Kerala High Court
M.M Mujeeb Rahman vs The Standard Chartered Bank on 10 June, 2010
Author: C.T.Ravikumar
Bench: C.T.Ravikumar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR
WEDNESDAY, THE 27TH DAY OF JUNE 2012/6TH ASHADHA 1934
WP(C).No. 37859 of 2010 (F)
----------------------------------------
PETITIONER(S):
----------------------
1. M.M MUJEEB RAHMAN,
S/O.MOOSA, AGED 39, MOOKADA HOUSE,
A.M.ROAD, MUDICKAL P.O., ERNAKULAM DIST.
PIN-683 547.
2. MRS.MUNEERA.K.M, W/O. MUJEEB RAHMAN,
AGED 34, MOOKADA HOUSE, A.M.ROAD
MUDICKAL P.O., ERNAKULAM DIST., PIN-683 547.
BY ADVS.SRI.K.A.SHAMSUDEEN
SMT.BHAMA G. NAIR
SRI.V.K.MEETHIANKUNJU
SRI.N.M.SIYAD
SRI.K.J.MOHAMMED ANZAR
SRI.K.I.ABDUL RASHEED
RESPONDENT(S):
-------------------------
1. THE STANDARD CHARTERED BANK
HDFC BUILDING, HDFC HOUSE, M.G.ROAD
RAVIPURAM, ERNAKULAM, PIN-682 015.
2. THE AUTHORIZED OFFICER,
STANDARD CHARTERED BANK, MORTGAGE COLLECTION
HDFC BUILDING, HDFC HOUSE, M.G.ROAD
RAVIPURAM, ERNAKULAM, PIN-682 015.
3. THE DISTRICT MAGISTRATE,
CIVIL STATION, KAKKANAD, ERNAKULAM
PIN-682 030.
4. THE SUPERINTENDENT OF POLICE,
ERNAKULAM RURAL, ALUVA-683 101.
R1 & R2 BY ADV. SRI.B.S.SURESH KUMAR
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 09/04/2012,
ALONG WITH WPC. 23568/2011, THE COURT ON 27/06/2012 DELIVERED THE
FOLLOWING:
MJL
WPC.NO:37859/2010
APPENDIX
PETITIONER'S EXHIBITS:
EXT.P1 : TRUE COPY OF THE LETTER ISSUED FROM THE RESPONDENTS
SANCTIONING THE LOAN AMOUNT.
EXT.P2 : TRUE COPY OF THE NOTICE DATED 10/06/2010 ISSUED BY THE
2ND RESPONDENT
EXT.P3 : TRUE COPY OF THE NOTICE DATED 23/07/2010 ISSUED BY THE
2ND RESPONDENT
EXT.P4 : TRUE COPY OF THE STATEMENT OF ACCOUNT DATED 23/07/2010
ISSUED BY THE 1ST RESPONDENT
EXT.P5 : TRUE COPY OF THE JUDGMENT DATED 31/08/2010 IN W.P.(C)
NO:24159/2010
EXT.P6 : TRUE COPY OF THE I.A.NO.13448/2010 IN WP(C)NO.24159/2010
EXT.P7 : TRUE COPY OF THE RECEIPT NO.CO203M101116 DATED
30/09/2010
EXT.P8 : TRUE COPY OF THE PETITION DATED 27/09/2010
EXT.P9 : TRUE COPY OF THE ORDER NO.D.D IS 59566/10/M1 DATED NIL
EXT.P10 : TRUE COPY OF THE DEMAND DRAFT NO.825480 DATED 04/01/2011
FOR Rs.1,75,186/- DRAWN ON THE STATE BANK OF TRAVANCORE,
ERNAKULAM.
EXT.P11 : TRUE COPY OF THE POSTAL A/D CARD SIGNED BY THE 2ND
RESPONDENT FOR RECEIVING THE DEMAND DRAFT
EXT.P12 : TRUE COPY OF THE DEMAND DRAFT DATED 05/10/2010 FOR
Rs.1,75,186/-
EXT.P13 : TRUE COPY OF THE DEMAND DRAFT DATED 04/11/2010 FOR
Rs.1,75,186/-
EXT.P14 : TRUE COPY OF THE DEMAND DRAFT DATED 03/12/2010 FOR
Rs.1,75,186/-
EXT.P15 : TRUE COPY OF THE DEMAND DRAFT NO:826959 DATED 4/2/2011
FOR Rs.1,75,186/- DRAWN ON THE STATAE BANK OF
TRAVANCORE, ERNAKULAM
MJL
WPC.NO:37859/2010
EXT.P16 : TRUE COPY OF THE REPLY NOTICE DATED 8/2/2011
EXT.P17 : TRUE COPY OF THE DEMAND DRAFT NO.434615 DATED 4/3/2011
FOR Rs.1,75,186/- DRAWN ON THE FEDERAL BANK LTD.
