Telangana High Court
Union Bank Of India vs Mr. Bandla Ganesh Babu on 3 July, 2026
1
*THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
*THE HON'BLE JUSTICE GADI PRAVEEN KUMAR
+ WRIT PETITION Nos.25486 AND 35956 OF 2025
% 03-07-2026
W.P.No.25486 of 2025:
# Union Bank of India, SAM Branch,
Hyderabad, rep. by its Authorised Officer
.....Petitioner
AND
vs.
$ Mr.Bandla Ganesh Babu and Four Others
... Respondents
W.P.No.35956 of 2025:
# Mr. Bandla Ganesh Babu and Three Others
.....Petitioners
AND
vs.
$ The Debts Recovery Appellate Tribunal,
Kolkata and Two Others
... Respondents
!Counsel for the Petitioners: Mr. S.Ravi, learned Senior Counsel
representing Mr. K. Aroah, learned
counsel appearing for the petitioners in
WP.No.35956 of 2025 and the
respondent Nos.1 to 4/guarantors in
W.P.No.25486 of 2025
^Counsel for Respondents: Mr. Mayur Reddy, learned Senior Counsel
representing Mr. Kanduri Koushik,
learned counsel appearing for the
respondent No.2 in W.P.No.35956 of
2025 and the respondent No.5 in
W.P.No.25486 of 2025.
2
^Counsel for Respondents: Mr. B. S. Prasad, learned Senior
Counsel representing M/s. Pearl Law
Associates for the respondent No.3 in
W.P.No.35956 of 2025 and the
petitioner in W.P.No.25486 of 2025.
<Gist :
>Head Note :
? Cases referred
1. (2021) 9 SCC 321
2. SBI v. Ramakrishnan; (2018) 17 SCC 394
3. (2008) 1 SCC 125
4. (2019) 2 SCC 198
5. (2018) 17 SCC 394
6. 2020 SCC OnLine NCLAT 957
7. (2008) 9 SCC 299
3
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
THE HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
THE HON'BLE JUSTICE GADI PRAVEEN KUMAR
WRIT PETITION NOs.25486 AND 35956 OF 2025
DATE OF COMMON ORDER: 03.07.2026
W.P.NO.25486 OF 2025:
Union Bank of India, SAM Branch,
Hyderabad, rep. by its Authorised Officer.
.....Petitioner
AND
Mr. Bandla Ganesh Babu and Four Others.
... Respondents
W.P.NO.35956 OF 2025:
Mr. Bandla Ganesh Babu and Three Others.
.....Petitioners
AND
The Debts Recovery Appellate Tribunal,
Kolkata and Two Others.
... Respondents
Mr. S.Ravi, learned Senior Counsel representing Mr. K. Aroah, learned
counsel appearing for the petitioners in WP.No.35956 of 2025 and the
respondent Nos.1 to 4/guarantors in W.P.No.25486 of 2025.
Mr. Mayur Reddy, learned Senior Counsel representing Mr. Kanduri Koushik,
learned counsel appearing for the respondent No.2 in W.P.No.35956 of 2025
and the respondent No.5 in W.P.No.25486 of 2025.
Mr. B. S. Prasad, learned Senior Counsel representing M/s. Pearl Law
Associates for the respondent No.3 in W.P.No.35956 of 2025 and the
petitioner in W.P.No.25486 of 2025.
4
COMMON ORDER:
(Per Hon’ble Justice Moushumi Bhattacharya)
1. W.P.No.25486 of 2025 is filed challenging the order passed by
the Debts Recovery Tribunal-II, Hyderabad (‘DRT’) on 08.08.2025 in
S.A.No.300 of 2022. W.P.No.35956 of 2025 challenges the order
dated 14.11.2025 in Appeal No.101 of 2025 passed by the Debts
Recovery Appellate Tribunal, Kolkata (‘DRAT’).
2. The Union Bank of India has filed W.P.No.25486 of 2025,
challenging the order passed by the DRT dated 08.08.2025. The
respondent Nos.1 to 4 are the guarantors and the impleaded
respondent No.5 is the auction purchaser in the said Writ Petition.
3. The guarantors have filed W.P.No.35956 of 2025 challenging
the order passed by the DRAT dated 14.11.2025. The Union Bank
of India is the respondent No.3 and the auction purchaser is the
respondent No.2 in the said Writ Petition.
