Gujarat High Court
Kunjbehari Jaygopal Mishra & vs Authorized Signatory & on 30 June, 2015
Author: R.M.Chhaya
Bench: R.M.Chhaya
C/SCA/2782/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 2782 of 2015
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KUNJBEHARI JAYGOPAL MISHRA & 1....Petitioner(s)
Versus
AUTHORIZED SIGNATORY & 1....Respondent(s)
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Appearance:
MR MASOOM K SHAH, ADVOCATE for Petitioner(s) No.12
MS MOHINI K SHAH, ADVOCATE for Petitioner(s) No.12
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 30/06/2015
ORAL ORDER
(1) Heard Mr.Masoom K. Shah, learned advocate for the petitioners.
(2) By way of this petition under Article 226 of the Constitution of India, the petitioners have prayed for the following reliefs:
"A. Be pleased to quash and set aside the impugned rejections dated 30.12.2014 adjudicated and decided by Advocate under the instructions of the Respondent No.2 (Bank) as ultra vires, illegal, without authority of law, null and void.
B. Be pleased to quash and set aside the section 13(2) notice dated 16.10.14 as illegal and bad in law.
C. Pending Admission, Hearing and Final Disposal of the Petition, the Respondent No.2 / and or their agents/ servants be restrained to take further steps under Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 qua the secured asset.
D. Costs of this Petition are awarded.
E. Such further and other relief, order or direction which may be just, fit proper and equitable in the facts and circumstances of the petition."Page 1 of 10 C/SCA/2782/2015 ORDER
(3) Before dealing with the submissions made by the learned advocate for the petitioners, it may be noted that the matter was listed for admission for the first time on 01.04.2015 and thereafter repeated adjournments have been granted at the request of the learned advocate for the petitioners, to see that the matter is resolved. Learned advocate for the petitioners has declared before this Court that it is not possible for the petitioners to pay the dues till the month of July, 2015.
(4) Learned advocate for the petitioners has raised the following contentions:
i) that reply to the representation / objection filed by the petitioners, against the notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (the Securitisation Act), cannot be given by advocate of the respondentBank;
ii) that the impugned notice under Section 13(2) of the Securitisation Act is not given by the authorized officer; AND
iii) that as per Clause 4.2.5 of the Master Page 2 of 10 C/SCA/2782/2015 ORDER CircularPrudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances -
would mean that once a borrower pays certain amount, the account, which has declared otherwise as NonPerforming Asset (NPA), would not remain NPA for all times to come;
Learned advocate for the petitioners has relied upon the averments made in Paragraph No.14 of his representation (at Page 54 of the paper book) to buttress the aforesaid argument.
Learned advocate for the petitioners has further relied upon the judgment of the Apex Court in the case of Keshavlal Khemchand & Sons Private Limited and Ors. Vs. Union of India & Ors. (2015) 4 S.C.C.
770. No other or further submissions are made by learned advocate for the petitioners.
(5) Considering the first contention, learned advocate for the petitioners has also candidly submitted that even though he Page 3 of 10 C/SCA/2782/2015 ORDER relies upon the said argument, the said issue is covered by judgment and order dated 30.01.2015 passed by this Court in Special Civil Application No.1670 of 2015. This Court, after taking into consideration the similar arguments, incidentally made by the very same learned advocate, has observed thus:
"4. From the appreciation of the submissions and perusal of record, the first aspect with regard to the authority or jurisdiction by the impugned communication rejecting the request of the petitioner through lawyer require consideration. The petitioner through lawyer communicated vide communication dated 12.9.2014 which is labeled as:
Request for withdrawal of notice under s. 13(2) dated 18.07.2014 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act no.54 of 2002) and Objections qua the same.