EXT.P18 : TRUE COPY OF THE DEMAND DRAFT NO:829290 DATED 5/4/2011
FOR Rs.1,75,186/- DRAWN ON STATE BANK OF TRAVANCORE
EXT.P19 : TRUE COPY OF THE DEMAND DRAFT NO.830181 DATED 4/5/2011
FOR Rs.1,75,186/- DRAWN ON THE STATE BANK OF TRAVANCORE.
EXT.P20 : TRUE COPY OF THE DEMAND DRAFT NO.830821 DATED 3/6/2011
FOR Rs.1,75,186/- DRAWN ON THE STATE BANK OF TRAVANCORE.
RESPONDENTS' EXHIBITS:
EXT.R2(a) : TRUE COPY OF THE ACKNOWLEDGMENT CARD SIGNED ON
26/07/2010 BY THE PETITIONER
EXT.R2(b) : TRUE COPY OF THE ACKNOWLEDGMENT CARD SIGNED ON
26/07/2010 BY THE PETITIONER
/TRUE COPY/
P A TO JUDGE
MJL
C.T.RAVIKUMAR, J.
--------------------------------------------------
W.P.(C)Nos.37859 of 2010 & 23568 of 2011
---------------------------------------------------
Dated 27th June, 2012
JUDGMENT
The same petitioners have filed both these writ petitions, on the same subject matter but, under different contextual situation for variant reliefs. The petitioners are man and wife. They availed a loan of Rs.1,40,27,953/- from the Standard Chartered Bank, HDFC Building, Ravipuram, the first respondent in these writ petitions, by creating equitable mortgage by depositing the title deed of the first petitioner's property having an extent of 56 cents in Survey No.119/5-2 of Marampilly Village. As per the terms and conditions of the loan agreement, admittedly, the said amount together with the interest thereon have to be repaid in equated monthly instalments of Rs.1,75,186/- for a period of 180 months commencing from 5.5.2009. Admittedly, there was no default in repayment up to October, 2009 and then, the cheques issued towards monthly instalments for October, November and December, 2009 were dishonoured. According to the petitioners, on 7.12.2009 Demand Draft No.757125 for Rs.1,75,186/- was drawn on ICICI Bank and handed over to one Ameer who was one of the Executives of the first respondent Bank. It is their case that after having discussions with the higher officials he told the first petitioner that it could be accepted only along with one more EMI. The further WP(C).Nos.37859/2010 & 23568/2011 2 contentions of the petitioners are as follows:-
Demand Draft No.757199 dated 4.1.2010 for Rs.1,75,186/-
was subsequently drawn and along with the demand draft drawn on 7.12.2009 it was handed over to the first respondent Bank. However, they were not accepted. Payment of all the three defaulted EMIs was demanded. Meanwhile, the petitioners paid EMIs for the months of January, February, March, April and May, 2010. But, again there occurred a default in payment in June, 2010 and thereupon, the second respondent who is the authorised officer of the first respondent Bank issued Ext.P2 notice dated 10.6.2010 calling upon the petitioners to pay an amount of Rs.7,88,817.93 together with interest thereon and penal interest besides restraining them from disposing or dealing with the mortgaged property. On 26.7.2010, the first petitioner went to the Bank for effecting payment of EMI for the month of July, 2010. He was asked to clear the entire arrears while refusing to accept the said EMI.
