Dismissed

Varghese Antony v. the Alappuzha District Co-Operative Bank Limited

Kerala HC18 Aug 2014WP(C)/17056/2014

Case brief

AI extract

What is this about?

This court dismissed a writ petition challenging a bank's attempt to recover a loan exceeding Rs. 1,00,000 including interest under the SARFAESI Act, despite the principal being below the threshold. The court held that the Act applies to the total dues and there is no legislative anomaly.

What did the court decide?

Writ petition dismissed as devoid of merit; parties to bear respective costs.

Varghese Antony Vs the Alappuzha District Co-Operative… — Banking and Recovery | Kerala HC (2014)

¶1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶2

PRESENT:

¶3

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶4

MONDAY, THE 18TH DAY OF AUGUST 2014/27TH SRAVANA, 1936

¶5

WP(C).No. 17056 of 2014 (F)

¶6

PETITIONER:

¶7

VARGHESE ANTONY, AGED 54 YEARS, S/O.ANTONY, ANCHIL, THAYANKARI P.O., ALAPPUZHA DISTRICT.

¶8

BY ADVS.SRI.S.SANAL KUMAR SMT.BHAVANA VELAYUDHAN SMT.T.J.SEEMA

¶9

RESPONDENT(S):

¶10

1. THE ALAPPUZHA DISTRICT CO-OPERATIVE BANK LIMITED, EDATHUA BRANCH, EDATHUA, ALAPPUZHA - 689573, REPRESENTED BY ITS MANAGER

¶11

2. THE AUTHORIZED OFFICER, THE DISTRICT CO-OPERATIVE BANK, ALAPPUZHA - 688 001.

¶12

BY SMT.K.N.RAJANI, SC

¶13

THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18-08-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶14

MBR/

¶15

WP(C).No. 17056 of 2014 (F)

¶16

		APPENDIX
PETITIONER(S	)' EXHIBITS
EXHIBIT P1-	COPY OF THE LOAN TRANSAC	PASS BAOOK OF THE PETITIONER EVIDENCING THE TION.
EXHIBIT P2-	COPY OF THE DATED 21.6.2	EXERPTS FROM THE MATHRUBHUMI DAILY 014.
EXHIBIT P3-	COPY OF THE 1ST RESPONDE	NOTICE DATED 15.5.2014 SENT BY THE NT TO THE VILLAGE OFFICER.
RESPONDENT(S ------------	)' EXHIBITS -----------	-

/TRUE COPY/

PA TO JUDGE

MBR/

'CR'

K. VINOD CHANDRAN, J. ===================== W.P.(C) No. 17056 of 2014 - F ====================== Dated this the 18^th day of August, 2014

¶22

J U D G M E N T

¶23

The petitioner's contention essentially raised in the above Writ Petition is that, the petitioner having availed of an amount of less than Rs.1,00,000/-; the respondent Bank cannot proceed for recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) 2002, for reason of Section 31(h) of the Act. In fact, this Court in O.P(DRT) No. 71 of 2014 answered the specific issue as hereunder:

¶24

The petitioners rely on Section 31(h), which excludes “any security interest for securing repayment of any financial asset not exceeding one lakh rupees” from the application of the SARFAESI Act. The learned counsel for the petitioners also points to the statement of objects and reasons, which referred to “loans not exceeding Rupees One lakh”.

¶25

The learned counsel for the respondent-Bank, however, refers to the definition clause, more specifically Section 2(1) (l), which defines “financial asset”, to mean

¶26

W.P.(C) No. 17056 of 2014 - F

¶27

¶28

debt or receivables and also provides for inclusion of items more specifically mentioned in clauses (i) to (vi). “Debt”, as defined under the above provision, is assigned the meaning “it has in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993” [for brevity “RDDBFI Act”] by Section 2(1)(ha). The definition of debt as per the RDDBFI Act is extracted hereunder:

¶29

“S.2(g) “debt” mens any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether pai99yable under a decree or order of any civil court or any arbitration award or otherwise or under a mortage and subsisting on, and legally recoverable on, the date of the application”.