Thus, the objections are sought to be raised for withdrawal of any notice under Section 13(2) on various grounds. It is this communication which is replied through lawyer by the Respondent Bank dated 25.9.2014 which is sought to be contended as without jurisdiction or authority. It is not in dispute that the notice as required under Section 13(2) of the Securitisation Act has been already issued by the authorised officer as provided in Section 2(z)(d) of the Securitization Act. The said notice under Section 13(2) is produced at AnnexureP1 dated 18.7.2014 signed by the Chief Manager and authorized officer. Therefore, a close look at the provisions of Securitization Act particularly Section 13 require appreciation of submission made by learned Advocate Shri Shah for the petitioners. Section 13(2) of the Securitization Act refers to the notice to the borrower for the default in repayment of the secured debt failing which the secured creditor may proceed as provided under the Securitization Act including as provided under Section 13(4) of the Securitization Act. The provisions of Section 3 or 3(a) which have been much emphasized submitting that the same analogy may be applied while considering the provisions of Section 13(3A) read with the Rules 2002. The provisions of Section 13(3A) on the contrary provide that if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate. (emphasis supplied) Therefore, like Page 4 of 10 C/SCA/2782/2015 ORDER any provision or notice under the Code of Civil Procedure or any other statute, when the objection is sought to be raised by the borrower through lawyer, the same is communicated by the Respondent Bank through lawyer that such objections are not tenable and not acceptable and it cannot be said to be without jurisdiction or authority. The scheme of the Securitisation Act as provided in Section 13 contemplate for notice under Section 13(2) before proceeding further with the recovery under the Act. Admittedly such notice has been served to the petitioners and such a notice is by the authorised officer of the Bank as stated above. Thereafter if any objection or a notice is given through a lawyer by the petitioners, one fails to understand why the Respondent Bank cannot reply suitably like any legal notice through the lawyer. Therefore, such submissions referring to the statutory provisions and the Rules as stated above has no relevance and the reliance sought to be placed on the judgment of the Hon'ble Andhra Pradesh High Court is without reference to the factual background. In the judgment of the Hon'ble Andhra Pradesh High Court it was an issue with regard to the notice and there is a specific reference that the notice under Section 13(2) has to be issued in accordance with the Enforcement Rules. It is in this context the discussion has been made referring to the provisions of Section 13(2) of the Act read with the Enforcement Rules 2002 and the definition of the authorised officer as provided in Rule 2(a) of the Enforcement Rules. Again, the reference to the judgment of the Kerala High Court also has no relevance as the demand notice has been admittedly issued by the authorised officer of the Bank.
5. Therefore such novel submissions which are sought to be raised with reference to the background of the facts relying on the judgment cannot be of any assistance to the petitioners.
6. The another facet of the submission that apart from the jurisdiction or authority, the reply rejecting the objection of the petitioners is without any application of mind is also misconceived.
7. Though the reference is made with comparison to both, it is evident that the same reply which is said to be without any application of mind in clear terms has stated:
"Fact of the case is that, After availing the financial facility your client is not doing business and sales proceeding through the cash credit facility and your client failed to regularize the said cash credit account. Your client has misused the fund of the cash credit account and transferred all the funds outside your business. My client several times informed and remaindered to regularize the account and approach to my client with concrete plan to regularize the cash credit account. Your client is highly irregular to provide stock statement, details required for completing the stock audit exercise.Page 5 of 10 C/SCA/2782/2015 ORDER
Your client is not bonafide against my clients and misappropriated the funds. And with ulterior motive your client has sold out hypothecated stock and not ready to submit stock statement, stock audit report. And reply given by your client is only to defeat and delay of dues of the bank. My client has approached your client several times for regularization of account but your client has neither given any concrete proposal nor paid the dues. Therefore my client rejected the reply."
8. Thus, the bottom line of the reply is that the petitioner has misused the funds and in spite of several reminders to regularize the account has failed to improve and in no uncertain terms it has been stated, Your client is not bonafide and has misappropriated the funds (emphasis supplied). It is in this background when the reply has been given it can hardly be said that there is no application of mind because the reply may not be found suitable to the person like the petitioners. Again the reply to the notice is not necessarily to be dealt with every aspect in detail. Therefore such a submission, which has been made by learned Advocate Shri Masoom K. Shah for the petitioners cannot be accepted.
9. The submission made by learned Advocate Shri Shah referring to the judgment of the Hon'ble Apex Court in the case of Central Bank of India v. Ravindra And Ors. (supra) referring to the penal interest is also misconceived inasmuch as it is not the case that the penal interest cannot be levied as observed in this judgment. The doctrine of interest and penal interest are two separate issues. It has a reference to capitalizing the penal interest which cannot be entertained or considered in exercise of discretion under Article 226 merely because the petitioner claim that the interest or the penal interest is sought to be capitalized. In any view of the matter the judgment of the Hon'ble Apex Court is in context of Section 34 of the CPC is also required to be noted. Therefore the submission is without any merit.
Both the judgment of the Hon'ble Andhra Pradesh High Court and Kerala High Court have also referred to dissenting view of Calcutta High Court which has also been discussed and fairly referred to by learned Advocate Shri Shah.
