissed

A Veeralakshmi v. Indian Overseas Bank

DRT11 Jun 2026SA/669/2024

Case brief

AI extract

What is this about?

This adjudicating officer dismissed the Securitisation Application filed by an educational loan applicant challenging a possession notice issued by the bank. The court found the bank had substantially complied with SARFAESI procedural requirements and the applicant failed to prove the NPA classification or interest rates were illegal.

What did the court decide?

The Securitisation Application (S.A. No. 669/2024) was dismissed without costs.

A Veeralakshmi versus Indian Overseas Bank — Banking and Recovery | DRT (2026)

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S.A. NO. 669/2024

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FAIR ORDER

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 11^TH DAY OF JUNE 2026 PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

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SA No. 669/2024

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Ms. Veeralakshmi D/o K. Athilingam D. No. 6/394, Samypuram Colony Pallapatti

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Sivakasi – 626 189

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-Vs-

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The Authorised Officer Indian Overseas Bank No. 1/491-C, Naranapuram Village Naranpuram (CT)

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Appearance of Advocates:

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M/s C. Gangai Amaran ---- Counsel for the Applicant Mr. R. Pandivel ---- Counsel for the Defendant Bank

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This Application was heard in the presence of M/s C. Gangai Amaran, Counsel for the Applicant and Mr. R. Pandivel, Counsel for the Defendant Bank in the aforesaid case and upon hearing the arguments of both sides Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

S.A. NO. 669/2024

ORDER

1. This Application has been filed under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 with a prayer to set aside the possession notice dated 07/10/2024 issued by the Defendant Bank under section 13(4) of the SARFAESI Act, 2002.

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2. The brief averments of the Application filed by the Applicant are as follows:-

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The Applicant is the first graduate in her family. Her father, Mr. K. Athilingam, is engaged in a small-scale milk business. Due to the family's financial constraints, the Applicant was unable to afford the tuition fees for pursuing the MBBS course.

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To facilitate her medical education, the Applicant and her father mortgaged two items of property situated at Samayapuram Colony, Pallapatti, Sivakasi, and availed an Educational Loan of Rs.11,70,000/- from the Respondent Bank in the year 2018. The Applicant's father stood as co-borrower. The duration of the MBBS course was five years and six months, and the Applicant successfully completed the course along with internship on 05.07.2024.

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Despite the Applicant being within the moratorium period applicable to educational loans, the Respondent Bank classified the loan account as Non-Performing Asset (NPA) on 09.07.2024 and subsequently issued a Possession Notice dated 07.10.2024 demanding a sum of Rs.17,43,401.17/-.

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Aggrieved by the said action, the Applicant filed S.A. No.669 of 2024 before this Hon'ble Tribunal. This Hon'ble Tribunal granted

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S.A. NO. 669/2024

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interim relief subject to payment of 30% of the claimed amount in two instalments, and the Applicant has duly complied with the said condition.

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The Respondent Bank has acted in violation of the Reserve Bank of India guidelines governing Educational Loans, particularly RBI Circular No. RPCD.PLNFS.BC.No.83/06.12.05/2000-01 dated 28.04.2001 embodying the Model Educational Loan Scheme.

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Under the RBI guidelines, repayment commences only after the expiry of the moratorium period, namely, the course period plus one year or six months after securing employment, whichever is earlier. Until the expiry of the moratorium period, no repayment obligation arises.

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The Applicant completed her course and internship only on 05.07.2024. Therefore, on the date of NPA classification, namely 09.07.2024, the moratorium period had not expired. The classification of the account as NPA was therefore contrary to the RBI guidelines and is illegal, arbitrary and void.

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Proceedings under Sections 13(2) and 13(4) of the SARFAESI Act can be sustained only upon a valid classification of the account as NPA. Since the NPA classification itself is invalid, all consequential measures initiated under the SARFAESI Act, including the Possession Notice dated 07.10.2024, are liable to be set aside.

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The statement of account relied upon by the Respondent Bank is vague and does not disclose the basis for the calculation of interest, penal interest and other charges. The entries lack sufficient particulars and cannot form a valid basis for NPA classification.

