The Authorised Officer, Canara Bank vs Patti Hima Bindu & Anr.

Instant Appeal has been preferred against a judgment and order dated 15^th February, 2025 passed by Learned DRT Visakhapatnam allowing the S.A. No. 561 of 2023 (Mrs. Patti Hima Bindu versus Canara Bank and others).

As per the pleadings of the parties, Respondent herein is the borrower/ guarantor of the Appellant for the credit limit allowed to M/s Sri Gayatri Women and Child Care Hospital Pvt. Ltd. wherein the loan of Rs.19.73 crore was sanctioned. Loan Account became irregular and was classified as NPA. A Securitisation Application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the 'Act') was filed seeking relief to declare the sale conducted on 15.11.2023 as illegal and invalid with consequential reliefs. It is stated that the Demand Notice and Possession Notices were not served upon the S.A. Applicant. Valuation Report of the secured assets was not obtained from two valuer. The auction was conducted on 15.11.2023 for an amount of Rs. 17,40,81,000/-. S.A. Applicant got the knowledge of the e-auction Sale Notice dated 05.10.2023 from 3rd person. Compliance of Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as the 'Rules') was not made and it was not properly served.

Opposition was filed by the Bank stating that the loan account became irregular and was classified as NPA. Notices under Section 13(2) of the 'Act' were issued on 03.04.2023 which was acknowledged by the Applicant or borrower on 15.04.2023. Possession Notice was served upon the Applicant on 16.06.2023 and Paper Publication in vernacular language and in English was done on 21.06.2023. Physical possession of the property was taken on 06.11.2023. Two Valuation Reports were obtained on 16.06.2023. Reserve price was fixed which was communicated to the borrower on 27.09.2023. Auction was conducted. Sale Notice was issued on 05.10.2023 which was published in two newspapers in vernacular language and in English on 11.10.2023. E-auction was conducted on 15.11.2023 and the sale amount is deposited by the Auction Purchaser.

Learned DRT allowed the S.A. but recorded some findings which was against the S.A. Applicant. It is held by the Learned DRT that Demand Notice is duly served upon the borrower and the guarantor. Possession Notice was also served in accordance with law which was also published in two newspapers one in English and another in vernacular language on 21.06.2023. Redemption Notice was also served upon the borrower and the guarantor. Account was rightly classified as NPA and the possession was taken in accordance with law. E-auction was conducted after obtaining the Valuation Report in accordance with law. Total amount was paid by the Auction Purchaser. However, Learned DRT arrived at a conclusion that before issuance of Sale Notice dated 05.10.2023, Notice was not issued, served and published upon the S.A. Applicant. Accordingly, the Sale Notice dated 05.10.2023 and sale conducted on 15.11.2023 are illegal. Accordingly, S.A. was allowed with a direction to the Respondent Bank to repay the bid amount to the highest bidder with liberty to proceed afresh in accordance with law.

I have heard the Learned Counsel for the parties and perused the records.

Learned Counsel for the Appellant would submit that no Appeal is filed by the S.A. Applicant against the impugned judgment. Accordingly, all the findings recorded in the judgment against the S.A. Applicant attained finality. Learned Counsel for the Appellant would further submit that notice dated 26.06.2023 was issued to the S.A. Applicant which was duly served but no right of redemption was exercised by the S.A. Applicant. Learned Counsel placed reliance upon the judgment of Hon'ble Apex Court in M. Rajendran and Others versus KPK Oils and Protiens India Pvt. Ltd. and Others (2026) 3 SCC 505 and argued that when the liberty to exercise the right to redemption was granted and was not availed, now S.A. Applicant cannot challenge the same. Learned Counsel would further submit that notice under Rule 8(6) of the 'Rules' was served upon the S.A. Applicant and the acknowledgement due was on record. The affixation was also done on the secured assets. Notices were also published in the daily newspaper in vernacular language as well as in English. Hence, the findings recorded by the Learned DRT are erroneous and is liable to be set aside.

Learned Counsel for the Appellant would further submit that no case is taken in the S.A. about Sri Ambula Kesava Rao who was the guarantor for the loan availed by the principal borrower and father of principal borrower namely Dr. A.B. Subba Rao. It is submitted that no plea was taken in the S.A. regarding notice to Sri Ambula Kesava Rao or his successor. Hence, this plea cannot be entertained.

Per contra, Learned Counsel for the Respondent supported the judgment of the DRT and submitted that no notice was ever served upon the S.A. Applicant. The notice was not affixed on the secured assets.

Relationship of borrower and creditor is not in dispute. The factum of availing the loan facility by the borrower and the S.A. Applicant being the guarantor is undisputed. Classification of the Account as NPA was held to be valid by the Learned DRT. Further, the Demand Notice and Possession Notice was duly served and published. Even the notice for redemption was also duly served upon the borrowers and guarantors. Facility for redemption was also not availed by them. Possession was also taken in accordance with law.

As far as the issue of sending any notice to Sri Ambulla Kesava Rao or his successor is concerned, a finding is recorded by the Learned DRT on the basis of written notes of arguments filed by the parties. But no such plea is taken in the S.A. by the S.A. Applicant. Law is very well settled that a plea which is not pleaded in the S.A., could not be looked into by the DRT. Hence, such a plea, if taken in the written notes of arguments, should not have been considered by the Learned DRT and is against law.

The only issue remains to be considered is about the service of notice under Rule 8(6) of the Rules, 2002. Admittedly, notice for redemption dated 26.06.2023 was served upon the S.A. Applicant. No effort was made for redemption by the S.A. Applicant. It has been held by the Hon'ble Apex Court in M. Rajendran and Others versus KPK Oils and Protiens India Pvt. Ltd. and Others (supra) that-

Accordingly, even service of redemption notice for all practical purposes would be sufficient. However, as far as service of notice under Rule 8(6) of the 'Rules' is concerned, it was duly served upon the S.A. Applicant and the acknowledgement due is on record. Record further establishes that the notice was duly affixed on the secured assets and was published in two newspapers one in vernacular language and the other in English. Publication was made on 11.10.2023 and the sale was conducted on 15.11.2023 which is in accordance with law. Hence, we are of the considered view that Learned DRT has erroneously recorded a finding regarding non-compliance of the provisions of Rule 8(6) of the 'Rules'.

On the basis of discussions made above, we are of the considered view that Learned DRT has erroneously arrived at its finding and allowed the S.A. Impugned judgment suffers from material illegalities. Appeal deserves to be allowed.

Appeal is allowed. Impugned judgment and order dated 15.02.2025 in S.A. No. 561 of 2023 (Mrs. Patti Hima Bindu versus Canara Bank and others) is set aside. Consequently, S.A. No. 561 of 2023 is also dismissed.

No Order as to costs.

File be consigned to Record Room.

Copy of the Judgment/ Final Order be uploaded in the Tribunal's Website.

Order signed and pronounced by me in the open Court on this the 14th day of September, 2026.