Dismissed

Komal Agarwal v. the Union of India

Andhra Pradesh HC1 Jul 2024WP/13761/2024

Case brief

AI extract

What is this about?

The High Court dismissed a Writ Petition filed by a non-borrower challenging the Bank's possession order under the SARFAESI Act. The court held that the procedural lapse, if any, could be addressed by the Debts Recovery Tribunal and noted the petitioner failed to meet the direction to deposit 50% of the auction price.

What did the court decide?

Petition discharged with no costs. The order permitting auction stands unaffected as conditions were not met.

Komal Agarwal Vs the Union of India — Banking and Recovery | Andhra Pradesh HC (2024)

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APHC010275652024

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IN THE HIGH COURT OF ANDHRA PRADESH Bench Sr.No:-18 [3443] AT AMARAVATI

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WRIT PETITION NO: 13761 of 2024

Komal Agarwal

...Petitioner

Vs.

The Union Of India and Others

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...Respondent(s)

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Mr.P. Rama Sharana Sharma, Advocate(s) for Petitioner

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CORAM : THE CHIEF JUSTICE DHIRAJ SINGH THAKUR SRI JUSTICE NINALA JAYASURYA

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DATE : 2nd July 2024

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PER DHIRAJ SINGH THAKUR, CJ (Oral):

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The present petition has been filed challenging the action of the respondent – State Bank of India to the extent that while invoking the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”), the procedure prescribed under Section 13(2) and Section 14 of the SARFAESI Act and also the Rules framed thereunder had not been followed.

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The case of the petitioner is that the petitioner’s brother and father, who are engaged in the business of trading of steel and hardware material, had taken loans from the respondent Bank to expand their business. It is stated that on account of the pandemic, the business suffered a setback, which affected the repayment of the loan to the Bank. It is stated that the loan

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HCJ & NJS, J W.P. No: 13761 of 2024

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account was declared as an NPA on 19.03.2021 and notice was issued under Section 13(2) of the SARFAESI Act on 25.03.2021 within one week of the declaration of the account as an NPA. It is stated that certain properties were mortgaged with the Bank, which later on came to be leased out to a tenant namely ‘M/s Sri Kanakadurga Iron Yard’ on 07.12.2020. The lease was stated to have been made through a notarized lease deed before the declaration of the asset as an NPA.

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It is stated that while the negotiations were on with the Bank for a one time settlement and one year’s time was being sought and while the negotiations had reached the final stage, the Bank approached the learned Chief Metropolitan Magistrate at Visakhpatnam in terms of Section 14 of the Act and obtained an order of possession of the property measuring 6800 Sq. Yds. An order, it is stated, came to be passed by the learned Chief Metropolitan Magistrate on 28.12.2023, which came to the knowledge of the petitioner only when the same was implemented by the Advocate Commissioner.

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The grievance of the petitioner as is reflected in the petition and urged at the time of hearing is that the procedure as prescribed under Section 14 of the SARFAESI Act had not been followed inasmuch as the Bank had not reflected in its affidavit before the Chief Metropolitan Magistrate that there was some repayment of the amount pursuant to the receipt of notice under Section 13(2) of the SARFAESI Act. Instead, it is stated that the Bank had filed an

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HCJ & NJS, J W.P. No: 13761 of 2024

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affidavit stating that the borrower had not paid “the entire amount”, which averment, it is stated, was totally incorrect.

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The petitioner states that she has a right in the property, which is the subject matter of mortgage with the Bank inasmuch as it had been bought by her father from the proceeds and business of her grandfather and with a view to assert her right in the said property, she was constrained to file a suit for partition before the competent Civil Court by way of Original Suit No.45 of 2023 which, it is stated, is still pending. The said Suit, it is stated, was filed on 01.07.2024, which would suggest that the same came to be filed only after the proceedings under Section 14 of the SARFAESI Act had been initiated and appropriate orders had come to be passed by the learned Chief Metropolitan Magistrate at Visakhapatnam.

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In the earlier round of litigation, the petitioner filed W.P. No.10053 of 2024 in which the stand taken was that the petitioner had filed an application bearing S.A. No.194 of 2024 before the Debts Recovery Tribunal at Visakhapatnam questioning the auction notice issued by the respondent Bank, which came to be dismissed in default on 19.04.2024. The stand taken was that restoration application had since been filed which was pending consideration before the Tribunal and was to be taken up on 01.05.2024 and therefore, it was urged by the petitioner in that petition that if the auction was permitted to be held on 30.04.2024 as scheduled, the proceedings already initiated before the Debts Recovery Tribunal, Visakhapatnam, would become

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HCJ & NJS, J W.P. No: 13761 of 2024

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infructuous leading the petitioner to suffer irreparable hardship and injury. In those circumstances, the Writ Petition came to be disposed of in the following manner:

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“5. Having heard the learned counsel for the petitioner and the Respondent-Bank, taking into consideration of nature of controversy and in view of filing of application for restoration of Securitization Application, this Court deems it appropriate to dispose of the Writ Petition, permitting the RespondentBank Authorities to proceed with the proposed auction on 30.04.2024. It is made clear that the sale shall not be confirmed till disposal of the application filed by the petitioner herein for restoration of Securitization Application and the proceedings initiated, subject to the petitioner paying half of the amount due to the Respondent-Bank within a period of six (06) weeks from today. It is also made clear that in the event of non-adherence to the aforesaid condition, this order will not enure to the benefit of the petitioner.”

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In the backdrop of the aforementioned order, it appears that the petitioner failed to pay the 50% amount as was directed to be paid within a period of six weeks from the date of the order. The amount of 50%, it is stated, would come to Rs.5,82,00,000/-. The case of the petitioner before us today is that since the application of the petitioner is still pending before the Debts Recovery Tribunal and the Bank was trying to dispose of the property worth Rs.20 Crores for a meager amount of Rs.11.46 Crores, which is the base price fixed, irreparable loss would be caused to the petitioner and in those circumstances, prayed that pending the final disposal of the application before the Debts Recovery Tribunal, the Bank be directed to receive 50% of the reserved price in terms of the order passed by the Coordinate Bench earlier.

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We have heard learned counsel for the petitioner.

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HCJ & NJS, J W.P. No: 13761 of 2024

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It is clear that a one time opportunity granted to the petitioner to deposit

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50% of the base price was not deposited much less within the period of six weeks allowed by the Coordinate Bench vide its order, dated 30.04.2024. The petitioner is neither a borrower nor a guarantor and it appears, is only seeking to somehow defeat the proceedings initiated under the SARFAESI Act by laying a claim to the property, which is mortgaged, by way of a Civil Suit for partition, which appears to have been filed much later than the initiation of proceedings under the SARFAESI Act. The argument that the Bank had failed to follow the procedure as prescribed under Section 14 of the SARFAESI Act can very well be considered by the Debts Recovery Tribunal in terms of the provisions of Section 17(2) of the SARFAESI Act.

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In our opinion, there is no merit in the present petition, which is accordingly dismissed. No costs.

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Pending miscellaneous applications, if any, shall stand closed.

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DHIRAJ SINGH THAKUR, CJ

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NINALA JAYASURYA, J akn

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HCJ & NJS, J W.P. No: 13761 of 2024

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HON’BLE MR.JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE &

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HON’BLE MR. JUSTICE NINALA JAYASURYA

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Writ Petition No: 13761 of 2024

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DATE : 02.07.2024

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AKN

Komal Agarwal v. the Union of India

Case brief

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Komal Agarwal v. the Union of India

Case brief

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