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Gujarat High Court · body

2008 DIGILAW 137 (GUJ)

Gaurangbhai Bipinbhai Pandya v. Bank of Baroda

2008-03-18

JAYANT PATEL

body2008
Judgment Jayant Patel, J.—Rule. Ms. Nalini S. Lodha learned Counsel waives service of notice of rule for Respondent Nos. 1 and 2. 2. With the consent of the learned Counsel appearing for both the sides, the matter is finally heard today. 3. The short facts of the case appear to be that the petitioners in the respective petitions, who are husband and wife, had taken housing loan and as the loan was not paid, the proceedings were initiated before the Debt Recovery Tribunal, and ultimately, thereafter the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as to the ‘Securitisation Act’) were initiated for disposal of the property. It appears that when the process of disposal of the property was undertaken, the petitioners had challenged the action of the Bank, by preferring writ petition and the said writ petition was dismissed, against which the LPA was preferred, and the same was also dismissed being SCA No. 2004 of 2006 with 1995 of 2005, and the LPA No. 903 with 904 of 2006. However, as the liberty was given to the petitioner to offer buyer, for the higher amount by approaching before the Bank, the petitioner had submitted the offer through that buyer of the higher amount, and it is an admitted position that the money has been realised by the Bank as offered. The Bank in view of its security interest in the property, has recovered the full amount, and it is also not in dispute that the surplus amount of Rs. 16,75,890.75 ps. remained as balance with the Bank, towards action taken under the Securitisation Act. 4. The grievance of the petitioner is that it was required for the respondent Bank to return the amount of Rs. 16,75,890.75 ps. to the petitioner, but the Bank did not return the amount, and communicated to the petitioner that the amount is kept in Sundry Deposit Account, and the matter is referred to the higher authority. Therefore, under these circumstance, the petitioner has preferred the present petitions. 5. Heard Mr. Unwala learned Counsel for the petitioner, and Ms. Lodha learned Counsel appearing for the respondents. 6. Therefore, under these circumstance, the petitioner has preferred the present petitions. 5. Heard Mr. Unwala learned Counsel for the petitioner, and Ms. Lodha learned Counsel appearing for the respondents. 6. It appears that as per the respondent bank, it has right of lien as per the deed of guarantee enter into by the petitioner, on 19.01.2000, in connection with the loan transaction with M/s. Printpack Industries Limited (presently in liquidation for the sake, of convenience it shall be referred to as ‘company’) which was granted loan for the credit facility aggregating Rs. 328 lacs. It is also the case of the respondent Bank that as the amount was not paid by the aforesaid company, and the petitioners in capacity as the Director or the Guarantor, as the case may be, were required to pay, but as the amount was not paid, the OA No. 110 of 2004, for recovering of the amount of Rs. 4,93,51,692/- with the interest, and cost is filed before the Debt Recovery Tribunal, and the same is pending. It is the contention of the respondent Bank that the matter is at large pending before the Debt Recovery Tribunal and since the amount is recoverable, as per the transaction of loan with the aforesaid company, keeping in view Clause No. 8 of the deed of guarantee, the Bank is entitled to enforce right of lien over the aforesaid surplus amount of Rs. 16,75,890.75 ps. and, therefore, the direction may not be issued by this Court to refund the amount to the petitioner. It is also submitted that after filing of the petition, respondent Bank has moved appropriate application before the Debt Recovery Tribunal, in the proceedings of O.A. No. 110 of 2004, preferred against the company in liquidation for attachment of the aforesaid amount, but as the present petition is pending, the matter has remained as it is before the Debt Recovery Tribunal. Learned Counsel for the respondent Bank has also submitted that as such if the matter arise for challenging action of the Bank under the Securitisation Act, the petitioner had the remedy of approaching before the Debt Recovery Tribunal, and if the petitioner is relegated for such purpose, the very Debt Recovery Tribunal, is considering the proceedings of O.A. No. 110 of 2004, preferred against the company and also the petitioner, therefore, this Court may not exercise the power under Article 226 of the Constitution, for giving direction to the respondent Bank to return the amount. 7. Ms. Lodha learned Counsel for the respondent Bank, lastly submitted that in the event, this Court is inclined to issue direction, the rights may be kept open of the respondent Bank to seek appropriate orders from the Debt Recovery Tribunal, as may be permissible, in law. 8. The scope of the exercise of power under Article 226 of the Constitution, against the action of Bank under the Securitisation Act, is covered by the decision of this Court in case of Apex Electricals Ltd. & Ors. vs. I.C.I.C.I. Bank Ltd., reported at 2003 (2) GLR Page 1785. In the said decision after considering various contentions including on the aspect of maintainability of the petition, this Court inter alia concluded at Para 65.6, as under: “65.6 All financial institutions covered by the Act exercising statutory rights and the measures as provided under the present Act are amenable to jurisdiction of this Court under Article 226 of the Constitution of India, but as the present Act itself provides for efficacious alternative remedy by way of self-imposed