Karnataka High Court
V Subbanna vs Chief Manager Canara Bank on 15 November, 2024
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NC: 2024:KHC:46447
WP No. 23545 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 15TH DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE V KAMESWAR RAO
WRIT PETITION NO.23545 OF 2021 (GM-RES)
BETWEEN:
1. V SUBBANNA
S/O. LATE VENKATARAYAPPA,
AGED ABOUT 68 YEARS,
2. V. PARVATHAMMA
W/O. LATE. V DODDAPPA
AGED ABOUT 63 YEARS
BOTH ARE RESIDING AT
CHIKKANAHALLI VILLAGE,
VIJAYAPURA HOBLI,
DEVANAHALLI TALUK,
BANGALORE RURAL DISTRICT - 562 135
...PETITIONERS
(BY SRI. CHANDRAPPA V, ADVOCATE)
Digitally
signed by K G AND:
RENUKAMBA
Location:
High Court of 1. CHIEF MANAGER
Karnataka CANARA BANK, ARM BRANCH,
NO.86, M.G.ROAD,
BANGALORE - 560 001
2. MANAGER,
CANARA BANK
VIJAYAPURA BRANCH,
VIJAYAPURA, DEVANAHALLI TALUK,
BANGALORE RURAL DISTRICT - 562 135
...RESPONDENTS
(BY SRI. RUKKOJI RAO H S, ADVOCATE FOR R1;
R2 IS SERVED)
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NC: 2024:KHC:46447
WP No. 23545 of 2021
THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH LETTER/ORDER
ANNEXURE-A DATED 24.11.2021 ISSUED BY THE
RESPONDENTS TO CONSIDER THE EARLIER PROPOSAL MADE
BY THE RESPONDENTS AS PER ANNEXURE-J AND ALSO LETTER
DATED 07.10.2021 AND ETC.
THIS PETITION COMING ON FOR PRELIMINARY HEARING
THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO
ORAL ORDER
The present petition has been filed by the petitioners with the following prayers:
WHEREFORE, the petitioners pray that this Hon'ble Court be pleased to-
a) Issue a Writ of certiorari to quash letter/order ANNEXURE-A dated 24.11.2021 issued by the respondents to consider the earlier proposal made by the respondents as per ANNEXURE-J and also letter dated 07.10.2021.
b) to grant such other relief/s as this Hon'ble Court deems fit, in the interest of justice and equity.
2. The learned counsel for the petitioners state that the respondents have sanctioned a loan of Rs.29,00,000/- (Rupees Twenty Nine Lakhs only) to the petitioners. He states that, on 24.04.2018, a One-Time Settlement scheme was issued. According to him, the -3- NC: 2024:KHC:46447 WP No. 23545 of 2021 respondents have agreed for a One-Time Settlement of Rs.35,00,000/- (Rupees Thirty-Five Lakhs only). The petitioners with great difficulty paid a sum of Rs.8,00,000/- (Rupees Eight Lakhs only) on 24.08.2021 and Rs.2,00,000/- (Rupees Two Lakhs only) on 26.08.2021.
3. He also states that, the respondents have agreed that, the petitioners may pay Rs.39,00,000/-
(Rupees Thirty-Nine Lakhs only) as One-Time Settlement and in fact they paid an amount of Rs.3,00,000/- (Rupees Three Lakhs only) on 27.10.2021, but the respondents have now issued the impugned communication dated 24.11.2021 which reads as under:
"Sub: Your request for OTS offer of Rs 39.00 Lakhs of Mr.Subbanna V and Mrs. Parvathamma V-Rejection information Ref: Your offer letter dated 07.10.2021 This bears reference to the above. You have offered an OTS amount of Rs 39.00 Lakhs on 07/10/2021. On placing the OTS proposal before the committee the committee has rejected the proposal as under -4-
NC: 2024:KHC:46447 WP No. 23545 of 2021
1. The loan granted to the party is Rs 29.00 lakhs. Therefore value of security is to be reckoned for OTS purpose.
2. The realizable value of the security is Rs 15.97 crores as against our contractual dues of Rs 1.09 crores. As per policy the minimum amount recoverable is book liability + interest @ (MCLR + 1.50 %) In view of the above, we request you to increase the OTS amount equal to or more than Rs 81.00 Lakhs. Hence the proposal is lodged at our end.