10. At the cost of repetition it is required to be mentioned that it is a novel way of abusing the process of the court for delay in the payment and the court particularly the High Court in exercise of discretionary jurisdiction under Article 226 or 227 would not be justified at all considering the objects and reasons of the Securitisation Act for which such an Act has been made by the parliament. If any such arguments are at all considered as relevant it would frustrate the very purpose of the Securitisation Act. Therefore, there is no reason or justification for exercise of discretion under Page 6 of 10 C/SCA/2782/2015 ORDER Article 226 and therefore this court has even declined to issue a notice and the present petition therefore deserves to be dismissed and accordingly stands dismissed in limine.
Sd/ (RAJESH H.SHUKLA, J.) "
(6) So far as the second contention is concerned, Rule 2(a) of the Security Interest (Enforcement) Rules, 2002, (the Rules) defines the word "authorized officer" as under:
"(a) "authorized officer" means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the [Act];"
(7) On perusal of the impugned notice, which is at AnnexureP1, it is clearly mentioned therein that the authorized signatory is Assistant General Manager of the respondentBank. The word "authorized officer" is clearly defined in the Rules, which includes the authority exercising powers of superintendence, direction and control of the business or affairs.
Except bare allegation there is nothing on record to show that the signatory of the impugned notice, who is the Assistant General Manager, is not equivalent or is Page 7 of 10 C/SCA/2782/2015 ORDER not authorized or specified by the Board of the respondentBank. Hence, the said contention deserves to be rejected outright.
(8) Similarly the third contention raised is also de hors the provisions of Regulation 4.2.5, which provides as under:
"4.2.5 Upgradation of loan accounts classified as NPAs If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as non performing and may be classified as 'standard' accounts. With regard to upgradation of a restructured / rescheduled account which is classified as NPA contents of paragraphs 12.2 and 15.2 in the Part B of this circular will be applicable."
It is not the case of the petitioners that the petitioners have paid arrears of interest and principal and even the learned advocate for the petitioners admits before this Court that he has paid Rs.8,00,000/, whereas the notice impugned clearly spells that a sum of Rs.52,84,410.02 is due and payable as on 15.10.2014.
Even in the case, which is relied upon by the learned advocate for the petitioners, i.e. Keshavlal Khemchand and Sons Private Page 8 of 10 C/SCA/2782/2015 ORDER Limited (supra) while examining vires of Section 2(o) of the Securitisation Act the Apex Court has observed (at Paragraph No.61) as under:
"61. Coming to the fourth submission of the borrower, it must fail on the basis of express language of Section 13(3A) which obligates the secured creditor to examine the representation/objection, if any, made by the borrower on the receipt of notice contemplated under Section 13(2) and communicate the reasons to the borrower if such a representation is not accepted by the secured creditor. We have already adjudicated in our judgment, in paras 33 to 35, that the representation/ objection contemplated under Section 13(3A) is required to be examined objectively. Section 13 obligates the secured creditor to communicate the reasons for nonacceptance of the representation or objections to the borrower."
Suffice it to state that the petitioners have misread the aforesaid provisions. Merely by making payment of Rs.8,00,000/, out of the total outstanding amount, would not render any assistance to the petitioners.
(9) At this juncture it would be appropriate to refer to and rely upon the ratio laid down by the Apex Court in the case of United Bank of India v. Satyawati Tondon & Ors. (2010) 8 SCC 110, more particularly considering the conduct of the petitioners. Having obtained loan from the respondentBank, which is given by the Bank out of public funds, at the threshold of the proceedings initiated by the Page 9 of 10 C/SCA/2782/2015 ORDER respondentBank for legitimate recovery is being questioned in this petition, that too on the aforesaid three grounds, which are totally meritless, hence this is not a fit case for exercise of extraordinary jurisdiction under Article 226 of the Constitution of India.
Considering the reply given by the respondentBank this Court finds that there is sufficient compliance. It cannot be said that the said reply does not have any reasons and therefore it cannot be said that obligation of the respondent Bank is not fulfilled by giving reply, through its learned advocate; the said contention fails.
(10) Petition is meritless and the same is hereby dismissed in limine with costs, which is quantified at Rs.25,000/ to be deposited by the petitioners with the Gujarat High Court Legal Services Committee.
Sd/ [R.M.CHHAYA, J ] *** Bhavesh[pps]* Page 10 of 10