Dismissed

Smt. T. Lakshmi Prasanna v. Dena Bank , M.G. Road

Telangana HC14 Feb 2012WP/16681/2010

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition challenging a bank's notice of possession under the SARFAESI Act. Relying on Supreme Court precedents, the court held that Section 17 of the Act provides an effective alternative remedy before the Debts Recovery Tribunal, barring judicial review under Article 226 for post-Section 13(4) actions.

What did the court decide?

Writ Petition and miscellaneous petitions dismissed. No order as to costs.

Smt. T. Lakshmi Prasanna Vs Dena Bank , M.G. Road — Consumer Protection | 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 WRIT PETITION NO.16681 OF 2010

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

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The petitioner availed housing loan to a tune of Rs.16,00,000/from the respondent bank. As per the loan agreement, EMI was fixed at Rs.17,000/- per month. The loan was repayable in 240 monthly instalments. The petitioner also mortgaged her flat as a collateral security. Statedly, she was paying instalments regularly to loan account No.01595100167. It appears, the petitioner also availed cash credit facility from the respondent bank for her business M/s. Taruni Silks, a propriety concern, under loan account No.0159513001102. To secure this loan, she mortgaged her residential plot No.283 in Survey No.59 in Ameenpur Village, Patancheru Mandal of Medak District, admeasuring 200 square yards. She allegedly repaid an amount of Rs.2,29,900/- towards this account.

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The respondent bank treated the business loan account as non-performing asset (NPA) and issued notice of demand under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter, the SARFAESI Act or the Act), on 02.02.2010. The petitioner allegedly made an oral representation to the bank raising objections. According to her, the loan account mentioned therein does not belong to her and that she is not a defaulter. She also raised objection with regard to treatment of loan as NPA. Be that as it is, the respondent issued another notice of demand, dated 26.03.2010. In response thereto, the petitioner allegedly submitted objections under Section 13(3A) of the Act on 29.04.2010. The bank then sent a reply on 01.06.2010 but the petitioner alleges that the same was not received by her. The bank sent another reply dated 01.07.2010 rejecting her

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objections and issued possession notice under Section 13(4) of the Act. Thereafter, on 12.07.2010, the petitioner filed the instant Writ Petition assailing the notice of demand and the notice of possession. This Court while admitting the Writ Petition on 14.07.2010, stayed all further proceedings on condition of the petitioner depositing Rs.4,00,000/- within a period of four weeks from the date of that order. The amount was not paid. Again on 26.08.2011, this Court noticed the default committed by the petitioner in complying with the order and extended time till 07.09.2011. It is now brought to the notice of this Court that the petitioner as of now deposited Rs.4,00,000/-.

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The respondent bank filed counter affidavit opposing the Writ Petition. The Writ Petition is also opposed on the ground that without availing remedy under Section 17 of the Act, the Writ Petition is not maintainable.

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The counsel for the petitioner submits that in the first notice of demand, totally different account number, which does not belong to the petitioner, is mentioned and it shows that there is no application of mind by the bank. When the bank mentions an account number, which does not belong to either of the loans availed by the petitioner, the bank cannot be said to have acted within the jurisdiction. When a notice is issued without jurisdiction, the same is liable to be set aside. She also points out that very incorrect particulars were mentioned in the notices and therefore, this Court could ignore the alternative remedy and proceed with the Writ Petition. These contentions are refuted by the counsel for the bank.

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[1] In Indian Overseas Bank v Ashok Saw Mil l , the Supreme Court considered the question as to whether the Debts Recovery Tribunal (DRT) would exercise jurisdiction under Section 17 of the Act after issuance of possession notice under Section 13(4) of the Act. The

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Supreme Court laid down that the DRT is vested with jurisdiction to rectify any error for wrongful use of the powers vested in the banks and financial institutions under the SARFAESI Act. The relevant observations are as under.

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“In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof.

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The intention of the legislature, is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.

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We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT.”

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(emphasis supplied by us)

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The notice of demand under Section 13(2) of the SARFAESI Act is mandatory requiring the borrower to discharge or liquidate the entire debt due to the bank within sixty days of the issue. If the same is not complied with or a representation is not made under Section 13(3A) of the SARFAESI Act or such representation is rejected by the bank or financial institution, it is open to initiate and take all measures as contemplated under Section 13(4) of the SARFAESI Act read with the Security Interest (Enforcement) Rules, 2002. If any order is passed after issue of notice under Section 13(4) of the SARFAESI Act, often called possession notice, or any steps are

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taken for auctioning the movable/immovable property or confirmation of such auction sale or cancellation of auction sale, the remedy to either borrower or surety, or a third party auction purchaser is only to avail the effective alternative remedies available under Sections 17 and 18 of the SARFAESI Act. A writ petition is not maintainable. In [2] United Bank of India v Satyawati Tondo n it was held.

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Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. … It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and 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.

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In a recent judgment in Kanaiyalal Lalchand Sachdev v State of Maharashtr a^[3] after referring to Sadhana Lodh v National Insurance Co. [4] [5] Ltd . , Surya Dev Rai v Ram Chander Ra i , Mardia Chemicals Ltd. v [6] [7] Union of Indi a , State Bank of India v Allied Chemical Laboratorie s , [8] Transcore v Union of Indi a , City and Industrial Development Corporation v Dosu Aardeshir Bhiwandiwal a^[9] , Indian Overseas Bank v Ashok Saw Mill and Satyawati Tondon, the Supreme Court held that the Debts Recovery Tribunal would have jurisdiction to consider and

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adjudicate post Section 13(4) events and an order passed under Section 14 would be within the ambit of Section 17(1) of the SARFAESI Act. It was also held that when the Act contemplates an efficacious remedy to the borrower or any person affected by an action under Section 13(4) of the SARFAESI Act, a writ petition would be barred.

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The counsel for the petitioner submits that the petitioner is willing to regularise the loan accounts – both housing loan and business loan – if the bank accept the proposal for rescheduling the loan accounts. We can only observe that nothing prevents the petitioner to approach the respondent bank with such a proposal in which event it may be considered in accordance with the relevant rules and regulations of the bank. Insofar as the grievance about the validity of the notice of demand and possession notice or any subsequent action consequent thereto can only be agitated before the DRT under Section 17 of the Act, as held by the Supreme Court.

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The Writ Petition, with the above observations, is accordingly dismissed. Consequently, miscellaneous petitions shall stand dismissed. There shall be no order as to costs.

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(V.V.S.RAO, J)

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_________________________________ (G.KRISHNA MOHAN REDDY, J)

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14^th February 2012 RRB

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[1] (2009) 8 SCC 366 : 2009 (8) SCJ 979 [2] (2010) 8 SCC 110 : AIR 2010 SC 311 [3] (2011) 2 SCC 782 : 2011 (8) SCJ 484 [4] (2003) 3 SCC 524

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[5] (2003) 6 SCC 675

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[6] (2004) 4 SCC 311

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[7] (2006) 9 SCC 252

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[8] (2008) 1 SCC 125 : 2007 (3) SCJ 201

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[9] (2009) 1 SCC 168 : 2008 (8) SCJ 920

Smt. T. Lakshmi Prasanna v. Dena Bank , M.G. Road

Case brief

What is this about?

What did the court decide?

Smt. T. Lakshmi Prasanna v. Dena Bank , M.G. Road

Case brief

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