restrictions, this Court would not entertain a petition challenging the action of the secured creditors of contemplating to undertake the measures as per the Section 13(4) of the Act unless the action is perverse on the face of it or it creates absurd result or situation which cannot be remedied by the forum provided under Sections 17, 18 read with the powers under Section 19 of the Act or there is inherent lack of right/power with the secured creditor.” (Emphasis supplied) 9. Therefore, if the action is with the inherent lack/power with the secured creditors, the petition under Article 226 of the Constitution is maintainable. Therefore, if the action is with the inherent lack/power with the secured creditors, the petition under Article 226 of the Constitution is maintainable. The same is coupled with the circumstance, in the present case that the respondent Bank, is nationalised Bank, which would fall within the meaning of “State” under Article 12 of the Constitution of India and therefore, also the writ can be maintained against instrumentality of the State, as covered under Article 12 of the Constitution. 10. Apart from the aspect that the respondent Bank within the meaning of Article 12 of the Constitution of India, it deserves to be examine that as to whether the action of the respondent Bank is with any right or power to retain the amount under the alleged right of lien or not. 11 .The following factual aspects are not in dispute: (a) The transaction of loan with the company and the deed of guarantee in the said loan transaction with the company are in the year 2000 and prior thereto. (b) The transaction of housing loan are of the period of on or about May, 2001, such housing loan transactions are all together different transactions by the petitioner with the bank, and the security interest created over the property, which is sold by the Bank is on account of such loan transactions for housing loan only. (c) The Bank has exercised the power under the Securitisation Act. (d) The Bank has already appropriated of the outstanding amount qua security interest created from the housing loan transaction. (e) There is surplus amount of Rs. 16,75,890.75 ps. with the bank, as the secured creditor after realisation of money, and after recovery of all dues pertaining to housing loan transaction of the security interest created thereon. 12. (d) The Bank has already appropriated of the outstanding amount qua security interest created from the housing loan transaction. (e) There is surplus amount of Rs. 16,75,890.75 ps. with the bank, as the secured creditor after realisation of money, and after recovery of all dues pertaining to housing loan transaction of the security interest created thereon. 12. In view of the aforesaid factual scenario, if the provisions of Section 13(7) of the Act, which is relevant for the purpose of the present petition, if considered, the same reads as under: “13 (7) Where any action has been taken against a borrower under the provisions of Sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the persons entitled thereto in accordance with his rights and interests” 13. It deserves to be recorded that when the Bank enforces its security interest under the Securitisation Act, it is clothed with the statutory power under the Securitisation Act. Therefore, the power so vested with the Bank under the Securitisation Act, can be construed within the scope of ambit of such power only, and it cannot be mixed up with the rights, if any, with the Bank pertaining to the different loan transaction, in different capacity based on separate agreement entered into for such purpose. If the language of Section 13(7) of the Act is considered, it provides that the secured creditor shall hold the amount in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received is required to be paid to the person entitled thereto in accordance with his rights and interests. Therefore, the secured creditor holding the money in trust, after recovery of the amount of costs, charges, expenses and the dues of the secured creditors and his dues, is required to return the residue of the money to the person concerned (the person whose, property is sold or disposed of by the secured creditors). The use of the word in Section 13(7) “in absence of any contract to the contrary” would be applicable to the contract, if any, pertaining to such property or realisation of the security interest of such property, or to such contract incidental to the principal transaction of creation of security interest or realisation of security interest. Therefore, under the act, such word “in absence of any contract to the contrary” cannot be related to any contract, which is not directly or indirectly concerned with such loan transaction, or a different contract all together pertaining to a different loan transaction, and the creation of separate security interest on account of such separate loan transaction. It is by now well settled that when any statutory powers are to be exercised by any authority or persons, clothed to exercise the power, such power can be exercised within four corners of conferment of such power. Any action beyond the scope of conferment of such power would be without jurisdiction or without any competence or authority. It further deserves to be recorded that when any power is conferred, such power can be read for taking any action, which may be incidentally required to be taken for exercise of such power, but it cannot be co-related or permitted to be transgressed beyond the scope and ambit of the very loan transaction, for which the security interest was created. 