IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED 24.02.2010
CORAM
THE HONOURABLE MR. JUSTICE M. VENUGOPAL
W.P.No.27517 of 2004
P.Sampath .. Petitioner
vs
1.The Authorised Officer,
State Bank of Mysore,
Thiruvanmiyur Branch,
Thiruvalluvar Salai,
Kamaraj Nagar,
Chennai 600 041.
2.The State Bank of Mysore,
Thiruvanmiyur Branch,
Thiruvalluvar Salai,
Rep by its Manager,
Chennai 600 041.
3.Bangalore Balan
Proprietor
M/s.Crow Marble
4.Mrs.Ramalakshmi Balan .. Respondents
Writ petition filed under Article 227 of the Constitution of India for issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent in respect of the impugned notice dated 06.06.2004 and quash the same and consequently, discharge the petitioner from the liability.
For Petitioner ... Mrs.K.Damayanthi
For second
Respondent ... Mrs.J.B.Anitha Banu
M/s. Surana & Surana
For 1st, 3rd and 4th
Respondents ... No Appearance
O R D E R
The petitioner has filed this writ of certiorarified mandamus in calling for the records of the first respondent pertaining to the impugned notice dated 06.06.2004 and to quash the same and also consequently discharge the petitioner from the liability.
2.The petitioner/Guarantor executed a deed of Guarantee on 21.5.1991 by offering his Flat No.12/15, Mosque Street, Mylapore, Chennai as a collateral security by creating an equitable mortgage by deposit of title deeds in respect of the deed executed by the third respondent for a loan of Rs.2,00,000/- availed from the second respondent on 21.5.1991. The third respondent had executed a demand promissory note in favour of the petitioner for the said sum of Rs.2,00,000/- which was deposited in the Bank with his endorsement, which would safeguard his interests, if he fulfills his guarantee in case of default by the second respondent.
3.Thereafter, the first respondent had enhanced the credit limit to the second respondent from Rs.2,00,000/- to 7,00,000/- on 01.10.1992 and also an adhoc limit of another Rs.7,00,000/- on 22.10.1992 the repayment of which amounts were guaranteed by the third respondent by means of executing a Deed of Guarantee dated 01.10.1992 and 22.10.1992. The third respondent executed a demand promissory note in favour of the fourth respondent as a security towards her interest in case of her fulfilling the guarantee towards the second respondent.
4.It is the stand of the petitioner that the enhancement of credit facility of Rs.7,00,000/- and adhoc limits of Rs.7,00,000/- were made without his knowledge by the second respondent and his consent was never obtained by the creditor before causing the variance in the loan documents and contracts between the Bank and the principal debtor and that he was not at all a party to the said transactions and the promissory note executed by the third respondent in favour of the fourth respondent prove the same.
5.The second respondent instituted a suit in C.S.No.1617 of 1994 for recovery of the amount on the file of this Court against the third and fourth respondents and also impleaded the petitioner as third defendant and later on the said suit was transferred to the file of the Debts Recovery Tribunal, Chennai and it was renumbered as T.A.No.340 of 1997 and that the petitioner in the said proceedings was set exparte by the Debts Recovery Tribunal on 10.09.1997, since there was no representation on his side and he came to know about the proceedings only on receipt of the final orders in T.A.No.340 of 1997 from the Debts Recovery Tribunal, in as much as the counsel had not intimated about the factum of himself being set ex parte before the Debts Recovery Tribunal. The petitioner projected I.A.No.770 of 2000 to set aside the ex parte order dated 10.9.1997 in T.A.No.340 of 1997 and I.A.No.771 of 2000 for stay of the final orders dated 28.2.2000 passed in T.A.No.340 of 1997 and the Tribunal passed a conditional order directing the petitioner to pay a sum of Rs.5,00,000/- to the second respondent and on making the said payment, the ex parte order passed against him would be set aside and he preferred Appeal No.105 of 2001 before the Debts Recovery Appellate Tribunal at Chennai but the Tribunal passed an order on 21.12.2001 by reducing the payment from Rs.5,00,000/- to Rs.2,50,000/-. Subsequently, he filed W.P.No.35573 of 2002 before this Court praying to quash the order of the Debts Recovery Appellate Tribunal and to discharge himself from the liability. This Court on 18.9.2002 passed a conditional order directing him to deposit a sum of Rs.2,00,000/- and on complying with the same the ex parte order would be set aside and later, he filed the Review Petition No.73 of 2003 which was admitted and the same was dismissed on 23.1.2006 (as informed by the learned counsel appearing for the second respondent).
