Madras High Court
Yashumathi Doshi And Etc. vs State Bank Of Travancore on 17 August, 2007
Equivalent citations: AIR2007MAD312, AIR 2007 MADRAS 312, 2008 (1) ALL LJ NOC 58, 2008 (1) ABR (NOC) 50 (MAD), (2007) 81 CORLA 330
Author: V. Dhanapalan
Bench: V. Dhanapalan
ORDER V. Dhanapalan, J.
1. Since the orders impugned in these writ petitions and the case of the petitioners are one and the same, these writ petitions are decided by this common order. For the sake of better comprehension, they are referred to by their names.
2. Yashumathi Doshi, the petitioner in W.P. No. 25193 of 2007 is the wife of Harshad Doshi, the petitioner in W.P. No. 25194 of 2007 and these two have filed the present writ petitions seeking a certiorarified mandamus calling for the impugned communication dated 16-7-2007 of the second respondent and quash the same insofar as it relates to condition No. 2 that the possession taken over was symbolic and would be handed over to the petitioners only on "as is where is" condition and consequently direct the respondents to handover actual possession after receiving the payment of a sum of Rs. 22,38,311.47 and comply with all the other terms and conditions as set out in their acceptance contained in the impugned communication dated 16-7-2007.
3. The case of the petitioners, in short, is as under:
a. Yashumathi Doshi and Harshad Doshi were transacting with the respondent-Bank in their capacity as partners of their firm "Doshi and Doshi." One Ashok Doshi had approached the respondent-Bank seeking credit facilities for his proprietary concern by name "Premier Marketing." The petitioners had never furnished any collateral security for the facilities granted by the respondent-Bank to Ashok Doshi and as such, there is neither memorandum of deposit of title deeds nor equitable mortgage of the petitioners' property in favour of the bank. In fact, the guarantee provided for facilities were not even extended subsequently. Since there were certain disputes amongst the members of the partnership firm after 1998, the petitioners and the family of Ashok Doshi separated and probably Ashok Doshi's wife had stood in as a guarantor to avail the cash credit limits offered by the respondent-Bank. Pursuant to the retirement of Harshad Doshi as a partner, Ashok Doshi had availed cash credit facilities from the respondent-Bank to the tune of Rs. 32 lakhs which was subsequently reduced to Rs. 22 lakhs.
b. This being the position, Harshad Doshi received a letter dated 27-9-2004 from the respondent-Bank putting him on notice that the cash credit account of Premier Marketing was not managed properly. In response, Harshad Doshi sent a reply to the respondent-Bank explaining that the guarantee said to have been issued favouring the bank was not renewed and that the guarantee earlier given was long time back and that he had retired from the firm in 1998. Pursuant to this letter sent by Harshad Doshi, the respondent-Bank sent a reply to him dated 25-1 -2005 stating that he is liable in view of the equitable mortgage and guarantee agreement executed by him on 13-3-1998. Following this, Harshad Doshi addressed a letter to the respondent-Bank on 15-3-2005 seeking certain particulars from the respondent-Bank. Questioning the bank's failure to provide him with the particulars asked for by him. Yashumathi Doshi and Harshad Doshi preferred W.P. Nos. 13057 and 13058 of 2006 in which this Court directed them to file their objections under Section 13(3)A and accordingly, they filed their objections before the respondent-Bank and while so, the respondent-Bank issued a possession notice to the petitioners and took possession of the properties stated in the possession notice. However, the petitioners, with a view to put an end to the dispute with the respondent-Bank and in exercise of the rights available to them under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short "the Act"), sent a letter dated 10-7-2007 through their counsel agreeing to pay the bank on the condition of release of documents and handing over of possession by the respondent-Bank. In reply, the second respondent addressed a letter to the petitioners stating that the possession would be handed over only on "as is where is" condition since the respondent-Bank has taken only symbolic possession and this letter is impugned in these writ petitions.
