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2015 DIGILAW 908 (CAL)

Jagdish Sarda v. State Bank of India

2015-11-18

DIPANKAR DATTA

body2015
JUDGMENT : 1. Sunbio Technology Limited, the third respondent, is a debtor of the State Bank of India, the first respondent, having committed default in repayment of dues in excess of Rs.26 crore. The due repayment and discharge of the balance due and/or to become due under the credit facilities was secured, inter alia, by the personal guarantee of the petitioner who executed a Deed of Guarantee in his personal capacity on being approached by the third respondent for working capital credit limit to be accorded by the first respondent to the third respondent. It is claimed by the petitioner that no security interest was created by him in favour of the first respondent for grant of credit facilities to the third respondent. It is, however, not in dispute that the third respondent defaulted in making payment resulting in the loan account becoming irregular, whereafter the first respondent invoked the provisions of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter the Act). At the centre of controversy is an e-auction notice issued by the second respondent (authorized officer of the first respondent), published in The Times of India, Kolkata Edition on May 10, 2014. The impugned notice, purportedly issued in exercise of power conferred by rules 6(2) and 8(6) of the Security Interest (Enforcement) Rules, 2002 (hereafter the Rules), mentions the name of the petitioner as one of several guarantors. The notice also gives details of properties (movable and immovable) sought to be sold on auction. The basic grievance of the petitioner, ventilated in this writ petition, is that the second respondent has acted in excess of jurisdiction by disclosing the name of the petitioner in the impugned notice as a guarantor and by wrongly treating plant and machinery as movable assets, which are not required to be disclosed in terms of rule 8(6) of the Rules. 2. Mr. Dutta, learned senior advocate appearing for the petitioner contended that while framing rule 8(6) of the Rules, providing the procedure for sale of secured immovable assets, the framer in its wisdom has expressly omitted publication of the details of the borrower, which is otherwise permissible in terms of rule 6(2) thereof for sale of secured movable assets. 2. Mr. Dutta, learned senior advocate appearing for the petitioner contended that while framing rule 8(6) of the Rules, providing the procedure for sale of secured immovable assets, the framer in its wisdom has expressly omitted publication of the details of the borrower, which is otherwise permissible in terms of rule 6(2) thereof for sale of secured movable assets. Furthermore, since the description of the details of the borrower cannot affect the nature and value of the property sought to be sold, the authorized officer cannot justify the publication of the details of the petitioner (who admittedly is not the owner of the properties put up for sale) under rule 8(6)(f) of the Rules. 3. Next, Mr. Dutta referred to a form bearing no. 8 uploaded by the regional manager of the first respondent along with the attachment thereto, being the Memorandum of Deposit for creation of further charge for term loan/overall limit where the initial charge is created by way of mortgage by deposit of title deeds dated February 22, 2008, whereby one of the directors of the third respondent had, inter alia, declared that “…several landed properties of the Borrower covered by the said title deeds together with all assets permanently fixed to the lands and buildings and plants and machinery appertaining or affixed thereto shall continue to remain mortgaged to the Bank as security for and charged with the repayment to the Bank of the sum of Rs. 26,50,00,000.00 or such part thereof as might be due and owing to the Bank from the borrower…”. Relying thereon, it was contended that the plant and machinery are to be treated as immovable property and the first respondent could not have invoked the provisions of rule 6(2) of the Rules to publish and circulate the details of the petitioner to his utter prejudice. 4. It has, accordingly, been prayed that the impugned notice be set aside and the second respondent be directed to proceed in accordance with law for recovery of the secured debt. 5. The writ petition has been vehemently opposed by Mr. Joy Saha, learned advocate representing the first and second respondents. According to him, the petitioner has raised an absurd objection. It has, accordingly, been prayed that the impugned notice be set aside and the second respondent be directed to proceed in accordance with law for recovery of the secured debt. 5. The writ petition has been vehemently opposed by Mr. Joy Saha, learned advocate representing the first and second respondents. According to him, the petitioner has raised an absurd objection. The petitioner having stood as guarantor for the third respondent who defaulted in making payment of its dues and the right of the first respondent to recover its secured debt having crystallized, no illegality was committed in disclosing the names of the guarantors together with the name of the borrower since in terms of section 2(f) of the Act, a borrower also means a person who has given any guarantee. It was also contended that there is no pleading in the writ petition that every plant and machinery which is sought to be put up on auction are embedded to the earth and, therefore, no notice could have been issued under rule 6(2) of the Rules. Reliance was placed by Mr. Saha on paragraphs 29.4, 30, 31 and 53 of the decision of the Supreme Court reported in (2014) 5 SCC 610 : Mathew Varghese v. Amritha Kumar & ors., regarding the procedure to be followed by a securedcreditor to put up the secured asset for sale. In support of the contention that ‘borrower’ includes ‘guarantor’, Mr. Saha relied on the decisions reported in (2014) 1 SCC 479 : Jagdish Singh v. Heeralal and (2010) 8 SCC 110 : United Bank of India v. Satyawati Tondon. Finally it was submitted that if at all the petitioner is aggrieved by the e-auction notice issued by the second respondent, the Act itself provides a forum where the petitioner could seek remedy. Relying on the decision reported in (2001) 6 SCC 569 : O.C. Krishnan v. Punjab National Bank, it was submitted that the procedure for seeking remedy provided by the Act should not be allowed to be derailed by invoking the extraordinary writ jurisdiction of the High Court. 