CITY UNION BANK LIMITED vs BALAJI STEEL AND PIPES on 29 October 2026

ORDER

This appeal is filed against final order passed in SA 568 of 2024 by the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru on 27.2.2026.

2. SA 568 of 2024 has been filed to set aside and quash the order passed by the Learned 46th Additional Chief Judicial Magistrate at Bengaluru in Crl. M.P. No. 1774 of 2024 on 13.9.2024. The Securitization Application has been filed on the grounds that – i) Security interest was not registered as per Section 26D of the SARFAESI Act, 2002 with the Central Registry; ii) Respondent Bank cannot classify the account as NPA as on 25.1.2023 since the Applicants have been serving the account till July 2023-24; iii) The account was classified as NPA by compounding the interest and other charges, and it is impermissible; iv) The representation given by the Applicants for restructuring the loan was not considered, as per the statutory guidelines; v) Due to COVID-19 pandemic, Applicant’s business had come down, and that aspect was not considered; vi) Respondent Bank filed false affidavit before the Learned 46th Additional Chief Judicial Magistrate at Bengaluru by suppressing the material particulars, especially by suppressing

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the earlier petition filed in Crl. M.P. No.385 of 2024 under Section 14 of the SARFAESI Act, 2002. vii) Respondent Bank failed to comply with Rule 8(1) of the SARFAESI Act, 2002.

viii) Applicants remitted a sum of Rs.11.00 crores into the loan account as a bona fide borrower to discharge the loan account. Without considering that, proceedings have been initiated under Section 14 of the SARFAESI Act, 2002. ix) With the payments made, the debt claim of Rs.14,32,05,891/- had come down to Rs.3,81,96,673/-; x) Based on the same possession notice, applications under Section 14 of the SARFAESI Act, 2002 had been filed two times.

3. The Learned Presiding Officer, DRT-I, Karnataka at Bengaluru, agreeing with the submissions of the Learned Counsel for the Applicants before the DRT, primarily on the ground that the Respondent Bank has failed to prove the registration of the secured asset with the Central Registry, allowed the Securitization Application. Aggrieved against this order, this appeal is filed.

4. Learned Counsel for the Appellant Bank submitted that though several other grounds were taken, the Securitization Application was allowed mainly on the ground that the secured asset was not registered with the Central Registry. The statement of objection filed before the DRT

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was extracted in the order, and it is clear from the statement of objection that Appellant Bank informed about the registration of the secured asset with the Central Registry and obtaining CERSAI Certificate from the competent authority. It was also indicated that a copy of the CERSAI Report was produced and marked as Annexure R6. However, Learned Presiding Officer, DRT-I, Karnataka at Bengaluru gave a finding that the Appellant Bank could not produce proof in respect of registration of secured asset with the Central Registry. What was produced by the Appellant Bank in Annexures B16 to B20 are only photocopies of the letter issued by the Bank to the CERSAI, including the mortgage detail, requesting registration in the portal, whereas no proof is produced to show that the same was registered in the portal. Learned Counsel for Appellant Bank now filed an application in IA 886 of 2026 to receive additional document i.e, to take on record CERSAI Search Report to establish the registration of the secured asset with the Central Registry. In the said circumstances, Learned Counsel for Appellant Bank prays for setting aside the order impugned and for allowing this appeal.

5. In reply to this submission, Learned Counsel for Respondents submitted that Appellant Bank had earlier filed Crl. M.P. No. 385 of 2024 under Section 14 of the SARFAESI Act, 2002 for taking physical possession of three properties shown as A, B, and C Schedules. After filing the application, with the permission of the Appellant Bank, Respondents sold B Schedule property and paid the sale amount to the loan account.

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Therefore, the loan amount claimed at Rs.14,32,05,891/- had come down to Rs.3,81,96,673/-. On such payment, Crl. M.P. No. 385 of 2024 was withdrawn by the Appellant Bank. Thereafter, Crl. M.P. No. 1774 of 2024 was filed under Section 14 of the SARFAESI Act, 2002 for taking possession of other two properties. In the said application, previous application filed in Crl. M.P. No. 385 of 2024 had not been dealt with. He also brought to my notice that the Securitization Application was allowed by the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru after finding that the Appellant Bank initiated the proceedings without registering the secured asset with the Central Registry, as required under Section 26D under Chapter 4A of the SARFAESI Act, 2002. It is also submitted that when a property was sold, it ought to have been removed from the Central Registry, as required under Section 26B(2) of the SARFAESI Act, 2002, prior to initiating proceedings under Section 14 of the SARFAESI Act, 2002 in Crl. M.P. No.1774 of 2024. That is not done in this case.

6. Substantial payment made by the Respondents and the reduction of due amount to Rs.3,81,96,673/-, when the demand made earlier was Rs.14,32,05,891/-, was not mentioned in the Section 14 application. The Appellant is expected to proceed against the properties against which security interest is created and subsisting and not against the property which was sold. Appellant miserably failed to mention in the Securitization Application about the sale of one of the properties and

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payment of substantial amount. This is a serious violation. False and wrong details were given for obtaining order under Section 14 of the SARFAESI Act, 2002, and thus, it is liable to be set aside.

