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2023 DIGILAW 86 (AP)

Kanigiri Jaya Sri v. Debt Recovery Tribunal

2023-01-06

A.V.SESHA SAI, DUPPALA VENKATA RAMANA

body2023
ORDER : 1. Heard Sri G. Arun Showri, learned counsel for the petitioners and Sri Sridhar Veliveti, learned Standing Counsel for the respondent-bank, apart from perusing the material on record. 2. In the present Writ Petition, the challenge is to the order dated 12.12.2022 passed by the Debts Recovery Tribunal, Visakhapatnam, in IR(SA) No. 6315 of 2022 in SA (UN) of 2022. 3. According to the learned counsel for the petitioners, they are the children of one Sri K. Srinivasa Rao and grand children of one Sri K. Nageswara Rao and the petitioners’ grandfather died intestate in the year 2005. It is further stated that the estate of the grandfather is managed by the father of the petitioners and there is no partition among the family members. It is further averred that after the death of the grandfather of the petitioners, the father of the petitioners and his brother started cotton business under the name and style M/s KNR Cotton Enterprises in the year 2006 with the income generated from the joint family properties and incurred huge loss in the business. It is further stated that the joint family properties are also mortgaged with the 1st respondent-bank and the father of the petitioners availed CC limit of Rs. 3 Crores, without the consent of the petitioners, who are coparceners of the property. It is further stated that the petitioners instituted a Suit for partition vide O.S. No. 112 of 2021 on the file of the Court of the learned Senior Civil Judge, Guntur and the same is pending adjudication and the respondent-bank is also a party defendant to the said Suit. 4. The respondent-bank authorities initiated proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herein after referred to as “the Act”) and issued notices under sub-section (2) and (4) of Section 13 of the Act. The respondent-bank authorities issued auction sale notice dated 07.11.2022 under Rule 8(6) of the Rules framed under the Act. The respondent-bank authorities issued auction sale notice dated 07.11.2022 under Rule 8(6) of the Rules framed under the Act. The petitioners, by invoking the provisions of Section 17 of the Act, filed Securitization Application vide IR (SA) No. 6315 of 2022 in SA (UN) of 2022, for the following reliefs on the file of the Debts Recovery Tribunal, Visakhapatnam: “(a) To declare the Sale Notice for e-auction under Rule 8(6) dated 07.11.2022 which was served upon the Borrower which is illegal, arbitrary and contrary to the provisions of the SARFAESI Act, 2002 under enforcement Rules of SARFAESI Act, 2002 as void ab initio and liable to be set aside. (b) To declare that the classification of NPA of the Appellant’s account is not as per the guidelines of the RBI and procedure contemplated under law and thus the entire action as illegal. (c) Grant stay of all further proceedings under SARFAESI Act, 2002 against the schedule mentioned property described in Sale Notice dated 07.11.2022. (d) Grant such other relief or relief’s as this Hon’ble Tribunal deems fit and proper under the circumstances of the case.” 5. The Debts Recovery Tribunal heard the matter on the point of admission on 12.12.2022 and passed an order, holding that the petitioners are liable to pay the loan taken by their father and further held that the Securitization Application filed by the petitioners is not maintainable and accordingly, dismissed the Application. 6. In the above background, challenging the validity and legal sustainability of the aforesaid order passed by the Debts Recovery Tribunal, the petitioners herein have come up before this Court by way of the present Writ Petition under Article 226 of the Constitution of India. 7. According to the learned counsel for the petitioners, the order passed by the Debts Recovery Tribunal, Visakhapatnam, which is impugned in the present Writ Petition is highly erroneous and contrary to law and not authorised by the statute i.e., the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Rules framed there under and the rules framed under the Recovery of Debts and Bankruptcy Act, 1993. In elaboration, it is further contended by the learned counsel that there is no provision either under the Act or under the Rules referred to supra, which authorizes and empowers the Debts Recovery Tribunal to reject the Application filed under Section 17 of the Act at the preliminary stage and it is further submitted by the learned counsel that there is also no provision in the enactment for consideration of issue at the admission stage. 8. On the other hand, Sri Sridhar Veliveti, learned Standing Counsel for the respondent-bank, strongly resisting the Writ Petition, contends that having regard to the findings recorded by the learned Presiding Officer in the impugned order, the petitioners are not entitled for any relief under Article 226 of the Constitution of India. It is further submitted by the learned Standing Counsel that the subject properties exclusively belong to the father of the petitioners and the same are self-acquired properties. It is further submitted by the learned Standing Counsel that in view of sub-rule (3) of Rule 5 of the Debts Recovery Tribunal (Procedure) Rules, 1993, an objection raised at the admission stage by the learned Presiding Officer, cannot be faulted. 