Immediately thereafter, Ext.P3 notice dated 23.7.2010 under section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (for short `SARFAESI Act') was issued to the petitioners demanding payment of an amount of Rs.1,42,21,420.61 within sixty days from its receipt besides intimating them that the debt was classified as Non performing Asset (NPA). WP(C).Nos.37859/2010 & 23568/2011 3 Feeling aggrieved by the initiation of such proceedings W.P.(C)No.24159 of 2010 was filed by the petitioners assailing Exts.P2 and P3 notices. On 3.8.3010 an order of stay of further proceedings, was issued on condition of payment of Rs.3,00,000/- on or before 20.8.2010 besides effecting the required EMI for the month of August, 2010 on 5.8.2010. The said writ petition was later, disposed of as per Ext.P5 judgment. Exts.P4 and P5 thereunder (Exts.P2 and P3 herein) were set aside on further condition of deposit of Rs.2,00,000/- towards arrears on or before 6.9.2010 and the balance amount on or before 23.9.2010. The petitioners were also required to effect payments of EMIs thereafter as originally scheduled under the loan agreement. Thereafter, the petitioners remitted an amount of Rs.2,00,000/- on 6.9.2010 along with the EMI that fell due on 5.9.2010. The person who was entrusted to take the Demand Draft for the balance amount of Rs.3,22,722/- could not reach the Bank in time to take the Demand Draft on 23.9.2010 and thereafter, on 24.9.2010 itself the Demand Draft for the balance amount, as per the aforesaid order, was taken. Sri.Senthil j. Vinod, the then Assistant Manager of the concerned branch of the Bank was unwilling to receive the Demand Draft without further direction from this Court. Thereupon, I.A.No.13448 of 2010 was filed in W.P.(C)No.24159 of 2010 with prayers to extend the time for making the payment of Rs.3,22,722/- and for appropriate direction to the Bank to receive the Demand Draft WP(C).Nos.37859/2010 & 23568/2011 4 covering the aforesaid amount. During its pendency, an officer of the Bank contacted the petitioners and agreed to accept Ext.P6(5) Demand Draft. Accordingly, it was handed over to a representative of the Bank on 30.9.2010. Ext.P7 is the receipt issued in token thereof. The petitioners were paying the EMIs regularly thereafter, as is obvious from Exts.P7 to P9. While so that Ext.P8 petition under section 14 of the SARFAESI Act was filed by the Bank. Ext.P9 is the order passed thereon by the District Magistrate. W.P.(C)No.37859 of 2010 was filed in the said circumstances with prayers to quash Ext.P9 and to declare that respondents 1and 2 therein have no authority to proceed against the petitioners under the provisions of SARFAESI Act in respect of the loan advanced as per Ext.P1 since they have not committed any default in the periodical instalments to be paid to the Bank. On 21.12.2010 this Court passed an interim order staying all further proceedings pursuant to Ext.P9 order. It was extended from time to time. Thereafter, the petitioners had drawn Ext.P10 demand draft and forwarded it to the Bank. Ext.P11 acknowledgment card would reveal that the second respondent had received the same. Thereafter, Exts.P12 to P15 demand drafts for Rs.1,75,186/- each, were also drawn and forwarded to the second respondent along with registered letters. Ext.P16 is the reply notice dated 8.2.2011 sent by the Bank's lawyer stating that since the Bank has initiated recovery proceedings under the provisions of the WP(C).Nos.37859/2010 & 23568/2011 5 SARFAESI Act he got instructions from the second respondent to intimate the petitioners that on account of their failure to pay the total balance outstanding within 60 days from 23.7.2010 the authorised officer would be taking steps to take over possession of the secured asset as contemplated under section 13(4) of the SARFAESI Act. The cheque bearing Nos.825480 dated 4.1.2011 and 826959 dated 4.2.2011 for Rs.1,75,186/- each were consequently declined to be accepted and were returned to the petitioners. Exts.P17 to P20 are the demand drafts drawn thereafter respectively on 4.3.2011, 5.4.2011, 4.5.2011 and 3.6.2011 and they were also forwarded to the Bank. However, the Bank refused to accept them as well. W.P.(C)No.23568 of 2011 was then filed by the petitioners with the following prayers:-
"(i) issue a writ of mandamus directing the respondents to accept the EMI from 5.1.2011 in the account relating to Ext.P1 maintained by petitioners with the respondents.
(ii) Issue a writ of mandamus directing to credit the EMI from 5.1.2011 on payment of the same without levying any interest for the period which they illegally refused to accept.
(iii) Issue a writ of mandamus directing the respondents to issue a statement of account to the petitioners as requested in Ext.P24 letter."
