Dismissed

Sri Hanuman Rice Industries v. Indian Bank

Andhra Pradesh HC15 Jun 2021WP/4898/2020

Case brief

AI extract

What is this about?

The High Court dismissed writ petitions challenging the DRT's rejection of applications for an additional written statement and cross-examination. The Court held that the petitioners' core challenge regarding SARFAESI Act enforcement and asset valuation was already sub-judice before DRAT, rendering the writ petitions premature.

What did the court decide?

Writ petitions W.P.No.4898 and 4564 of 2020 were dismissed.

Sri Hanuman Rice Industries Vs Indian Bank — Banking and Recovery | Andhra Pradesh HC (2021)

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HON'BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON’BLE MS JUSTICE J. UMA DEVI

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Writ Petition Nos.4898 and 4564 of 2020

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COMMON ORDER: (Per UDPR,J)

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The challenge in the writ petition No.4898 of 2020 is to the order dated 29.01.2020 in I.A.No.14/2020 in O.A.No.308/2016 passed by learned Presiding Officer of the Debts Recovery Tribunal , Visakhapatnam dismissing the petition filed by the petitioner/defendant No.2 under Section 17(1) of SARFAESI Act, r/w Section 19(25) of RDDB&FI Act, 1993 seeking permission to file additional written statement.

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Whereas, writ petition No.4564 of 2020 is filed against the order dated 29.01.2020 in I.A.No.15 of 2020 in O.A.No.308 of 2016 dismissing the petition filed by the petitioner/defendant No.2 seeking permission to cross-examine AW-1.

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2. The petitioner’s case is thus:

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a) Respondent/applicant filed O.A.No.308/2016 for recovery of Rs.8,89,38,323-92 ps with future interest @ 11.9% p.a with monthly rests and the petitioner/defendant No.2 is contesting the matter.

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b) Petitioner No.1 is running Rice Mill and approached the respondent bank in 2012 for credit facilities and offered different properties as security. In 2014, due to petitioner sustaining huge loss, there was some irregularity in serving the interest in OCC account. Though there were three FDRs for a sum of Rs.34,61,896/- as a security in the custody of the bank, without

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adjusting the same to the loan account, the respondent bank illegally declared the loan account of the petitioner as NPA on 29.03.2014 contrary to the RBI guidelines and proceeded further under SARFAESI Act against the secured assets.

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c) Respondent also filed O.A No.308/2016 before the Debts Recovery Tribunal, Visakhapatnam for recovery of a sum of Rs.8,89,38,323-92 ps . The petitioner filed written statement and contested the O.A. The further case of the petitioner is that while above O.A was pending, the respondent bank proceeded under SARFAESI Act and took physical possession of all the assets unauthorizedly and illegally without following the procedure contemplated under the SARFAESI Act and sold the same for a meager price and appropriated the sale proceeds to the loan account. Aggrieved by the above proceedings, the petitioner filed SA No.223/2016 before Debts Recovery Tribunal, Visakhapatnam. However, without considering the case of the petitioner in proper manner, the Debts Recovery Tribunal, Visakhapatnam dismissed the SA vide its order dated 29.09.2017. Challenging the same, the petitioner preferred appeal before DRAT, Kolkata and the same is pending.

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d) While so, without the knowledge and consent of the petitioner, the 2^nd respondent bank misappropriated a sum of Rs.24,05,000/- by misusing the cheque bearing No.544640, dated 27.04.2013. Respondent while taking physical possession of the properties committed many irregularities, under valued the machinery and also sold stock worth more than Rs.2.00 crores for meager amount of Rs.28 lakhs. After sale of stocks still 40 lakhs worth of stock was available with them for which the bank has not given any account

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till date and sold the secured assets for meager price even though the value of stock, machinery and factory and commercial property at Ongole was more than Rs.16.00 Crores.

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e) Since the respondent bank sold the properties under SARFAESI Act pending O.A, it is necessary to bring the same on record to cross-examine the bank witness AW1. Therefore, the petitioner filed I.A.No.14/2020 to permit the petitioner to file additional written statement and also I.A.No.15/2020 to permit them to cross-examine AW1. However, without considering the case of the petitioner in a proper perspective, the DRT, Visakhapatnam has dismissed both the petitions. The Tribunal failed to see that the respondent bank declared the loan account of the petitioner as NPA on 31.03.2014 even though a sum of Rs . 34,61,896/- was available with the bank in the form of FDRs and without appropriating the same to the loan account, the declaration of the loan account of the petitioner as NPA itself was against law.

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f) Tribunal failed to see that the pending O.A, respondent bank proceeded under SARFAESI Act and sold the properties for a meager price and committed many irregularities and it is necessary to bring the same on record. The Tribunal failed to see that the value of the mortgaged properties was more than Rs.16.00 Crores as on 08.09.2016 but the respondent bank sold all properties for Rs.6.59 Crores. The Tribunal failed to see that the respondent bank not filed part satisfaction memo in the O.A, even though it has realized amount after filing the O.A. The Tribunal failed to consider the events took place after filing the O.A. It ought to have given an opportunity

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to the petitioners to file additional written statement and cross-examine AW1. Therefore, an opportunity may be accorded.

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Hence, the writ petitions.

