Telangana High Court
Smt. Gudupati Laxmi Devi vs Canara Bank And 2 Others on 10 November, 2021
Author: Chillakur Sumalatha
Bench: Chillakur Sumalatha
HONOURABLE SRI JUSTICE UJJAL BHUYAN
AND
HONOURABLE DR.JUSTICE CHILLAKUR SUMALATHA
W.P.No.28291 OF 2021
ORDER:(Per Hon'ble Sri Justice Ujjal Bhuyan) Heard Mrs.K.Annapurna Reddy, learned counsel for the petitioner.
2. By filing this petition under Article 226 of the Constitution of India, petitioner seeks a direction to respondent No.1/Canara Bank not to take any steps against her for recovery of dues from respondent Nos.2 and 3 under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly 'the SARFAESI Act' hereinafter).
3. It appears that respondent No.2 had obtained a loan from respondent No.1/Canara Bank to which petitioner stood as guarantor. It further appears that respondent No.2 had defaulted in repayment of the loan.
4. Respondent No.1/Canara Bank invoked the provisions of the SARFAESI Act and thereafter issued notice to respondent No.2 as well as to the petitioner under Section 13(2) of the SARFAESI Act on 07.04.2021. Insofar the petitioner is concerned, the notice was addressed to her as the guarantor and she was called upon to repay to the secured creditor a sum of Rs.1,61,71,042.74, failing which it was mentioned that action under sub-section (4) of Section 13 would be taken.
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5. Petitioner submitted her objection to the above notice on 31.05.2021. In the said objection, certain factual anomalies were also pointed out, such as loan sanction date and declaration of the loan account as Non-performing Asset (NPA).
6. It is seen that on 05.08.2021, respondent No.1 again issued a notice under Section 13(2) of the SARFAESI Act stating that it was in supercession of the earlier notice dated 07.04.2021. In this notice, it was mentioned that as per the books of account, the dues payable by the borrower to the secured creditor stood at Rs.1,70,58,724.74 as on 20.07.2021. Because of persistent default of respondent No.2, the loan account was classified as NPA on 16.01.2021.
7. According to the petitioner, a fraud was committed by respondent No.2 on the petitioner alluring her to stand as guarantor for the loan availed of. Respondent No.2 is in a position to repay the loan amount in full. In such circumstances, petitioner lodged first information before the Neredmet Police Station on 08.07.2021 which has been registered as F.I.R.No.440 of 2021 for the offences under Sections 406 and 420 of the Indian Penal Code. This has also been informed to respondent No.1.
7.1 It is in the above backdrop that the present writ petition has been filed seeking the reliefs as indicated above.
8. Section 13 of the SARFAESI Act deals with enforcement of security interest. Sub-section (1) starts with a non obstante clause 3 having overriding effect over Section 69 or 69-A of the Transfer of Property Act, 1882. It says that notwithstanding anything contained in the aforesaid two provisions, any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or the Tribunal, by such creditor in accordance with the provisions of the SARFAESI Act. As per sub-section (2), in the event of the borrower defaulting in repayment of the secured debt and his account in respect of such debt is classified by the secured creditor as NPA, then the secured creditor may require the borrower by notice in writing to discharge the liabilities in full to the secured creditor. Sub-section (3) clarifies that the notice issued under sub-section (2) shall give details of the amounts payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.
9. Sub-Section (3-A) of Section 13 is relevant. For ready reference, the same is extracted hereunder:
"If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:
Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon 4 the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A".
10. From the above, it is evident that upon receipt of a notice under sub-section(2), if the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate the reasons for non-acceptance of the representation or objection to the borrower within a period of 15 days of receipt of such representation or objection. However, the proviso clarifies that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or to the court of District Judge under Section 17-A.
11. Sub-section (4) deals with a situation where the borrower fails to discharge his liability despite receipt of notice under sub-section (2). It mentions the measures available to the secured creditor to recover the secured debt, which includes taking over possession of the secured asset.
12. The provisions of Section 13 of the SARFAESI Act, more particularly that of sub-section (3-A), was gone into in detail by this court in a recent decision dated 26.10.2021 rendered in W.P.No.25503 of 2021, relevant portion of which is extracted hereunder: 5
"3. Respondents had issued notice to the petitioners on 07.08.2021 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly 'the SARFAESI Act' hereinafter). By the said notice respondent - Bank called upon the petitioners to discharge their outstanding liabilities to the tune of Rs.6,04,46,394.20 (Rupees six crores four lakhs forty six thousand, three hundred ninety four and twenty paise only) as on 31.07.2021 inclusive of interest up to 31.07.2021, within sixty days.
