Andhra Pradesh High Court - Amravati
Palakuru Venkatarmana, vs The State Bank Of India on 21 August, 2020
Author: C.Praveen Kumar
Bench: C.Praveen Kumar, B Krishna Mohan
HON'BLE SRI JUSTICE C. PRAVEEN KUMAR
AND
HON'BLE SRI JUSTICE B. KRISHNA MOHAN
W.P. No. 11244 of 2020
ORDER :(Per Hon'ble Sri Justice C.Praveen Kumar)
1) The present Writ Petition came to be filed seeking issuance of writ of Mandamus to declare the action of the respondents in issuing notice, dated 08.06.2020, under Section 13(4) of the SARFAESI Act read with Rule 9 of Security Interest (Enforcement) Rules, 2002, taking symbolic possession of the schedule property of the petitioner, as wholly illegal, violative of the provisions of the SARFAESI and Article 14, 21 and 300A of the Constitution of India.
2) (i) The averments in the affidavit filed in support of the Writ Petition show that, the petitioner herein availed a housing loan; while the brother's son of the petitioner availed educational loan, from the State Bank of India, Rajempet main branch, in the year 2012. For the loan obtained by his brother's son, the petitioner stood as guarantor and offered the schedule property i.e., D. No. 5/114, NGO Colony, Boyinapalli, Tallapaka Gram Panchayat, Rajampet, Kadapa, admeasuring 144.83 square yards as collateral security. The said property was also given as security for the housing loan availed by the petitioner himself. It is said that, the petitioner 2 has been paying his house loan without fail till outbreak of COVID-19 and his account was never declared as NPA.
(ii) While things stood thus, the 2nd respondent issued a notice under Section 13(2) of the SARFAESI Act stating that the account of the petitioner and the account of his brother's son have become irregular and non-performing. They were called upon to pay Rs.6,77,694/- + Rs.11,14,303/- aggregating to Rs.17,91,997/- within 60 days from the date of the notice. The petitioner is said to have received the same in the month of January 2020.
(iii) The averment in the affidavit further show that, on receipt of the said notice, the petitioner approached the 2nd respondent bank seeking details of the default committed and thereafter, gave a representation, on 29.03.2020, to 1st respondent, marking a copy of the same to 2nd respondent raising objection under Section 13(3-A) of the Act. Without giving any reply to the said representation, the 2nd respondent bank proceeded further by issuing Possession Notice under Section 13(4) of the Act, on 08.06.2020, which was received by the petitioner, on 10.06.2020. This action of the respondents is sought to be questioned in the present writ petition.
3) A counter came to be filed by the 2nd respondent bank stating that, they have not received the representation/ objection, dated 29.03.2020, to the show-cause notice issued 3 under Section 13(2) of the Act. According to the respondents, the said representation is invented for the purpose of this case. Insofar as the argument that both the loans, namely, the housing loan and educational loan, cannot be declared as non-performing asset, the respondents relied upon the guidelines issued by the Reserve Bank of India to show that the same is permissible under law.
4) Insofar as the plea relating to the alternative remedy of filing an appeal before the Debts Recovery Tribunal is concerned, since, the very initiation of the proceedings itself is said to be contrary to law, mainly, non-compliance of the mandatory provision of Section 13 (3A) of the Act, the counsel for the petitioner pleads that the Writ Petition is maintainable under Section 226 of the Constitution of India.
5) In-fact, in Shaik Janimiya v. State Bank of India, Hyderabad1, the Division Bench of the Telangana High Court while referring to the judgment of the Hon'ble Supreme Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India Limited2, discussed the principles as to the maintainability of a writ petition and held as under:-
"27.... the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.1
2020(4)ALD397(TS)(DB) 2 (2004) 3 SCC 553 4
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable.
28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any (2001) 10 SCC 740 (2004) 3 SCC 553, at page 572 11 other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks3.) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."(emphasis supplied).
6) Further, the Division Bench relied upon the judgment of the Three Judge Bench of the Hon'ble Supreme Court in State of Tripura v. Manoranjan Chakraborty4 on maintainability of a Writ under Article 226 of the Constitution of India and held as under:-
"36. So it is not an absolute rule of law that a High Court cannot exercise of it's jurisdiction under Art.226 of the Constitution of India merely because there exists an alternative remedy. It is in the nature of a self imposed restriction only. If a particular case falls in the above named exceptions, there is no bar for this Court to entertain and grant relief to the person aggrieved by the arbitrary 3 (1998) 8 SCC 1 4 (2001) 10 SCC 740 5 and unreasonable action of a State or State entity where there is grave injustice caused to a citizen".
7) In view of the above, we feel that this is a fit case where a writ petition under Article 226 of the Constitution of India be entertained.
8) It may not be necessary for us to go into the various issues raised, namely, as to whether the respondent bank was justified in attaching the property of the guarantor and also declare his housing loan as NPA, as the short point that calls for consideration here is, whether there was any violation of the statutory provisions of the SARFAESI Act?
9) Chapter-3 of the SARFAESI Act carves out a complete mechanism for enforcement of the security interest by the secured creditor. In this Chapter, Section 13 of the Act is devoted to a detailed procedure for the said purpose. Section 13 is reproduced herein below:-
"13. Enforcement of security interest. (1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as nonperforming asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the 6 secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under subsection(4).
(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of nonpayment of secured debts by the borrower.
[(3A) If, on receipt of the notice under subsection (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 one week 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 the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.] (4) In case the borrower fails to discharge his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor 7 shall take over the management of such business of the borrower which is relatable to the security or the debt;]
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt."
x x x x x x x x x x x"
10) (i) A plain reading of the above provision makes it is clear that, sub-section (1) of Section 13 begins with the non-
ostensive clause and provides for enforcement of security interest created in favour of the secured creditor without intervention of the Court or Tribunal.