7. Considered the rival submissions and perused the records.

8. Appellant has produced documents with regard to the sanctioning of loan to the 1st Respondent, like – i) creation of mortgage by deposit of title documents, letters sent enclosing equitable mortgage by memorandum of deposit of title deed for registration under CERSAI; ii) demand notice issued under Section 13(2) of the SARFAESI Act, 2002 on the default committed by the Respondent; iii) demand notice, possession notice issued under Section 13(4) of the SARFAESI Act, 2002; iv) proof of service of possession notice through post, publication of possession notice and affixture.

9. Appellant also produced the order passed under Section 14 of the SARFAESI Act, 2002 in Crl.M.P.No.385 of 2024, and Crl.M.P.No. 1774 of 2024, along with copies of the Section 14 applications. Admittedly, Appellants have not produced proof of registration of the security interest with the Central Registry as required under Section 26D of the SARFAESI Act, 2002 before the DRT-I, Karnataka at Bengaluru. Appellant has produced IA 886 of 2026 for production of CERSAI report dated

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16.3.2019, and 17.3.2019 to prove the registration of the secured asset, both immoveable and moveable, with the Central Registry of Securitization, Asset Reconstructions and Security Interest of India. These documents are necessary for the right and correct adjudication of this appeal and therefore, IA No.886 of 2026 (To Receive Additional Document) is allowed and the documents produced are received as additional documents. They are as follows:

i) CERSAI Report of Asset ID 200029631640 (residential property at Bengaluru); ii) CERSAI Report of Asset ID 200029632805 (residential property at Bengaluru); iii) CERSAI Report of Asset ID 200026932313 (commercial property at Bengaluru); iv) CERSAI Report of Asset ID 200029303623 (Movables and current assets);

10. Similarly, the Respondents have produced the following documents as additional documents.

i) Copy of letter dated 20.3.2026; ii) Copy of the proceedings of 46th Additional Chief Judicial Magistrate, Bengaluru; iii) Copy of affidavit along with an application filed under Section 309 of Code of Criminal Procedure dated 4.2.2025;

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iv) Copy of the letter dated 7.4.2026; v) Copy of letter dated 4.5.2026.

11. Some of these documents had come into existence after the disposal of the Securitization Application to show the subsequent events happened. For giving complete adjudication of this issue, these documents are also received as additional documents.

12. The order of the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru shows that, “Securitization Application is allowed mainly on the ground that the secured asset was not registered with the Central Registry, as required under Section 26D of the SARFAESI Act, 2002, and the Appellant has produced only a photocopy of a letter in Annexures B16 to B20, addressed to the CERSAI Registry for registration, but not produced the registration certificate/report. Since security interest is not registered under CERSAI, the measures taken under the SARFAESI Act, 2002 with the issuance of demand notice under Section 13(2) of the SARFAESI Act, 2002, possession notice issued under Section 13(4) of the SARFAESI Act, 2002, and the order obtained under Section 14 of the SARFAESI Act, 2002 were all set aside.”

13. As already stated in this appeal, CERSAI registration report has been submitted in respect of the immoveable and moveable secured asset, numbering four, as detailed above. Therefore, there is no iota of doubt with regard to the registration of the secured asset with the Central

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Registry, as required under Section 26D of the SARFAESI Act, 2002. When the appeal is allowed only on the ground of not proving the registration of the secured asset with the Central Registry and when it is appealed by production of the CERSAI registration report, this Tribunal is of the view that the finding and order of the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru has to be set aside. Appellant has produced all the required documents to prove the service of demand notice and possession notice, including publication and affixture of possession notice. Therefore, the order of the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru in setting aside the demand notice and possession notice is set aside.

14. On the merits of the order passed under Section 14 of the SARFAESI Act, 2002, Section 14 of the SARFAESI Act, 2002 requires a secured creditor to file an application under Section 14 of the SARFAESI Act, 2002 accompanied by an affidavit duly confirmed by the authorized officer of the secured creditor declaring that -

(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;

(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;

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(iii) the borrower has created security interest over various properties giving the details of properties referred to in sub-clause (ii) above;

(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;

(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset;

(vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;

(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower;

(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act;

(ix) that the provisions of this Act and the rules made thereunder had been complied with:

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15. Appellant is required to state the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application, and that borrower has created security interest over the properties and it is subsisting. Borrower has committed default and notice under Section 13(2) of the SARFAESI Act, 2002 was issued claiming the due amount. The borrower has not made any payment in spite of the notice and, therefore, Appellant is entitled to take physical possession of the secured asset.

