Dismissed

Tadepalli Sivalingeswara Rao, v. Central Bank of India

Telangana HC2 Apr 2012WP/10101/2006

Case brief

AI extract

What is this about?

This order dismissed the writ petition challenging a possession notice issued under the SARFAESI Act. The court held that banks cannot simultaneously invoke SARFAESI Act and approach DRT, relying on Supreme Court precedent in Transcore. Recourse against the notice lies under Section 17(1) of the Act.

What did the court decide?

Writ Petition No.10101 of 2006 and WPMP.No.12730 of 2006 were dismissed without order as to costs.

Tadepalli Sivalingeswara Rao, Vs Central Bank of India — Banking and Recovery | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND

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THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY

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WRIT PETITION NO.10101 OF 2006

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ORDER: (Per the Hon’ble Sri Justice V.V.S.Rao)

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Three petitioners herein assail the possession notice published in Eenadu daily dated 26.04.2006 issued under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter, the SARFAESI Act or the Act), as illegal and arbitrary.

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The short fact of the matter is that the first petitioner is the managing partner of two firms engaged in milling and trading of rice. The two firms availed financial facilities to a tune of about Rs.55 lakhs from the first respondent. When the loan repayment was irregular, the bank filed O.A.No.461 of 2001 before the Debts Recovery Tribunal (DRT), Hyderabad (now stands transferred to DRT, Visakhapatnam, and renumbered as O.A.No.321 of 2002). The petitioners contested but the DRT passed an ex parte order for recovery of the amount due. The petitioners then moved an application to set aside the ex parte order, which is statedly pending on the date of filing of the Writ Petition.

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The Authorised Officer of the first respondent issued notice of demand dated 17.02.2002 under Section 13(2) of the Act calling upon the petitioners to clear the loan within 60 days. They did not do so. Therefore, the Authorised Officer issued possession notice under Section 13(4) of the Act notifying taking of the possession and advising the public not to deal with the properties and have any dealings in properties mortgaged to the Central Bank.

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The only question urged in the Writ Petition is that the bank has no powers to simultaneously invoke the provisions of the SARFAESI Act having approached the DRT under the Recovery of

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Debts due to Banks and Financial Institutions Act, 1993 (the RDB Act).

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The question is no more res integra. In Transcore v Union of [1] Indi a , the Supreme Court, inter alia, considered the question as to whether the banks or financial institutions having elected to seek the remedy in terms of the RDB Act can still invoke the SARFAESI Act for realising the secured assets without withdrawing or abandoning the O.A. filed before the DRT. Answering the question in the negative, the Supreme Court held that, “withdrawal of the O.A. pending before the DRT under the DRT Act is not a pre-condition for taking recourse to NPA Act……….It is for the bank/financial institution to exercise its discretion as to cases which may apply for leave and in the cases where they may not apply for leave to withdraw”. In view of the binding precedent, the Writ Petition is misconceived. Insofar as the other issues are concerned, it is always open to the petitioners to approach the DRT by filing application under Section 17(1) of the Act assailing the possession notice or any subsequent steps that may have been initiated by the Authorised Officer.

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The Writ Petition, subject to the above observations, stands dismissed without any order as to costs. WPMP.No.12730 of 2006 shall stand dismissed.

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_______________ (V.V.S.RAO, J)

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_________________________________ (G.KRISHNA MOHAN REDDY, J)

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2^nd April 2012 RRB

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[1] (2008) 1 SCC 125 : 2007 (3) SCJ 201

Tadepalli Sivalingeswara Rao, v. Central Bank of India

Case brief

What is this about?

What did the court decide?

Tadepalli Sivalingeswara Rao, v. Central Bank of India

Case brief

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