IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 30813 of 2008(R)
1. SMT. PUSHPALATHA.S., W/O. SUGUNAN,
... Petitioner
Vs
1. STATE BANK OF TRAVANCORE REPRESENTED BY
... Respondent
2. KHADI AND VILLAGE INDUSTRIES COMMISSION,
For Petitioner :SRI.JOHN JOSEPH(ROY)
For Respondent :SRI.P.N.PURUSHOTHAMA KAIMAL
The Hon'ble MR. Justice THOTTATHIL B.RADHAKRISHNAN
Dated :11/02/2009
O R D E R
THOTTATHIL B RADHAKRISHNAN, J
...........................................
WP(C).NO. 30813 OF 2008
............................................
DATED THIS THE 11TH DAY OF FEBRUARY, 2009
JUDGMENT
The petitioner availed a loan from the first respondent.
According to her, that was on the basis of a then available financial
assistance scheme of the second respondent, Khadi and Village
Industries Commission. She states that the second respondent
recommended her application and forwarded it to the first
respondent, Bank, however, that the bank did not duly honour its
commitments and hence margin money and other amounts payable by
the second respondent, Commission was not appropriately released.
2. On default in repayment, the bank initiated action under the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002( in short, SARFAESI Act).
A notice under Section 13(2) was issued. The petitioner replied to
that as per Ext.P11, stating that in view of the disputes between the
petitioner and the first respondent regarding the total amount
outstanding from her to bank, the parties have to go for arbitration in
terms of Section 11 of SARFAESI Act read with the provisions of
Arbitration and Conciliation Act, 1996.
WP(C) 30813/2008 2
3. If a measure is taken under Section 13(4), the obvious
remedy for the petitioner is to take recourse to Section 17 of
SARFAESI Act and move the Debt Recovery Tribunal. If further action
under Section 13(4) has not followed, the petitioner would not have
any right to challenge the decision of the bank, rejecting the
objections to the notice under Section 13(2). This proposition settled
by Apex Court in the judgment in Mardia Chemicals V. Union of India
(2004(4)SCC 311). It is contended that the said ratio is not
applicable, in view of the fact that the petitioner’s challenge is to the
bank’s decision that it does not agree for arbitration in terms of
Section 11 of SARFAESI Act.
4. It therefore needs to be considered as to whether the
petitioner has the locus to initiate or ask for an arbitration by invoking
Section 11 of SARFAESI Act. That provision reads as follows:-
“Resolution of disputes – Where any dispute
relating to securitization or reconstruction
or non-payment of any amount due
including interest arises amongst any of the
parties, namely, the bank or financial
institution or securitization company or
WP(C) 30813/2008 3
reconstruction company or qualified
institutional buyer, such dispute shall be
settled by conciliation or arbitration as
provided in the Arbitration and Conciliation
Act, 1996(26 of 1996), as if the parties to
the dispute have consented in writing for
determination of such dispute by
conciliation or arbitration and the
provisions of that Act shall apply
accordingly”.
5. A reading of Section 11 of the SARFAESI Act shows that the
disputes which could be resolved by recourse to that provision are
disputes relating to securitisation or reconstruction or non-payment of
any amount due including interest. Such a dispute could be resolved
only when that arises amongst any of the parties stated in that said
provision. They are the bank or the financial institution or the
securitisation company or the reconstruction company or a qualified
institutional buyer. Therefore any dispute between a secured creditor
and a debtor in relation to the security interest or secured debt does
not fall for arbitration under that provision. For that clear reason,
Section 11 of SARFAESI Act cannot be initiated by a debtor. Hence
WP(C) 30813/2008 4
the decision of the bank as contained in Ext.P12 to that extent is
sustainable.
6. Therefore, the petitioner’s plea based on Section 11 of the
SARFAESI Act is rejected. Having rejected the plea under Section
11 of the SARFAESI Act, I do not find any ground to issue any order
in relation to the other disputes between the parties, which relate to
the release of margin money, etc. They do not call for determination
in writ jurisdiction.
7. Learned counsel for the second respondent, on instructions,
submitted that as if now, the scheme relied on by the petitioner is not
in force and a different scheme has been later brought in. This
submission is recorded. In the result, rejecting the plea raised by the
petitioner on the basis of Section 11 of the SARFAESI Act and leaving
open all other issues, this writ petition is dismissed. No costs.
THOTTATHIL B RADHAKRISHNAN,
JUDGE
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