(ii) Sub-section (2) of Section 13, with which, we are now concerned, provides for giving a notice by the secured creditor to the borrower, in writing, to discharge his liabilities to the secured creditors within 60 days from the date of the notice failing which the secured creditor shall exercise all or any of the rights as stated under sub-section (4).
(iii) Sub-section (3) of Section 13 states that, the notice issued under Section 13(2) shall contain the details of the amount payable by the borrower and also the details of the secured assets intended to be enforced by the financial institution. 8
(iv) Sub-section (3-A) provides that on receipt of the notice under Section 13(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 within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower.
(v) Sub-section (4) of Section 13 refers to taking recourse by the secured creditor to recover his secured debt which includes taking possession of the secured assets of the borrower.
11) From the above, it is very evident that, once a notice under Section 13(2) is issued by the secured creditor, and if a reply or objection is issued to the said notice, the secured creditor shall consider such representation or objection and pass an order giving reasons for non-acceptance of representation or objection to the borrower.
12) The question that arises now is, whether there was any representation or objection made by the borrower and, whether such representation or objection was considered by the secured creditor? There is no dispute that, a notice under Section 13(2) was issued. The said demand notice, dated 18.01.2020, was sent by registered post acknowledgment 9 due, but the same was unserved. Thereafter, the said demand notice was published in Andhra Jyothi and New Indian Express, on 30.01.2020. According to the petitioner, on 29.03.2020, i.e. within a period of 60 days, he addressed a letter to the General Manager, State Bank of India Local Head Office, Amaravati, who is the 1st respondent herein raising objections with regard to the claim of the 2nd respondent i.e. SBI, Rajempet main branch, Kadapa district.
13) But, the counsel for the respondents would submit that the said letter was invented for the purpose of this case and the same was never sent earlier. It is to be noted here that, though, the notice was said to have been published on 30.01.2020 and the petitioner came to know about the said notice on 30.01.2020 itself, he had 60 days time for giving a reply. According to him, the reply was said to have been given on 29.03.2020, by then the situation in the country was different, due to COVID pandemic. It is his case that, because of prevailing situation, it was difficult for him to send the said notice by registered post acknowledgment due as well. Hence, he e-mailed the said reply/objection to [email protected] marking a copy to [email protected]. The screen shot of the said e-mail is filed before this court, which shows the attachment of the representation/reply/objection, dated 29.03.2020. From the said forwarded message through e-mail, it is evident that, though, it was addressed to the General Manager, State Bank 10 of India, Amaravathi, who is the 1st respondent, a copy of the same was marked to [email protected].
14) A perusal of the notices sent by the 2nd respondent bank, either under Section 13(2) or 13(4) of the Act, show that, Rajempet main branch code number is 00905, meaning thereby, that the copy of the said reply was forwarded to the branch, which has issued the notice under Section 13(2). Therefore, prima facie, it cannot be said that, the respondent bank has not received the said notice. Of-course, this contingency has arisen because of the prevailing situation in the court, otherwise, the courts would have definitely insisted proof of sending reply by registered post acknowledgment due and the acknowledgment card evidencing the receipt of the same. When, once objections are raised and sent, statue demands that the bank must consider the objections with due application of mind and also give reasons for not accepting the objection, however brief they may be, communicating to the borrower thereafter.
15) In Jayant Agencies v. Canara Bank and Ors5, the High Court of Jharkhand while setting aside the proceedings issued under Section 13(4) of the Act held that, "the reason assigned for non-consideration of the petitioner's representation and non-observance of the mandatory provisions of sub-section (3−A) of Section 13 of the SARFAESI 5 AIR2011Jhar68 11 Act is not supported by the material on record and is devoid of credence. Since the provision is mandatory in nature, secured creditor cannot be allowed to refuse consideration of the borrower's representation in a casual manner. Thus, any action taken pursuant to the notice under Section 13(4) of the SARFAESI Act, as a consequence, stands abrogated. The respondent-bank shall be at liberty to proceed in accordance with law after considering the petitioner's representation".
16) Similarly, in M.R. Gawai Enterprises v. Vidarbha Urban Co-operative Bank Limited and Ors6, the Division Bench of the Bombay High Court [Nagpur Bench] while referring to the judgment of the Hon'ble Supreme Court in Mardia Chemicals Limited and Ors. v. Union of India7 allowed a writ petition filed under Article 226 of the Constitution of India, for violation of Section 13(3A) of the Act. Accordingly, directed the authorities to reconsider the objections submitted by the petitioner and deal with the matter afresh.
17) In Tensile Steel Ltd. and Ors. v. Punjab and Sind Bank and Ors.8 the Single Judge of the High Court of Gujarat after referring to the judgment of the Madras High Court in Division Electronics Limited v. Indian Bank9 allowed the writ petition, but, however, gave liberty to the 6 2004(4)ALLMR857 7 AIR2004SC2371 8 AIR2007Guj126 9 2005CLC978 12 bank to proceed under the Act after considering and deciding the reply submitted therein.
18) Having regard to the legal position and the judgments referred to above, we find that reply/objections were raised to the notice issued under Section 13(2) of the Act, and copy of the same was forwarded to the 2nd respondent, who issued notice under Section 13(2). In-spite of the same, there was no reply from the secured creditor. Hence, the notice under Section 13(4) is set-aside, giving liberty to 2nd respondent bank to proceed in accordance with law, after considering the objection/ representation, dated 29.03.2020.
19) Accordingly, the Writ Petition is disposed of. No order as to costs.
Consequently, miscellaneous petitions pending, if any, shall stand closed.
_______________________________ JUSTICE C. PRAVEEN KUMAR _______________________________ JUSTICE B. KRISHNA MOHAN Date : 21.8.2020 SM