On 2.9.2011 this Court passed an order directing the respondents to accept the EMI from 5.1.2011 in respect of the loan transaction in WP(C).Nos.37859/2010 & 23568/2011 6 question and to credit the same in the petitioners' loan account. R.P.No.713 of 2011 was then filed by the Bank and its authorised officer who are respondents 1 and 2 therein to review the order dated 2.9.2011. Subsequently, the interim order was vacated and W.P.(C)No.23568 of 2011 was ordered to be posted before me by the learned Judge who heard the same. The respondents were directed to credit all the amount paid by the petitioners in cash or demand draft to their loan account. In view of that order passed in the said writ petition the review petition was closed. Along with the said writ petition true photocopies of DDs drawn on 4.7.2011 and 4.8.2011 were also produced as Exts.P22 and P23. The learned counsel for the petitioners submitted that the petitioners have been drawing Demand Draft for amount covering the EMI unfailingly on all months and forwarding them to the first respondent Bank for crediting in the loan account in question.
2. In the former writ petition respondents 1 and 2 have jointly filed a counter affidavit. Essentially, their contention is that SARFAESI Act is a self contained Act providing remedies for challenging proceedings under the Act and, therefore, the remedy of the petitioners is to challenge Ext.P9 under section 17 of the SARFAESI Act before the Debt Recovery Tribunal. It is further contended that M/s.Standard Chartered Bank is not an authority contemplated under Article 12 of the WP(C).Nos.37859/2010 & 23568/2011 7 Constitution of India and therefore, these writ petitions are not maintainable on that count as well. That apart, it is stated therein that against the judgment in W.P.(C)No.24159 of 2010 an appeal was filed and it was not posted on account of the delay in filing the same. The counter affidavit filed in the latter writ petition is also on the same lines. It is further stated therein that on account of the pendency of the former writ petition the petitioners should not have filed the latter writ petition on the same subject matter.
3. In the context of the contentions in the counter affidavits it is relevant to note that a perusal of Ext.P5 judgment dated 31.8.2010 in W.P.(C)No.24159 of 2010 would, in fact, reveal that the said judgment was rendered after hearing the learned counsel for respondents 1 and 2 as well and taking note of the submissions made by him on their behalf. It is stated therein as follows:-
"The learned counsel for the respondents submitted that at present amount in arrear towards the said loan account is Rs.5,22,721.99/-. If the petitioners pay off the entire arrears and undertake to effect the E.M.I. in terms of the agreement, the loan can be regularized, it is further submitted. Learned counsel for the petitioners submits that the petitioners are prepared to pay an amount of Rs.2,00,000/- (two lakhs only) on or before 6.9.2010 and they would pay off the entire arrears towards the loan account on or before 23.9.2010. It is also submitted that the petitioner would remit E.M.I. as originally scheduled.WP(C).Nos.37859/2010 & 23568/2011 8
The learned counsel for the respondents submits that in case, the petitioners comply with the said undertaking, the loan account would be regularized."
(emphasis supplied)
4. It is thus obvious from the above extracted portion from Ext.P5 that Rs.5,22,721.99 was the then outstanding arrears towards the loan account. Evidently, it was taking note of the rival submissions that the said writ petition was disposed of as per Ext.P5. Exts.P4 and P5 therein viz., Exts.P2 and P3 in W.P.