Madras High Court
State Bank Of India vs S.Ramesh Narayanan
Author: M.M.Sundresh
Bench: M.M.Sundresh, R.N.Manjula
O.S.A.No.37 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 23.07.2021
Delivered on : 10.08.2021
CORAM :
THE HONOURABLE MR. JUSTICE M.M.SUNDRESH
AND
THE HONOURABLE MS. JUSTICE R.N.MANJULA
O.S.A.No.37 of 2021
& C.M.P.No.1024 of 2021
1.State Bank of India,
Adyar Branch,
Represented by its Senior Manager,
No.24, II Main Road, Nethaji Colony,
Kasturba Nagar, Adyar,
Chennai-600 020.
2.State Bank of India,
Represented by its Assistant General Manager,
No.4, Santhome High Road,
Mylapore, Chennai-600 004. .. Appellants
Vs.
1.S.Ramesh Narayanan
2.Banu Ramesh ..Respondents
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O.S.A.No.37 of 2021
Prayer: Original Side Appeal filed under Order XXXVI of Rule 1 of Original Side
Rules read with Clause 15 of the Letters Patent against the order and decreetal
order dated 03.11.2020 passed in O.A.No.1031 of 2020 in C.S.No.715 of 2019.
For Appellants : Mr.M.L.Ganesh
For Respondents : Mr.M.S.Krishnan, Senior Counsel for
Mr.C.Ramesh
JUDGMENT
M.M.SUNDRESH,J.
The appellants being the defendants in the suit, filed an application to reject the plaint in O.A.No.1031 of 2020 in C.S.No.715 of 2019 on the premise that the suit filed by the respondents/plaintiffs in C.S.No.715 of 2019 lacks jurisdiction in lieu of the provisions under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the “SARFAESI Act”) read with Section 18 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the “RDDBFI Act).” The said application was dismissed by the learned single Judge. Assailing the order passed on 03.11.2020, the present Original Side Appeal has been filed by the appellants.
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2.BRIEF FACTS :
2.1.M/s Oceanic Tropical Fruits Private Limited and M/s Oceanic Edibles International Limited had availed credit facilities from the appellants-Bank and committed default in repayment. For the aforesaid credit facilities, the respondents herein stood as guarantors. The account of the companies become non performing assets, which made the appellants to approach the Debt Recovery Tribunal-II, Chennai, for recovery of a sum of Rs.227,20,59,666.28 as on 19.03.2015 in O.A.No.344 of 2015. Needless to state that the respondents were arrayed as defendants in the abovesaid application and the property mortgaged by them was also included.
2.2.The Original Application in O.A.No.344 of 2015 filed by the appellants before the Debt Recovery Tribunal-II, Chennai, was allowed on 14.03.2019 and the same stands as against the respondents till today. One of the reliefs sought for and granted by the Court is a declaration by all the defendants including the respondents of their assets both movable and immovable on oath by way of filing an affidavit. In this connection, we would only remember Section 25 of the RDDBFI Act which facilitates attachment and sale of movable or immovable properties of the defendants, after issuance of the recovery certificate. Page 3 of 17
https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 2.3.During the pendency of the proceedings mentioned above on the file of the Debt Recovery Tribunal, Chennai, the respondents approached the appellants and sought for minimum term loan, which was accordingly granted as could be seen from the sanction letter dated 16.03.2017 for a sum of Rs.1,16,75,000/- towards the housing loan.
2.4.When the aforesaid transaction came to light, the second appellant sent a communication to the Assistant General Manager, State Bank of India, Retail Assets Central Processing Centre, Chennai, asking him to put on hold while keeping the title deeds without releasing and without prior permission in writing even if the respondents close the account by paying the entire amount of the loan. Needless to state that at the time of aforesaid intra communication between the two wings of the appellants the amount was already sanctioned and withdrawn by the respondents, before the Debt Recovery Tribunal-II, Chennai in O.A.No.344 of 2015.
2.5.On 01.07.2019, the respondents sent a communication to the first appellant that they were inclined to close their housing loan account sanctioned on Page 4 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 16.03.2017. The account was classified as non performing asset as on 16.11.2019.
2.6.On 20.11.2019 the suit was presented by the respondents, signed on 18.11.2019 seeking the following reliefs.