14. Therefore, it appears that on a true construction of Section 13(7), the Bank can exercise the right under the contract, if it is so conferred upon it by the loan transaction or the agreement pertaining thereto through which, the security interest is created or any incidental thereto. Such use of the language “in absence of any contract to the contrary” cannot be related to altogether different contract of different loan transaction or different property altogether. 15. Such use of the language “in absence of any contract to the contrary” cannot be related to altogether different contract of different loan transaction or different property altogether. 15. There are two additional circumstances, as expressly made clear by the legislature under Section 13(7) of the Act, one is that such amount is to be held by the secured creditors in trust, therefore, capacity to hold the amount is like the trustees, and the second is that it is mandated by the legislature by using word “shall be paid to the person entitled thereto” for payment of the residue of the amount. Therefore, in view of the specific word used by the legislature in the later part of the Section 13(7) so far as return of the money is concerned, the strict interpretation is called for and it cannot be inter mixed with the other rights of the secured creditors, pertaining to other contract of different loan transaction. It is hardly required to be stated that the person holding money in fiduciary capacity owes more responsibility and accountability, and he cannot inter mixed his personal rights to the money held by him in fiduciary capacity. Therefore, if the secured creditor who is holding the position of the trustee is required to retain money of the surplus amount, he cannot be permitted to retain money or appropriate money or permitted to exercise any so-called right based on separate transaction of loan of separate property, which is not concerned with the loan transaction in question for which the security interest was created, and is enforced by exercising power under Securitisation Act. 16. In view of the aforesaid discussions and the observations, it appears that the respondent Bank was holding the money in trust, and was required to return the residue of the amount of Rs.16,75,890.75 ps. to the petitioner, and the action of the Bank to retain the amount under the alleged right of lien, can be said as beyond its power, since, the said alleged right of lien is based on the loan transaction with the company, which is altogether a separate loan transaction, and in such loan transaction the capacity of the petitioners are as that of the Director or Guarantor as the case may be and the company is the loanee. 17. 17. The learned Counsel for the petitioner did submit that no right of lien could be exercised for separate loan transaction altogether in the present loan transaction, for which Bank had proceeded under the Securitisation Act. In support of his contention, he relied upon the decision of Gauhati High Court in case of Tilendra Nath Mahanta vs. United Bank of India, reported at AIR 2002 Gauhati Page 1, wherein view taken by the Gauhati High Court is that the right of lien cannot be exercised under the Contract Act, for different loan transaction, but such right has to be for the very loan transaction. He also relied upon the another decision of Orissa High Court in case of Alekha Sahoo vs. Co-operative Bank Ltd., reported at AIR 2004 Orissa Page 142, for contending that such right of lien for different loan transaction over the amount of the present loan transaction cannot be enforced by the bank. 18. Whereas as per the respondent bank, in view of the deed of guarantee dated 19.1.2000 and more particularly Clause (8), it was contended that Bank has the right of lien on all securities, now or hereafter held by the bank, and all moneys now or hereafter standing to the credit with the Bank on any account or any other account. Therefore, it was submitted that the Bank could exercise the right of lien. 19. It appears to the Court that it is not necessary for this Court, in the present petitions, to examine and conclude, as to whether under the Contract Act rights of lien could be exercised by the Bank over the surplus amount of Rs. 16,75,890.75 ps. and the reason being that the Bank has received custody of the money, not on account of any contractual agreement, but on account of the power available to it under the Securitisation Act. The inbuilt mechanism of Securitisation Act, cannot be fully equated with the provisions under the Contract Act. Therefore, when in view of the aforesaid observations, it is found by this Court that Bank could not rely upon or inter mixed the other contract pertaining to separate loan transaction, while acting under Section 13(7) of the Act, it may not be required for this Court to record findings and conclusion on the aspect of right of lien under the Contract Act. 20. 20. The attempt was made by the learned Counsel for the petitioner to contend that the Securitisation Act is an Act of 2002 and when the transaction of the loan was entered into by Bank with the company and also deed of guarantee, the Securitisation Act, was not even on the statute book and, therefore, even the Bank might not have conceived the right under Securitisation Act, and amount available under the Securitisation Act. Therefore, it was submitted that the attempt on the part of the Bank to retain the amount, is only by way of afterthought and not bona fide. It was also submitted by the learned Counsel for the petitioner that in view of Section 35 of the Securitisation Act, the Act is having overriding effect and therefore, the right of lien may be under the contract or any other law for the time being enforced cannot be enforced in the present action. 