(C)No.37849 of 2010 were set aside on condition of deposit of an amount of Rs.2,00,000/- by the revision petitioners towards the arrears outstanding in the loan account on or before 6.9.2010. The balance amount of Rs.3,22,722/- was directed to be paid on or before 23.9.2010. Further, it was directed to effect payment of regular E.M.I thereafter as originally scheduled under the agreement. The specific contention of the petitioners is that in compliance with the directions in Ext.P5 they have remitted an amount of Rs.2,00,000/- on 6.9.2010 along with the E.M.I that fell due on 5.9.2010. In none of the counter affidavits filed by the respondents in these writ petitions the said specific averment of the petitioners was denied. True that, they were also directed to pay an amount of Rs.3,22,722/- on or before 23.9.2010. The petitioners assigned the reason for the failure to remit the said amount on 23.9.2010 and WP(C).Nos.37859/2010 & 23568/2011 9 specifically averred that on the next day itself viz., on 24.9.2010 they drew Ext.P6(5) demand draft for Rs.3,22,722/- in favour of the first respondent bank and the same was accepted by the bank as can be seen from Ext.P7. These specific averments were also not refuted by the respondents in either of the counter affidavits. A scanning of the statements in the counter affidavits filed by the respondents would reveal that no dispute whatsoever was raised with respect to the specific averment of the petitioners that the entire amount of Rs.5,22,722/- was paid subsequent to Ext.P5 judgment. Evidently, DD for an amount of Rs.3,22,722/- was drawn on 23.9.2010 and it was accepted on 30.9.2010. Going by the spirit of the submissions made by the respondents in W.P.(C)No.24159 of 2010 which was in the form of an undertaking, the first respondent on receipt of Rs.5,22,722/- should have regularized the loan account of the petitioners. In the absence of a case of non-receipt of the amount of Rs.5,22,722/- pursuant to Ext.P5 judgment the counter affidavits should have disclosed the reasons or justification for declining regularization of the loan account of the petitioners. There is absolute absence of any such reason or justification in the counter affidavits. Curiously, instead of regularizing the loan account respondents 1 and 2 moved the third respondent by filing Ext.P8 petition under section 14 of the SARFAESI Act. What is more censurable is that Ext.P8 did not contain not even a whisper about the lis that led to WP(C).Nos.37859/2010 & 23568/2011 10 Ext.P5 judgment and the consequential receipt of payments towards the loan account. Ext.P8 is dated 27.9.2010. In the counter affidavits filed by the respondents though respondents 1 and 2 have made statements with respect to the filing of Ext.P8 petition before the third respondent the date on which it was moved was conspicuously absent in them. If it was actually filed only after 30.9.2010 what was cause of action for respondents 1 and 2 to move the third respondent under section 14 of the SARFAESI Act. In fact, there is nothing on record to show that it was moved prior to 30.9.2010. Even if it is taken that it was moved prior to 30.9.2010 the absence of relevant particulars with respect to the directions of this Court and consequential payments effected by the petitioners cannot be taken as a mere innocuous omission and it can only be taken as a willful concealment of the relevant particulars from the third respondent. In the context of the case, it is very much relevant to note that Ext.P9 order passed by the third respondent on Ext.P8 petition is also undated. However, it is evident that the said order was despatched from the office of the third respondent only on 12.11.2010. Having accepted the payments against the outstanding dues viz., Rs.5,22,722/- made by the petitioner pursuant to Ext.P5 judgment and having returned the demand drafts pertaining to the subsequent EMIs respondents 1 and 2 should not have approached the third respondent by moving Ext.P8/pursued with Ext.P8 after Ext.P7, that too, by WP(C).Nos.37859/2010 & 23568/2011 11 concealing the relevant crucial materials. Another aspect also persuades me to form the said conclusion. Evidently, Exts.P2 and P3 were set aside as per Ext.P5 judgment after hearing the first and second respondents. Though an appeal is claimed to have filed against Ext.P5 judgment respondents 1 and 2 got no case that it was admitted or any order interfering with Ext.P5 was passed in the writ appeal. At the same time, it is to be noted that virtually, all the directions except regularization of the account have been effected. The first respondent who was unwilling to receive the payments towards the EMIs has received the payments of Rs.2,00,000/- and Rs.3,22,722/-. That apart, demand drafts drawn and forwarded subsequently were also accepted.