“ i. That an account may be taken of the amount due to the first defendant under mortgage dated 05.04.2017 registered as Doct. No.1009 of 2017, S.R.O. Mylapore, for Principal and interest.
ii.That the Plaintiffs may be at liberty by a day to be fixed by the court to pay the said amount and the costs of the First Defendant of this suit into court, and that thereupon the said First Defendant may be ordered to bring into Court the said mortgage instrument and all documents in their possession or power relating to the property described in the Schedule to the Plaint, and an acknowledgement, in writing that their interest created by the said mortgage has been extinguished. iii.To grant a Decree of Permanent Injunction restraining the Defendants, their Officers, men, Agents, servants or any other person acting under them or authorized by them from bringing the property described in the Schedule to the Plaint for sale by Public Auction.
Page 5 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 iv.For costs of the suit;
v.For such further or other reliefs as this Hon'ble Court may deem fit and proper in the circumstances of the case and thus render justice.
Dated at Chennai this the 18th day of November, 2019.” 2.7.In the plaint, the respondents have averred that till April, 2017, the repayment was made properly and there was no reply to the letter dated 01.07.2019 informing the intention to close the loan in furtherance to which a sum of Rs.1,44,26,247/- was also deposited. However, as the appellant refused to proceed further, the intending purchaser withdrew his offer and the amount was returned on the request made by the M/s Karur Vysya Bank, Mylapore Branch.
2.8.As the respondents wanted to discharge the loan, the appellants cannot deny the same and therefore, the immediate cause of action has arisen. The cause of action also would include the subsequent communication between the parties. Thus, the suit was filed seeking redemption of the mortgage with a further prayer for permanent injunction.
Page 6 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 2.9.In the said suit, the appellants filed an application in O.A.No.1031 of 2020. In the said application, the appellants have contended that the suit is not maintainable in view of Section 34 of the SARFAESI Act read with Section 18 of the RDDBFI Act. It is also stated that the proceedings under SARFAESI Act has also been initiated and it is also placed before the learned single Judge. There is already a recovery order in O.A.No.344 of 2015 against the respondents, which fact is not mentioned in the plaint.
2.10.The learned single Judge dismissed the application filed inter alia holding that the appellants prevented the exercise of the power available under Section 60 of the Transfer of Property Act, 1882. There was no proceedings pending before the Debt Recovery Tribunal on the date of filing the suit nor under Section 13(4) of the SARFAESI Act, though the appellants have already filed an application in O.A.No.261 of 2020 before the Debts Recovery Tribunal No.II, Chennai, on 08.06.2020, which was pending at the time of passing an order by the learned single Judge. It was further held that the property which is the subject matter of the suit has been mortgaged to the appellants for the dues being the subject matter of O.A.No. 344 of 2015. The suit property is also not a secured interest. The loan granted to the companies, in which, the respondents were Page 7 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 guarantors, was under a different contract. The respondents cannot approach Debt Recovery Tribunal in the absence of the proceedings initiated under Section 13(4) of the SARFAESI Act. On facts, a finding has been given that the redemption of documents by the appellants is without any legal basis.
3.Submissions of the learned counsel for the appellants:
The very suit itself is a counter blast and an after thought to negate the fruits of the order and the consequential recovery in O.A.No.344 of 2015. Section 25 of the RDDBFI Act provided for recovery of any asset pursuant to any order passed by the Debt Recovery Tribunal-II, Chennai, on 14.03.2019 and only thereafter, the respondents made the offer. The very sanctioning of the loan itself was through deceit by misrepresentation by the respondents. The factum of non performing asset of the accounts of the two companies and the respondents being the guarantors of the loan has been suppressed deliberately while obtaining a sanction. The proceedings were also initiated under the SARFAESI Act. Even at the time of passing an order, the suit proceeding which was initiated already was pending. The learned single Judge was placed with all the facts. The respondents have suppressed the material facts in filing the suit. The account of the respondents was closed and it was declared as non performing asset on Page 8 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 16.11.2019. It is not as if, the respondents are remediless as could be seen seeking a prayer in the pending proceedings in O.A.No.261 of 2020. In support of his contention, the learned counsel has rightly relied upon the following decisions.