4. Both sets of Writ Petitions pray for a Writ of Certiorari to set
aside the orders passed by DRT and the DRAT on the dates
mentioned above. The parties are referred to as per their
nomenclature in the loan transaction.
5. Both Writ Petitions are disposed of by this Common Order
since they involve the same parties.
5
6. Learned Senior Counsel appearing for the Union Bank of
India, the guarantors and the auction purchaser sought to advance
arguments in W.P.No.25486 of 2025. We hence propose to deal
with the merits of the controversy involved in the order passed by
DRT dated 08.08.2025. This order forms the basis of the second
order passed by the DRAT dated 14.11.2025.
7. The auction purchaser challenged the order of the DRT dated
08.08.2025 which resulted in the DRAT’s order dated 14.11.2025.
By the said order, the DRAT refused to vacate the interim order
passed by it on 30.10.2025 (as prayed for by the auction purchaser)
and listed the Appeal for hearing on 01.12.2025. The guarantors
have challenged the DRAT’s order by way of W.P.No.35956 of 2025.
8. The dates relevant to the adjudication of the Writ Petitions are
as follows:
30.04.2017 The respondents’ Accounts were classified as
Non-Performing Assets (NPA).
29.01.2018 The Bank issued a Demand Notice to the
Guarantors under section 13(2) of The
Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002 (‘SARFAESI Act‘).
17.09.2019 The concerned Company (of which the
respondents are guarantors) was admitted into
the Corporate Insolvency Resolution Process
(‘CIRP’) and a moratorium was imposed
6thereafter. An Interim Resolution Professional
(‘IRP’) was appointed by the National Company
Law Tribunal, Hyderabad Bench (‘NCLT’).
24.10.2020 The CIRP came to an end.
09.10.2019 The Bank issued a Possession Notice under
section 13(4) of the SARFAESI Act.
March, 2020 The Bank accepted a One-Time Settlement
(‘OTS’).
02.06.2021 The OTS was cancelled.
23.11.2021 The Bank issued a Demand Notice to the
guarantors under Rule 7(1) of the Insolvency and
Bankruptcy (Application to Adjudicating
Authority for Insolvency Resolution Process of
Personal Guarantors to Corporate Debtors)
Rules, 2019.
15.12.2021 The guarantors’ challenge to the Possession
Notice was dismissed by this Court in
W.P.No.33851 of 2021.
23.03.2022 The Bank filed O.A.No.209 of 2022 before the
DRT for recovery of a total debt of
Rs.1,25,44,61,601.24 paise.
The guarantors filed S.A.No.300 of 2022 before
the DRT challenging the Possession Notice dated
2022 09.10.2019 and the Sale Certificate issued in
pursuance of E-Auction sale of the Schedule-II
property.
26.09.2022 Auction Notice was issued by the Bank for the
sale of three secured assets of the borrower
Company.
20.10.2022 The secured asset (as mentioned in the
Possession Notice) was auctioned, pursuant to
Auction Notice dated 26.09.2020.
28.10.2022 Sale Certificates were issued, one of which was
registered in favour of the auction purchaser/the
respondent No.5 in W.P.No.25486 of 2025.
08.08.2025 DRT passed the impugned order in the
7
guarantors’ S.A. (No.300 of 2022) in favour of the
guarantors by directing the Bank to refund the
auction amount along with interest @6% per
annum to the auction purchaser and directed
the auction purchaser to hand over physical
possession of the property to the guarantors.
The auction purchaser challenged the DRT’s
order dated 08.08.2025 before the DRAT.
04.09.2025 The DRAT granted stay of the operative part of
the order of DRT dated 08.08.2025.
30.10.2025 The DRAT granted an interim order in favour of
the auction purchaser.
14.11.2025 The DRAT refused to continue the interim order
dated 31.10.2025 on the undertaking given by
the auction purchaser that it would not create
any third-party interest and would not claim any
interest over the secured asset in case it loses
the Appeal.
9. The issue for consideration is whether the DRT erred in
granting relief to the guarantors by allowing S.A.No.300 of 2022
filed by them and setting aside the Possession Notice dated
09.10.2019, the Auction Sale held on 20.10.2022 and the Sale
Certificate issued in favour of the auction purchaser on 28.10.2022.
