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2017 DIGILAW 611 (KER)

SIVAKUMAR. G. v. FEDERAL BANK LTD.

2017-03-29

K.VINOD CHANDRAN

body2017
JUDGMENT : The identical petitioners in both the Original Petition and the Writ Petition challenge the orders passed by the Debts Recovery Tribunal [for brevity "DRT"] in a Securitisation Application [for brevity "S.A."] filed against the proceedings taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for brevity "SARFAESI Act"], initiated by the creditor-Bank and against the Asset Reconstruction Company; the 3rd respondent in the Writ Petition, having approached the Chief Judicial Magistrate's Court. The Original Petition is against Exhibit P9 order of the DRT. 2. The petitioners admittedly availed two loans; one Cash Credit Loan and the other Housing Loan, from the respondent-Bank mortgaging residential property of the petitioners. Proceedings were initiated under the SARFAESI Act; when the petitioners approached the Tribunal under Section 17 raising various contentions. The application was numbered as S.A.477 of 2010. There was also an interim order granted in the said S.A. at the time of admission, wherein the Bank was restrained from further proceeding with the matter. The said interim order stood extended and eventually when the matter was pending, the respondent-Bank filed an application to withdraw the SARFAESI proceedings, finding certain deficiencies in the proceeding. The creditor-Bank had also transferred the security interest created in the Cash Credit loan to the Asset Reconstruction Company. The Asset Reconstruction Company also filed an application for substitution in the S.A. filed by the petitioners. The Tribunal, considering the prayer for withdrawal, was "not appreciative of the attitude of the applicants" in having objected to the withdrawal of the application. 3. The learned Counsel for the petitioners specifically refers to Section 19 of the SARFAESI Act and points out that in certain cases damage would be the necessary consequence in the event of violation of the provisions of the Act, which could be awarded by the DRT. It is also submitted that there is an application filed at Exhibit P10 for such damages, which has to be considered by the DRT. 4. Looking at Section 19, this Court is not convinced that it applies in the case of the petitioners. True, the petitioners had been proceeded against under the SARFAESI Act; against which a S.A. was filed before the DRT, in which there was a stay of further proceeding. 4. Looking at Section 19, this Court is not convinced that it applies in the case of the petitioners. True, the petitioners had been proceeded against under the SARFAESI Act; against which a S.A. was filed before the DRT, in which there was a stay of further proceeding. Admittedly the possession of the property was never taken by the respondent-Bank and, hence, there is no question of any restoration. Section 19 specifically speaks of an instance in which possession has been taken over; when there could be a direction to resume possession of the secured assets to the concerned borrowers or any other aggrieved person, in which event they would also be entitled to compensation and costs, as may be determined by the Tribunal. In the present case since there is no possession taken of the property, there is no question of resumption of the secured assets and, hence, there could also be no claim of compensation and costs. Compensation and costs would be payable only in the event of a dis-possession carried out illegally. In such circumstances, this Court is not inclined to direct any consideration of Exhibit P10. 5. The petitioners have claimed compensation for the loss of face and also the agonies suffered; having been driven to the Tribunal wherein the S.A. was pending for long years. A claim for such damages could be appropriately filed in a Civil Court; which the petitioners could take up, if they are so advised. This observation is not to be taken of this Court having found the claim to be sustainable. All the same, there is no reason why the Original Petition should be disposed of with a direction to consider Exhibit P10 application; this Court having found the claim under Section 19 to be not a valid one. 6. Be that as it may, it is pertinent that the Bank had initiated S.A. proceedings and on finding certain discrepancies, had sought for withdrawal of the same after six years. In such circumstance, the Court Fees paid by the petitioners in S.A.No.477 of 2010 has to be necessarily compensated by the respondent-Bank. It is admitted that the respondent-Bank has only transferred the security interest created in the Cash Credit loan to the Asset Reconstruction Company. The Housing Loan stands defaulted and pending recovery by the Bank. In such circumstance, the Court Fees paid by the petitioners in S.A.No.477 of 2010 has to be necessarily compensated by the respondent-Bank. It is admitted that the respondent-Bank has only transferred the security interest created in the Cash Credit loan to the Asset Reconstruction Company. The Housing Loan stands defaulted and pending recovery by the Bank. The respondent-Bank having initiated proceedings under the SARFAESI Act for recovery of dues under the Home Loan and also Cash Credit Loan and having conceded to withdraw such proceedings before the Tribunal after six years, for reason of defect in the procedure, would have to compensate the litigation against the defective proceeding. 7. Hence the respondent Bank should give appropriate deduction in the Home Loan dues, to the extent of the Court Fees paid before the DRT in S.A.No.477 of 2010. It is to be noticed from Exhibit P9 that despite the withdrawal of SARFAESI proceedings as sought for by the respondent-Bank having been allowed, the S.A. itself is pending. Exhibit P10 was filed before the Tribunal, claiming compensation under Section 19. This Court has held that Exhibit P10, based on Section 19 of the SARFAESI Act, cannot be proceeded with. All the same, the Tribunal would take up the S.A. and before closing it, direct deduction of the Court Fees paid in the S.A. by the respondent-Bank; which is a necessary consequence of the directions issued by this Court and the Tribunal would only specify the amounts to be so adjusted, which shall be from the date of filing of the S.A. The Original Petition (DRT) is disposed of with the above directions. 8. W.P.(C) No.32218 of 2016 is with respect to the proceedings taken by the 3rd respondent, Asset Reconstruction Company. There can be no infirmity found in the transfer of such assets, which is permissible under Section 5 of the SARFAESI Act. The petitioners' contention is that the withdrawal of the SARFAESI proceedings would not by itself result in the cancellation of Exhibit P1 order passed by the Tribunal in the S.A. The order passed by the Tribunal in the S.A. was only to the effect of restraining the respondent-Bank from proceeding further with the SARFAESI proceedings which was already initiated. The said proceedings have been withdrawn. The Tribunal has also reserved the liberty of the respondent-Bank/Asset Reconstruction Company to proceed afresh under the SARFAESI Act. The said proceedings have been withdrawn. The Tribunal has also reserved the liberty of the respondent-Bank/Asset Reconstruction Company to proceed afresh under the SARFAESI Act. There is hence no bar against fresh proceedings by the Bank or its assignee. 9. The petitioners also have a contention that the proceedings initiated by the 3rd respondent is not in terms of the SARFAESI Act and that the property being an agricultural land, is absolved from the proceedings under the Act. The learned Counsel for the Asset Reconstruction Company asserts that there is no such ground taken in the writ petition and that the petitioners have merely produced two documents in a reply affidavit, which, by itself, cannot prove the nature of the land. 10. There is also a contention that the transfer of secured assets is not registered. The respondent-Asset Reconstruction Company, however, submits that in paragraph 10 of the counter affidavit they have averred that the transfer of security interest has been duly registered as contemplated under the SARFAESI Act. 11. These are all contentions which could be taken by the petitioner before the DRT and it may not be proper for this Court to pre-empt such consideration under Section 17 of the SARFAESI Act. The respondents would be entitled to proceed further; but, however subject to any challenge raised by the petitioners before the appropriate forum. Leaving open all contentions of the petitioners and the respondents, W.P(C) No.32218 of 2016 would stand closed. Ordered accordingly. Parties are directed to suffer their respective costs.