Allowed

Mahajuicy Food Processing Pvt. Ltd., v. The State Bank of India

Telangana HC8 Jun 2023WP/37511/2022

Case brief

AI extract

What is this about?

Under Article 226, the High Court held it legal and arbitrary for a bank to withhold collateral security documents after accepting full loan closure payment under an OTS scheme, despite a technical breach of a condition by the borrower.

What did the court decide?

Director the State Bank of India to return all original collateral security documents pertaining to the six mortgaged properties within four weeks.

Mahajuicy Food Processing Pvt. Ltd., Vs… — Contract and Commercial Disputes | Telangana HC (2023)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

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THURSDAY, THE EIGHTH DAY OF JUNE TWO THOUSAND AND TWENTY THREE

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PRESENT

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THE HON'BLE SRI JUSTICE MUMMINENI SUDHEER KUMAR

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WRIT PETITION NO: 375'll O F 2022

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Between:

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Mahajuicy Food Processing Pvt. Ltd., Rep. by Mr. T. Madan l/ohan, Havinq its Req. Office at 15, Tirumala Nilayam, S.R.Lane 4'n Cross, Near Corporation Bank, New Bell Road, Bangalore - 560 094.

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...PETITIONER

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ANO

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The State Bank of lndia, flqp by its Asst. General Manager/DGM, Stressed Assets Recovery Branch, 2"" floor, APSRTC, Commuter Amenity Center, Bus Terminal Complex, Koti, Hyderabad - 500 095.

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The Reserve Bank of lndia, Rep by its Chief General Manager Consumer Education and Protection Department Reserve Bank of lndia 1'' Floor, Amar Building, Sir P.M. Road, Mumbai-4OO 001.

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The Union of lndia, Rep by its Principal Secretary, Ministry of Finance, North Block, New Delhi

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...RESPONDENTS

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Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue any writ or order or direction more particularly one in the nature of writ of mandamus, declaring the action of the respondent No.1 in not returning the original collateral security documents bearing the numbers Doc No.582 of 2009 dated 24.07.2OO9 executed by APllC, Doc. No. 8990/2002 dated 24.1O.2002, Doc No. 885 of 1990 dated^'19.02.1990, Doc No. 4043 of 1992 dated 05.08.1992, Doc. No. 16899 / 06-07 dated 29.09.2006 (Rectification Deed No. 5256 12010-11 dated 10.02.2011 and 542312010- 11 dated 19.02.2011), and Doc. No. 5990/06-07 dated 07.O2.2OO7 pertaining to the loan account No.31865725025 -fL 3191211 1 183, even after the payment of full amount in the

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Respondent \o t rs p()r the OTS scheme Ref No. S B l/SA Fttl/V RN 12018-191116 dt. 29 09.2018. as il egal, arbitrary, null, void, and violati,,rt of Articles 14 and 300-A of the^(lorst :ution i)f lndra and consequently direct tl'rr Re!;pondent Nos. 1 and 2 to TetJrn il I thrl above referred original do:umen.r, furnished as the security for tle sai J roan forthwith and further direct the Re :,porrdent Nos. 3 to enquire in to tht: legal acts committed by the Respond lnl No. 1 by taking stringent acticn €gi inst the involved for not returning the ( ri.tinal title deeds to the Petitioner ,rnd/o guarantors of the petitioners

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lA NO: 1 OF 2022

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Petition unrle S;ec;tion 151 CPC praying that in the c r<;umstances stated in the affidavit irled n support of the petition, the High Cour rnay be pleased to direct the Respon le rt Nos. 1 and 2 to deposit all the oriqin;r :olletaral security documents bearir g tlre numbr:rs Doc No. 582 of 2009 oated 24 O7.2O09 executed by AF'llC, Ito:. No. 8990/2002 da|ed24.10.2002, Dcr. No.885 of 1990 dated 19.02 19110, D,,c No.4043 of 1992 dated 05.08.1992, i)Oc. I'Jo. 16899/0607 dated 29.O{t 2CO( (Rectification Deed No. 525612010-11 (tated 10.02.2011 and 542312O1(t-1' C:rted 19 02.2O11), and .Doc. No. 5(t90106-02 dated 07.O2.20O7 pertain n1 l,) th€) loan account No.31865725025 - 1-L 31912111183, to the Petitioner

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Counsel for the Petiti >ner: SRl. V. SRINIVAS SENIOR COUNS:1.