16. Reading of Section 14 application filed in Crl. M.P. No.385 of 2024 shows that the Bank filed this application for taking possession of three properties which have shown as A, B, and C schedules. The grant of a loan, creation of security interest by mortgage, default committed, issuance of demand notice, claiming a loan due amount of Rs.14,32,05,891/- were all mentioned. Since the amount has not been paid, notice under Section 13(4) of the SARFAESI Act, 2002 was issued for taking possession, followed by an application under Section 14 of the SARFAESI Act, 2002 for taking physical possession of the secured asset. This application was allowed by the Learned 46th Additional Chief Judicial Magistrate at Bengaluru on 23.2.2024.

17. It is the admitted case of both the parties that after Crl. M.P. No.385 of 2024 was allowed, the Respondents made substantial payment and, therefore, the amount due and recoverable from the Respondents got

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reduced. Since the balance amount is not paid, Appellant again filed Crl. M.P. No.1774 of 2024 before the Learned 46th Additional Chief Judicial Magistrate at Bengaluru. This application is filed for taking physical possession of only two properties shown as A and B schedules. The property which was sold with the consent of the Bank was omitted in this application. That property was shown as B schedule property in Crl. M.P. No.385 of 2024. Appellant has also referred about the details regarding the loan sanctioned, creation of mortgage, default committed by the Respondents, declaration of the loan account as NPA, issuance of demand notice, and possession notice. Though Appellant had stated that as per the demand notice, the outstanding amount was Rs.14,32,05,891/-, the liability was restricted only to Rs.3,81,96,673/- in para 7 of the Section 14 application because of the payment made subsequent to the order passed in Crl. M.P. No.385 of 2024. When sufficient details are available, merely because Crl. M.P. No.385 of 2024 was not referred in Crl. M.P. No.1774 of 2024, there is no specific mention about the release of one of the properties, its sale and payment to the loan account, these omissions cannot be considered as suppression of material facts, because the Respondent knew these details.

18. Respondents pretty well knew that only on their request, one of the properties was released and sold for discharging part of the debt. The debt due on the date of filing the application at Rs.3,81,96,673/- was rightly mentioned in the Section 14 application in Crl. M.P. No.1774 of 2024. The

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properties against which order under Section 14 was sought are also restricted to only two properties. Omission to cancel the registration with the Central Registry of the property which was sold cannot be taken as a ground for setting aside the order passed under Section 14 of the SARFAESI Act, 2002 when all other requirements are substantially complied. The adjudication under Section 14 by the Learned 46th Additional Chief Judicial Magistrate at Bengaluru is only an administrative and ministerial act. A roving enquiry is not required to be done.

19. The Learned 46th Additional Chief Judicial Magistrate at Bengaluru has omitted to mention in his order the outstanding due on the date of filing the application but referred only the outstanding due as on 2.5.2023 at Rs.14,32,05,891/-. However, he found that Appellant Bank produced the documents with regard to sanction of loan, issuance of demand notice, possession notice, and the affidavit in support of the action taken. It is only by mistake and oversight, the due as on the date of filing the application at Rs.3,81,96,673/- was omitted to be mentioned in the Section 14 order. This again cannot be the reason for setting aside the order.

20. The additional documents produced by the Respondents relate to the letter dated 20.3.2026 of the Respondents with regard to communication of contempt petition before the DRT for non-compliance of the orders of the Tribunal, the affidavit filed by the Bank before the Learned 46th

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Additional Chief Judicial Magistrate at Bengaluru in Crl.M.P. No. 1774 of 2024 seeking permission for taking physical possession and the communication between the Appellant and the Respondents dated 7.4.2026, and 4.5.2026 with regard to taking physical possession, and the alleged re-delivery of possession by the Bank to the Respondents. Except the letter dated 7.4.2026, the Respondents have not produced any material to show that the Bank has re-delivered the possession and the Respondents are in physical possession of the secured asset.

21. On considering the rival submissions and records, this Tribunal finds that order under Section 14 of the SARFAESI Act, 2002 in Crl.M.P. No. 1774 of 2024 has been passed by the Learned 46th Additional Chief Judicial Magistrate at Bengaluru on substantial compliance of requirements under Section 14 of the SARFAESI Act, 2002. Minor omissions and lapses, technicalities, as detailed above, will not entitle the Respondents to seek the quashment of the order.

22. Therefore,

i) the order of the Learned Presiding Officer, DRT-I, Karnataka at Bengaluru is set aside in its entirety, and the SARFAESI measures taken so far are upheld.

ii) the order dated 13.9.2024 of the Learned 46th Additional Chief Judicial Magistrate at Bengaluru in Crl. M.P. No. 1774 of 2024 is confirmed.

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23. Thus, this appeal RA (SA) 93 of 2026 is allowed.

24. Parties are directed to bear their own costs.

25. Pending IAs, if any, stand closed.

[Dictated to Stenographer (NN), transcribed by him, corrected, signed, and pronounced by me in open court, this 29th day of October, 2026]

Sd/- (JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON