Mayunk Industries vs Union Bank of India and Others

J.M. Malik, J. (Chairperson)

The learned Presiding Officer DRT, Jabalpur, vide her order dated 15th March, 2010 refused to grant interim stay, during the pendency of application u/s 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short ''the SRFAESI Act''). She observed that the Appellant /applicant is not willing to pay the dues though sufficient time was granted. She further observed that the applicant has failed to establish any lapse on the part of the bank in auctioning the property for recovery of its dues and as such the said Tribunal could not intervene and prevent the recovery of the dues.

I have heard the Counsel for the parties. The learned Counsel for the Appellant vehemently argued that u/s 17 of the SRFAESI Act the DRT cannot impose any condition as per the law laid down in Mardia Chemicals Ltd. v. Union of India.1

I find no force in this argument. The DRT has not imposed any condition. The Presiding Officer just mentioned that since the Appellant is not willing to pay the dues in dispute, therefore, she declined to stay the recovery proceedings. The law laid down by the Hon''ble Apex Court in Mardia''s case (supra) has got no application to the facts of this case.

The learned Counsel for the Respondent bank vehemently argued that the present petition was filed u/s 18 of the SRFAESI Act and as such there lies no rub for this Court to impose the precondition as per the provisions of Section 18 of the SRFAESI Act. In order to buttress his case, he has cited two authorities which are reported in Babu Ganesh Singh Deepnarayan v. Union of India,2 decided by the Division Bench of the Hon''ble Gujarat High Court and K. Chidambara Manickam v. Shakeena,3 decided by Division Bench of Hob''ble Madras High Court.

This argument, too, is devoid of force. This appeal has been filed against the interim order. The Hon''ble Delhi High Court has taken an opposite view in the case reported in Naresh Kumar Mittal v. State Bank of India W.P. (C) No. 520/2009 decided on 17th July, 2009. Paras 3, 4 and 7 ol the said judgment are relevant for the present controversy. I have already decided this point in the case of B.L. Gupta Construction (P) Ltd. v. Vijaya Bank Miscellaneous Appeal No. 226/2009 decided on 12th November, 2009, wherein I have held as follows:

15... It is noteworthy that Court is to see the ratio of an authority, Moreover, it would lead to anomalous situation if more than one appeal with regard to interlocutory orders are filed. In Superintendent and Remembrancer of Legal Affairs to Government of West Bengal v. Abani Maity,1 the Hob''ble Apex Court was pleased to observe that a statute is not to be interpreted merely from the lexicographer''s angle. The Court must give effect to the will and in-built policy of Legislature as discernible from the object and scheme of the enactment and the language employed therein. Again, Halsury has observed that the words "should be construed in the light of their context rather than what may be either their strict etymological sense or their popular meaning apart from the context.

As no authority from the Hon''ble Madhya Pradesh High Court to the contrary has been cited, I follow the authority of Naresh Kumar Mittal''s case (supra).

The next submission made by the Counsel for the Appellant was that the Appellant has got a very good case on merits. In this respect he invited my attention to some relevant issues. It is an admitted fact that notice u/s 13(2) of the SRFAESI Act does not give correct figure of outstanding dues. The bank mentions that the Appellant was to pay a sum of Rs. 52,30,101/- as oh 31st March, 2009 while, on the other hand, the statement of account shows that as on 31st March, 2009 a sum of Rs. 50,53,976.20 was due. To my mind, it appears to be a typographical mistake. The Counsel for the Respondent himself admitted that a sum of Rs. 52,30,101/- pertains to the month of June when the notice was is-sued.

In the case reported in State Bank of India v. Hon''ble Debts Recovery Appellate Tribunal,2 the correct amount of demand was not stated in the notice u/s 13(2) of the SRFAESI Act. There was violation of rules. It was held by the Hon''ble Delhi High Court that none of the requirements which can affect the mortgagor had been violated. The only violation of the said rule was not to specify the amount secured by the mortgage. There was undoubtedly no injury to the mortgager arising from not stating the amount of debt due. It was also held that mere technical violation in compliance of the rules is not sufficient to vitiate the action.

The learned Counsel for the Appellant has invited my attention towards the guidelines issued by the Reserve Bank of India dated 1st July 2009. Its relevant portion is reproduced as follows:

Definitions

2.1 Non-performing Assets

2.1.1 An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.

2.1.2 A non-performing asset (NPA) is loan or advance where:

(i) interest and/or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,

(ii) the account remains ''out of order'' as indicated at para 2.2 below, in respect of an Overdraft/Cash Credit (OD/ CC),

(iii) the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

(iv) the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

(v) the instalment of principal or interest thereon remains overdue for one crop season for long duration crops,

(vi) the amount of liquidity facility remains outstanding for more than 90 days, in respect of securitisation transaction undertaken in terms of guidelines on securitisation dated 1st February, 2006.

(vii) in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

2.1.3 Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

2.2 ''Out of order status.

An account should be treated as ''out of order'' if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as ''out of order

The Counsel for the Appellant opined that since the secured assets could cover the value of the loan and, therefore, it should not have been declared as NPA.

I am unable to agree to the contention put forward by the Counsel for the Appellant. Prima facie the account was rightly declared as NPA.

The learned Counsel for the Appellant argued that the Appellant has got only one house and he is not in a position to pay off the dues of the bank. Moreover, the Appellant has claimed damages. Lastly, the Appellant has recently undergone heart surgery.

As per the notice dated 17th June, 2009 u/s 13(2) of the SRFAESI Act the Appellant had to pay an amount of Rs. 50 lacs and odd. The Appellant has nowhere denied the receipt of the money. Although he has stated that he has suffered damages, yet the details were not filed before the Court.

Keeping in view all the facts and circumstances of the case, I stay the recovery proceedings subject to the Appellant''s depositing a sum of Rs. 15 lacs within a period of 15 days. Subject to Appellant''s depositing the said amount, the recovery proceedings shall remain stayed till the final disposal of the application filed by the Appellant before the learned Trial Court.

Copies of this order be furnished to the parties as per law and another copy be sent to the learned DRT.