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2020 DIGILAW 353 (AP)

Ch. Uma Maheshwari v. State Bank of India

2020-05-12

D.RAMESH, RAKESH KUMAR

body2020
ORDER : Rakesh Kumar, J. 1. The petitioners herein, whose loan accounts were declared as Non Performing Assets (NPAs) long back in the year 2009 and thereafter under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) demand notices were issued in the year 2009 itself, have succeeded in keeping the litigation alive till date, despite the fact that twice earlier they approached this Court invoking the Writ jurisdiction and, on both occasions, they did not get favourable orders. This is the third attempt. 2. Petitioner No.1 had obtained loan of Rs.4,00,000/-vide Loan Account No.30011043530, on 30.07.2005, from the respondent-bank and created mortgage by way of depositing title deeds and also personal guarantee of 2nd petitioner. Similarly, 2nd petitioner had obtained loan of Rs.4,00,000/-vide Loan Account No.30011041033, on 25.07.2005, and created mortgage by depositing title deeds and also secured personal guarantee of 1st petitioner. Since both the loan accounts remained irregular, in the year 2009, both accounts were declared NPAs, and demand notices were issued to both the petitioners. Despite issuance of notices, the said accounts were not settled and as such under Section 13(4) of the SARFAESI Act, possession notices were issued on 11.08.2009 and thereafter sale notice too was issued. Petitioners thereafter filed S.A. No.25 of 2011 before the Debts Recovery Tribunal (for short, ‘the DRT’), Visakhapatnam, challenging the sale notice, which was dismissed by the DRT, Visakhapatnam, on 11.12.2012. The order of the DRT, Visakhapatnam, was challenged by the petitioners vide S.A. No.74 of 2013 before the Debts Recovery Appellate Tribunal (for short, ‘the DRAT’), Kolkata, which also stood dismissed on 05.12.2017. Since respondent-bank had already issued 2nd sale notice, dated 07.01.2013, because of the fact that earlier sale was not materialized pursuant to the sale notice, dated 22.01.2011, before final order was passed by the DRAT, Kolkata, the petitioners had preferred a Writ Petition vide W.P. No.1520 of 2016, wherein a prayer was made for expeditious disposal of S.A. No.74 of 2013. As stated in the Writ Petition, the said Writ Petition was disposed of directing the petitioners to move DRAT. As stated in the Writ Petition, the said Writ Petition was disposed of directing the petitioners to move DRAT. After dismissal of S.A. No.74 of 2013, the petitioners again filed a Writ Petition vide W.P. No.42025 of 2017, which stood dismissed on 12.12.2017, leaving it open to the petitioners to pursue remedies available to them in law, if any, in accordance with due procedure. Despite dismissal of the Writ Petition, the petitioners again filed the present Writ Petition with the following prayer: “30. It is therefore prayed that this Hon’ble Court may be pleased to issue an appropriate writ, order or direction particularly one in the nature of writ of Mandamus declaring: (i) the notification “sale by means of sealed tender-cum-open auction” dated 07.01.2013 on 08.01.2013 in Deccan Chronicle English Daily; (ii) conformation of the sale dated 08.02.2013 and the sale certificate dated 12.02.2013 issued in favour of the respondent No.4; (iii) proceedings dated 04.10.2012 issued by the respondent No.3 as illegal, violative of Articles 14, 19(1)(g) and 300-A of the Constitution of India and the provisions of the SARFAESI Act, 2002 and the Rules framed there under; (iv) declaring that the petitioners are entitled for the benefits of OTS-2012 scheme and (v) pass such other orders as this Hon’ble Court may deem fit in the circumstances of the case.” 3. In the Writ Petition, besides arraying the bank and its officials as respondents, the petitioners also impleaded the auction purchaser as 4th respondent. By order dated 06.03.2018, while the Writ Petition was taken up for admission before notice, learned standing counsel for the respondent-bank took notices on respondent Nos.1 to 3, whereas personal notice by registered post upon respondent No.4 was directed and thereafter on 01.05.2018 since none appeared on behalf of respondent No.4, despite service of notice, the case was directed to be listed after summer vacation, 2018 and in the meanwhile it was directed to maintain status-quo, which order is still continuing. 4. In the Writ Petition, respondent-bank appeared and filed a detailed counter-affidavit. In the counter-affidavit, a preliminary objection was also raised regarding maintainability of the Writ Petition due to the reason that petitioners were having a statutory remedy under Section 17 of the SARFAESI Act. 4. In the Writ Petition, respondent-bank appeared and filed a detailed counter-affidavit. In the counter-affidavit, a preliminary objection was also raised regarding maintainability of the Writ Petition due to the reason that petitioners were having a statutory remedy under Section 17 of the SARFAESI Act. Besides preliminary objection, the respondent-bank also raised an objection of non-maintainability of the Writ Petition due to the reason the petitioners’ earlier Writ Petition vide W.P. No.42025 of 2017 was already rejected on 12.12.2017. In the counter-affidavit it has been