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3. Respondent filed counter and opposed the writ petitions inter alia contending thus: a) The petitioners approached the respondent bank with a request to sanction OCC, term loans and letter of credit facilities for which they offered different properties as securities and the facilities were sanctioned on 09.03.2013. As the petitioners have not adhered to repayment programme, those facilities were classified as NPA on 29.03.2014 and bank was constrained to plunge into recovery mechanism. During the process of recovery mechanism, the respondent bank has filed O.A.No.308/2016 before the DRT, Visakhaptnam for recovery of Rs.8,89,38,323-92 ps, in which the petitioners filed written statement and contesting the matter.

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b) The contention of petitioners that though three FDRs worth of Rs.34,61,896/- were available as security, still, without adjusting the same to the loan account, the respondent bank illegally declared the loan account of the petitioners as NPA on 31.03.2014 contrary to the RBI guidelines and proceeded under SARFAESI Act against secured assets, is far from the truth and petitioners are put to strict proof of the same. The petitioners have already raised the same objection on so many occasions, even in the Securitization Application (SA) No.223 of 2016 in which the said question was clarified by the respondent bank through its counter stating that the FDRs were already adjusted into the petitioners’ loan account on 01.08.2014 and the petitioners were also aware of the said fact. Considering the same,

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the DRT, Visakhapatnam has dismissed the SA vide its order dated 29.09.2017 . Against the said order, the petitioners filed appeal before DRAT, Kolkata and the same is pending.

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c) It is further contended that the allegations of the petitioners that in spite of pending O.A before DRAT, the respondent bank sold the properties under SARFAESI Act and therefore, it is necessary to bring these facts on record by way of additional written statement, are all false and baseless. d) Both the IAs are rightly dismissed by the Tribunal. Instead of filing the appeal before Appellate Tribunal, the petitioners approached this High Court without any right and hence the writ petitions are not maintainable and may be dismissed.

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4. Heard Ms . V. Dyumani, learned counsel for petitioners and Sri Sreedhar Valiveti, learned counsel for respondent. a) The argument of Ms . V. Dyumani is that the petitioners’ loan account was illegally declared as NPA and their properties were also undersold causing huge loss. Since the alienation of the properties took place after filing of O.A, the concerned factual and legal aspects have to be brought on record by way of additional written statement and cross-examination of AW1. The Tribunal without considering that the valuable rights of the petitioners are at stake, dismissed the petitions on the sole ground that the petitions were filed at belated stage. Learned counsel submits that since the principles of natural justice are not followed, writ petitions may be allowed. b) Per contra, learned counsel for respondent Sri Sreedhar Valiveti argued that there was absolutely no violation of statutory law or RBI guidelines in declaring the petitioners’ loan account as NPA. After adjusting

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the FDRs available with the respondent bank to the loan account, still there was a huge outstanding of loan amount and hence the bank was constrained to declare the petitioners’ loan account as NPA. Thereafter the bank took the recourse under SARFAESI Act in the matter of selling of the properties and in that context also there was no deviation from the law. He would submit that the petitioners challenged the action of the respondent bank in taking recourse under SARFAESI Act in S.A.No.223/2016 and the same was dismissed and appeal filed by the petitioners is pending before DRAT, Kolkata. He thus argued that the Tribunal has rightly dismissed the IA Nos.14 and 15 of 2020. Without preferring appeals against those orders, the petitioners filed writ petitions. He thus prayed to dismiss the writ petitions.

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5. The point for consideration is whether there are merits in the writ petitions to allow? 6. By way of proposed additional written statement and crossexamination of AW1, the petitioner/defendant No.2 wants to project that the classification of the petitioners’ loan account as NPA on 29.03.2014 was illegal, inasmuch as, the FDRs were lying with the bank and it ought to have adjusted the same to the loan account. Therefore, such act of the respondent bank was against law and contrary to RBI guidelines. However, the contention of the respondent bank is that after adjusting the FDR amounts to the loan account, still there was huge outstanding and hence the bank declared the loan account as NPA.

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7. Be that it may, admittedly the petitioner filed S.A.No.223/2016 questioning the bank’s action in taking up the steps under SARFAESI Act and the said S.A was dismissed and appeal is now pending before DRAT,

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Kolkata. In these circumstances, the petitioners’ request to permit them to file additional written statement and cross-examine AW1 to elicit these facts cannot be countenanced. So far as other allegations of underselling of properties of the petitioners, misusing of the bank cheque etc., are concerned, these aspects also connected with the appeal said to be filed by petitioner and pending before DRAT, Kolkata. Hence, the Tribunal rightly dismissed the petition and at the outset, we do not find any irregularity or illegality in the orders impugned. Accordingly, the writ petitions are dismissed. No costs.

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As a sequel, interlocutory applications, if any, pending for consideration shall stand closed.

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_________________________ U. DURGA PRASAD RAO, J

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______________ J. UMA DEVI, J

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15^th June, 2021 krk

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THE HON'BLE SRI JUSTICE U.DURGA PRASAD RAO

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AND

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HON'BLE MS. JUSTICE J. UMA DEVI

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Writ Petition Nos. 4898 and 4564 of 2020

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15^th June, 2021

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krk

Sri Hanuman Rice Industries v. Indian Bank

Case brief

What is this about?

What did the court decide?

Sri Hanuman Rice Industries v. Indian Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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