3.1. Petitioners submitted reply to the said demand notice on 06.09.2021. In the said reply, petitioners pointed out about the difficulties faced on account of the pandemic, which created hurdles in repayment of the loan. Therefore, request was made to the respondents to withdraw the notice issued under Section 13(2) of the SARFAESI Act, and to restructure the loan, so as to enable the petitioners to repay the same.
3.2. Grievance of the petitioners is that till date, there has been no response from the respondents.
3.3. Apprehending that coercive steps may be taken following the notice issued under Section 13(2) of the SARFAESI Act, the present writ petition has been filed.
4. Section 13 of the SARFAESI Act deals with enforcement of security interest. Sub-section (2) provides for issuance of notice by the secured creditor to the borrower for discharge of liabilities in the event of default. As per sub-section (3-A), if on receipt of notice under sub- section (2), the borrower makes any representation, or raises any objection, the secured creditor shall consider said representation or objection, and if the secured creditor comes to the conclusion that such representation or objection is not acceptable, or tenable, he shall communicate within fifteen days of receipt of such representation, or objection, the reasons for non- acceptance of the representation, or objection of the borrower.6
4.1. However, as per the proviso, the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons, shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17, or to the Court of District Judge under Section 17-A.
5. A careful analysis of sub-section (3-A) of Section 13 of the SARFAESI Act would go to show that upon receipt of notice issued by the secured creditor under sub-section (2), the borrower has a right to make a representation, or raise any objection, as to the notice so issued. If the borrower exercises that right, then, it is incumbent upon the secured creditor to consider such representation or objection. The use of the word 'shall' in sub-section (3-A) is indicative of the legislative intent of considering such representation or objection, by the secured creditor mandatory. If the secured creditor is not satisfied with the representation or objection, and finds it to be unacceptable, or untenable, he shall communicate such decision within fifteen days along with the reasons to the borrower.
6. While the statute is silent as to what happens in case of a positive decision by the secured creditor on consideration of such representation or objection, it is axiomatic that once the decision is taken either way, the same has to be communicated to the borrower, notwithstanding the fact that it would not give rise to a cause of action for moving an application either under Section 17 or under Section 17(A). But the fact remains that it would be obligatory on the part of the secured creditor to consider the representation or objection of the borrower, and then take a conscious decision one way or the other, which should be communicated to the borrower within fifteen days of receipt of such representation or objection.
7. Adverting to the facts of the present case, we find that petitioners have made a request to the respondents that in view of the unprecedented situation created by the pandemic, which has affected life and business of one and all, Section 13(2) notice may be 7 withdrawn and the loan account may be restructured. This has to be considered by the respondents by taking a reasonable and a pragmatic view, and whatever decision is taken, has to be communicated to the petitioners.
8. Let such decision be taken by the respondents within a period of fifteen days from the date of receipt of a copy of this order, and communicated to the petitioners.
9. Till such decision is taken and communicated to the petitioners, no coercive steps shall be taken by the respondents against the petitioners".
13. Thus, this court has held that whatever decision is taken by the secured creditor on the representation or objection of the borrower, whether allowed or rejected, the same has to be communicated to the borrower within the timeline specified.
14. Having regard to the above and considering the fact situation of the present case, we are of the view that it would be in the interest of justice if the petitioner is given liberty to submit a representation or objection afresh to the notice dated 05.08.2021 issued by the secured creditor under Section 13(2) of the SARFAESI Act.
15. Accordingly and in the light of the above, we grant liberty to the petitioner to file a fresh representation/objection to the notice dated 05.08.2021 issued by respondent No.1 under Section 13(2) of the SARFAESI Act. If such representation/objection is filed by the petitioner within a period of 15 days from today, the same shall be considered by respondent No.1 in accordance with law, where after it shall take a reasoned decision, which shall be communicated to the petitioner within 15 days of receipt of the representation/objection. 8 It is made clear that we have not expressed any opinion on merit and all contentions are kept open.
16. Till receipt of the decision made by respondent No.1, as above, by the petitioner, we direct that no coercive steps shall be taken by respondent No.1 against the petitioner.
17. With the above direction, the writ petition is disposed of.
18. Miscellaneous applications, if any pending, shall stand closed.
19. No costs.
____________________ UJJAL BHUYAN, J __________________________________ DR. CHILLAKUR SUMALATHA, J Date: 10.11.2021.
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