stated that the loan amounts availed by the petitioners were of two different loans and executed security documents for the said loans. However, the mortgages created by them over their respective properties were extended to the loans and also they had given personal guarantees to the loan accounts apart from execution of individual loan agreements. The 1st petitioner availed a loan of Rs.4,00,000/-by execution of loan documents on 30.07.2005 for his business of trading in fertilizers; 2nd petitioner availed a loan of Rs.4,00,000/-by executing security documents on 25.07.2005 for doing business in pesticides. The property covered by the title deed, dated 06.07.1972, of 1st petitioner was deposited with the respondent-bank by creating equitable mortgage as security for the loan facility while extending the same to the loan facilities of the 2nd petitioner. The 2nd petitioner also deposited his title deed, dated 27.09.1982, by way of equitable mortgage as security for the loan facilities sanctioned to him and the said mortgage was also extended as security for the loan facilities of the 1st petitioner. As per the counter-affidavit, the said loan accounts of the petitioners became irregular, the same were classified as ‘NPAs’ and respondent-bank initiated recovery proceedings under the SARFAESI Act by issuing demand notices, dated 03.04.2009, calling upon the 1st petitioner to pay Rs.4,63,920.33 ps. (as on 31.03.2009) and the 2nd petitioner to pay Rs.4,61,552.91 ps. (as on 31.03.2009). Both the petitioners failed to repay the debts within the stipulated time and as such the respondent-bank had issued possession notices dated 11.09.2009, individually, to both the petitioners. Since even after publication of the possession notices, petitioners did not clear the debts, the respondent-bank issued sale notice on 22.01.2011 for sale of secured assets as one block for fetching better price as the property covered by two sale deeds of the petitioners forming together as one block of property. 5. Since even after publication of the possession notices, petitioners did not clear the debts, the respondent-bank issued sale notice on 22.01.2011 for sale of secured assets as one block for fetching better price as the property covered by two sale deeds of the petitioners forming together as one block of property. 5. The respondent-bank further stated in its counter-affidavit that sale notice, dated 22.01.2011, was challenged by the petitioners by filing S.A. No.25 of 2011 before the DRT, Visakhapatnam, however, it stood dismissed on 11.12.2012. The petitioners thereafter preferred Appeal No.74 of 2013 before the DRAT, Kolkata, which too stood dismissed on 05.12.2017, as respondent-bank had already issued 2nd sale notice, dated 07.01.2013, since the earlier sale was not materialized pursuant to the said notice, dated 22.01.2011. Against the order, dated 05.12.2017, passed by the DRAT, Kolkata, the petitioners filed a Writ Petition vide W.P. No.42025 of 2017, which stood dismissed on 12.12.2017 granting liberty to the petitioners to take appropriate measures in accordance with law. 6. It is further case of the respondent-bank that the Bank, since the petitioners had failed to repay the debts, proceeded for sale of secured assets pursuant to the notification, dated 07.01.2013, in which 4th respondent became successful bidder of the secured assets and on 12.02.2013, 4th respondent had paid entire consideration amount and thereafter on 12.02.2013 itself sale certificate was issued in favour of 4th respondent. It has been reiterated that valuation of the secured property was obtained for the 2nd time on 24.05.2012 before issuance of 2nd sale notice, while the 1st valuation report was obtained on 13.12.2010 before issuing sale notice dated 22.01.2011. It has also been specifically stated that One Time Settlement (OTS) proposal of the petitioners was not accepted by the respondent-bank and the same was informed to them by the Bank through letter, dated 04.10.2012. 7. Learned counsel for the petitioners has assailed the action of the respondent-bank on several grounds. It was emphasized by learned counsel for the petitioners that petitioners were ready for settlement of the accounts, even thereafter the respondent-bank proceeded with auction proceedings. Learned counsel for the petitioners has argued that respondent-bank has proceeded contrary to the provisions contained in Section 13(8) of the SARFAESI Act, since petitioners were ready for OTS. It has been claimed that the offer of OTS by the petitioners was never rejected. Learned counsel for the petitioners has argued that respondent-bank has proceeded contrary to the provisions contained in Section 13(8) of the SARFAESI Act, since petitioners were ready for OTS. It has been claimed that the offer of OTS by the petitioners was never rejected. However, the petitioners in Paragraph No.13 of the Writ Petition itself have stated that 1st respondent-bank had claimed regarding rejection of the OTS proposal vide communication, dated 04.10.2012 which was not correct. This statement was categorically denied by the respondent-bank in its counter-affidavit which has not been disputed by the petitioners by filing any rejoinder to the same. However, learned counsel for the petitioners has placed reliance on a