¶30

Since “debt” includes any interest payable; and the “financial asset”, defined under the SARFAESI Act, has been given the meaning of debt or receivables; necessarily the Bank would be entitled to proceed against the petitioners' property under the SARFAESI Act in the present proceedings. In such circumstance, the writ petition is found to be devoid of merit.

¶31

The issue hence is no longer res integra. However,

¶32

the learned Counsel for the petitioner contends that, one another ground has not been considered by this Court in the aforesaid judgment. The learned Counsel specifically

¶33

W.P.(C) No. 17056 of 2014 - F

¶34

¶35

points to clause (j) of Section 31 of the Act, which refers to the “principal amount and interest thereon”. It is the contention of the learned Counsel that, when clause(j) refers to principal amount and interest thereon, what was intended by the legislature even by sub-section (h) was that, the principal amount shall not be in excess of Rs.1,00,000/-. If that were the intention; it cannot be so garnered from the specific words used in sub-clause (h); which speaks only of “financial assets”.

¶36

As has been noticed above, 'financial asset' has been defined as a 'debt', which term as per the incorporated definition means any liability, inclusive of interest. This Court cannot and should not go beyond the specific meaning assigned to a word. An interpretative exercise to ferret out an assumed intention would be unnecessary. The principal amount availed though less than Rs.1,00,000/-; at the time of recovery along with interest; if the amount exceeds Rs.1,00,000/-, recovery

¶37

W.P.(C) No. 17056 of 2014 - F

¶38

¶39

under the SARFAESI Act would be permissible.

¶40

The petitioner also asserts that, there is an anomaly, which is as follows: Recovery of a loan, in which the principal amount is less than Rs.1,00,000/- would be capable of being proceeded under the SARFAESI Act, if on default it exceeds that limit; whereas any debt in which total arrears would be much more, cannot be recovered under the enactment, if the total arrears due is less than 20% of the 'principal amount and interest' as prescribed in clause(j). Primarily it is to be noticed that the acceptance of the petitioner's contention would not cure that anomaly. Since, even than, a loan of Rs.1,00,000/- and above would be covered under the Act while no recovery of a higher amount could be effected if that arrears is below the limit in sub-clause(j).

¶41

Then again, the value of the security interest created would be relatable to the principal amount availed; always in excess of the latter, to take in every contingency

¶42

W.P.(C) No. 17056 of 2014 - F

¶43

¶44

of default. The SARFAESI Act is a departure from the normal rules of adjudication and recovery. Normally a creditor, on default, has to approach a civil forum to quantify the exact amounts due, fasten it on the debtor and then proceed for recovery from the debtor. The creditor, being a financial institution as defined under the Act can, without anything more than a default, proceed against the secured asset, and take possession of the same. The legislature thought it fit that if the total dues are less than Rs.1,00,000/-, the speedy remedy need not be resorted to. Likewise when the dues are less than 20% of the principal amount, it was deemed that a security interest, which is presumably worth many times more than the dues need not be proceeded against. The normal delay in adjudication in such a case would not be detrimental to the creditor since the possibility of the debt, exceeding the value of the security interest is then remote. It has to be found that the legislature has deliberately employed distinct and different

¶45

W.P.(C) No. 17056 of 2014 - F

¶46

¶47

words in the sub-clauses and there is absolutely no anomaly and a concious intend, to the contrary, is discernible.

¶48

The above reasoning persuades this Court to answer

¶49

the question raised against the petitioner. The Writ Petition is found to be devoid of merit and the same stands dismissed. Parties to suffer their respective costs.

¶50

Sd/-

¶51

K. VINOD CHANDRAN, JUDGE

¶52

¶53

// True Copy //

¶54

P.A To Judge.

Varghese Antony v. the Alappuzha District Co-Operative Bank Limited

Case brief

What is this about?

What did the court decide?

Varghese Antony v. the Alappuzha District Co-Operative Bank Limited

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

Coram

Case details

Similar cases

Martin Mathew Vs the Deputy Tahsildar Revenue Recovery

Janamma Thomas Vs State of Kerala

P.Sivababu Vs Secretaray to the Government

P.S.Sarvanath Vs Kerala Financial Corporation

Jerome, S/O.Augustine Vs the Authorized Office, Coastal Urban Co-

Abdul Jaleel P.K Vs the State of Kerala