4. The first respondent has filed its counter-affidavit contending mainly that:
a. the writ petitions are not maintainable in law as per the judgment of the Supreme Court in the case of Mardia Chemicals Ltd. v. Union of India and Transcore v. Union of India and respectively and as per the judgment of a Division Bench of this Court in the case of Sree Lakshmi Products v. State Bank of India reported in 2007 (2) CTC 193 : AIR 2007 Mad 148 and that the only remedy available to the petitioners is to file an appeal in the Debts Recovery Tribunal under Section 17(1) of the Act;
b. Section 13(4) of the Act deals with the rights of secured creditor to take measures to possess the secured asset including the right to sell the same and it is clear from all the above judgments that actions taken under Section 13(5) to 13(8) are also subject to appeal under Section 17(1) of the Act;
c. the actual physical possession of the subject property is within the petitioners' knowledge as they are the owner of the property and the 'property is always under lock and key whenever inspected by the respondents' representatives and in view of this, the respondents have taken only symbolic possession of the subject immovable property as per the procedure prescribed under the Act and as such, the respondents can only in turn hand over symbolic possession to the petitioners in the event of their tendering the entire outstandings to the bank;
d. the petitioners are mortgagors/guarantors of the loan availed by Premier Marketing, a proprietary concern of Ashok Doshi who is none other than Harshad Doshi's brother and in the course, of their transactions over the last twenty years, they have furnished collateral security to the respondent-Bank for the facilities availed by the Premier Marketing;
e. the petitioners have already created an equitable mortgage of their property to secure another loan with the respondent-Bank and had extended this mortgage for this loan by executing a Memorandum of Extension of Mortgage dated 14-3-1998 and the facts relating to these are the subject-matter of recovery proceedings filed by the first respondent on the file of the Debts Recovery Tribunal-II, Chennai wherein the petitioners are parties both as mortgagors and guarantors on a subsisting guarantee;
f. though it is true that the cash credit limit was reduced from Rs. 32 lakhs to Rs. 22 lakhs, the petitioners are certainly aware of these dealings in the amount of Premier Marketing and they are bound by the terms irrespective of the non-execution of a revival letter by them as no revival letter is necessary to be obtained from them under the terms of continuing guarantee;
g. while W.P. Nos. 13057 and 13058 of 2006 filed by the petitioners challenging the notice issued by the respondent-Bank under Section 13(2) of the Act were dismissed, another batch of writ petition in W.P. Nos. 37798 and 37799 of 2006 filed by the petitioners challenging the possession notice dated 21-9-2006 is pending on the file of this Court even without any interim orders being passed therein;
h. the respondents are not bound to accept the settlement offered by the petitioners and as such, they have not accepted their offer;
i. the petitioners approached the first respondent for settlement with an offer to pay the entire outstanding on the specific condition that since only symbolic possession had been taken by the respondents, only symbolic possession would be handed over to the petitioners.
j. the stand taken by the respondents to return only symbolic possession on "as is where is" basis to the petitioners is not at all peculiar while on the other hand, the question of handing over physical possession is extraneous to any proceedings or procedure contemplated under the Act;
k. the Act merely spells out the modes of taking possession of movable and immovable properties and nowhere prohibits the taking of symbolic possession of immovable property and even Section 13(8) does not spell out the handing back of possession, either symbolic or physical, in the event the borrower tendering the entire dues with costs and l. the offer made by the petitioners is not genuine but only aimed at stalling the process of sale of the subject property by the bank and if they are permitted to do this, the very purpose of the Act would be defeated and the bank is prepared to handover symbolic possession of the subject property to the petitioners on "as is where is" basis upon receipt of the entire outstanding.
5. I have given careful consideration to the submissions made by Mr. Rahul Balaji, learned Counsel for the petitioners and Mr. P.N. Radhakrishnan, learned Counsel for the respondents.
6. The learned Counsel for the petitioners has pointed out Section 13(8) which stipulates that secured creditor shall not sell or transfer the property and that no further steps shall be taken by the secured creditor to sell or transfer the same. He has contended that in the judgments of the Supreme Court and the Division Bench of this Court already referred to, it has been held the possession contemplated under the Act is actual possession and whereas the impugned order reads as if the respondent-Bank has taken only symbolic possession and hence would return symbolic possession which is not sustainable. By placing reliance on the judgments referred to above, he has contended that only Section 13(4) proceedigns will attract possession and contended that Sections 13(5) to 13(8) are not consequential provisions that flow from the taking of possession of the asset and, therefore, these judgments will not have application to the facts of this case and that the petitioners need not go before the Debts Recovery Tribunal since the writ petitions can be entertained by this Court. Lastly, he has contended that to maintain these writ petitions, Section 13(8) has to be looked into independently. In support of his contention, the learned Counsel for the petitioner has relied on a judgment of the Madurai Bench of this Court in the case of Shakeena v. Bank of India reported in 2007 (3) CTC 543 (Para 20):
...Admittedly, in this case, the conveyance is not executed. In this context, it would be appropriate to look into the decision of the Hon'ble Supreme Court reported in Narandas v. S.A. Kamtam stated supra wherein it is held that the mortgagor's right to redeem survives until there has been completion of sale by the mortgagee by a registration of sale deed. In this context, it is also relevant to refer to Sub-section (8) Section 13 of SARFAESI Act wherein it is stated that "if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditor and no further steps shall be taken by him for transfer or sale of that secured asset." The words employed in Sub-section (8) of Section 13 namely "sale or transfer" connotes execution of the conveyance/registered sale deed. Admittedly, in para 8 of the counter of the respondents 1 and 2. it is mentioned that 'sale is yet to be registered.' In this case, it is not in dispute that the sale deeds are not executed by the respondents 1 and 2 in favour of the third respondent till 17-1-2006 on which date, the respondents 1 and 2 have received the demand draft for Rs. 25 lakhs sent by the petitioner, hence, this Court is of the considered view that the petitioners right of redemption has not been extinguished.