5. The specific averments of the revision petitioners regarding the drawing and forwarding of the demand drafts for crediting towards the loan account in question prior to and after Ext.P5 judgment, including the payment of Rs.2,00,000/- on 6.9.2010 along with the EMI that fell due on 5.9.2010 and receipt of Ext.P6(5) demand draft for Rs.3,22,722/- dated 24.9.2010 as revealed from Ext.P7 dated 30.9.2010, were not all denied by respondents 1 and 2 in their joint counter affidavit. The irresistible conclusion that can be arrived at, in the said circumstances, is that the petitioners are, now, effecting payments towards the loan account in such a manner to get their loan account WP(C).Nos.37859/2010 & 23568/2011 12 upgraded as a standard asset. When that be the case, emerging from the rival pleadings, I am of the considered view that even in the absence of the submission, in the form of an undertaking given by respondents 1 and 2 in W.P.(C)No.24159 of 2010 respondents 1 and 2 were/are obliged to regularize the loan in terms of the `Master Circular - Prudential norms on Income Recognition, Asset Classification and Advances' issued by the Reserve Bank of India and above all, by virtue of the Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions, 2003 (for short `Reserve Bank Directions, 2003'). In this context, paragraph 3(vi) of the Reserve Bank Directions 2003 that defines `NPA' and paragraph 3(x) thereunder defines `standard asset' assume relevance and they read thus:-
"3(vi) "Non-performing asset" (NPA) means an asset in respect of which-
(a) interest or principal (or instalment thereof) is overdue for a period of 180 days or more from the date of acquisition or the due date as per contract between the borrower and the originator, whichever is later;
(b) interest or principal (or instalment thereof) is overdue for a period of 180 days or more from the date fixed for receipt thereof in the plan formulated for realisation of the assets referred to in paragraph 7(1)(6) herein;
(c) interest or principal (or instalment thereof) is overdue on expiry of the planning period, where no plan is formulated for realisation of the assets referred to in paragraph 7(!)(6) herein;WP(C).Nos.37859/2010 & 23568/2011 13
(d) any other receivable, if it is overdue for a period of 180 days or more in the books of the securitisation company or reconstruction company:
Provided that the board of directors of a securitisation company or reconstruction company may, on default by the borrower, classify an asset as a non-performing asset even earlier than the period mentioned above (for facilitating enforcement as provided for in section 13 of the Act).
3(x) "Standard asset" means an asset, which is not an NPA;"
Paragraphs 2 and 12(2)(ii) of the Reserve Bank Directions, 2003 also assume relevance in this context. Paragraph 2 deals with the applicability of the directions. It reads thus:-
"2. Applicability of the directions:- The provisions of these guidelines and directions shall apply to securitisation companies or reconstruction companies registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, in respect of the trust(s) mentioned in paragraph 8 herein, the provisions of paragraphs 4, 5, 6, 9, 10(i), 10(iii), 12, 13, 14 and 15 shall not be applicable."
A careful consideration of Reserve Bank Directions, 2003 would reveal WP(C).Nos.37859/2010 & 23568/2011 14 that in the circumstances obtained in this case respondents 1 and 2 were to upgrade the asset as a standard asset especially, in the absence of denial regarding the subsequent payments. As already noticed hereinbefore, respondents 1 and 2 contended that on account of the specific provisions under the SARFAESI Act for challenging proceedings under that Act and on account of the fact that the first respondent Bank is not an authority falling under Article 12 of the Constitution of India these writ petitions are not maintainable. A careful reading of the provisions under the SARFAESI Act would reveal that merely because a property has been mortgaged to a financial institution or any institution covered by the SARFAESI Act that would not by itself enable that institution concerned to approach the District Magistrate with a petition under section 14 of the SARFAESI Act to assist to take possession of the secured asset unless amount fall outstanding in such a manner enabling it as a secured creditor to seek for such assistance. In view of the provisions which were adverted to earlier and in view of the submissions recorded by this Court in Ext.P5 judgment, which in essence, in the form of an undertaking, respondents 1 and 2 should have regularized the loan account of the petitioners. In such circumstances, a careful scrutiny of the rival pleadings in these cases, have no room for any doubt that there was no cause of action for respondents 1 and 2 to invoke the power of the District Magistrate under section 14 of WP(C).Nos.37859/2010 & 23568/2011 15 the SARFAESI Act that too, without disclosing the crucial and relevant materials regarding Ext.P5 judgment of this Court and the subsequent drawing of demand drafts by the petitioners and their receipt by the first respondent Bank. In view of the overall circumstances it will be a miscarriage of justice to relegate the petitioners to resort to the remedies under the SARFAESI Act Act.