You are also at liberty to take back your upfront amount deposited with us, if no above mentioned improvement is possible from your end. Incase, you are not improving the OTS offer substantially within a reasonable time, we reserve our all legal rights to proceed legally through DRT for sale of lands etc."
4. According to him, the said communication is not tenable in view of the facts contended by him.
5. On the other hand, learned counsel for the respondent has justified the impugned communication and also state that, the respondent had initiated action against the petitioners before the Debt Recovery Tribunal for recovery of amount and DRT has allowed OA filed by the -5- NC: 2024:KHC:46447 WP No. 23545 of 2021 Bank and pursuant thereto recovery proceedings have been initiated.
6. The short question is, whether the prayer as sought by the petitioners can be granted. In effect, the petitioners are seeking a direction from the Court against the respondent to consider the earlier proposal made by the respondent for settlement.
7. The law in this regard is well settled by the Hon'ble Supreme Court in the case of BIJNOR URBAN COOPERATIVE BANK LIMITED, BIJNOR AND OTHERS VS. MEENAL AGARWAL AND OTHERS in Civil Appeal No. 7411 of 2021 decided on 15.12.2021 reported in (2023) 2 SCC 805, wherein the Hon'ble Supreme Court has held that, no borrower can, as a matter of right, pray for grant of benefit of/under One-Time Settlement scheme. The relevant paragraphs of the judgment are reproduced as under:
"8. Therefore, as per the guidelines issued, the grant of benefit of OTS Scheme cannot be prayed as a matter of right and the same is subject to fulfilling -6- NC: 2024:KHC:46447 WP No. 23545 of 2021 the eligibility criteria mentioned in the scheme. The defaulters who are ineligible under the OTS Scheme are mentioned in Clause 2, reproduced hereinabove. A wilful defaulter in repayment of loan and a person who has not paid even a single instalment after taking the loan and will not be able to pay the loan will be considered in the category of "defaulter" and shall not be eligible for grant of benefit under the OTS Scheme. Similarly, a person whose account is declared as "NPA" shall also not be eligible. As per the guidelines, the Bank is required to constitute a Settlement Advisory Committee for the purpose of examining the applications received and thereafter the said Committee has to take a decision after considering whether a defaulter is entitled to the benefit of OTS or not after considering the eligibility as per the OTS Scheme. While making recommendations, the Settlement Advisory Committee has to consider whether efforts have been made to recover the loan amount and the possibility of recovery has been minimised, meaning thereby if there is possibility of recovery of the amount, either by initiating appropriate proceedings or by auctioning the property mortgaged and/or the properties given as a security either by the borrower and/or by guarantor, the application submitted by the borrower for grant of benefit under the OTS Scheme can be rejected.
14. The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively -7- NC: 2024:KHC:46447 WP No. 23545 of 2021 grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS scheme and the guidelines issued from time-to-time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove."
8. The said judgment has been followed by the learned Single Judge of this Court in the case of M/S H P S AND SONS VS THE AUTHORIZED OFFICER OF STATE BANK OF INDIA AND ANOTHER in W.P.No.101265 of 2024 decided on 23.07.2024, wherein the learned Single Judge in paragraph Nos.1 to 6, has held as under:
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1. The captioned writ petition is filed by the petitioner assailing the impugned e-auction/sale notice dated 05.02.2024 (Annexure-A) issued by the respondent-
bank under Rule 8 of the Security Interest (Enforcement) Rules, 2002. Consequently, a mandamus is sought to consider the loan account for one time settlement.