judgment of the Hon’ble Supreme Court reported in Dwarika Prasad v. State of Uttar Pradesh and others (2018) 5 SCC 491 and specifically referred to Paragraph No.8 of the judgment, which is as follows: “8. Section 13(8) of the SARFAESI Act provides as follows: “13. (8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.” These provisions have fallen for interpretation before this Court in Mathew Varghese v. M.Amritha Kumar ( 2014 (5) SCC 610 ). Dwelling on Section 60 of the Transfer of the Property Act, 1882 this Court held that the right of redemption is available to a mortgagor unless it stands extinguished by an act of parties. The right of the mortgagor to redeem the property survives until there has been a transfer of the mortgagor’s interest by a registered instrument of sale. Applying these principles in the context of the SARFAESI Act this Court held as follows: “39. When we apply the above principles stated with reference to Section 60 of the TP Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant rules applicable, under Section 13(1), a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. However, under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer. Under subsection (8) of Section 13, as noted earlier, the secured asset should not be sold or transferred by the secured creditor when such tender is made by the borrower at the last moment before the sale or transfer. The said sub-section also states that no further step should be taken by the secured creditor for transfer or sale of that secured asset. We find no reason to state that the principles laid down with reference to Section 60 of the TP Act, which is general in nature in respect of all mortgages, can have no application in respect of a secured interest in a secured asset created in favour of a secured creditor, as all the above stated principles apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act.” 8. Similarly, learned counsel for the petitioners has emphatically argued that the petitioners were never given notice regarding of auction sale and on this very point, he has placed reliance on a judgment of the Hon’ble Supreme Court reported in Canara Bank v. M.Amarender Reddy and another (2017) 4 SCC 735 and also placed reliance on judgments of the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh reported in M/s. Pochiraju Industries Limited v. Punjab National Bank and others 2018 (2) ALD 543 and Kwality Agro Products, Warangal District v. Canara Bank, Madikonda Branch, Warangal District and others 2019 (1) ALD 157 (DB). 9. According to learned counsel for the petitioners, action of the respondent-bank is not sustainable and is liable to be set-aside and, petitioners are entitled for redemption on payment of the outstanding dues to the respondent-bank. 10. Learned standing counsel appearing on behalf of respondent Nos.1 to 3 by way of referring to facts disclosed in the counter-affidavit has argued that the petitioners are not entitled to invoke the writ jurisdiction of this Court in the matter since on the same count petitioners’ earlier Writ Petition i.e., W.P. No.42025 of 2017 stood dismissed. 10. Learned standing counsel appearing on behalf of respondent Nos.1 to 3 by way of referring to facts disclosed in the counter-affidavit has argued that the petitioners are not entitled to invoke the writ jurisdiction of this Court in the matter since on the same count petitioners’ earlier Writ Petition i.e., W.P. No.42025 of 2017 stood dismissed. Besides this, it has also been argued that against the relief sought for in the Writ Petition, the petitioners were having statutory remedy under Section 17 of the SARFAESI Act and as such the Writ Petition was itself not maintainable. Similarly, learned counsel appearing on behalf of 4th respondent-auction purchaser has opposed the Writ Petition and it was submitted that whatever the consideration amount was there, as per auction, 4th respondent has already deposited the same within the stipulated time and thereafter sale certificate was issued in his favour. Learned counsel for respondent No.4 has adopted the argument advanced by learned standing counsel for respondent Nos.1 to 3. 11. Besides hearing learned counsel for the parties, we have examined the entire material available on record. Fact remains that petitioners were extended loan long back in the year 2005 and since their loan accounts became irregular, same were declared as NPAs in the year 2009. In the year 2009 itself demand notices, under Section 13(2) of the SARFAESI Act, were issued and in the month of August, 2009 itself, possession notices were also issued, meaning thereby that possession of the secured property was taken by the respondent-bank. Thereafter, 1st first sale notice was issued in the year 2011, which was challenged by the petitioners before the DRT, Visakhapatnam and the same was dismissed. Against rejection of S.A. No.25 of 2011, the petitioners preferred S.A. No.74 of 2013. While S.A. No.74 of 2013 was pending, the petitioners filed W.P. No.1520 of 2016 seeking a direction for disposal of S.A. No.74 of 2013 within two (2) months, wherein a Division Bench of combined High Court of Telangana and Andhra Pradesh did not find any ground to grant direction as prayed in the Writ Petition, filed under Article 226 of the Constitution