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Counsel for the Re:ip, rndent No.1: SRl. C. PRABHAKAR

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Counsel for the Res;pr,n,lent Nos.2 & 3: Ms. B. KAVITHA YAD/i!',

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S,C. FOR CENTRAL GOvT:RNIMENT

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The Court made the f< llowing: ORDER

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THE HON'BLE SRI JUSTICE MUMMINENI SUDHEER KUMAR WRIT PETITION No.375 Ll of 2022

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ORDER:

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Heard Sri V. Srinivas, learned Senior Counsel for the petitioner, Mr. C. Prabhakar, learned Standing Counsel for respondent No. 1 and Ms. B. Kavitha yadav, learned Standing Counsel for Central Government.

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This writ petition is filed seeking a writ of mandamus to declare the action of respondent No.l in not returning the original documents deposited by the petitioner i.e., documents bearing No.582 of 2OO9, dated 24.07.2009, executed by ApIIC; No.8990 of 2OO2, dated 24.10.2002; No.885 of 1990, dated 19.02.1990; No.4043 of 7992, dared 05.08. 1992; No.16899 of 06-07, dated 29.O9.2006, (Rectification Deed No.5256 of 2O10_ 11, dated lO.O2.2Ott, and 5423 of 201O_11, datect 19.02.2011) and No.5990 of 06-07, daLed OZ.O2.2OO7, in connection with the loan account No.31865725025 - TL 3lgl2ll 11g3, even after closure of the loan account on payment of dues under One Time Settlement Scheme (OTS Scheme) vide Ref. No.SBI/ SARB/VRN/2O t8- 1 9 I tZ 6, dated 29.O9.2O 18, as illegal and arbitrary

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Th c lrrc: s of thc casc .lrc thzrt the petiiioner trr rr:in rvailed loan of lis.tl.i 5 crore s from lespondent No.1-llank e.: Ld^jn view of the dr:farilt crmnritte d by the petitioner in 5sprr,'t tnt. of the said lc an proceedings urrder the Se<:uritiz zLtion a.ncl Reconstruc -ic : of Financial Assets and Enforc,:men r;f S,:curiLv Lrterest Ac.-, 2[t02 r'for short, 'the SARFA-IJSI Act, ! t.tQl J v7g1g inil-iat,:d agri; rsI thr: pctitioner and tyo prope]-ties, c,rrt cf eight Propertios,^tL al were mortgaged '*'ith the respon<lr:t-rt No.1 - Bank, u ere r u rject.ecl to auction ur-rder Section . .l 4) of the SARFAESI -\C ., 2OO.2. Aggrieved by such action, t.t () pe titione r approacl-red t rc Debts Rccovery 'lribunal - l, Hyrl:^-abad, lry filing S..,.N:.r ,8 of 21O18 and during pendency of tLe: sail S.A., the responctel t No.I -Bank introduced OTS Scheme :rnd :ffered the samr: tc 1- Ic petitioner through letter, datc,1 29.(t') 2OlB. irr respons(: tc t re said OTS olfer made by thc respo t(len1 No. 1- Bank, tlLe pe, il-roner has pajd entrre dues of Rs.2,tti.87.725/-. However, ir t re sairl offer letter, dated 29.09.2018, lhere was a condition tha . t he petitioner sha11 withdraw a1l thc^(:as€ s filed against t he re rF,ond,3nt No.1-Bank and its officia1s. !'hough the petilioner pa d the entire dues in terms of tht: Qf3, 11r. petitioner did not comply with the said condition of rvithdrawing all the c:rse; i gzrinst the respondent No. 1-Bank and itr; olfrcials.

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In spite of the same, the respondent No.l-Bank aecepted the entire OTS arnount and closed the loan account. As on date, admittedly there are no dues payable by the petitioner to the respondent No. 1-Bank.