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The Respondent Bank failed to consider the special nature of the Educational Loan and the moratorium protection available to the

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S.A. NO. 669/2024

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Applicant. The impugned action is arbitrary, unreasonable and violative of Article 14 of the Constitution of India.

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Initiating coercive recovery proceedings against the residential property of the Applicant and her family during the subsistence of the moratorium period is harsh, disproportionate and contrary to the principles of equity and fairness.

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The Applicant relies upon the judgment of the Hon'ble Supreme Court in Sardar Associates v. Punjab & Sind Bank, (2009) 8 SCC 257, it is respectfully submitted that RBI guidelines are binding on all banks. In the present case, the Respondent has violated the mandatory moratorium applicable to education loans, thereby rendering the entire action illegal.

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wherein it was held that RBI guidelines are binding on banks. Consequently, any action taken in violation of such guidelines is unsustainable in law.

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In view of the above facts and circumstances, the Respondent Bank has illegally classified the account as NPA and mechanically initiated SARFAESI proceedings in violation of the binding RBI guidelines. The impugned proceedings are therefore liable to be quashed.

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Main Grounds :

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1. The Defendant failed to consider the moratorium benefits and other protections applicable to educational loans under the RBI guidelines before initiating recovery proceedings.

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2. The Defendant mechanically issued the impugned Possession Notice without proper application of mind and without considering the facts and circumstances of the Applicant's case.

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3. The statement of account relied upon by the Defendant does not disclose the applicable rate of interest and is therefore defective.

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S.A. NO. 669/2024

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Consequently, the classification of the loan account as NPA based on such statement is illegal and unsustainable.

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4. The initiation of proceedings under the SARFAESI Act, based on an invalid NPA classification and in disregard of the RBI guidelines governing educational loans, is arbitrary, illegal, and liable to be set aside.

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5. The impugned action of the Defendant is violative of the principles of natural justice and contrary to the provisions of law.

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6. The Applicant craves leave of this Hon'ble Tribunal to raise additional grounds and to amend, alter, or modify the present grounds as may be necessary.

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SCHEDULE OF PROPERTY

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First Schedule

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The Southern part of house site plot no 7 measuring east west 51.25 feet on the north, 51.75 feet on the south, south north 30 feet on the west, 30 feet on totally 1545 sq feet =143.59 Sq metre out of the total extent of 64 cent = 0.26.0 Hectare lies in Ayan Punja survey No 187/3 corresponding to told Bymass No 177/1 divided into house site plots and named as "Kumaran Nagar and the layout was duly approved under proceedings Na. Ka.A.3/3941/2000 dated 30.11.2000 by the commissioner of sivakasi Panchayat union having common pathway and cart track rights in Narnapuram village, Naranapuram Panchayat, Sivakasi Panchayat union, Thiruthangal sub Registration District and Virudhunagar Registration District is owned by K. Athilingam and bounded by

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West: 20 feet width south north common pathway

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North: The northern part of Plot No 7

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East: Land of Arasan Amorces

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South: The northern part of plot No 8 of M Nagarajan

S.A. NO. 669/2024

Second Schedule

The Northern part of house site plot no 44 and plot 45 measuring east west 35 ½ feet on the north, 35 ¼ feet on the south, south north 48 feet on the west, 47 feet on the east totally 1680.3125 sq. feet out of the total extent of 2 acre 20 cents ie, 1 acre 04 cents lies in Ayan Punjab survey No 184/9 Corresponding to old Inam Adangal No 540/6 and1Acre16 cents lies in Ayan Punja Survey No 184/8 corresponding to old Inam adangal No 178/1 divided into house site plots and named as "Aruna Nagar" having common pathway and cart track rights in Narnapuram Village, Naranapuram Panchayat, Sivakasi Panchayat union, Thiruthangal sub Registration District and Virudhunagar Registration District is owned by K. Athilingam and bounded by,

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West : Land of Kandasamy Asari

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North: Plot No. 65

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East : 15 feet width south north pathway

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South: Land purchased by S. Shanmugaiah.

