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2025 DIGILAW 627 (AP)

Sita Mahalakshmi Rice Traders v. Canara Bank

2025-04-25

DHIRAJ SINGH THAKUR, RAVI CHEEMALAPATI

body2025
COMMON ORDER : Ravi Cheemalapati, J. Inasmuch as the parties in these writ petitions are common and the reliefs sought are interrelated, both the writ petitions are heard together and are being disposed of by this common order. 2. The contents of the petitions can briefly be summarized as under: (a) The petitioner no.1 is a partnership firm and petitioner nos.2 and 3 are its partners. The respondent bank sanctioned credit facilities including bank guarantees to the tune of Rs.3,10,00,000/- for running the business. The petitioner no.1 rice mill was mortgaged with the respondent bank as security for the liability. Pursuant to the sanction, the respondent bank issued four (04) Bank Guarantees (BGs) in favour of A.P.State Civil Supplies Corporation Limited (for short, ‘APSCSCL’) on behalf of petitioner no.1 to the tune of Rs.3,10,00,000/-, valid upto 20.12.2021. In course of business, petitioner no.1 entered into a contract with APSCSCL for delivery of Custom Milled Rice (for short, ‘ CMR’) for the Rabi season 2021-22, as per which the CMR was to be delivered by 30.11.2021, however, the same could not be delivered, since rice and paddy kept in the premises got damaged on account of Gulab cyclone. Thereafter, as APSCSCL was trying to encash BGs without passing orders on the representation of the petitioner seeking extension of time, the petitioner no.1 filed writ petition vide W.P.No.25147 of 2021. This Court passed orders on 29.10.2021 recording the undertaking given by Standing Counsel that they would not invoke BGs till 02.11.2021, which was subsequently extended upto 12.12.2022 and subsequently petitioner no.1 did not get extension of the said orders. However, the BGs were expired on 20.12.2021 and the respondent Bank also did not issue any proceedings extending the said BGs. While so, without any prior intimation to the petitioner, despite representation submitted by the petitioner on 24.3.2023 informing that writ petition stood posted to 28.3.2023 and further reminding that the BGs. stood expired by 20.12.2021, the respondent bank honoured invocation of BGs by APSCSCL on 31.03.2023. Pursuantly, the respondent bank issued letter in REF:13665/BG/CLAIM/SMLRT/2022-23, dated 31.03.2023 requesting the petitioner to refund the amount covered under the BGs. Invocation of BGs. which stood expired long prior to invocation is against the principles, therefore, the letter dated 31.03.2023 issued to the petitioner is illegal. Pursuantly, the respondent bank issued letter in REF:13665/BG/CLAIM/SMLRT/2022-23, dated 31.03.2023 requesting the petitioner to refund the amount covered under the BGs. Invocation of BGs. which stood expired long prior to invocation is against the principles, therefore, the letter dated 31.03.2023 issued to the petitioner is illegal. Fearing that the respondent bank may take coercive steps pursuant to the letter dated 31.03.2023, the petitioner filed writ petition vide W.P.No.9835 of 2023. Wherein, this Court granted interim orders directing the respondents not to take any coercive steps, which was extended from time to time and finally extended for a period of four (04) weeks on 06.10.2023 and thereafter the matter was not listed until 02.04.2024. The petitioners were under the impression that the interim orders were extended and were in force. It is the further case of the petitioners that subsequent to issuance of the letter impugned in Writ Petition No.9835 of 2023, the APSCSCL permitted petitioner no.1 to deliver CMR and accordingly the same was delivered, however, payment was not made to petitioner no.1. While things stood thus, the respondent bank filed Crl.M.P.No.93 of 2024 in C.F.No.148 of 2024 before the Court of the Chief Judicial Magistrate at Machilipatnam under Section 14(1) of SARFAESI Act seeking physical possession of petitioner no.1 rice mill, without bringing to the notice of the Court about pendency of W.P.No.9835 of 2023. The said Court by order dated 14.05.2024 had appointed commissioner for taking physical possession of the property to hand it over to respondent bank and the Commissioner affixed notice on the property. It is the further case of the petitioners that they are willing to refund the amount towards encashment of bank guarantee as and when they receive amounts from APSCSCL and the same also was intimated to the respondent bank. However, the respondent bank, with the help of Advocate Commissioner took physical possession of the property, which is an operational rice mill. Resultantly, more