7. The learned Counsel for the respondents, per contra, has vehemently contended that these writ petitions cannot be maintained in view of the judgments of the Supreme Court in Mardia Chemicals case and Transcore case and the judgment of a Division Bench of this Court in Sree Lakshmi Products case and a latest Division Bench of this Court reported in (2007) 4 MLJ 245 in the matter of Misons Leather Limited v. Canara Bank. He has further contended that Section 13(4) speaks of the rights of the secured creditor to take measures to possess the secured asset including the right to sell the same and that Sections 13(5) to 13(8) are consequential provisions that flow from the taking of the possession of the asset and arise out of the grievance relating to the taking of measures under Section 13(4) by the respondent Bank. By relying on the judgments referred to above, he has contended that all actions taken under Sections 13(5) to 13(8) are also subject to appeal under Section 17(1) of the Act and as such, the petitioners have to approach only the Debts Recovery Tribunal, Chennai challenging the impugned order.
8. Admittedly, the petitioners are running a partnership firm and Ashok Doshi is none other than the brother of Harshad Doshi and Yashumathi Doshi is the wife of Harshad Doshi. It appears that Harshad Doshi had retired from the partnership firm in the year 1998. The case of the petitioners that they have not stood as guarantors to the facilities extended by the respondent-Bank to Premier Marketing is a matter to be adjudicated before the appropriate forum. In that view of the matter, I am not inclined to traverse on any of the factual details placed before this Court and I am only concerned with the applicability of rulings of the Supreme Court as well as the ruling of the Division Benches of this Court with reference to Section 13(8) sustain these petitions before this Court. While the learned Counsel for the petitioners has pleaded that this Court has got jurisdiction to entertain these petitions, it is to be noted that the objects and reasons for enactment of the Act to adjudicate cases like these are very well explained and Supreme Court and this Court have taken cognizance of the matter and have decided that no borrower or guarantor or mortgagor or any other person aggrieved by the action taken under Section 13 of the Act, can approach this Court and the remedy open to them is to adjudicate the matter only before the appropriate forum which is the Debts Recovery Tribunal. Thus, the main contention raised by the learned Counsel for the petitioners that only Section 13(4) will attract possession and that Sections 13(5) to 13(8) are not consequential provisions, based on the judgments of the Supreme Court in Mardia Chemicals case, Transcore case and Sree Lakshmi Products case cannot be sustained as the subject for discussion in these cases are only Section 13(4) and not Section 13(8).
9. Since the learned Counsel on either side have relied on the following decisions and have advaned their arguments interpreting the same to their advantage and to answer the point raised in this case as to whether the measures taken under Section 13(8) of the Act are measure under Section 13(4) and the remedy is available to the petitioner only under Section 17(1) of the Act, it would be useful to refer to the relevant portions of those decisions which are as under:
i. a judgment of the Supreme Court in the matter of Mardia Chemicals Ltd. v. Union of India (para 80):
Under the Act in consideration, we find that before taking action a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debts Recovery Tribunal. The abovenoted provisions are for the purpose of giving some reasonable protection to the borrower. Viewing the matter in the above perspective, we find what emerges from different provisions of the Act, is as follows:
1. Under Sub-section (2) of Section 13, it is incumbent upon the secured creditor to serve 60 days' notice before proceeding to take any of the measures as provided under Sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion, we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act, at that stage.
2. As already discussed earlier, on measures having been taken under Sub-section (4) of Section 13 and before the date of sale/auction of the property, it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal.
3. That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition as it may deem fit and proper to impose.
4. In view of the discussion already held in this behalf, we find that the requirement of deposit of 75% of the amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down.
