Allowed

Velusamy v. Indostar Home Finance Private Limited

DRT28 Jul 2026SA/806/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application filed by a loan applicant seeking to set aside a possession notice issued under the SARFAESI Act. The tribunal found the notice unsustainable due to lack of evidence regarding insurance claim processing and non-compliance with mandatory publication rules.

What did the court decide?

The Possession Notice dated 25.11.2024 is set aside; Defendant directed not to recover expenses for issuance; liberty to initiate fresh proceedings in compliance with law.

Velusamy versus Indostar Home Finance Private Limited — Banking and Recovery | DRT (2026)

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S.A. No. 806/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 28^th OF JULY, 2026

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd]

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PRESIDING OFFICER

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SA No. 806/2024

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Velusamy, S/o Subbaiya

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No. 1-30A, Kurumbapatti Eriyodu, Vedasanthur Taluk Dindigul District – 624 702 --- Applicant

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-Vs-

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NIWAS Housing Finance (Formerly IndoStar Home Finance Private Limited) Represented by its Authorized Officer Corporate Office, Unit No. 305, 3^rd Floor Wing 2/E, Corporate Avenue, Andheri Mumbai – 400 093, having branch at Aarthi Theatre Road Dindigul – 624 001 ---

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--Defendant

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Appearance of Advocates: M/s S. Suresh ---- Counsel for the Applicant Defendant Finance Company sets Ex-parte.

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This SARFAESI Application was heard in the presence of Counsel for the Applicant and the Defendant Finance Company for passing final order before me and upon hearing the arguments of the Counsel for the Applicant and having stood over for consideration till this day, this Tribunal delivered the following:

O R D E R

Page 1 of 7

S.A. No. 806/2024

1. This application has been filed under Sec.17(1) of the SARFAESI Act 2002 by the Applicant, praying that this Hon'ble Tribunal may be pleased to set aside the Possession Notice under Section 13(4) of the SARFAESI Act dated 25.11.2024 in respect of scheduled property and quash the same as illegal, perverse, arbitrary and against the principles of natural justice.

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A. The Applicant submitted that the Defendant Finance Company sanctioned a Housing Loan of Rs.6,50,000/- (Rupees six lakhs fifty thousand only) to the Applicant's deceased son, Late Sathishkumar , on 27.07.2022 . The Applicant and his wife stood as co-borrowers for the said loan, and the schedule-mentioned property was offered as security.

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B. The Applicant submitted that, at the time of sanction of the loan, a life insurance policy was obtained in the name of Late Sathishkumar to cover the outstanding loan liability. It is further stated that Late Sathishkumar regularly repaid the loan instalments until his untimely death in a road accident on 02.02.2024. Thereafter, the Applicant furnished the Death Certificate and Legal Heir Certificate to the Defendant, who allegedly assured the Applicant that the insurance claim would be processed and the loan account would be closed.

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C. The Applicant further submitted that, contrary to the said assurance, the Defendant classified the loan account as a NonPerforming Asset (NPA) on 08.08.2024, allegedly without following the applicable RBI Guidelines. The Applicant contends that such classification is illegal and, therefore, the Defendant was not entitled to invoke the provisions of the SARFAESI Act, 2002.

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D. The Applicant further submitted that the Defendant issued a Demand Notice dated 21.08.2024 under Section 13(2) of the SARFAESI Act demanding a sum of Rs.6,68,382/- (Rupees six lakhs sixty eight thousand three hundred eighty two only). Upon receipt of

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Page 2 of 7

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S.A. No. 806/2024

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the notice, the Applicant approached the Defendant and enquired about the insurance claim relating to the deceased borrower. However, no satisfactory response was furnished.

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E. The Applicant submitted that the Defendant thereafter issued a Possession Notice dated 25.11.2024 under Section 13(4) of the SARFAESI Act. The Possession Notice was neither affixed on the conspicuous part of the secured asset nor published in two leading newspapers in accordance with the Security Interest (Enforcement) Rules, 2002. Aggrieved by the said action, the Applicant has filed the present Securitisation Application seeking to set aside the SARFAESI proceedings.

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GROUNDS

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a) The impugned Possession Notice dated 25.11.2024 issued under Section 13(4) of the SARFAESI Act is arbitrary, illegal, contrary to law, unsupported by evidence, and violative of the principles of natural justice.

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b) The Defendant has failed to comply with the mandatory provisions of the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002 while initiating and pursuing the recovery proceedings.

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c) The classification of the loan account as a Non-Performing Asset (NPA) is contrary to the RBI Guidelines. Consequently, the Defendant had no jurisdiction to invoke the provisions of the SARFAESI Act.

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d) The Defendant failed to process and realize the insurance claim under the life insurance policy obtained in the name of the deceased borrower despite having collected the insurance premium as part of the loan transaction. According to the Applicant, the loan account ought to have been closed by adjusting the insurance proceeds.

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e) The Defendant allegedly failed to properly account for the payments made by the borrower and charged interest contrary to the applicable RBI Guidelines.

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Page 3 of 7

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S.A. No. 806/2024

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f) The Possession Notice dated 25.11.2024 was not affixed on the secured asset nor published in two leading newspapers in the manner prescribed under the Security Interest (Enforcement) Rules, 2002, rendering the possession proceedings invalid.

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g) The Applicant contends that the entire SARFAESI proceedings are legally unsustainable and liable to be set aside.