9. In the above background, now the issue that emerges for consideration of this Court in the present Writ Petition is - whether the order passed by the learned Presiding Officer, Debts Recovery Tribunal, Visakhapatnam, is sustainable and tenable having regard to the submissions of the learned counsel for the petitioners and learned Standing Counsel for the respondent-bank? 10. According to Section 17 of the Act, any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of Section 13 of the Act, taken by the secured creditor or his authorised officer, is entitled to file an application before the Debts Recovery Tribunal. According to the petitioners, they have already instituted a Suit referred to supra and the said suit is pending consideration in respect of the subject properties. It is also not in dispute that the respondent-bank is also one of the defendants in the said Suit. As per Section 37 of the Act, the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or any other law for the time being in force, renamed as the Recovery of Debts and Bankruptcy Act, 1993, are applicable to the instant proceedings. As per Section 37 of the Act, the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or any other law for the time being in force, renamed as the Recovery of Debts and Bankruptcy Act, 1993, are applicable to the instant proceedings. Procedure for filing an application is stipulated under Rule 4 of the Debts Recovery Tribunal (Procedure) Rules, 1993 and Rule 5 of the said Rules deals with presentation and scrutiny of the application. The said Rules read as follows: “4. Procedure for filing applications: (1) The application under Section 19 or Section 31-A, or under Section 30(1) of the Act may be presented as nearly as possible in Form I, Form II and Form III respectively annexed to these rules by the applicant in person or by his agent or by a duly authorised legal practitioner to the Registrar of the Bench within whose jurisdiction his case falls or shall be sent by registered post addressed to the Registrar. (2) An application sent by post under sub-rule (1) shall be deemed to have been presented to the Registrar the day on which it was received in the Officer of the Registrar. (3) The application under sub-rule (1) shall be prescribed in two sets in a paper-book along with an empty file size envelope bearing full address of the defendant and where the number of defendants is more than one, then sufficient number of extra paper-books together with empty file size envelopes bearing full address of each of the defendants shall be furnished by the applicant. 5. Presentation and Scrutiny of applications: (1) The Registrar, or, as the case may be, the officer authorised by him, shall endorse on every application the date on which it is presented or deemed to have been presented under Rule 4 and shall sign endorsement. (2) If on scrutiny, the application is found to be in order, it shall be duly registered and given a serial number. (3) If the application, on scrutiny, is found to be defective and the defect noticed is formal in nature, the Registrar may allow the party to rectify the same in his presence and if the said defect is not formal in nature, the Registrar, may allow the applicant such time to rectify the defect as he may deem fit. (3) If the application, on scrutiny, is found to be defective and the defect noticed is formal in nature, the Registrar may allow the party to rectify the same in his presence and if the said defect is not formal in nature, the Registrar, may allow the applicant such time to rectify the defect as he may deem fit. (4) If the concerned applicant fails to rectify the defect within the time allowed in sub-rule (3), the Registrar may by order and for reasons to be recorded in writing, decline to register the application. (5) An appeal against the order of the Registrar under sub-rule (4) shall be made within 15 days of the making of such order to the Presiding Officer concerned in chamber whose decision thereon shall be final.” 11. While referring to sub-rule (3) of Rule 5 of the said Rules, it is submitted by the learned Standing Counsel, Sri Sridhar Veliveti that the said provision of law enables the learned Presiding Officer to reject the application at the stage of admission. But, a reading of the above provision of law makes it manifestly clear that if the application, on scrutiny is found to be defective, the Registrar may allow the parties to rectify the same in his presence and the Registrar is authorized to allow the applicant such time to rectify the defect. Sub-Rule (4) of Rule 5 enables the Registrar to decline to register the application in the event of not rectifying the defect within the time allowed. Sub-Rule (5) enables the parties aggrieved to approach the learned Presiding Officer against the order passed by the Registrar under sub-rule (4). In the considered opinion of this Court, the aforesaid contingencies are conspicuously absent in the instant case. As seen from the impugned order, the learned Presiding Officer passed the order, declining to consider the application and fixed the liability at preliminary stage, which is not authorised under law. A perusal of the Memorandum of Securitization Application filed along with Writ Petition as a material paper, demonstrates, in clear terms, that number of objections have been taken by the petitioners against the proceedings initiated by the respondent-bank under the provisions of the Act. A perusal of the Memorandum of Securitization Application filed along with Writ Petition as a material paper, demonstrates, in clear terms, that number of objections have been taken by the petitioners against the proceedings initiated by the respondent-bank under the provisions of the Act. As mentioned supra, no provision of law could be brought to the notice of this Court, which enables the learned Presiding Officer to reject the application filed under Section 17 of the Act at the preliminary stage. The learned Presiding Officer ought to have directed to number the said Securitization Application and should have proceeded further in accordance with the procedure contemplated under the Act and Rules framed there under. 12. It is also brought to the notice of this Court by the learned counsel for the petitioners that Securitization Application came to be filed by the petitioners herein in the month of November, 2022 and also filed Interlocutory Applications, including an Application seeking stay of sale. It is also brought to the notice of this Court by the learned Standing Counsel for the respondent-bank that on 14.12.2022, the respondent-bank authorities conducted auction and the respondent-bank confirmed the same. 13. For the aforesaid reasons, the Writ Petition is allowed, setting aside the order dated 12.12.2022 in IR (SA) No. 6315 of 2022 in SA (UN of 2022 and consequently, the Securitization Application filed by the petitioners is directed to be numbered and required to be proceeded in accordance with law. Further it is made clear that all the subsequent developments after filing of the Securitization Application shall be subject to the outcome of the Securitization Application. 14. Miscellaneous Petitions, if any, pending in this case, shall stand closed.