than 100 employees working in the rice mill lost their livelihood. It is the further case of the petitioners that invocation of BGs is against the principles, since they stood expired by the time of the said invocation. Further, the petitioners repaid an amount of Rs.3,00,00,000/-. Resultantly, more than 100 employees working in the rice mill lost their livelihood. It is the further case of the petitioners that invocation of BGs is against the principles, since they stood expired by the time of the said invocation. Further, the petitioners repaid an amount of Rs.3,00,00,000/-. However, without considering the bona fides of the petitioners, the bank issued E-auction sale notice dated 29.10.2024 for sale of immovable property, fixing date of auction as 20.11.2024 and upset price as Rs.14,27,00,000/-, which is very low. As per the said auction notice, the amount due as on that date was Rs.2,46,97,943/- with subsequent interest, out of which, an amount of Rs.1,50,00,000/- was paid. The petitioners made representation on 28.05.2024 requesting waiver of interest, on which no action was taken and without considering the same, the sale auction notice was issued. The petitioners are willing to clear off the loan amount, subject to result of W.P.No.9835 of 2023, provided the Court grants time to them. In the above circumstances, issuing E-auction sale notice without considering the request of the petitioners for waiving of the interest is wholly illegal, arbitrary and violative of Articles 14,19 and 21 of the Constitution. 3. The contents of the counter-affidavits filed by respondent bank can be summarized as under: (a) The petitioners are having alternative effective statutory remedy under Section 17 of the SARFAESI Act, but without availing the same and without impleading necessary parties, the petitioners approached this Court with distorted facts and therefore, the writ petition is liable to be dismissed on those counts. Consequent to the communication regarding invocation of all the BGs and on the confirmation given by APSCSCL that there were no subsisting stay orders restraining payment of BGs., the respondent bank, left with no other option, as there was no positive response from the petitioners, made payment of Rs.310 lakhs to APSCSCL on 31.03.2023. Accordingly, a communication was sent to the petitioners and pursuantly the petitioners filed writ petition vide W.P.No.9835 of 2023. (b) Since the petitioners have not discharged the liabilities to the respondent bank, the bank had initiated proceedings under SARFAESI Act. After following the due procedure contemplated under law and upon issuance of notice under Section 13(2) of the SARFAESI Act and after filing a petition under Section 14 of the SARFAESI Act before the concerned Court, took physical possession of the mortgaged property. After following the due procedure contemplated under law and upon issuance of notice under Section 13(2) of the SARFAESI Act and after filing a petition under Section 14 of the SARFAESI Act before the concerned Court, took physical possession of the mortgaged property. Thereafter, notice under Rule 8(6) of the SARFAESI Rules has been served, followed by a sale notice under Rule 9(1) of the Rules. The sale notice was served on the petitioners, which was also published as per Rules. The petitioners, who did not challenge the earlier notices issued under Section 13(2) of the Act and redemption notice, had challenged the e-auction notice by filing writ petition. The petitioners having made payment of Rs.3 crores after invocation of BGs had now turned around stating that invocation is contrary to law. The writ petitions bereft merits and are liable to be dismissed. 4. Heard Sri Kirthi Teja Kondaveeti, learned counsel for the petitioners, and Sri Balaji Medamalli, learned Standing counsel for respondent bank. 5. Sri Kirthi Teja Kondaveeti, learned counsel, in elaboration to the contents of the writ affidavit would contend that invocation of BGs which stood expired by lapse of time is per se illegal that too without intimating the petitioners, therefore, the consequential proceedings initiated by the bank under SARFAESI Act are liable to be quashed. The learned counsel would further contend that the respondent bank ought not to have initiated proceedings under SARFAESI Act considering the bona fides of the petitioners in attempting to clear off the dues, since they made payment of Rs.3 crores after invocation of BGs. The learned counsel would further contend that the respondent bank should have considered that damage caused to paddy and rice due to Gulab cyclone and non-payment by APSCSCL for the CMR delivered are the root cause or else there would not have been any necessity for revocation of BGs. The learned counsel would further contend that without disposing of the representation submitted by the petitioners for waiving of the interest, the bank could not have initiated proceedings under SARFAESI Act. Further, the reserve price quoted in the E-auction sale notice is very meager compared to prevailing market rate. Therefore, the E auction sale notice is liable to be set aside. Accordingly, prayed to allow the writ petitions. 