6. In the context of the contentions the decision of the Hon'ble Apex Court in U.P.State Co-operative Land Development Bank Ltd. v. Chandra Bhan Dubey (AIR 1999 SC 753) is noteworthy. The essence of the said decision is that if there is a statutory duty placed on an institution the court is to enforce such statutory public duty. There is yet another aspect as well. Even if the first respondent Bank is not falling under any other authority under Article 12 of the Constitution of India, that by itself is not a reason for this Court to hold these writ petitions as not maintainable. A Full Bench of the Madras High Court in Marappan v. Dy.Registrar of Co- operative Societies (2006 (4) KLT 667 (F.B.) (Mad.H.C.)) held that though a co-operative society carrying on banking business cannot be termed as instrumentality of State within the meaning of Article 12 of the Constitution of India a writ would lie against it to enforce a statutory public duty. In the light of the said decision, a reference to sections 12 WP(C).Nos.37859/2010 & 23568/2011 16 and 12A of SARFAESI Act would become relevant. Going by section 12 power is vested with the Reserve Bank to determine policy and issue directions under the SARFAESI Act. Section 12A deals with the power of Reserve Bank to call for statements and information. Section 12 reads thus:-
"12. Power of Reserve Bank to determine policy and issue directions-
(1) If the Reserve Bank is satisfied that in the public interest or to regulate financial system of the country to its advantage or to prevent the affairs of any securitisation company or reconstruction company from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such securitisation company or reconstruction company, it is necessary or expedient so to do, it may determine the policy and give directions to all or any securitisation company or reconstruction company in matters relating to income recognition, accounting standards, making provisions for bad and doubtful debts, capital adequacy based on risk weights for assets and also relating to deployment of funds by the securitisation company or reconstruction company, as the case may be, and such company shall be bound to follow the policy so determined and the directions so issued.
(2) Without prejudice to the generality of the power vested under sub-section (1), the Reserve Bank may give directions to any securitisation company or reconstruction company generally or to a class of securitisation companies or reconstruction companies or to any securitisation company or reconstruction company in particular as to-
(a) the type of financial asset of a bank or financial institution which can be acquired and procedure for acquisition of such assets and valuation thereof;WP(C).Nos.37859/2010 & 23568/2011 17
(b) the aggregate value of financial assets which may be acquired by any securitisation company or reconstruction company."
]It is evident that the Reserve Bank Directions, 2003 was issued in exercise of the powers conferred by sections 3, 9, 10 and 12 of the SARFAESI Act. The Master Circular, referred to hereinbefore, also applicable in the circumstances. In the totality of the said circumstances, I am of the view that the aforesaid objections raised by respondents 1 and 2 contending that these writ petitions are not maintainable cannot be upheld.
7. The learned counsel for the petitioners had in fact, submitted that on certain occasions the first respondent refused to receive demand drafts and returned it to the petitioners. Thereafter, they used to present cheques in respect of the same months for which demand drafts were drawn and on dishonour of such cheques used to impose penal interest. In view of Ext.P16, which was not disputed by respondents 1 and 2, I find no reason to disbelieve the said submissions made on behalf of the petitioners. The overall circumstances as mentioned above constrained me to come to the conclusion that there was absolute absence of cause of action for respondents 1 and 2 to WP(C).Nos.37859/2010 & 23568/2011 18 approach the third respondent with Ext.P8 petition. The petitioners are therefore, entitled to the reliefs sought for in these writ petitions. In the peculiar circumstances emerging in this case, the filing of the latter writ petition also need not be viewed as an abuse of process. A perusal of the reliefs sought for would reveal that it, in essence, is a prayer for a direction to the first respondent to upgrade the asset, which was classified as NPA, as a standard asset. As noted earlier, in view of the provisions referred to hereinbefore, I am of the considered view that a statutory duty was cast upon the first respondent to upgrade the NPA asset as standard asset subject to the satisfaction of the related provisions. In view of the unrebutted position obtained in this case, I have no hesitation to hold that the loan account that stand in the name of the petitioners which was classified as NPA should have been upgraded as standard asset. The upshot of the discussion is that Ext.P9 is illegal and unsustainable and accordingly it is set aside. Respondents 1 and 2 shall properly credit the amounts received through demand drafts drawn and forwarded by the petitioners to the first respondent Bank and regularize the loan account that stands in the name of the petitioners and upgrade it as a standard asset on such proper accounting. It is made clear that in respect of the period during which demand drafts were drawn and forwarded but, returned by the first respondent Bank no penal interest shall be imposed on the petitioners WP(C).Nos.37859/2010 & 23568/2011 19 merely on account of the subsequent presentation of the cheques and their dishonour. Before parting with the case, I think it appropriate to record my fervent view that the higher authorities under the Bank will look into the issue involved in these cases and to take appropriate action for avoiding recurrence of any such circumstances.
The writ petitions are disposed of as above.
Sd/-
C.T.RAVIKUMAR Judge TKS