1. State Bank of India Vs. Allwyn Alloys Pvt. Ltd. And Others (2018 (5) CTC 225);
2. Sree Anandhakumar Mills Ltd. Vs. Indian Overseas Bank and Others (MANU/SC/0638/2018);
3. R.Subramanian Vs. The Hong Kong and Shanghai Banking Corporation Ltd. And Others (MANU/TN/0959/2018);
4. V.Thulasi Vs. Indian Overseas Bank (MANU/TN/1939/2011);
5. Sri Chandra and S.Chitra Vs. K.Nagarajan and Others (MANU/TN/1517/2012); and
6. Ranganath Raju Vs. Bank Of India (MANU/OR/0361/2006).
4. Submissions of the learned counsel for the respondents:
The Cause of action being the bundle of facts has arisen prior to the initiation of the action under the SARFAESI Act by the appellants. As Section 13(4) of the SARFAESI Act does not provide for any relief unless the bank initiates any action, the respondents were left with no other remedy as right of redemption would be taken away. The existence of the relief before the Debt Recovery Tribunal has got exhausted and in any case, taken away the power of the Page 9 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 trial court which is plenary in nature. The relief sought for cannot be granted as there is no connection between the facts governing the present case and the one decided earlier by the Tribunal. Therefore, there is no need to mention the facts which are not relevant. The respondents wanted to show their bona fides in foreclosing the loan. To butress his submissions, the learned Senior Counsel has made substantial reliance upon the decision of the Honble Apex Court in Indian Bank Vs. ABS Marine Products (P) Ltd., ((2006) 5 Supreme Court Cases 72) as approved in Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation ((2009) 8 Supreme Court Cases 646). Incidentally the following decisions were also relied upon.
1. Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation ((2009) 8 Supreme Court Cases 646);
2. Robust Hotels Pvt. Ltd. And Others Vs. EIH Ltd. And Others ((2017) 1 SCC 622);
3. Indian Bank Vs. ABS Marine Products (P) Ltd. (2006 (5) SCC 72);
4. VCK Share & Stock Broking Services Ltd. Vs. Bank of Rajasthan Ltd. ((2011) 2 Cal LT 525);
5. State Bank of India Vs. Jayanthi and 2 Others (2011 (2) CTC 465);
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6. Housing Development Finance Corporation Ltd. (HDFC Ltd.) & Anr. Vs. Dorjee Dolma Bhutia and Ors. ((2015) 4 CLT 108);
7. Bank of Rajasthan Lts. Vs. VCK Shares and Stock Broking Services Ltd. ((2015) 13 SCC 635);
8. Hindon Forge Pvt. Ltd. Vs. State of Uttar Pradesh (2018 SCC Online SC 2298);
9. Shakeena and Another Vs. Bank of India and Others (2019 SCC Online SC 1059);
10. Pyari Devi Chabiraj Steels Pvt. Ltd. Vs. Axis Bank Ltd. (2020 SCC Online Cal 535); and
11. Bank of Baroda Vs. Gopal Shriram Panda and Another (2021 SCCOnline Bom 466).
5.DISCUSSION:
5.1.The foundational facts are not in dispute. The respondents were guarantors of the loan, which was the subject matter of the credit facilities which were not repaid, followed by declaration as non performing assets. The respondents are also the parties in O.A.No.344 of 2015. Thus, they also suffer an adjudication against them for a huge amount of dues. It is only during the pendency of the suit proceeding, they obtained a house loan. The offer to foreclose the said loan is also after the conclusion of the said proceedings on 14.03.2019. Page 11 of 17
https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 Thus, only when the original application filed in O.A.No.344 of 2015 was allowed, the respondent made an offer by way of letter dated 01.07.2019 to close the house loan. There is absolutely no reference about the earlier proceedings against O.A.No.344 of 2015 in the plaint. O.A.No.344 of 2015 was allowed admittedly and one of the prayers sought for is a direction to the respondents to declare their movable and immovable assets by way of filing an affidavit before the Debt Recovery Tribunal No.II, Chennai.