6. I have heard the learned advocates for the parties. 7. Before proceeding further, rules 6(2) and 8(6) of the Rules need to be read. The provisions, to the extent the same are relevant for a decision on this writ petition, are reproduced hereunder: “6. 6. I have heard the learned advocates for the parties. 7. Before proceeding further, rules 6(2) and 8(6) of the Rules need to be read. The provisions, to the extent the same are relevant for a decision on this writ petition, are reproduced hereunder: “6. Sale of movable secured assets.— (1) * * * (2) The authorised officer shall serve to the borrower a notice of thirty days for sale of the movable secured assets, under sub-rule (1): Provided that if the sale of such secured assets is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality by setting out the terms of sale, which may include,— (a) details about the borrower and the secured creditor; (b) description of movable secured assets to be sold with identification marks or numbers, if any, on them; (c) reserve price, if any, and the time and manner of payment; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of movable secured assets. * * * 8. * * * 8. Sale of immovable secured assets.— * * * (6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,— (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price, below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.” 8. The decision in Mathew Varghese (supra) dealt with a different issue i.e. the interpretation of section 13(8) of the Act read with rules 8 and 9 of the Rules, and not exactly the issue that is involved in this writ petition. 9. The impugned e-auction notice makes it clear that the same has been issued in regard to sale of movable and immovable assets charged to the first respondent under the Act and that the second respondent has taken over possession of the properties mentioned therein under section 13(4) thereof. It is thus apparent that the same is a combined notice issued under rules 6(2) and 8(6) of the Rules. Rule 6(2) enables the authorized officer of a secured creditor to cause publication of notice in two leading newspapers by setting out the terms of sale and also enables him to include therein, inter alia, details about the borrower and the secured creditor. Rule 6(2) enables the authorized officer of a secured creditor to cause publication of notice in two leading newspapers by setting out the terms of sale and also enables him to include therein, inter alia, details about the borrower and the secured creditor. Insofar as sale of immovable secured asset covered by rule 8 is concerned, sub-rule (6) ordains that the notice shall include matters covered by clauses (a) to (e) as well as any other thing which the authorized officer considers material for a purchaser to know in order to judge the nature and value of the property. Similar such clause is also discernible in clause (f) of sub-rule (2) of rule 6. 10. Despite the usual caution that is sounded in a definition clause, there is no question of the context requiring the word ‘borrower’ in clause (a) of rule 6(2) being read in a constricted manner so as to exclude a guarantor and, therefore, the authorized officer seems to be right in disclosing, inter alia, the name of the petitioner as one of several guarantors in the impugned notice. The contention of Mr. Dutta that the word ‘borrower’ in rule 6(2)(a) must mean a borrower in the plain sense and not a ‘guarantor’ is misconceived and stands overruled. 11. That apart, careful reading of clauses (f) in both rules 6(2) and 8(6) of the Rules would leave none in doubt that the authorized officer has been conferred a wide discretion by the statute to make it known to an intending bidder whatever such authorized officer in his perception considers material so as to fetch the highest price for the property put up for sale. It is obvious that the respondent no. 3 has disclosed the name of the petitioner as a guarantor without any oblique motive. Once the petitioner stood as guarantor, his liability is co-extensive with that of the principal debtor. It is noteworthy that upon consideration of the provisions of the Act in Satyawati Tondon (supra), argument raised that no steps had been taken by the bank against the borrower and the guarantor was only proceeded against did not find favour of the Supreme Court. Disclosure of the name of the petitioner as guarantor in the impugned e-auction notice does not appear to offend any statutory provision and is, thus, unexceptionable. 12. Disclosure of the name of the petitioner as guarantor in the impugned e-auction notice does not appear to offend any statutory provision and is, thus, unexceptionable. 12. Also, plant and machinery that is available on the factory premises of the third respondent need not necessarily mean equipment embedded to the earth but may also include equipment that are movable and, therefore, by issuing a combined notice under rules 6(2) and 8(6) of the Rules, the authorized officer did not act in excess of jurisdiction, as claimed by the petitioner, so as to warrant interference. 13. There is no merit in the writ petition and, accordingly, the same stands dismissed without any order for costs. 14. Since this writ petition has been decided on merits, the point raised herein and other points that were available to be raised but have not been raised are not allowed to be raised before the tribunal under section 17 of the Act, if at all it is approached in future by the petitioner. Urgent certified copy of this judgment and order, if applied for, may be furnished to the applicant at an early date.