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DESCRIPTION OF PROPERTY

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All that piece and parcel of the property, bearing Old S.No. 888/2B, New S.No. 888/2B2, Measuring 20 cents, in Dindigul District, Palani Registration District, Vada Madurai Sub Registration District, Vedasanthur Taluk, Eriyodu Vilage, which is bounded as under

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North : Pathway usage in Kallankuthu South : Land belongs to Veluchamy East : Kallankuttu Pathway, Land belongs to Venkidusamyan and other West : Land belongs to Savadamuthu

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The Applicant have submitted the following List of documents in support of their claim in the SA, which are as follows:

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S.No.	Date	Description
1.	17.02.2024	DeathCertificate ofSathishkumar
2.	19.03.2024	Legal HeirCertificate ofSathishkumar
3.	21.08.2024	13(2)DemandNotice
4.	25.11.2024	13(4) Possession Notice (Impugned Notice)
5.	-	Statement of Accounts

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3. On the other hand, the Counsel for the Defendant Finance Company appeared before this Tribunal and undertook to file a Vakalatnama but failed to do so. Subsequently, he remained absent; despite being called in open court, he did not appear and was therefore set ex parte on 09.04.2026.

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Page 4 of 7

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S.A. No. 806/2024

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4. ON THE BASIS OF ABOVE PLEADINGS, THE POINT WHICH ARISES FOR CONSIDERATION IS: -

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I. Whether the Applicant has been able to prove his case in his favour?

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II. Whether the Applicant is entitled to get the reliefs as prayed for?

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5. Having heard the party I perused the records and I find that the Defendant Finance Company sanctioned a Housing Loan of Rs.6,50,000/(Rupees six lakhs fifty thousand only) to the Applicant's deceased son, Late Sathishkumar, on 27.07.2022, wherein the Applicant and his wife stood as co-borrowers. It is the specific case of the Applicant that, at the time of sanction of the loan, a life insurance policy was obtained in the name of the deceased borrower to secure the loan liability and that the insurance premium was collected by the Defendant.

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6. It is the further case of the Applicant that Late Sathishkumar regularly repaid the loan instalments until his unfortunate demise in a road accident on 02.02.2024. Thereafter, the Applicant submitted the Death Certificate and Legal Heir Certificate to the Defendant with a request to process the insurance claim. According to the Applicant, the Defendant assured that the insurance claim would be processed and the loan account would be closed. However, instead of processing the insurance claim, the Defendant classified the loan account as a Non-Performing Asset on 08.08.2024, issued a Demand Notice dated 21.08.2024 under Section 13(2) of the SARFAESI Act and thereafter issued the impugned Possession Notice dated 25.11.2024 under Section 13(4) of the Act.

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7. The Applicant has also contended that the Possession Notice was neither affixed on the conspicuous part of the secured asset nor published in two leading newspapers as mandated under the Security Interest (Enforcement) Rules, 2002. The Applicant has further alleged that the

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Page 5 of 7

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S.A. No. 806/2024

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Defendant failed to process the insurance claim despite collecting the insurance premium and that the classification of the loan account as NPA was contrary to the RBI Guidelines.

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8. In support of the above contentions, I find that the Applicant has produced the Death Certificate dated 17.02.2024, Legal Heir Certificate dated 19.03.2024, Demand Notice dated 21.08.2024, Possession Notice dated 25.11.2024 and the Statement of Account.

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9. On the other hand though sufficient opportunity was granted, the Defendant neither filed a reply statement nor produced any documents to substantiate the legality of the measures initiated under the SARFAESI Act. The Defendant has also failed to contest the specific averments relating to the insurance coverage, the alleged assurance to process the insurance claim, the classification of the account as NPA and the statutory compliance regarding the issuance of the Possession Notice. It is a settled principle of law that where a borrower had obtained a credit life insurance policy in connection with the loan transaction and the borrower dies during the currency of the loan, the secured creditor is expected to take appropriate steps for processing the insurance claim, subject to the terms and conditions of the policy. I find that the Defendant has failed to place any material before this Tribunal to establish that necessary steps were taken for processing the insurance claim or to explain why the claim was not pursued before initiating coercive measures under the SARFAESI Act. 10. Further, I find that the Defendant has not produced any material to demonstrate compliance with the mandatory requirements relating to affixture of the Possession Notice on the secured asset and publication of the Possession Notice in two leading newspapers as contemplated under Rule 8 of the Security Interest (Enforcement) Rules, 2002 inspite of knowledge of this case.

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11. In the absence of any rebuttal evidence from the Defendant and having regard to the unrebutted documentary evidence placed by the Applicant, I am of the considered view that the Defendant has failed to prove or establish that the measures initiated under the SARFAESI Act

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Page 6 of 7

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S.A. No. 806/2024

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were in accordance with law. Consequently, the impugned Possession Notice dated 25.11.2024 cannot be sustained.

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In the result ,

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S.A. No. 806 of 2024 is allowed.

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1. The Possession Notice dated 25.11.2024 is hereby set aside.

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2. The Defendant Finance Company is directed not to recover from the Applicant the expenses incurred towards the issuance of the Possession Notice.

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3. It is made clear that the 1st Defendant Finance Company is at liberty to initiate fresh proceedings against the Applicant for recovery of the outstanding loan amount, strictly in accordance with the provisions of the SARFAESI Act, 2002, and the Security Interest (Enforcement) Rules, 2002.

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Consequently, all pending IAs (if any) are also disposed of. No costs.

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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 28^th July, 2026).

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Sd/(SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 04.08.2026

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Page 7 of 7

Velusamy v. Indostar Home Finance Private Limited

Case brief

What is this about?

What did the court decide?

Velusamy v. Indostar Home Finance Private Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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