By the impugned order, the DRT also directed the Bank to refund
the entire sale consideration to the auction purchaser along with
simple interest at 6% per annum and directed the auction
purchaser to hand over physical possession of the schedule
property to the guarantors within a specified timeframe.
8
10. Learned Senior Counsel appearing for the Bank submits that
the impugned order is contrary to the provisions of the SARFAESI
Act including sections 13(4) and 17 thereof read with The Security
Interest (Enforcement) Rules, 2002 (‘2002 Rules’). Senior Counsel
further submits that the DRT had no jurisdiction to direct delivery
of the secured asset to the guarantors under section 13(4) of the
SARFAESI Act as its jurisdiction is confined and circumscribed to
only examine the measures and rules made thereunder alone and
that it has wrongly exercised the jurisdiction of the NCLT. It is also
submitted that the impugned order is hit by the principle of res
judicata in light of the dismissal of W.P.No.33851 of 2021.
11. Learned Senior Counsel appearing for the guarantors submits
that the provisions of The Insolvency and Bankruptcy Code, 2016
(IBC) is relevant to the present adjudication and that it was within
the jurisdiction of the DRT to examine those provisions for the
effective adjudication of the disputes between the parties. He
further submits that the Bank ought to have proceeded under the
IBC, as opposed to the SARFAESI Act, after the initiation of the
CIRP under the provisions of the IBC. Counsel submits that the
IBC is a special enactment which came into force subsequent to the
SARFAESI Act and prevails over the latter.
9
12. Learned Senior Counsel appearing for the auction purchaser
submits that the mere issuance of the Demand Notice dated
23.11.2021 under Rule 7(1) of The Insolvency and Bankruptcy
(Application to Adjudicating Authority for Insolvency Resolution
Process for Personal Guarantors to Corporate Debtors) Rules, 2019
(‘2019 Rules’), does not amount to e-filing of an application under
section 95 of the IBC. It is also submitted that the DRT granted
reliefs that were not prayed for by the guarantors, including
declaring the Possession Notice as void. Counsel further submits
that the sanctity of a public auction must be protected and cannot
be set aside solely on the basis of alleged procedural irregularities.
13. The issue which falls for consideration is whether the order
dated 08.08.2025 passed by the DRT calls for interference. The
said order was passed on the Securitisation Application filed by the
respondents/guarantors. The second impugned order of the DRAT
dated 14.11.2025 was passed on an Appeal filed by the Auction
Purchaser against the DRT order dated 08.08.2025.
14. The personal guarantors are ex-Promoters/Directors of the
corporate debtor, M/s.Parameswara Poultry Farm Pvt. Ltd.
Proceedings under the IBC were initiated against the corporate
debtor by one of the operational creditors vide an order dated
10
17.09.2021 in CP No.105/9/HPB/2019 passed by the NCLT. The
OTS as agreed by the Bank and the guarantors on 13.11.2019
could not materialize and was finally cancelled on 02.06.2021. The
Bank, thereafter, proceeded to auction the property. The auction
notice was issued on 26.09.2022 and property was auctioned on
20.10.2022. The respondent No.5, as the highest bidder, made full
payment of the bidding price and the Bank accordingly issued a
sale certificate in favour of the respondent No.5/auction purchaser.
15. The argument of the guarantors before the DRT was that the
IBC, as per section 238 therein, would have an overriding effect over
all laws including the SARFAESI Act and that the NCLT is the
appropriate Adjudicating Authority for corporate persons and
personal guarantors as per section 60 of the IBC. Hence, the
proceedings initiated by the Bank against the secured asset under
the SARFAESI Act are void ab initio and are liable to be set aside.
16. The Bank argued that securitisation measures were initiated
vide a Demand Notice dated 28.01.2018 for an amount of
Rs.91,01,25,967/- along with interest pursuant to the account of
the Corporate Debtor becoming Non-Performing Asset (NPA) on
30.04.2017. A Possession Notice was served on the guarantors on
06.07.2019 following the procedure under the 2002 Rules. The
11
Bank obtained physical possession of the property on 03.03.2022
following the direction of this Court in W.P.No.33851 of 2021 and
auction sale was initiated on various dates. The property was
finally auctioned on 20.10.2022 in favour of the auction purchaser
for Rs.8,50,76,750/-. The auction purchaser paid the full amount
for the property within the prescribed time and the Bank issued a
sale certificate in favour of the auction purchaser.