6. Further, the reserve price quoted in the E-auction sale notice is very meager compared to prevailing market rate. Therefore, the E auction sale notice is liable to be set aside. Accordingly, prayed to allow the writ petitions. 6. On the other, Sri Balaji Medamalli, learned Standing Counsel for respondent bank, while reiterating the contents of the counter affidavit would contend that availability of alternative effective statutory remedy debars the petitioners from maintaining these writ petitions. The learned counsel would further contend that consent of the petitioners is not required for revocation of B.Gs. and no interim orders are subsisting as on the date of revocation of BGs. The learned counsel would further contend that the petitioners, who had made payment of Rs.3 crores subsequent to invocation of BGs., are estopped from questioning invocation. Further, the bank has nothing to do with non- payment of amount by APSCSCL and that cannot at all be a ground to seek postponement of SARFAESI proceedings. The learned counsel would further contend that there was due compliance of procedure contemplated under SARFAESI Act for issuing sale notice. The writ petitions are devoid of merits and they are liable to be dismissed. Accordingly, prayed to dismiss the writ petitions. 7. Perused the material available on record and considered the submissions made by learned counsel for the parties. 8. Admittedly, on the date of honouring the request for revocation of BGs., no restraint orders subsist. Even according to the petitioners, they made payments to the tune of Rs.3 crores pursuant to revocation of BGs and hence they are estopped from questioning the validity of revocation. Further, except a bald plea that their consent is necessary for revoking the BGs., they failed to specify any specific clause or Rule in support of the said contention defying the specific contention raised by the respondent bank that there is no need to obtain any consent. Therefore, we are unable to find any merits in writ petition vide W.P.No.9835 of 2023 and consequently the same is liable to be dismissed. 9. Through the writ petition vide W.P.No.26900 of 2024, the petitioners are assailing issuance of E auction sale notice, dated 29.10.2024, inter alia on the ground that reserve price fixed for the property is very low compared to the prevailing market value. 10. 9. Through the writ petition vide W.P.No.26900 of 2024, the petitioners are assailing issuance of E auction sale notice, dated 29.10.2024, inter alia on the ground that reserve price fixed for the property is very low compared to the prevailing market value. 10. In Union Bank of India v. Satyawati Tondon , (2010) 8 SCC 110 , the Hon’ble Supreme Court has deplored action of High Courts in exercising writ jurisdiction ignoring availability of statutory remedies under the DRT Act and SARFAESI Act. They are extracted hereunder: “55. It is a matter of serious concern that despite repeated pronouncements 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.” 11. Of late, this Court, vide orders dated 11.07.2024, passed in Writ Petition No.14411 of 2024, held that in the absence of exceptions enumerated in the decision of the Hon’ble Supreme Court in PHR Invent Educational Society v. UCO Bank , (2024) 6 SCC 579 , the petitioners should avail the alternate remedy in terms of SARFAESI Act and further taking note of the observations referred to supra in para-55 in Satyawati Tondon (supra 1), finding no merit in the writ petition granted liberty to the petitioners to avail an appropriate remedy. 12. Therefore, availability of alternative efficacious statutory remedy provided under SARFAESI Act debars the petitioners from invoking writ jurisdiction. 13. Regarding undervaluing the property, no doubt, the petitioners can raise the said contention also before Debt Recovery Tribunal by initiating appropriate proceedings under SARFAESI Act. 14. In view of the above, we do not find any merit in writ petition No.26900 of 2024 and the same has to be dismissed. 15. Accordingly, both the writ petitions are dismissed. There shall be no order as to costs. Pending miscellaneous petitions, if any, shall stand closed.