SARFAESI Section 17 application not maintainable when title dispute over secured asset pending with stay on cancellation decree.

JUDGMENT : 17 April, 2026 THE APPELLATE TRIBUNAL:

1. Instant Appeal is preferred against a judgement and order dated 10.06.2024 passed by Learned DRT-II Hyderabad dismissing the S.A. No. 75 of 2021 Duddala Lokesh & Another Vs The South Indian Bank & Another.

2. As per pleadings of the parties an application under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ACT) (hereinafter referred as to as the ‘Act’) was filed challenging the notice under Section 13(4) dated 05.09.2021 issued by the Respondent No. 1 herein i.e. South Indian Bank with the assertions that the Securitization applicant and appellants namely Sri Duddala Lokesh and Smt. Duddala Vara Lakshmi purchased the scheduled property from VR Associates Constructions i.e. Respondent No. 2 through two sale deeds. Respondent No. 2 executed a registered sale deed in respect of a Scheduled property in favour of Mr. Jatin R. Jain on 12.06.2018 wherein allegedly fraud was played by Jatin R. Jain upon Respondent No. 2. Original suit No. 1391 of 2018 was filed on the file of Learned XV Additional District and Sessions Judge, Ranga Reddy district for cancellation of the sale deed dated 12.06.2018 which was decreed in favour of the Respondent No. 2. The Appellants are in possession over this property but the Respondent No. 1 issued a notice under Section 13(4) of the Act which is under challenge.

3. Respondent No. 1 alleged that the decree was passed in O.S. 1391 of 2018 was challenged before the Hon’ble High Court of Telangana in A.S. No. 668/2019. Hon’ble High Court stayed the operation of the decree and judgement. Jatin R. Jain availed cash credit loan facility of Rs. 4 crores from Respondent No. 1 bank in the year 2018 and also created equitable mortgage by deposit of sale deed No. 4279/2018 dated 12.06.2018 executed by Respondent No. 2 to secure the loan. But the O.S. No. 1391/2018 was filed by Jatin R. Jain in collusion with Respondent No. 2 and obtained an Ex parte decree of cancellation of deed. When the account of Jatin R. Jain in the name of M/s. Crown Metal marketing, became NPA by 30.06.2019, recovery proceedings were initiated by the bank then bank came to know about the collusive decree passed in O.S. No. 1391/2018. Thereafter the appeal was preferred before the Hon’ble High Court and interim order of stay of operation of decree and judgement was passed which is still in force. Accordingly, appellants have no right over the subjective property. S.A. is liable to be dismissed.

4. Respondent No. 2 also filed a separate written statement stating that the sale deed dated 12.06.2018 was executed by the Respondent No. 2 in favour of Jatin R. Jain without receiving a complete sale consideration and without delivery of the physical possession. However, Jatin R. Jain availed the loan facility from the Respondent No. 1 South Indian Bank on 18.06.2019. When Jatin R. Jain failed to honour the memorandum of understanding between the parties, O.S.1391/2018 filed by the Respondent No. 2 for cancellation of the sale deed dated 12.06.2018 which was decreed ex parte, factum of pendency of appeal is not disputed.

5. Learned DRT framed filing two issues for disposal in Para 10

i) Whether the Applicant made out any valid ground for quashing the possession notice date 05.09.2021 issued under section 13(4) of the SARFAESI Act?

ii) To what relief?

6. Learned DRT arrived at a finding that since the dispu