Dismissed

Remella Chitti Babu v. The Collector and District Magistrate

Telangana HC13 Mar 2012WP/17853/2008

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition challenging a bank's possession notice under Section 13(4) of the SARFAESI Act. The Court held that since an effective statutory remedy under Section 17 to approach the Debt Recovery Tribunal is available, the writ petition is not maintainable.

What did the court decide?

The writ petition was dismissed with liberty to approach the Debt Recovery Tribunal for available remedies; no order as to costs.

Remella Chitti Babu Vs The Collector and District… — Banking and Recovery | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY

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WRIT PETITION No.17853 of 2008

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ORDER: (per Hon’ble Sri Justice G.Krishna Mohan Reddy)

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In this writ petition, possession notice issued under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for short ‘the Act’) dated 2.6.2007 and proceedings in Rc.No.2995/08/D1 dated 22.7.2008 issued by the 1^st respondent against the petitioner are questioned with a plea to declare them as illegal, arbitrary and without jurisdiction.

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It is necessary to mention the facts of the case briefly, at the outset.

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The 2^nd respondent Bank sanctioned credit loan of Rs.20,00,000/- on 11.3.2004 to one Viswanathuni Mohana Rao, proprietor of M/s Navashakti Gunny Trading Company, Guntur, the 3^rd respondent. The petitioner stood as guarantor to repay the loan and mortgaged his house property bearing Door No.113, Ward No.1, Assessment No.1651, Door No.1-888-B Railway Station Road, Mangalagiri village, Guntur with an extent of 500 sq.yards as a security to repay the loan. As the loan became Non-Performing Asset (NPA), the secured creditor issued notice under Section 13(2) of the Act dated 19.11.2005 to the 3^rd respondent giving 60 days to repay the loan. The secured creditor also filed O.A.No.29 of 2007 before the Debts Recovery Tribunal against the 3^rd respondent for recovery of the amount due, which was allowed and then Recovery Certificate was issued on

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22.4.2008 for Rs.28,59,648-63 ps. Based on the said recovery certificate, the Bank filed Execution Proceedings in R.P.No.87 of 2008 for the recovery of the due amount. Further, the Bank issued possession notice under Section 13(4) of the Act read with Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (for short ‘the Rules’). Thereby, the present writ petition is filed.

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Learned counsel for the petitioner contends that the Bank issued possession notice under Rule 8(1) of the Rules following the demand notice dated 19.11.205 issued only to the principal borrower while the O.A. was pending i.e. no notice under Section 13(2) of the Act was issued to the petitioner and Section 13(2) of the Act mandates that such a notice has to be served on the principal borrower as well as on the guarantor and without doing that, issuance of possession notice is without jurisdiction. Learned counsel further contends that Section 14 of the Act can be invoked only when the Bank serves demand notice under Section 13(2) of the Act to the petitioner and thereby ultimately the petitioner seeks for the declaration of the impugned order as illegal and invalid.

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On the other hand, learned counsel appearing for the Bank contends that the petitioner has got effective, alternative and efficacious remedy to file appeal before the Debts Recovery Tribunal under Section 17(1) of the Act against the impugned notice issued by the Bank and when such remedy is available, the writ petition is not maintainable.

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Section 13(2) notice is issued when such loan becomes NPA giving 60 days time to the borrower to pay the amount. Under Section 13(3A) of the Act, the borrower has got liberty to approach the secured creditor and file representation/ objections in that context within the stipulated time and the Bank has to examine the representation or objections and take decision in the

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matter and inform about it to the borrower within (7) days of receiving the representation or objections. Further, on the failure of the borrower to take necessary steps, consequent upon the issuance of Section 13(2) notice, the Bank has got power to issue proceedings under Section 13(4) of the Act for the purpose of taking possession of the secured asset and sell it for realizing the amount due observing necessary formalities. Rule 8 of the Rules provides procedure to be followed to take possession of and sell the property. Section 14 of the Act also provides for taking possession of the property by way of approaching concerned District Collector/Chief Metropolitan Magistrate, as the case may be.

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The borrower has got remedy to approach the Debts Recovery Tribunal Under Section 17 of the Act questioning the proceedings issued under Section 13(4) of the Act. Section 17 of the Act actually provides that any person aggrieved by any of the measures referred in Section 13(4) of the act can approach the Debts Recovery Tribunal having jurisdiction within 45 days of taking the measures [under Section 13(4)]. Here the word ‘any person’ includes the guarantor also whether he was served with 13(2) notice or not. All the questions raised in this writ petition are to be considered only in the corresponding appeal before the Debt Recovery Tribunal.

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In United Bank of India v. Satyawati Tondo n^[1] the Supreme Court considered the ambit of Article 226 of the Constitution, but in the context of SARFAESI Act and 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

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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 a 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, the 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 the 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 debts. 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 another decision of the Supreme Court in Kanaiyalal

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Lalchand Sachdev v. State of Maharashtr a^[2] while referring to Satyawati Tondon, the Supreme Court upheld an order of the High Court of Judicature at Bombay dismissing a petition filed under Article 226 assailing an action of State Bank of India Officials in dispossessing the appellants therein from a secured property under the Act. The Supreme Court held as follows:

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“We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT.

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In our opinion, therefore the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Article 226/227 of the Constitution of India is not available if an

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efficacious alternative remedy is available to any aggrieved person (See Sadhana Lodh v. National Insurance Co. Ltd (2003) 3 SCC, 524, Surya Dev Rai v. Ram Chander Rai (2003) 6 SCC 675 and SBI v. Allied Chemical Laboratories (2006) 9 SCC 252).”

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Therefore, when there is effective alternative remedy of appeal is available to the petitioner against the impugned proceedings, the writ petition is not maintainable and deserves to be dismissed.

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For the foregoing reasons, the writ petition is dismissed giving liberty to the petitioner to approach the Debt Recovery Tribunal and work out his remedies as available to him under law. 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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Date: 13.3.2012 DA

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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.17853 of 2008