17. The auction purchaser argued that issuance of a notice under
the provisions of the IBC would not prohibit an auction under the
SARFAESI Act against secured assets belonging to the personal
guarantors. The primary case of the auction purchaser is that the
entire sale consideration was paid within the prescribed time; and
the sale certificate in respect of the property was issued accordingly.
18. The DRT, after considering the contentions of the parties
before it i.e., the guarantors, the Bank and the auction purchaser,
found the possession notice dated 09.10.2019, auction sale dated
20.10.2022 and all the SARFAESI measures subsequent to the
issuance of Demand Notice dated 23.11.2021 to be void ab initio
since the proceedings against the Corporate Debtor and guarantors
would lie before the NCLT. The DRT held that the entire sale
process was invalidated upon the foundational action being void.
12
The DRT accordingly allowed the Securitisation Application by
setting aside the Possession Notice and directed the Bank to refund
the entire sale consideration to the auction purchaser along with
interest. The auction purchaser was also directed to hand over the
physical possession of the property to the guarantors within a
specific time frame.
19. The issue before us, as culled out from the arguments made
on behalf of the Bank, the guarantors and the auction purchaser, is
whether the action taken by the Bank for possession, auction and
sale of the secured asset under the SARFAESI Act is sustainable
despite the Bank issuing a Demand Notice to the guarantors under
Rule 7(1) of the IBC Rules 2019? In other words, whether recovery
proceedings against the personal guarantors can be maintained
under the SARFAESI Act where Corporate Insolvency Resolution
Process (CIRP) has been initiated against the Corporate Debtor and
is pending before the NCLT?
20. The Bank says – Yes, i.e., action for recovery under the
SARFAESI Act can be pursued against the guarantors independent
of the CIRP. The guarantors say otherwise. According to the
guarantors, once the Bank issued a notice under the IBC to the
13
guarantors, any further proceedings against them would be
governed by the provisions of the IBC and adjudicated by the NCLT.
21. The entire argument of the guarantors in these Writ Petitions is
that the Demand Notice issued by the Bank on 23.11.2021 under
Rule 7 of The Insolvency and Bankruptcy (Application to Adjudicating
Authority for Bankruptcy Process for Personal Guarantors to
Corporate Debtors) Rules, 2019 (‘IBC Rules, 2019’) would trigger the
provisions of the IBC, 2016 and consequently the benefit of interim
moratorium as envisaged under section 96 of the IBC.
22. The provisions referred to above should be placed in context of
the undisputed facts of this case.
23. Rule 7 of the IBC Rules, 2019 provides for an application by a
creditor in the prescribed form under section 123(1) of the IBC which
falls under Chapter IV (Part II) – Bankruptcy Order for Individuals and
Partnership Firms.
24. In the present case, section 95 of the IBC would be relevant
since it contemplates an application for initiation of the Insolvency
Resolution Process by a creditor. Therefore, the Interim Moratorium
can only be ordered upon an application being filed under section 95
by a creditor to the Adjudicating Authority (the National Company Law
Tribunal (‘NCLT’) for initiating an Insolvency Resolution Process under
14
section 95(1). Interim moratorium operates as a stay of any legal
action pending in respect of any debt and puts an embargo on the
creditors of the debtor not to initiate any legal action in respect of any
debt.
25. In the present case, it is undisputed that the Bank sent only a
Demand Notice in the prescribed Form-B under Rule 7(1) of the IBC
Rules, 2019, and did not proceed further in terms of filing an
application under section 95 of the IBC which is a sine qua non for the
interim moratorium under section 96(1) to commence in relation to a
debtor (guarantors in this case).
26. The Scheme of the IBC makes it clear that the CIRP initiated by
a financial creditor only commences from the date of admission of the
application under section 95 of the IBC, by the Adjudicating Authority
upon the occurrence of the default. The contrast in the language of
section 7 and section 8 of the IBC is pertinent to this case. Section 7
provides for a financial creditor to initiate CIRP upon filing of an
application against the corporate debtor before the Adjudicating
Authority upon the occurrence of a default. On the other hand,
section 8 provides for an operational creditor, upon the occurrence of
default, to deliver a Demand Notice of unpaid operational debtor copy
of an invoice demanding payment of the amount involved in the default
to the corporate debtor.