21. Whereas on behalf of the respondent bank, it was submitted that in view of Section 37 of the Securitisation Act, the rights under any other law for the time being enforced of the bank, are not affected and they are saved. Therefore, it was submitted that Bank would be entitled to enforce its right of lien under the Contract Act, read with the agreement of deed of guarantee dated 19.01.2000. 22. If Section 35 of the Securitisation Act is read with Section 37 of the Securitisation Act, there cannot be any second view than that the Securitisation Act, has the overriding effect over any other law for the time being enforced, if anything is inconsistent with the Securitisation Act. Therefore, if any rights are available other than under the Securitisation Act, then they are saved. If the right arise under the Securitisation Act itself, the Securitisation Act, is to be given precedence, and such rights would prevail over the other rights. When its a matter for enforcement of the rights under the Securitisation Act, it would equally be a matter for discharging of the obligation under the Securitisation Act, and the reason being that rights of the secured creditors under the Securitisation Act, are not the rights in absolute, but by way of inbuilt mechanism under the Act, it also crates an obligation as conceived and expressly provided under the Act. In view of the. In view of the. observations and discussions, the right is conferred upon respondent bank, as the secured creditor to realise money by disposal of the property, over which the security interest has created, and obligation is also by virtues of later part of Section 13(7) to return the residue of the amount to the person concerned whose property is sold. Therefore, if the matter is covered for creation of the right and of obligation under the Securitisation Act, the same would prevail over any other rights created under any other law for the time being enforced. 23. Hence, so-called right of lien of the Bank under the Contract Act, for different loan transaction all together, cannot be read to dilute overriding effect of Section 35 of the Securitisation Act, as provided under Section 35 of the Securitisation Act. Therefore, on reconciliation provisions of Section 35 read with Section 37 of the Securitisation Act, read with the observations made by this Court for obligation created with the secured creditor to return the money under Section 13(7) of the Act, the contention of learned Counsel for the respondent Bank cannot be accepted for maintaining right of lien under the Contract Act, as against the provisions for obligation created under the Securitisation Act. 24. Learned Counsel for the respondent Bank did submit that interest may not be awarded by this Court, since Bank had only retained amount, and had not invested the amount in any FDR. It was also submitted that petition was pending and if the Bank was so directed earlier, it could have deposited the amount. Therefore, the interest may not be awarded by this Court. 25. Whereas Mr. Unwala learned Counsel for the petitioner submitted that petitioner has claimed interest at the rate of 24 percent per annum. 26. In my view the as action of the Bank is found without authority, more particularly when the money held by it was as the trustees. The lawful obligation was created to return money, but if not returned, the interest by way of compensatory measure is required to be awarded. The fact remains that Bank has retained money and has enjoyed money, and the petitioners are deprived of the legitimate amount of interest at the rate prevailing for the minimum investment of one year in all Nationalised bank. The fact remains that Bank has retained money and has enjoyed money, and the petitioners are deprived of the legitimate amount of interest at the rate prevailing for the minimum investment of one year in all Nationalised bank. Hence, I find that by way of compensatory measures, the interest can be awarded at the rate of 8 percent per annum. Therefore, the said contention of learned Counsel for the respondent Bank cannot be accepted. 27. In view of the above, the action of the Bank of not returning amount of Rs. 16,75,890.75 ps. and of retaining the same can be said as without right, or authority and consequently the Bank will be required to return amount of Rs. 16,75,890.75 ps. with interest at the rate of 8 percent per annum, which is prevailing rate of interest on the FDR investment. As the Bank has already deposited the amount with this Court, pursuant to the order dated 18.02.2008, the petitioner would be entitled to withdraw the same from this Court. The amount of accrued interest shall be paid by the Bank to the petitioner within the period of four weeks from today by A/c payee cheque. 28. It is clarified that the aforesaid order shall not prejudice the right of the either side in the proceedings of OA No. 110 of 2004, pending before the Debt Recovery Tribunal for the loan transaction with the company, nor the same shall prejudice the right of the bank, if available, under the law for any interim order in such proceedings. Suffice to state that if such application is made, the right of both the sides as may be available in law shall remain open. 29. The petitions are allowed to the aforesaid extent. Rule made absolute accordingly. 30. Ms. Lodha learned Counsel for the respondent Bank prayed that the operation of the order of this Court be stayed for some time so as to enable respondent Bank to approach before the higher forum. 31. Considering the facts and circumstances, the said request is declined. However, it is only observed that payment if any, made shall be subject to the further orders, as may be passed by the higher forum.