2. Time and again, the Hon'ble Apex Court has held that this Court should not entertain actions initiated by secured creditors against defaulters under the provisions of the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
3. The Division Bench of this Court, in W.A. No. 1305/2021 disposed of on 23.12.2021, took cognizance of the judgment rendered by the Hon'ble Apex Court in K. Virupaksha and another vs. State of Karnataka(2020) 4 SCC 440). The Division Bench held that the SARFAESI Act is a complete code in itself, providing the procedure to be followed by the secured creditor. The Division Bench further held that the SARFAESI Act also provides remedies for borrowers. The Hon'ble Apex Court in the case of K. Virupaksha (supra) noted the authority vested with the Debt Recovery Tribunal (DRT) under sub-section (3) of Section 17 of the SARFAESI Act. The Court held that the Legislature, by including sub- section (3) in Section 17 of the SARFAESI Act, vested the DRT with the authority to set aside transactions, including sales, and restore possession to the borrower in appropriate cases. Therefore, the Apex Court has strongly discouraged High Courts from entertaining writ petitions -9- NC: 2024:KHC:46447 WP No. 23545 of 2021 challenging orders passed under the provisions of the SARFAESI Act, which fall within the jurisdiction of the DRT.
4. The principles laid down by the Apex Court in the aforementioned judgment, followed by the Division Bench, bind this Court. The possession notice issued by the respondent/Bank falls squarely within the domain of Section 17 of the SARFAESI Act. Consequently, the petitioner should not have approached the writ Court to challenge the impugned order.
5. The petitioner's grievance in the captioned petition is that the petitioner's OTS application is rejected by impugned endorsements, which are arbitrary and the respondent-authorities have not adverted to the bonafide offer made by the petitioner. This Court has given its anxious consideration to the grounds urged in the petition. Under OTS scheme, the petitioner-borrower cannot dictate the terms of settlement. The Hon'ble Apex Court in the case of Bijnor Urban Cooperative Bank Limited, Bijnor and Others vs. Meenal Agarwal and Others (2021) SCC Online SC 1255) has held that no borrower, as a matter of right, can claim the benefit of OTS scheme and no writ of mandamus can be issued by the Courts in exercise of powers under Article 226 of the Constitution of India directing the financial institution/bank to positively grant a benefit of OTS to a borrower. The grant of benefit of OTS Scheme is subject to the eligibility criteria and the guidelines issued from time to time.
6. The grounds urged in the captioned petition are totally misconceived and this Court under the garb of judicial
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NC: 2024:KHC:46447 WP No. 23545 of 2021 review cannot direct the secured creditor/bank to accept the offer made by the borrower. Therefore, no indulgence can be granted. Consequently, a mandamus to direct the respondent-Bank to consider OTS also cannot be acceded to, in the light of the observations made supra. Accordingly, this Court passes the following:
ORDER i. The writ petition is devoid of any merits and is accordingly dismissed.
ii. However, it is made clear that this order will not preclude the petitioner from availing remedies as provided by law.
iii. The Registry is directed to return the original documents after securing photocopies.
iv. In view of disposal of the petition, pending interlocutory applications, if any, do not survive for consideration and are disposed of accordingly.
9. The submission of the learned counsel for the petitioners is that, the benefit of the scheme has been given to the other persons and denied to the petitioners.
The plea is unmerited, in view of the settled position of law, noted above wherein the Hon'ble Supreme Court has clearly held that, no writ of mandamus can be issued by
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NC: 2024:KHC:46447 WP No. 23545 of 2021 the High Court in exercise of the powers under Article 226 of the Constitution of India, directing Financial Institution/Bank to positively grant the benefit to the OTS to the borrower.
10. That apart I find, no pleading has been made in that regard in the petition.
11. In any case, in view of the settled position of the law, the present petition is without merit. The same is dismissed.
12. No Costs.
Sd/-
(V KAMESWAR RAO) JUDGE SMC List No.: 1 Sl No.: 12