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Typeset of documents filed by the Applicants:

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Sl.No.	Date	Documents particulars
1.	10.10.2024	Application Form
2.	16.07.2024	DemandNotice
3.	10.10.2024	ImpugnedPossession Notice
4.		Statement of Accounts
5.	10.10.2024	Vakalatnama

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3. On the other hand, the Defendant bank appeared and filed their Reply Statement along with type set of papers wherein it has been submitted that:

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The SARFAESI Application is false, frivolous, and baseless. Hence, it is liable to be dismissed in limine.

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S.A. NO. 669/2024

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Except for the admissions expressly made herein, all other allegations in the SARFAESI Application are denied as false and misleading, and the applicant is put to strict proof thereof.

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The applicant has admitted the availing of the loan, execution of loan documents, creation of mortgage, default in repayment, and receipt of SARFAESI notices.

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The Defendant Bank denies all allegations under the "Facts of the Case" and "Grounds" of the SARFAESI Application. The applicant is put to strict proof of the same. Most of the allegations are unwarranted and irrelevant to the issues involved. The Defendant Bank strongly and specifically denies the allegations under the heading “Facts of the Case” and “Grounds” of the SARFAESI Application that the Bank acted arbitrarily, illegally, or in violation of RBI guidelines and prudential norms. The Bank submits that all procedures applicable to educational loans were duly followed, the account was rightly classified as NPA, and the possession notice was lawfully issued. The allegations regarding the moratorium period, repayment obligations, invalidity of the statement of accounts, non-application of mind, violation of natural justice, and illegality of SARFAESI proceedings are false, misleading, and unsustainable. The statement of accounts is valid and legal, the Bank has acted in accordance with law, and the possession notice is neither illegal nor liable to be set aside.

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The Defendant Bank submits that the loan was availed for pursuing the MBBS course in the year 2016. As per the loan terms, repayment of principal was to commence after the moratorium period of six years (5 years MBBS course + 1 year holiday period), i.e., from the year 2022. However, interest was payable from the month following disbursement of the loan. The applicant has completed the course including house surgency and

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S.A. NO. 669/2024

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is presently employed, as reliably learnt by the Bank. Despite repeated reschedule of the loan by the Bank, the applicant failed to repay the dues. Therefore, the allegations regarding unemployment, moratorium period, repayment obligations and servicing of interest are untenable and unsustainable.

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The Defendant Bank submits that a demand notice was duly issued and served on the applicant.

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The Defendant Bank submits that symbolic possession of the secured asset was taken and possession notice was duly served upon the applicant, affixed on the conspicuous part of the property and published in both Tamil and English daily newspapers within the prescribed time.

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The Defendant Bank submits that the applicant failed to send any reply to the notice issued under Section 13(2) of the SARFAESI Act. Such failure is fatal to the applicant's case.

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The Defendant Bank submits that there was no procedural irregularity in issuing the demand notice, taking symbolic possession or issuing the possession notice under the SARFAESI Act and Rules. All actions were taken strictly in accordance with law. If the possession notice is set aside, the Bank will suffer irreparable loss and hardship, whereas no prejudice would be caused to the applicant. The balance of convenience is entirely in favour of the Defendant Bank.

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The Defendant Bank submits that the applicant is a chronic and willful defaulter who has deliberately failed to repay the loan despite having sufficient means. The applicant's conduct indicates an intention to delay proceedings and defeat the lawful rights of the Bank. The amount due under the SARFAESI notices constitutes public money and remains payable with interest and costs. The applicant, seeking equitable relief, must first discharge

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S.A. NO. 669/2024

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the outstanding dues. Hence, in the interest of justice and to safeguard public funds, the claim deserves to be rejected.

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The Defendant Bank submits that only symbolic possession has been taken and no order has been obtained from the Chief Judicial Magistrate for physical possession. The Bank has never disturbed the applicant's peaceful possession and enjoyment of the property. Therefore, the prayer in I.A. No. 3374/24 seeking injunction against disturbance of possession does not arise.

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The Defendant Bank submits that the only remedy available to the applicant is to discharge the entire outstanding dues in terms of Section 13(8) of the SARFAESI Act to prevent further recovery proceedings.

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The SARFAESI Application is not maintainable either in law or on facts.

