KARNATAKA BANK LIMITED vs DR HEGDE NANOCULUM INC on 2 November 2026

IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

IA 1632/2026(Urgent) In IA 1633/2026 (Delay) in A.IR:2868/2026

Karnataka Bank Ltd V/S Dr Hegde Nanoculum INC

02/11/2026

IA 1632/2026 (Urgent)

Learned Counsel for both sides are present.

This application is filed for hearing the application IA 1633 of 2026 (Delay) filed for condonation of delay on an urgent basis.

The other side has no serious objection to this application.

Therefore, urgent application 1632 of 2026 is allowed.

IA 1633/2026 (Delay)

IA 1632 of 2026 (Urgent) is allowed.

Learned Counsel for both sides are present.

This appeal is filed against the final order dated 14.8.2026 passed by the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru in SA No.299 of 2026, along with an application to condone the delay of two days in filing this appeal.

Learned Counsel for Petitioner/Appellant Bank submitted that SA No. 299 of 2026 has been filed to set aside the sale notice dated 23.4.2026 and for other reliefs. The Learned Presiding Officer, DRT-I, Karnataka at Bengaluru allowed the Securitization Application on the grounds that –

i) Petitioner failed to comply with the applicable RBI framework for revival and rehabilitation of MSME before classifying the Respondent’s account as NPA; ii) Petitioner Bank failed to establish valid CERSAI Registration in respect of Item 2 of the schedule property;

iii) Though Petitioner established service of demand notice, since the very classification of the account as NPA is vitiated due to Bank’s failure to follow RBI framework for revival and rehabilitation of MSMEs, the demand notice cannot survive;

iv) Petitioner failed to establish compliance with the mandatory requirements regarding service, affixture, and publication of possession notice;

v) Sale notice did not culminate in sale and has become infructuous.

Thus, the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru allowed the Securitization Application. It is further directed that Petitioner shall not debit or recover from the Respondent’s loan account any expenses, charges or costs incurred towards the impugned SARFAESI proceedings, and if any such amount has already been debited to the Respondent’s loan account, Petitioner Bank shall reverse the same within a month and furnish statement of accounts to the Respondent. Against this order, this appeal is filed.

Learned Counsel for Petitioner Bank submitted that the Hon’ble Supreme Court of India in Writ Petition (Civil) No.684 of 2025 in Shri Shri Swami Saamarth Construction & Finance Solution & Anr Vs. The Board fo Directors of NKGSH Co-Op. Bank Ltd., & Ors held, relying on the decision of Pro Knits Vs. Canara Bank case reported in (2024) 10 SCC 292, that “In our reading, the terms of the FRAMEWORK do not prohibit the lending bank/secured creditor (assuming that it has no conscious knowledge that the defaulting borrower is an MSME) to classify the account of the defaulting MSME as NPA and to even issue the demand notice under Section 13(2) of the SARFAESI Act without such identification of incipient stress in the account of the defaulting borrower (MSME); however, upon receipt of the demand notice, if such borrower in its response under Section 13(3-A) of the SARFAESI Act asserts that it an MSME and claims the benefit of the FRAMEWORK citing reasons supported by an affidavit, the lending bank/secured creditor would then be mandatorily bound to look into such claim keeping further action under the SARFAESI Act in abeyance; and, should the claim be found to be worthy of acceptance within the framework of the FRAMEWORK, to act in terms thereof for securing revival and rehabilitation of the defaulting borrower.”

Thus, he submitted that it is not in every case the borrower is entitled for the benefits of MSMEs. When appeal is filed and pending, the Respondent filed contempt application for enforcing the order of the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru. On these grounds, Learned Counsel for Petitioner Bank filed this appeal, and also a separate stay application.

Learned Counsel for Respondent pressed into service the decision of the Hon’ble High Court of Karnataka at Bengaluru in WP No. 25305 of 2024 (GM-DRT) to press his point that the Bank is bound to invoke the benefits under the MSMEs before proceeding under SARFAESI Act, 2002.

Be that as it may. These issues on merits will be considered in the main appeal. It is the submission of the Learned Counsel for Petitioner Bank that there is a delay of two days in filing the appeal. This is refuted by the Learned Counsel for Respondent by stating that the delay is six days. It is also submitted by him that the Respondent is not permitted to operate his account and he may be permitted to operate his account. This factor will again be considered in the main appeal.

In view of the issues involved in the appeal and that the delay is only two days, this Tribunal, with a view to give an opportunity to the Petitioner Bank to prosecute this appeal, condones the delay of two days in filing this appeal, subject to payment of costs of Rs.1,000/- to the Library of DRT/DRAT Bar Association, Chennai, on or before 16.11.2026.

Meanwhile, Learned Presiding Officer, DRT-I, Karnataka at Bengaluru is directed not to pass any orders in the contempt application, if any, filed.

List the matter for compliance on 18.11.2026..

Sd/-

Chairperson