15
27. Hence, it is clear that section 7 does not contemplate delivery of
any Demand Notice by the financial creditor to the debtor for the
purpose of initiation of CIRP. The initiation of the CIRP against
personal guarantors by a financial creditor commences only upon
admission of an application under section 95 of the IBC.
28. Further, the imposition of a moratorium under section 14 of the
IBC against the corporate debtor (Parameshwara Poultry Farm Pvt.
Ltd.) would not amount to an embargo on the petitioner Bank to
enforce its security interest against the personal guarantors under the
provisions of the SARFAESI Act. The scheme of the IBC makes it clear
that section 14 under Chapter II (Part II) – ‘Corporate Insolvency
Resolution Process’ – applies to a corporate debtor who has committed
a default and against whom CIRP has been initiated before the
Adjudicating Authority. Section 14(1) of the IBC provides that the
Adjudicating Authority shall declare moratorium on the
commencement date of the CIRP prohibiting certain actions taken
against the corporate debtor including the institution of suits,
continuation of pending suits/proceedings, execution of any judgment,
or order in any Court of law. Section 14(1)(b) also bars the corporate
debtor from transferring or alienating its assets.
29. Section 95(1) and 96(1) of the IBC falls under Chapter III
(Part III) – ‘Insolvency Resolution Process’ – and contemplates an
16
interim moratorium pursuant to an application being filed by the
creditor for CIRP against individuals where any legal proceedings are
pending in respect of any debt. The legal proceeding shall be deemed
to have been stayed and the creditors of the debtor shall not initiate
legal action in respect of any debt.
30. In this connection, it is apposite to mention that the proceedings
before the DRT or DRAT, which form the subject matter of the present
Writ Petitions, could not have proceeded at all and would have been
deemed to have been stayed under section 96(1)(b)(i), had the interim
moratorium under section 96 (1) been triggered. Hence, it is also clear
that the imposition of a moratorium under section 14 of the IBC
against the corporate debtor is entirely under a different Chapter of the
IBC which has no bearing on the interim moratorium under section
96(1) which relates to individuals including personal guarantors.
Consequently, the fact that the corporate debtor (Parameshwara
Poultry Farm Pvt. Ltd.) was under a moratorium under the IBC as on
08.08.2025 would not amount to an implied or express bar on the
continuation of proceedings against the guarantors under the
31. Moreover, the two sets of proceedings were initiated under two
different statutes and against two different entities/individuals
altogether. The IBC does not recognise any merging between these two
17
sets of proceedings unless the financial creditor has initiated
insolvency/bankruptcy proceeding against the corporate debtor as well
as the personal guarantors before different fora.
32. The argument of the guarantors with regard to a common and
continuous cause of action emanating from the Possession Notice
issued by the Bank to the corporate debtor (Parameshwara Poultry
Farm Pvt. Ltd.) on 09.10.2019 is not found to be tenable in light of the
above facts as well as the reasons stated below.
33. Section 60(1) under Chapter VI (Part II) of the IBC –
‘Adjudicating Authority for Corporate Persons’ – stipulates that the
NCLT shall be the Adjudicating Authority for corporate persons
including corporate debtors and personal guarantors having territorial
jurisdiction over the place where the registered office of the corporate
person is located.
34. Section 60(2) provides that an application relating to the
insolvency resolution, liquidation or bankruptcy of a corporate
guarantor or personal guarantor shall be filed before the same
National Company Law Tribunal where the CIRP or liquidation
proceeding of a corporate debtor is pending before a National Company
Law Tribunal.
18
35. Section 60(3) further provides that any insolvency resolution
process or liquidation/bankruptcy proceeding of a corporate guarantor
or personal guarantor pending before any Court or Tribunal shall
stand transferred to the Adjudicating Authority dealing with insolvency
resolution process of the corporate debtor.
36. Section 60 and the sub-sections thereunder should be placed in
context of the undisputed facts of the present case. As stated above,
the Bank, while having issued a Demand Notice under Rule 7(1) of the
IBC Rules, 2019 to the guarantors on 23.11.2021, chose not to
proceed in terms of filing an application against the guarantors
thereafter under the IBC, specifically under section 95(1) thereof.