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It is not the case of the respondent No.l_Bank that the OTS offer given by the respondent No. l_Bank through letter, dated 29.O9.2018, is rejected by the Bank and the loan account is active as on date. However, respondent No.l_Bank failed to return the collateral security documents pertaining to the rest of six properties belonging to the petitioner, even after closure of the loan account, on the ground that the petitioner failed to comply with the condition of OTS, namely withdrawing all the cases filed and pending against the respondent No. 1-Bank and its officials.

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As it is not in dispute that the loan account in respect of which six properties are mortgagecl tith the respondent No. l_ Bank is already crosed and by virtue of the orS scheme and if the petitioner failed to comply with any of the conditions, it could have been always open for the respondent No.l_Bank to refuse to close the loan account of the petitioner under OTS scheme. But, the respondent No.l-Bank did not resort to such

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riction a rd a( c(:ptcd the pavmcnt made ltv the pe -tt on,:r alrd ciosed tl Le 1')€r r .lccount

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AJrni Le 11y, as on cl:rlc, loan account sr-ands : osr:d and no zr.mollnLs rre due and payabie by the pt:titior <:: . Irr Lhe 3.bsencc oi ar y dues payable by the petition(rr, ar! action on thc part ol respondent No. 1 Bank in witht o.Cing the documents tt al are submitted to the Banl< towar< lrl coilateral security is tot rlJy unjust and illcgal.

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Even ol hr:rwise, tlre said S.A.No.9S of llo I 8 li :d bi, ths petitioner iri i ls o stated to have been dismissed Ll r -he Debts Recoverl Tr bunal b1. order, dated 31.O1.1):,20, and W.P.No.i)904 tt 2O2O hled there against is also ste tr:d t: have b:en dismisrsr d with liberty to the pe titioner to avail -:re remedy before thc De bts Recovery Appellate Tribunal. As rr derte, no appeai is stat :d to have been fi1ed. Thus, no cases rl3 p:ndirrg against th<: la nk in connection rvith thc loan zrccorrnt in question. Hr nr:e, there is no impcdiment tbr: the :-.'spr>ndent Irlo. 1 'Bank ir returning the documents in resps,:t of six properties cf 1 :rr: petitionr:r.

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The s,ta r<[ of the respondent No. l-Banl< tha - in view of the faiirrre r f the petitioner to comply^q'ith ' rrre^,lf the

t rcElEffi-r=-

conditions, the respondent No. l -Bank is withholding the documents pertaining to six properties is untenable, as respondentNo. 1-Bank has accepted the payment under OTS Scheme and closed the loan account of the petitioner. There are no dues in the loan account in question as on date and no amounts are payable by the petitioner to the respondent No. 1-Bank.

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In light of the above, this Court does not see any reason for the respondent No. I -Bank to withhold the documents pertaining to the proprieties in question and such an action of the respondent No.l-Bank is accordingly declared as illegal and arbitrary and violative of under Article 3OOA of the ConsLitution of India.

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Accordingly, the writ petition is allowed directing the respondent No.l-Bank to return all the documents pertaining to the subject six properties to the petilioner within a period of four (04) weeks from the date of receipt of a copy of this order. However, it is made clear that in the event the petitioner files any appeal against the order, dated 31.01.2020, the respondent No.1- Bank is entitled to take all the grounds that are available

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to the Bar < r r< luding non-r;ompliance of thc ::olrcli-, irs ol'O1'S

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l-.y the pctir.io rer.^'itrere shall be r-ro order as tr) c()sts

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Misc:il rncous; Pctitions, if any, pcnc ir-rg rr this wriL

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pctition sh,rlI sland closr:d

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til:rL N. RAJAGOPAL ASSIS,I-ANT REGISTRAR

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//TRUE COPY// ,rlt siEc'floN oFflcER

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To,

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1 ThestateBinlloflndia,Asst.Generallvlana<lerlDClll'SlressedAssets R;;.;;;; rrr: n,.n,^{2nd floor, APSRTC,66rnrnrrter- l rtrenity Center'Bus} Terminai Ct,rr^{lkrx, Koti, Hyderabad - 500 095'}

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2 fn" anJ Frotecf Cfr"i^i;e ror^r€ t)epartmerit^{ral Manader, Reserve iese..Bank Bank_ of Of lndia lndia 1st :loor, [):,nsumer Amar EducationBuilding,} Sir P.M. Road^{[tlumbai-4OO 001.}

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