Dismissed

Ms Sri Aditya Hotels and Resorts v. State Bank of India

DRT31 Jul 2026SA/98/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a securitization application challenging the State Bank of India's recovery measures under the SARFAESI Act. The Tribunal held the bank complied with procedural requirements and that applicants failed to prove eligibility for regulatory relief to quash the proceeding.

What did the court decide?

Writ/Application dismissed. Interim stays granted in prior interlocutory applications are vacated.

Ms Sri Aditya Hotels and Resorts versus State Bank of India — Company and Corporate | DRT (2026)

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IN THE DEBTS RECOVERY^{TRIBUNAL_ II AT HYDERABAD}

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DATEO THIS THE 31ST^{DAY OF ]ULY.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' 98 OF 2022}

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M/s. Sri Aditya^{Hotels and Resorts} Represented^{its Managing Partner} Sri Pothireddy^{Rami Reddy} Survey No.^{516 to 5/L2, Beside Nac Gate,} Hytex Campus,^{Izzath Nagar, Kondapur,} Hyderabad -^{500 084}

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Smt. Pittu Indira^Reddy, W/o Sri Pittu^{SuryaBuchiReddy,} R/o Plot No. 25,^{InduResidency,} Kondapur,^{Near ChirecPublic School,} Hyderabad -^{500 084}

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..........APPlicants

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Versus

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State^{Bank of India} Stressed^{AssetRecoverY Branch} 2nd Floor,^{TSRTCCommuter Amenity Centre'} Bus Terminal^{ComPlex, Koti,} Hvderabad -^{500 095} Rep by its^{Authorized Officer}

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..... ResPondent

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: Mr. Virendra^Singh counsel for the^APPlicant : Mr, C.^Prabhakar Cou nsel^{for ResPondents}

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': o3p-EB:-

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l.ThepresentSecuritizationApplicationisflledbytheApplicants uls.77 of^{the Securitisationand Reconstructionof FinancialAssets} andEnforcementofSecuritylnterestAct,2oo2(..Act,,hereinafterfor short)tosetasideallthemeasuresinitiatedbytherespondentbank under^{section13(4) of the Act and underRule 8(1)' 8(2) & 8(5) of} the Security^{Interest(Enforcement) Rules'2OO2 (hereinafter "Rules"} !/ ,z.flrrlIi_a ""''\ '--^1,

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Page 2 of 8

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SA No, 98/2022

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for short) including the action of taking physical possession of the SA Schedule Property via appointment of advocate commissioner in pursuance to orders in Crl.M.P.No.1260 of ZO22 before Hon,ble III Additional Metropolitan Magistrate, Nampally.

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The averments of the application, in brief, are that Applicant No.1, an MSME engaged in the hotel and resort business, had originally availed various credit facilities from respondent bank. It is contended that the applicants' business suffered severe financial distress owing to demonetisation, implementation of GST, and the COVID-19 pandemic, despite which the respondent failed to extend the relief measures announced by the Reserve Bank of India and the Government of India for MSME borrowers, including moratorium benefits, restructuring of the loan account, GECL assistance, and conversion of the irregular portion of the account into WCTL/FITL. The applicants assert that, in disregard of the applicable RBI circulars and MSME guidelines, the respondent illegally classified the loan account as a NpA on O1.02.202t and issued a demand notice under Section 13(2) of the SARFAESI Act on 20.02.2027. It is further contended that the respondent mechanically rejected the applicants, objections under Section 13(34), suppressed material facts while obtaining orders under Section 14 of the Act, undervalued the secured asset, failed to comply with the mandatory requirements under the Rules, 2002, and proceeded with possession proceedings in violation of the interim orders of this Tribunal. The applicants further allege that the respondent ignored payments made by them, faited to disclose the tenancy over the secured asset. and deliberately undervalued the property to facilitate its sale. In support of their contentions, reliance is placed upon the RBI Master Circular dated 07.07.20t4, the RBI Circular dated 01.01.2019 relating to restructuring of MSME accounts, the RBI/DOR Circulars dated 77.02.2020, 23.05.2020 and 06.08.2O2O, and the-yarious COVID_19

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sA No.98/2022

relief measures announced by the^{Government of India. On these} grounds, the applicants seek to declare the NPA^{classification and all} consequential SARFAESI^{measuresas illegal and void, besides} seeking consequential directions^{for extension of the apPlicable} RBI/Government relief^measures.