5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in Civil Court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the Court.
ii. a judgment of the Supreme Court in the case of Tanscore v. Union of India (para 56):
Under Section 13(8), if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charge and expenses referred to in Section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a Court receiver under Order XL, Rule 1, C.P.C. The Court receiver can take symbolic possession and in appropriate cases where the Court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorised officer under Rule 8 has greater powers than even a Court receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorised officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with 2002 Rules.
iii. a judgment of the First Bench of this Court in the case of Sree Lakshmi Products v. State Bank of India reported in 2007 (2) CTC 193 : AIR 2007 Mad 148 (para 9):
On a plain reading of the observations made in Transcore case it is clear that the bank/FI is entitled to take actual possession of the secured assets from the borrower or from any other person in terms of Section 13(4) of the SARFAESI Act. Any transfer of secured assets after taking possession of the same by the bank/FI shall vest in the transferee all rights in relation to the secured assets as if the transfer has been made by the owner of such secured assets. Any party aggrieved by such dispossession will have to take recourse to approaching the DRT under Section 17(4) of the SARFAESI Act. If the party is dispossessed, not in accordance with the provisions of the Act, then the DRT is entitled to put the clock back by restoring the status quo ante. By virtue of Section 17(4) read with Section 35 of the SARFAESI Act, if, in a given case the measures undertaken by the secured creditor under Section 13(4) come in conflict with the provisions of any State law, then notwithstanding such conflict, the provisions of Section 13(4) shall override the local law. Section 13(13) of the SARFAESI Act operates as an attachment/injunction restraining the borrower from disposing of the secured assets and, therefore, any tenancy created after such notice would be null and void. Any tenancy created by the mortgager after the mortgage in contravention of Section 65-A would not be binding on the bank/FI, and in any event such tenancy rights shall stand determined once action under Section 13(4) has been taken by the bank/FI. When the petitioner is claiming a tenancy prior to the creation of mortgage and such tenancy is disputed by the bank the remedy of the petitioner is to approach DRT by way, of an application under Section 17 of the SARFAESI Act to establish its rights.
iv. yet another first Bench judgment of this Court in the case of Misons Leather Ltd. v. Canara Bank reported in (2007) 4 MLJ 245 wherein it has been held as under:
We are afraid that the contention is totally misconceived. The provisions of Section 17(1) of the Act provides remedy for the borrower/guarantor/mortgagor to challenge the action of the Bank under Section 13(4) of the Act before the Debt Recovery Tribunal. The Debt Recovery Tribunal is required to decide whether the action of the Bank/Financial Institutions, under Section 13(4) is in accordance with the provisions of the Act and the rules framed thereunder. It is open to the borrower/guarantor/mortgagor to demonstrate before the Debt Recovery Tribunal that resort to Section 13 of the Act is not permissible by law. In a given case, the claim of the Bank/ Financial Institutions may be barred by limitation or there may be cases, where the adjustment of the amount paid is not reflected in the notice or the calculation of interest may not be in accordance with the contract between the parties. Needless to say that all such grounds, which render the action of the Bank/Financial Institutions illegal can be raised in the proceedings under Section 17 of the Act before the Debt Recovery Tribunal.
10. From the above catena of judgments, it is clear that the object for which the Act has been enacted is whatsoever the matter arising out of the purview of the Act, the forum for adiudication is the Debts Recovery Tribunal. As such, actions taken under Section 13(5) to 13(8) of the Act are measures taken after the issuance of the possession notice under Section 13(4) of the Act. Thus, it has to be naturally held that in case of the proceedings initiated under Section 13, the remedy open to the person aggrieved is only to move the Debts Recovery Tribunal of the jurisdiction concerned. In that view of the matter, the measures taken under Section 13(5) to 13(8) also come under the purview of the proper forum, viz., the Debts Recovery Tribunal of the jurisdiction concerned and accordingly, this Court has no jurisdiction to maintain these writ petitions. As far as the judgment of the Madural Bench of this Court reported in 2007 (3) CTC 543 relied on by the learned Counsel for the petitioners is concerned, it cannot be of any support to him since the context in which that case was dealt with and the question raised and answered therein are not the same in the case on hand and as such, the proposition laid down in that judgment cannot be made applicable to the present case.
In view of the above, this Court holds that there is no scope for the petitioners to maintain these petitions before this Court as they have to approach only the appropriate forum, viz., the Debts Recovery Tribunal, Chennai to adjudicate all the issues raised in these petitions. As such, this Court is not expressing any view on the merits of the case and accordingly, these writ petitions are dismissed for want of jurisdiction giving liberty to the petitioners to move the Debts Recovery Tribunal, Chennai within a period of two weeks from the date of receipt of a copy of this order and till such time, the impugned order shall be kept in abeyance. No costs. Consequently, connected miscellaneous petitions are closed.