of India, however, the Writ Petition stood disposed of with an observation that if such an application is filed before the Tribunal, the Tribunal may consider and pass appropriate order for expeditious hearing of the Appeal. Subsequently, S.A. No.74 of 2013 stood dismissed, as same had become in fructuous. The petitioners thereafter without challenging the 2nd auction notice, under the provisions of SARFAESI Act, directly filed a Writ Petition before combined High Court for the State of Telangana and Andhra Pradesh vide W.P. No.42025 of 2017, which stood dismissed on 12.12.2017. The Court considers to reproduce order passed in W.P. No.42025 of 2017, which is as follows: “The HON'BLE SRI JUSTICE SANJAY KUMAR AND THE HON'BLE MS.JUSTICE J.UMA DEVI WRIT PETITION No.42025 of 2017 ORDER: (Per Justice Sanjay Kumar) Challenge in this writ petition is to the order dated 05.12.2017 passed by the Debts Recovery Appellate Tribunal at Kolkata in Appeal No.74 of 2013/231. This appeal arose out of S.A. No.25 of 2011 filed by the petitioners herein before the Debts Recovery Tribunal, Visakhapatnam. The prayer of the petitioners in the said S.A. was to set aside the sale notice dated 22.01.2011 issued by the State Bank of India proposing to hold the auction sale of the petitioners’ properties, which were offered as secured assets, on 23.02.2011. This Securitization Application was dismissed by the Tribunal on 11.12.2012. Aggrieved thereby, the petitioners approached the Appellate Tribunal by way of the aforestated appeal. As the S.A. stood dismissed, the bank issued a fresh sale notice on 07.01.2013. It appears that the petitioners filed an application in the appeal pending before the Appellate Tribunal challenging the subsequent sale notice on various grounds. It is not in dispute that the initial sale notice dated 22.01.2011 which was subjected to challenge before the Tribunal at Visakhapatnama came to naught. Significantly, the subsequent sale notice dated 07.01.2013 was never the subject matter of S.A. No.25 of 2011 before the Tribunal at Visakhapatnam and challenge thereto was raised straight away in the appeal by way of an application. Taking note of this fact, the Appellate Tribunal dismissed the appeal by the order under challenge holding that the appeal itself was rendered in fructuous as the main sale notice dated 22.01.2011 worked itself out as no sale took place pursuant thereto and the subsequent sale notice dated 07.01.2013 could not be subjected to challenge in the first instance before the Appellate Tribunal. We find no error in this reasoning of the Appellate Tribunal. We find no error in this reasoning of the Appellate Tribunal. The writ petition is therefore dismissed on this short ground leaving it open to the petitioners to pursue remedies available to them in law, if any, in accordance with the due procedure. Pending miscellaneous petitions, if any, shall also stand dismissed. No order as to costs." 12. On perusal of the aforesaid order, passed in W.P. No.42025 of 2017, it is clear that even after 2nd sale notice, which was issued on 07.01.2013, the petitioners’ Writ Petition was not entertained and same stood dismissed leaving it open to the petitioners to pursue remedies available to the in law, if any, in accordance with the due procedure. We are of the opinion that once, in the same circumstance, the Writ Petition filed by the petitioners was not entertained and dismissed, certainly, the present Writ Petition almost for the same relief cannot be entertained. 13. Since we have not examined the present Writ Petition, on merits, there is no reason to deal with the case laws, which were cited by learned counsel for the petitioners. 14. Accordingly, without going into merit of the case, we are of the considered opinion that since for the same relief earlier Writ Petition stood dismissed, there is no reason to again entertain the present Writ Petition. Besides this, had petitioners been aggrieved with the impugned action of the respondent-bank they were having a statutory remedy under the SARFAESI Act for filing an appeal. Time without number the Hon’ble Supreme Court has deprecated interference by the High Courts in such matters. 15. The Hon’ble Supreme Court in United Bank of India v. Satyawati Tondon 2010 (8) SCC 110 in Paragraph Nos.43 and 45 has observed as follows: “43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this Rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. 55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.” 16. The Hon’ble Supreme Court in Authorized Officer, State Bank of Travancore and another v. Mathew K.C 2018 (3) SCC 85 in Paragraph No.15 has observed as follows: “15. It is the solemn duty of the court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the taxpayer’s expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.” 17. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.” 17. Accordingly, in view of the law set at rest by the Hon’ble Supreme Court as well as the fact that in the present case almost in similar circumstance earlier Writ Petition was rejected, there is no reason to again entertain almost same Writ Petition and, accordingly, the Writ Petition stands dismissed. 18. As a sequel, miscellaneous petitions pending, if any, in this Writ Petition shall stand dismissed.