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The Respondent Company filed^{reply statement along with} documents. The averments^{thereof. briefly, are that the respondent} bank had sanctioned^{various credit facilitiesaggregatingto Rs'} 45O.OO lakhs to the^{applicantsvide Letter of Arrangementdated} 22.03.2013, which were^{secured by execution of the requisiteloan} and security documents^{and creation of an equitable mortgageby} deposit of title deeds'^{Applicantscommitted persistent defaultsin} repayment, resulting^{in the loan account being classified as a NPA in} accordance with the^{RBI guidelinesand its transfer to the Stressed} Assets Recovery^{Branch (SARB). It is averredthat the respondent} initiated recovery^{proceedingsby filing O.A No' 278 of 2021before} DRT-I, Hyderabad,^{which came to be decreed on 11 10 2022'and} simultaneously initiated^{measuresunder the SARFAESIAct by issuing} a demand notice^{under Section 13(2), duly afflxing and publishing the} same upon return^{of certain notices. It is furtherasserted that the} applicants admitted^{the loan transaction and creation of the mortgage} in their representation^{dated 26.12.2021, whichwas duly considered} and rejected under^{Section 13(34) of the Act, and thereaftera} possession notice under Section^{13(4) read withRule 8 of theRules'} 2oO2 was issued,^{served.affixed, and publishedin accordance with} law. The respondent^{also contends that the applicantsunsuccessfully} challenged the^{proceedings beforethe Hon'ble High Court in W P' No'} 23138 of 2022,^{which was dismissed for non-compliancewith the} conditional stay^{order. The respondent asserts that all the mandatory} provisions of the Act and^{Rules,2002have ber1drycomplied wlth} and, therefore,^{praysfor dismissal of the SA. /} t/^{"''\r\ t'r'}

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Page 4 ofB

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SA No.98/2022

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4, Heard both learned counsel for the applicants and learned counsel for the respondent. Perused the written arguments filed by the respondent and also perused the material brought on record.

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During the course of arguments, the Learned Counsel for the Applicants while reiterating the contents of the application would contend that the applicant availed the loan, however the business was severely hit by demonetization, cST and the COVID-19 lockdown Although the Applicant remained eligible for RBI/GoI relief measures for MSMEs, the Bank did not extend those benefits, wrongly declared the account NPA w.e.f. 01.02.2027, issued a notice under Section 13(2) on 20.02.2027, and later proceeded with possession and auction without proper compliance. Learned counsel also contended that the Respondent bank suppressed the pendency of S.A. No. 98/2022 and the Tribunal's interim stay dated 16.11.2022 in IA No.295/2022. He further contended that the Respondent did not disclose the payments thereby failed to follow Sec.14(1)(viii) of the Act, 2002. Accordingly learned counsel prayed to set aside the measures initiated by the Respondent Bank against the SA schedule properties.

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Per contra, Learned Counsel for the Respondent Bank submitted that the at the request of Applicants, the erstwhile State Bank of Patiala, now SBI, had sanctioned various loan facilitires aggregating to Rs.450 lakhs vide letter of arrangement dated 22.03.20L3 which came to be renewed on 04.05.2019. The loan facilities are secured by mortgage of SA schedule property. As the Applicants violated the terms of sanction, account became NpA as per RBI guidelines, Respondent bank got issued a legal notice on 13.10.2021 and also filed OA No.27812021 before DRT-1, Hyderabad for recovery of Rs.3,33,76.706l- which was decreed on 11.10.2022 in

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5A No' 98/2022

favour of the bank. Simultaneously,^{SARFAESIaction hasbeen} inltiated by issuing demand^{notice dated 2A.70.2021 which was} served and^published. Learned^{counselfurther stated that the} Applicants^personally approached the bank^{for reductionin rate of} interest vide tetter dated 23.09.2021.^{Possession noticedated} 09.03.2022 was^{personallyserved besidesbeing sent by registered} post, affixture and publication. Learned counsel asserted that^the respondent bank has followed all the^{guidelinesof the RBI including} Circular dated 01.01.2019^pertaining to^{MSME-Restructuring of} advances; circulars dated^{11.02.2020, 23.05.2020, 06.08.2020and} dated 13.05.2020 ln^respect of^{Atma Nirbhar Bhartath.He further} stated that the Applicants^{earlierflled writ Petition No.23138of 2022} and failed to comply the^{condition of depositing50o/o of outstanding} dues and subsequently^{was dismissed by the Hon'ble HighCourt} dlsmlssed the WP vide order^{dated12.L0.2022 on the very ground of} non-compliance. Learned^{counsel contended that having availedloan} facilities and assures repayment^{as per agreedterms,Applicants have} been litigating without^clearing the^{dues to the bank. With these} contentions, learned counsel^{prayed to dismissthe SA withcosts.}

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The points for consideration are^{as follows :} -

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i) Whether the applicants^{madeout any valid ground for} quashing any of the measures initiated by the Respondent Bank against the SA Schedule^{Propertiesincluding} demand notice,^{possession notice and action under Sec.14} of the Act, 2002, as PraYed for?