5.2.We have already noted the scope and ambit of Section 25 of the RDDBFI Act, which facilitates recovery of debt determined by the Debt Recovery Tribunal No.II, Chennai. For doing so, it is well open to the Recovery Officer to seek an attachment of sale of movable and immovable properties of the defendants. Therefore, the suit property would anyway be liable either for sale or attachment to give effect to the order passed by the Tribunal in O.A.No.344 of 2015. The Respondents clearly anticipated the trouble which made them to sell off the house through the foreclosure of the House Loan. Initiation under the SARFAESI Act is also consequential and much anticipated. The cause of action in a suit consists of bundle of facts. If these facts are proved in favour of the plaintiffs entitling them to a decree, they can be called as such. Therefore, they Page 12 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 are material facts. In the case on hand, the respondents not only managed to obtain loan, but notwithstanding the pending proceedings sought for foreclosure after O.A.No.344 of 2015 was allowed. There is also no question of foreclosing the loan, which has already been declared as non performing asset, though it is well open to the respondents to contend that they have the right to seek for redemption of mortgage. We may note that the suit is not only for a direction but also for permanent injunction. Even though notice under Section 13(2) of the SARFAESI Act was issued, subsequently, the respondents know that the writing was on the wall. This we can see through the injunction application filed. The prayer for injunction would take away the right of the appellants to initiate action under the SARFAESI Act. The notice also indicates the date of foreclosure as 16/11/2019.
5.3.The learned single Judge, in our considered view, is not correct in holding that the lis involved in this present suit and the one decided in O.A.No.344 of 2015 are different. Though while dealing with an application filed seeking to invoke Order VII Rule 11 of Code of Civil Procedure, one has to see the averments in the plaint alone, the admitted facts being relevant are to be looked into. The conduct of the parties are also relevant. The learned single Judge ought to have taken into consideration the pendency of O.A.No.261 of 2020 before the Page 13 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 Debt Recovery Tribunal-II, Chennai, which is subsequent to the suit. We may note that account was closed as non performing assets even much prior to the filing of the present suit. Perhaps, therefore the present suit being prior in point of time and the respondents cannot go remediless, has got no factual basis. We do not wish to speculate on the real intendment of the respondents in going for the house loan and thereafter expressing their desire to foreclose it when they are liable to pay substantial amount of money to the very same bank in an earlier proceeding. On perusal of the plaint, we find that it is the very case of the respondents that intending purchaser withdrew his offer and so also his bank. If the respondents want to be good Samaritans, they should have shown it in the first proceeding initiated and concluded in O.A.No.344 of 2015. The respondents also admitted in their plaint that they were unable to comply with the agreed terms in making repayment though reasons have been assigned for it. We are constrained to go into the factual aspects in view of the findings rendered by the learned single Judge and also to support our ultimate conclusion though we are conscious on the role to be played at this stage.
5.4.Number of decisions have been quoted at the Bar. We have no hesitation in holding that the object of the SARFAESI Act and RDDBFI Act is Page 14 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 to provide a clear mechanism for recovery of dues in public interest. We are also conscious of the fact that in a given situation, a suit may be maintainable. Suffice it is to state that this is not a case where a suit is permitted to go on with a main prayer for permanent injunction along with an application for temporary injunction qua the suit property.
6.CONCLUSION:
6.1.Thus, on an analysis of the above, we are unable to sustain the order of the learned single Judge. However, while allowing this original side appeal and the application filed in O.A.No.1031 of 2020 by striking of the plaint in C.S.No.715 of 2019, we leave all the issues open by taking note of the pendency of the proceedings in O.A.No.261 of 2020 on the file of Debt Recovery Tribunal-
II, Chennai. We expect the Debt Recovery Tribunal-II, Chennai, to decide the application in O.A.No.261 of 2020 on its own merit and therefore, our observations are prima facie having no bearing. The respondents are also given liberty to file appropriate applications, if so advised.
6.2.The Original Side Appeal stands allowed. Consequently, O.A.No.1031 of 2020 is also allowed and the order of the learned single Judge Page 15 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 stands set aside. The plaint in C.S.No.715 of 2019 is directed to be struck off. No costs. Connected civil miscellaneous petition is closed.
(M.M.S., J.) (R.N.M., J.) 10.08.2021 Internet : Yes raa To The Sub Assistant Registrar, Original Side, High Court, Madras.
Page 16 of 17 https://www.mhc.tn.gov.in/judis/ O.S.A.No.37 of 2021 M.M.SUNDRESH,J.
and R.N.MANJULA,J.
(raa) Pre-Delivery Judgment in O.S.A.No.37 of 2021 10.08.2021 Page 17 of 17 https://www.mhc.tn.gov.in/judis/