Dismissed

G.R.L.Industries, chinna Kakani Village, v. Authorised officer

Telangana HC13 Feb 2012WP/25574/2011

Case brief

AI extract

What is this about?

This court dismissed a writ petition challenging a bank’s notice under Section 13(2) of the SARFAESI Act. The court held that writ jurisdiction under Article 226 is not maintainable as effective alternative remedies under Sections 17 and 18 of the Act and the DRTA exist for recovery disputes.

What did the court decide?

The writ petition and miscellaneous petitions were dismissed without order as to costs, with liberty to raise grounds under Section 17 of the Act.

G.R.L.Industries, chinna Kakani Village, Vs… — 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.25574 OF 2011

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

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The petitioner firm, which is established for manufacturing adhesive and construction chemicals, availed term loan up to Rs.173.00 lakhs. The property of the partnership firm was mortgaged to secure the loan. The firm also availed working capital of Rs.130.00 lakhs against the mortgage. As the payment of instalments was not regular, the loan became non-performing asset (NPA). The respondent bank treated the loan as 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), calling upon the petitioner to pay an amount of Rs.77,02,687.20 ps towards open cash credit and Rs.1,63,77,745.80 ps towards term loan within a period of 60 days. Alleging that the respondent acted arbitrarily in issuing demand notice and also in reducing loan limits, the present Writ Petition is filed challenging notice of demand under Section 13(2) of the Act.

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This Court, while admitting the Writ Petition, stayed all further proceedings on condition of the petitioner depositing an amount of Rs.25,00,000/- within a period of four weeks from the date of the said order and a further sum of Rs.25,00,000/- within a period of two weeks thereafter.

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The respondent filed counter affidavit. It is stated that after issuing notice under Section 13(2) of the Act, the bank also issued possession notice under Section 13(4) of the Act after duly publishing the same in ‘Hindu’ English daily and ‘Sakshi’ Telugu daily dated 08.09.2011 stating that the bank has taken symbolic

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possession of commercial building bearing D.No.54-2-340 in R.S.No.481, Plot Nos.18 & 19, Autonagar, Vijayawada, on 07.09.2011.

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The respondent bank also filed WVMP.No.2 of 2012 opposing the Writ Petition, inter alia, on the ground that the petitioner has an effective alternative remedy. This Court heard the counsel for the petitioner and the Standing Counsel for Andhra Bank.

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The counsel for the petitioner submits that after payment of Rs.50,00,000/- in obedience of the orders of this Court, the petitioner’s loan is no more NPA and therefore, the bank should be directed to withdraw all further proceedings under the SARFAESI Act. This contention is refuted by the other side.

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The petitioner approached this Court by filing Writ Petition on 12.09.2011. It was mainly contended that notice under Section 13(2) of the Act was issued in arbitrary manner. By that date, the respondent issued possession notice and took symbolic possession on 07.09.2011 itself. This fact was suppressed before the Court. When the petitioner approached the Court without disclosing all the facts, we are not inclined to exercise any discretion. Further, as per the remedy provided under Sections 17 and 18 of the Act, any aggrieved person has effective and efficacious alternative remedy. The Writ Petition is, therefore, barred. We, therefore, are not inclined to go into the merits of the case.

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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

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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 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.

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In United Bank of India v Satyawati Tondo n^[1] it was held. 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

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of Maharashtr a^[2] after referring to Sadhana Lodh v National Insurance Co. Ltd .^[3] , Surya Dev Rai v Ram Chander Ra i^[4] , Mardia

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Chemicals Ltd. v Union of Indi a^[5] , State Bank of India v Allied [6] [7] Chemical Laboratorie s , Transcore v Union of Indi a , City and Industrial Development Corporation v Dosu Aardeshir [8] Bhiwandiwal a , 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 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 Writ Petition, with the above observations, is dismissed without any order as to costs. Consequently, miscellaneous petitions shall also stand dismissed. Liberty is given to the petitioner to raise all grounds in application under Section 17 of the Act.

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

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_________________________________ (G.KRISHNA MOHAN REDDY, J)

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13^th February 2012 RRB

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