37. Section 60, sub-sections (1), (2), and (3) contemplate the
consolidation of parallel adjudications against the corporate debtor
and its personal guarantors by centralizing the adjudication thereof
before the Adjudicating Authority/NCLT. The effect of section 60 is
thus, to discourage multiplication of proceedings and conflicting
decisions in respect of the corporate debtor and its guarantors.
However, the relevance of section 60 cannot be muscled into these
facts in light of the admitted position of no application under section
95 of the IBC being filed by the Bank under the IBC against the
guarantors. As on date, the only CIRP pending before the NCLT is
against the corporate debtor (Parameshwara Poultry Farm Pvt. Ltd.).
19
There is no CIRP pending against the guarantors before any NCLT as
on date. Consequently, there is no possibility of any parallel
proceedings or any conflict of decisions in respect of the corporate
debtor.
38. The discussion before the Supreme Court in Lalit Kumar Jain
v. Union of India 1, was on the validity of the notification issued by
the Ministry of Corporate Affairs on 15.11.2019, i.e., the IBC
(Application to Adjudicating Authority for Insolvency Resolution
Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
The Supreme Court, after a detailed analysis of the relevant
sections of the IBC, came to the conclusion that personal
guarantors fall under a different category compared to other
individuals and that THE initiation of separate processes in
different fora against corporate entities and personal guarantors
would be against the Legislative intent underlying the IBC. The
Supreme Court concluded that the arrangement of the provisions of
the IBC rationalise consolidation of the adjudication against the
Corporate Debtors and the personal guarantors before the NCLT.
Paragraph 125 of the Report however states that approval of a
Resolution Plan would not ipso facto discharge a personal guarantor
1
(2021) 9 SCC 321
20
(of a Corporate Debtor) of his/her liabilities under the contract of
guarantee.
39. Lalit Kumar Jain (supra) does not assist the case of the
guarantors since a unified adjudication process before the NCLT
would only arise where the secured creditor has initiated a CIRP
against the personal guarantor. Section 238 of the IBC, whereby
the IBC has been given overriding powers over all other statutes,
would also not come to the guarantors’ aid since there is only one
CIRP pending against the corporate debtor and not against the
guarantors as on date. The issue of centralizing the adjudication
against the Corporate Debtor and the personal guarantors would
hence not arise.
40. Needless to say, the sanctity of a public auction must be
protected at all times. The respondent No.5/Auction Purchaser
before us claims to be irrevocably prejudiced by reason of the
impugned order passed by the DRT on 08.08.2025 whereby the
DRT set aside the public auction held on 20.10.2022 and the
consequent Sale Certificate dated 28.10.2022 issued in favour of
the respondent No.5. Sale of an immovable property/secured asset
forms part of Rule 8 of The Security Interest (Enforcement) Rules,
2002. The notice of sale, issue of Sale Certificate and delivery of
21
possession of the secured immovable asset falls under Rule 9 of the
2002 Rules. Rules 8 and 9 stipulate a strict procedural sequence
before an immovable property can be sold by way of public notice
followed by confirmation of the sale in favour of the purchaser who
has offered the highest bid price.
41. Rules 8 and 9 of the 2002 Rules contain several safeguards
before an immovable property can be sold in favour of a purchaser.
The safeguards are in the form of strict timelines with regard to
issue of public notice, the amount of sale price offered in relation to
the reserve price and the requirement of the purchaser putting in
the deposit of 25% of the sale price and the balance amount within
the prescribed timeframes. Rule 9(5) stipulates that the deposit put
in by the purchaser shall be forfeited on occurrence of a default and
the property shall be resold. Rule 9(6) stipulates that the secured
creditor/Authorised Officer shall issue a certificate of sale of the
immovable property in favour of the purchaser on confirmation of
sale in the prescribed form.
42. Therefore, the sale certificate issued by the Bank to the
auction purchaser in the present case presumes that the auction
purchaser crossed all the statutory hurdles and satisfied the
procedural requirements under the relevant Rules. It is undisputed
22
that the auction purchaser presently holds the Sale Certificate in
respect of the secured asset/schedule property.