6.In the writ petition, the petitioner challenges the issuance of notice dated 06.06.2004 as per Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 calling him to repay the entire loan dues of Rs.22,29,201.95 together with future interest within sixty days from the date of the said notice failing which, the first respondent warned him to take action against him under Section 13(4) of the Act and therefore, the impugned notice dated 06.06.2004 was bad in law.
7.Added further, it is contended on the side of the petitioner that the impugned order dated 06.06.2004 ignores the principle laid down in Section 133 of the Indian Contract Act and as such, the impugned order is also liable to be quashed.
8.At this stage, it is relevant for this Court to refer to Section 13 (1) and 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 which enjoins as follows:
“(1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2)Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).”
9.Also 13 (4) of the Act reads hereunder:
“In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-
(a)take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;)
(c) appoint any person )hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.”
10.It is to be noted that when the vires of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 was challenged, the Hon’ble Supreme Court in MARDIA CHEMICAL’s Case (2004) 4 SCC 311 upheld the provisions of the Act.
11. As a matter of fact Sub Section 2 of Section 13 of the Act enjoins the action by a Secured Creditor against the borrower may be intimated by a notice in writing calling upon him to discharge in full his liabilities within sixty days from the date of notice, failing which the Secured Creditor is entitled to exercise all or any of the rights as per Sub Section 4 of the Act.
12.It is relevant to point out that after service of notice under Section 13 (2) of the Act the reply/objection must be considered with due application of mind and the reasons for not accepting the objections even if it is brief, ought to be communicated to the borrower. Once the Bank considers the reply sent by a defaulter to the notice issued by it as per Section 13 (2) of Securitisation Act communicate its decision, no further hearing is contemplated before taking action under Section 13 (4) of the Act.
13.The learned counsel for the second respondent contends that the notice issued under Section 13 (2) of Securitisation Act does not give a cause of action to an individual in view of the fact that the said notice does not affect any right or liability of the borrower and in the instant case on hand, the petitioner being a guarantor could not challenge the impugned notice dated 06.06.2004 issued under Section 13 (2) of the Act and therefore the writ petition filed by the petitioner is per se not maintainable in the eye of law and to lend support to the said contention, he relies on the decision of this Court DIGVISION ELECTRONICS LTD. V. INDIAN BANK (2005 (3) CTC 513) wherein at page 514, it was observed that a notice as per Section 13 (2) of the Act given to the borrower or secured debtor was only a show cause notice and does not give rise to a cause of action and therefore, the said challenge under writ proceedings was a premature one and moreover, the petitioner was not entitled to raise all the points urged in the writ petition by means of reply to the notice issued under Section 13 (2) of the Securitisation Act.
14.That apart, the Hon’ble Supreme Court in the decision in TRANSCORE V. UNION OF INDIA ((2007) 73 SCL 11 (SC)), has observed that ‘the notice issued under Section 13 (2) of the Act by a secured creditor was an action taken under the provisions of the Act and not a mere show cause notice’.
15.By applying the principles of the decision of this Court in DIGVISION ELECTRONICS LTD. V. INDIAN BANK (2005 (3) CTC 513) and also taking into consideration the observation of the Hon’ble Supreme Court referred to in the decision in TRANSCORE V. UNION OF INDIA ((2007) 73 SCL 11 (SC)), this Court comes to an inevitable conclusion that the petitioner has no locus standi to project the present writ petition questioning the impugned notice dated 06.06.2004 issued under Section 13 (2) of the Securitisation Act and in short, the said notice does not provide a lever to the petitioner to question the impugned notice dated 06.06.2004 and when the petitioner has an alternative remedy of taking of the plea before the Appropriate Authority under the Act, the present writ petition is a premature and sans merits and resultantly the writ petition fails for want of bonafides.
16.In the result, the writ petition is dismissed leaving the parties to bear their own costs. The dismissal of the writ petition will not preclude the petitioner to raise all the points raised in the writ petition before the Appropriate Authority under the Securitisation Act. Consequently, connected W.P.M.P.No.33459 of 2004 and W.V.M.P.No.69 of 2006 are closed.
cla
To
1.The Authorised Officer,
State Bank of Mysore,
Thiruvanmiyur Branch,
Thiruvalluvar Salai,
Kamaraj Nagar,
Chennai 600 041.
2.The State Bank of Mysore,
Thiruvanmiyur Branch,
Thiruvalluvar Salai,
Rep by its Manager,
Chennai 600 041