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The Defendant Bank reserves its right to file an additional reply statement, if necessary.

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Typeset of documents filed by the Defendant Bank:

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S.No	Date	Particulars
1.	16.07.24	Demand Notice with Postal Receipts & AD Cards
2.	07.10.24	Possession Noticewith ADCards
3.	07.10.24	Possession Notice published in English Daily “TheHindu”on 11.10.24 –Original
4.	07.10.24	Possession Notice published in Tamil Daily “Dinamalar”on 11.10.24 –Original
5.	07.10.24	Original Photography showing the affixture of Possession Notice
6.		Statement of Accounts
7.		Interest Charged Report

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S.A. NO. 669/2024

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4. On the basis of the above pleadings, the following issues have been framed:

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(i) Whether actions initiated by the Respondent Bank in respect of the schedule mentioned property under the SARFAESI Act are illegal, void and contrary to the settled principles of Law?

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(ii) Whether the applicant is entitled for relief as claimed for?

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5. Upon hearing both parties and perusing the records, it is found that the Applicant availed an educational loan of Rs.11,70,000/from the Defendant Bank in 2018 by mortgaging the schedule property as security.

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6. The loan was availed for pursuing an MBBS course. As per the loan terms, repayment of the principal was to commence after the moratorium period of six years (five years course period plus one year holiday period), i.e., from 2022. However, interest was payable from the month following disbursement. It is the contention of the Defendant Bank that the Applicant completed the course, including internship, and is presently employed. Despite repeated rescheduling of the loan by the Bank, the dues remained unpaid.

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7. Thereafter the Bank classified the account as NPA and issued a Demand Notice dated 16.07.2024 under Section 13(2) of the SARFAESI Act demanding a sum of Rs.17,10,073.17. I further find that the notice was duly served on the Applicant, as evidenced by the postal receipts and AD cards (Bank’s typed set of papers, pages 01 to 05) , and that no proof has been filed by the applicant that she has given any objection under Section 13(3A) of the Act.

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S.A. NO. 669/2024

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8. Thereafter, the Bank issued the impugned Possession Notice dated 07.10.2024 under Section 13(4) of the SARFAESI Act. I find that the Possession Notice was duly served on the Applicant, as evidenced by the postal receipt and AD cards (Bank’s typed set of papers, pages 06 to 08) .

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9. Further the Defendant Bank has published the Possession Notice in two leading newspapers and also affixed the same on a conspicuous part of the secured asset. I perused the documents filed by the Defendant Bank (Bank’s typed set of papers, pages 09 to 12) and find that service of the notice, newspaper publications, and affixture have been duly proved through the records. Therefore, I hold that the Bank has substantially complied with the statutory requirements prescribed under the SARFAESI Act.

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10. Further, the Applicant has not placed any material evidence before this Tribunal to substantiate her contention that the classification of the loan account as NPA was erroneous or that the rate of interest charged was contrary to the guidelines issued by the Reserve Bank of India. Further, the Applicant has not produced any document or proof to show that she had made any representation to the Defendant Bank seeking a copy of the statement of account.

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11. However, during the pendency of the proceedings, this Tribunal granted a conditional stay order dated 16.10.2024 directing payment of Rs.5,24,000/- in two instalments. The Applicant complied with the order, which has been admitted by the Defendant Bank, thereby demonstrating bona fides.

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S.A. NO. 669/2024

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12. In view of the above facts and circumstances, this Tribunal finds that the Applicant has failed to establish any illegality in the measures taken by the Bank. On the other hand, the Bank has followed the procedure prescribed under the SARFAESI Act for recovery of its dues. Hence, the Securitisation Application is devoid of merit.

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13. Accordingly, SA No.669/2024 is dismissed without costs. However, considering the Applicant's compliance with the conditional order and demonstrated bona fides, the Bank may consider an amicable settlement in accordance with law.

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(Dictated to KKN taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court in this the 11^th June, 2026).

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Sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 22.06.2026

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A Veeralakshmi v. Indian Overseas Bank

Case brief

What is this about?

What did the court decide?

A Veeralakshmi v. Indian Overseas Bank

Case brief

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