43. We have carefully perused the impugned order of the DRT
dated 08.08.2025.
44. In allowing the SA filed by the guarantor by the impugned
order dated 08.08.2025, the DRT took into consideration the
solitary act of the Bank in issuing the Demand Notice to the
guarantors AS PER the IBC 2019 Rules. The DRT found that the
Bank was a member of the Committee of Creditors in the CIRP
pending against the Corporate Debtor in the NCLT and proceeded to
conclude that all proceedings, including the proceedings against the
personal guarantors of the Corporate Debtor, would lie before the
NCLT. The view of the DRT was premised on the ground that the
Bank after issuing the Demand Notice under the IBC 2019 Rules,
should not have continued the proceedings under the SARFAESI
Act over the assets belonging to the personal guarantors. The DRT
concluded that the SARFAESI measures initiated by the Bank
against the personal guarantors were hence without jurisdiction
and void ab initio.
45. We cannot accept the findings of the DRT as reflected in the
impugned order dated 08.08.2025 on several grounds. Our reasons
23
have substantially been stated in the foregoing paragraphs. We
however deem it fit to reiterate that the DRT failed to appreciate
that a Demand Notice under Rule 7(1) of the 2019 Rules would not,
ipso facto, translate to filing of an application under section 95(1) of
the IBC. Section 95(1) entails an ‘Application’ by the creditor for
initiating an Insolvency Resolution Process under Chapter III of the
IBC against individuals or a partnership firm. Chapter III falls
under Part III of the IBC (Insolvency Resolution and Bankruptcy for
Individuals and Partnership Firm). Without such an application
under section 95(1) being FILED before the jurisdictional NCLT,
there would consequently be no interim moratorium under section
96(1) of the IBC. In other words, the guarantors can only claim the
benefit of an Interim Moratorium under section 96(1) subject to
satisfaction of the condition precedent of the Bank/Secured
Creditor filing an application for CIRP under section 95(1) of the
IBC.
46. Admittedly, the Bank in the present case chose not to pursue
the provisions under the IBC. Hence, no CIRP was initiated against
the guarantors and consequently no proceedings were pending
before NCLT against the guarantors on the date of the impugned
order of the DRT. The DRT’s entire basis for interfering with the
Possession Notice, the auction sale and the Sale Certificate was
24
premised on the impermissibility of parallel proceedings under the
SARFAESI Act and the IBC. Therefore, the basis of the relief
granted to the guarantors collapses since there was admittedly only
one CIRP pending against the Corporate Debtor (and not against the
guarantors) as on the date of the impugned order.
47. The law makes a conscious demarcation between a Corporate
Debtor and its personal guarantors in terms of initiation of
Insolvency and Bankruptcy proceedings against each of them 2. The
IBC also clarifies that distinction by putting the relief of moratorium
in relation to a Corporate Debtor and in relation to an
individual/guarantor under distinct and separate chapters of the
IBC (sections 14 and 96, respectively). Hence, there also cannot be
any legal argument against a secured creditor proceeding against
personal guarantors for realization of its dues under a different
statute altogether i.e., the SARFAESI Act when there are no
proceedings pending against the personal guarantors before the
NCLT in respect of the same debt.
2
SBI v. Ramakrishnan; (2018) 17 SCC 394
25
Decisions relied on by the Parties
48. The Supreme Court in Transcore v. Union of India 3 addressed
the permissibility of pursuing two remedies simultaneously under
Section 19(1) of the DRT Act, 1993, and the SARFAESI Act, 2002,
and held that both were complementary remedies against the same
debtor. In the present case, however, the Notice under Rule 7(1) of
the IBC Rules 2019 and Section 13(4) of the SARFAESI Act, 2002,
operate against the personal guarantors and the corporate debtor,
respectively. The absence of insolvency proceedings against the
guarantors on account of no application being filed under section
95 of the IBC, precludes the applicability of the principle of election
of remedies, which was the crux in Transcore. Transcore also
recognized that the Authorised Officer is empowered to take
possession of the secured asset by following the procedure under
Rule 8 of the 2002 Rules and auction/sell the secured asset.