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ii) To what relieP

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Point No.(i'l:

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It is not in dispute that^the applicants availed various^credit facilities from the respondent^bank aggregating to^{Rs.450.00lakhs} ffio*

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SA No. 98/2022

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and created security interest by way of equitable mortgage over the schedule^properties. The records further disclose that the applicants admittedly committed defaults in repayment of the loan, resultingⁱⁿ the account becoming irregular. Hence, the Respondent Bank cannot be faulted for classifying the account as NPA and initiating recovery process for recover of outstanding dues which is public money.

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In fact, the Respondent Bank has obtained a order under a judicial process for recovery vide order dated 11.10.2022 in OA No.278 of 2o2L on the file of learned Debts Recovery Tribunal-1, Hyderabad, which is binding on the Applicants herein. It is^pertinent to note that the Applicants failed to comply the conditional order of Hon'ble High Court to deposit 50Vo of outstanding dues.

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It is a matter of record that this Tribunal, vide order dated 76.77.2022 in I.A. No. 295 of 2022, had granted stay of all measures initiated subsequent to the possession notice dated 09.03.2022. Thereafter, vide order in I.A. No. 164 of 20?3, this Tribunal continued the said interim protection by staying the e-auction scheduled to be held on 23.02.2023 pursuant to the sale notice dated 07.01.2023, along with all consequential proceedings arising from the possesslon notice dated 09.03.2022. In view of the aforesaid interim orders, it is not required to examine the validity of the proceedings relating to the taking of physical possession under section 14 of the SARFAESI Act or the alleged compliance with Rules 8(5). 8(6), 8(7) and 9(1) of the Rules, 2002, as cause of action does not survive in respect of those issues in the present proceedings.

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The contention of the applicants is that the respondent ought not to have classified the account as NPA without first extending the benefits available under the RBI circulars g^overning MSME ffi**

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sA No.98/2022

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restructuring and the COVID-19 regulatory^{relief packages. Except} placing reliance upon the RBI circulars, the applicants have^not produced any material to establish that they had fulfilled all^the mandatory conditions^prescribed therein or that^{the respondent} arbitrarily denied restructuring despite their^{eligibilityand carried} their grievance, if any, to the higher-ups of^{the Bank or the RBI. Mere} existence of RBI^guidelines does not confer an^{automaticright upon} every borrower to claim restructuring. The burden^{lies uponthe} applicants to establish that they fulfilled^{the eligibility criteria and that} the bank acted contrary to the applicable^{regulatory framework.}

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f2. The Respondent Bank^placed on record^{material documents} along with reply statement as^proof of^compliance of^{due procedure} prescribed in the Act, 2002 and Rules thereunder. Pages 5 to 23^of the material^paper filed separately are the Photostat^{copies of postal} acknowledgement cards and^postal return^covers and^{publication of} the same in English and Telugu^{(vernacular language)newspaperson} 07.72.2027. Likewise,^pages 24 to 32 of the^{record comprisecopies} of the objectlons submitted^{by the applicants under Section 13(3A) of} the Act and the reply furnished by the^{respondentBank thereto,} demonstrating compliance^with the^{requirementsof Section 13(3A) of} the Act. These documents amply^{proveserviceof demandnotice.} Similarly, Pages 33 to 55 are the^{Photostat copiesof photocopy of} Possession Notice dated 09.03.2022^{along with endorsement of the} applicants,^postal acknowledgement^{cards, return covers,} photographs as proof of affixture on secured assets and^{publlcation ot} the same in English and Telugu^{(vernacular language)newspaperson} fl.03.2o22. In view of sufficient^{proof place} on^record, I^{find no} infraction of section 13(2),^13(3A) & 13(4)^{of the Act and Rules 3,} 8(1) & 8(2) of the Rules,^{2002.As a securedcreditoAlheRespondent}

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SA No.98/2022

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Bank initiated the SARFESI^proceedings, which cannot be categorized as illegal or arbitrary.

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In view of the above observations, it is^{concluded that the} Applicants have failed to establish any valid^ground to^interdictthe measures initiated by the Respondent Bank under the^provisionsof the Act against the SA schedule^{property. Accordingly,the SA is liable} to be dismissed.

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Point No.(ii'l:

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In the result, the Securitisation Applicatlon fails and is hereby dismissed.

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Consequently, interim stay granted vide order dated 16.11.2022 in IA.No.295/2022 and order dated 02.02.2023 in lA No.764/2023, shall stand vacated and Interlocutory Applications pending, if any, shall stand closed.

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No order as to costs.

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t7. communicate a copy of thls order to the^parties concerned and upload in the official website.

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(Typed to my dictotion by the Steno., coffected, signed ond pronounced by me in the open court on this the 31" doy of )uly, 2026).

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1(o)^.r-vl</sup>

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WAR KOTHE) PRESIDING OFFICER

Ms Sri Aditya Hotels and Resorts v. State Bank of India

Case brief

What is this about?

What did the court decide?

Ms Sri Aditya Hotels and Resorts v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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