49. The secured creditor being entitled to require discharge of
liability in full was reiterated in Hindon Forge (P) Ltd. v. State of
U.P. 4. Hindon Forge also recognised that the secured creditor is
entitled to pass on the entire interest in the property to the auction
3
(2008) 1 SCC 125
4
(2019) 2 SCC 198
26
purchaser. SBI v. V.Ramakrishnan 5 definitively held that SARFAESI
proceedings against the guarantor can continue under the
SARFAESI Act, despite a moratorium being imposed on the
corporate guarantor. Notably, the Supreme Court held that the
object of the IBC is not to allow personal guarantors to escape from
an independent co-extensive liability to pay off the entire
outstanding debt. Punjab National Bank v. Vindhya Cereals Pvt.
Ltd. 6 reiterated that a financial creditor can simultaneously proceed
under SARFAESI Act as well as IBC.
50. The decisions placed on behalf of the auction purchaser
reinforce that a confirmed auction can only be interfered with on
extremely limited grounds and that a party who challenges an
action must show its bona fides by participating in the said auction
and making a bid 7.
51. It may not be out of place to mention that the DRT granted
reliefs to the Guarantors over and above what was prayed for in the
SA.No.300 of 2022. The prayers in the S.A. included a declaration
against the Sale Certificate and the Possession Notice issued by the
Bank and further declarations with regard to E-Auction Notice and
5
(2018) 17 SCC 394
6
2020 SCC OnLine NCLAT 957
7
Valji Khimji and Co. v. Hindustan Nitro Product (Gujarat) Ltd. (Official Liquidator),
(2008) 9 SCC 299
27
auction sale Notices published in newspapers. All six prayers in the
S.A. were for declarations of various kinds. The only direction
prayed for was for the Bank to furnish a true and fair view of the
loan account from the sanction till date and to award costs of the
application to the applicants/guarantors. The DRT, however,
proceeded to pass the impugned directions including for refund of
entire sale considerations along with interest to the Auction
Purchaser and for the Auction Purchaser to hand over the physical
possession of the Schedule Property to the guarantors.
52. The above reasons persuade us to hold that the DRT
misdirected itself in coming to a factual finding of the Bank having
initiated a CIRP against the personal guarantors when no such
application had been filed as per section 95 of the IBC by the Bank
as on the date of the impugned order. The directions given by the
DRT in terms of setting aside the possession notice, the auction
sale, and the sale certificate were premised on the aforesaid
erroneous factual finding and are hence required to be set aside.
53. We accordingly find sufficient reasons to interfere with the
impugned order passed by the DRT on 08.08.2025 and the
directions contained therein by which the Possession Notice dated
09.10.2019, Public Auction Sale held on 20.10.2022 and the Sale
28
Certificate dated 28.10.2022 were set aside and consequential
directions were passed on the Bank and the auction purchaser to
refund the entire sale consideration along with interest @ 6% per
annum and to hand over the physical possession of the Scheduled
Property to the Borrowers, respectively.
54. The impugned order dated 08.08.2025 is accordingly set
aside. Consequently, the order passed by the DRAT, in the appeal
preferred by the auction purchaser, on 14.11.2025 becomes
redundant. The guarantors have challenged the DRAT’s order by
way of the second Writ Petition. The impugned order dated
14.11.2025 reflects that the appeal was made returnable on a
certain date. Needless to say, the appeal filed by the auction
purchaser (from the DRT’s order dated 08.08.2025) abide by our
decision to set aside the DRT’s order dated 08.08.2025.
55. We also deem it fit to hold that W.P.No.25486 of 2025 is
maintainable despite the existence of an alternative statutory
remedy under the SARFAESI Act in terms of filing an appeal before
the DRAT. The issue of alternative remedy becomes academic in
view of the DRT’s order being taken up in appeal before the DRAT
by the Auction Purchaser. As stated above, both the Writ Petitions
29
were heard together in view of the identity of the issues and the
parties.
56. W.P.No.25486 of 2025 is accordingly allowed by setting aside
the order dated 08.08.2025 in S.A.No.300 of 2022 passed by the
Debts Recovery Tribunal-II, Hyderabad.
57. W.P.No.35956 of 2025 is disposed of in terms of the reasons
given for allowing W.P.No.25486 of 2025.
_________________________________
MOUSHUMI BHATTACHARYA, J
____________________________
GADI PRAVEEN KUMAR, J
Date: 03.07.2026
NDS/TJMR
