M/s. United Industries, Ludhiana vs Vijaya Bank and Others

G.S. Sandhawalia, J.—The present writ petition has been filed under Article 226 /227 of the Constitution of India for quashing the notice dated 16.11.2011 (Annexure P-5), issued u/s 13(2) of the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, the "SARFAESI Act"). The case set up by the petitioner is that it had availed cash credit facility from the respondent-Bank. The petitioner was running its business under the name and style of M/s. United Industries. In the month of June/July, 2011, the behaviour of the Bank became strange and bothersome and the petitioner was asked to deposit illogical charges on the threat of declaring the account as Non Performing Asset (NPA) and selling the immovable properties of the petitioner. The Bank had not provided the petitioner any statement of account nor the detail of charges asked which the petitioner was forced to pay inspite of the request made to it vide letter dated 13.07.2011 and 10.09.2011. Respondent No. 2 confided with the petitioner that since he was under pressure from the higher officers of his Bank to ensure that the account of the petitioner was declared NPA and the assets were brought to sale and, therefore, suggested the petitioner to shift his account to some other Bank. When the petitioner was on the verge of entering negotiations with the other Bank for taking over the account, it received notice dated 16.11.2011 u/s 13(2) of the SARFAESI Act and the petitioner wrote to the Bank on 26.11.2011 asking various details. Respondent No. 2 advised him that he was being pressurized by respondent No. 4 but he would not succumb to his pressure and, therefore, the petitioner did not pursue the matter. On the transfer of respondent No. 2, respondent No. 3 was posted at his place and the petitioner came to know that respondent No. 3 had approached some realtors on behalf of respondent No. 4 to arrange for some benami purchaser to purchase the property under the SARFAESI Act for further transfer at the bidding of respondent No. 4. Since no notice was issued u/s 13(4) of the SARFAESI Act, the petitioner could not approach the Debts Recovery Tribunal (for brevity, "the DRT") and hence the writ petition was filed.

Respondent-Bank, in its reply, stated that the limit of the cash credit of the petitioner was Rs. 1,25,00,000/- and the account had been overdrawn on 28.07.2011 and after expiry of 90 days, the account had become NPA and, accordingly, the notice u/s 13(2) of the SARFAESI Act had been issued. The petitioner had cleverly taken the certificates from the then Bank Manager on 21.02.2011 and 10.10.2011 during the said period of 90 days when the account was not declared NPA since the petitioner was an old customer of the Bank and had been dealing for the last so many years with the then Chief Manager, who issued the certificates in good faith. It was further pleaded that the letters dated 26.11.2011 and 21.12.2011 were not noted in the record of the Bank. The petitioner had an alternative remedy u/s 17 of the SARFAESI Act. Reliance was placed upon Triveni Yarns Limited Vs. Punjab Financial Corporation and Others, and it was pleaded that not only M/s. United Industries had taken financial assistance from the respondent-Bank but another company, viz., Punjab Ferries Private Limited had also taken financial assistance from the respondent-Bank. The said company mortgaged property measuring 19 kanals situated at Village Majrian, Sub-Tehsil Majri, Tehsil Kharar and this property had been sold by one of the Directors of the company, Jatinder Pal Singh though the original sale deed dated 12.06.2006 was deposited with the Bank. Various allegations were also made that another property situated at Village Bhatha Dhua, Tehsil Jagraon was also given as security and the said property had been purchased by Parminder Singh Nalwa in the auction conducted by the DRT, Chandigarh, which was well within its rights to proceed u/s 13 of the SARFAESI Act. Petitioner had concealed material facts and misstated facts regarding the story of the Bank officials being mixed up with the builders.

After hearing counsel for the parties and after perusing the record, in our opinion the petition can be disposed of without entering into the factual matrix which is disputed inter se the parties. Admittedly, the respondent-Bank has served a notice dated 16.11.2011 u/s 13(2) of the Act. Thereafter, the petitioner, on 24.11.2011, vide an alleged communication, had asked for certain information relating to the date on which the account had been declared as NPA and on what basis. A Division Bench of this Court in the case of M/s. Triveni Yarns Ltd. (supra), after taking into account the judgment of Harminder Singh and Another Vs. State Bank of India, has held that objections have to be decided by the Bank before passing an order u/s 13(4) so that it is open to the petitioner to file appeal against the same before the DRT and that the writ petition filed prior to the order u/s 13(4) would be premature. Relevant portion of the judgment reads as under:

The judgment in Harminder Singh''s case (supra) relied upon by counsel for the petitioner does not help him in any way as the respondent-Corporation has disposed of the objections raised by the petitioner and the same have also been communicated to him. The Hon''ble Supreme Court in Mardia Chemicals Ltd and others v. Union of India and others, has authoritatively laid down that the reasons communicated to the petitioner after considering the reply of the borrower do not give any right to him to approach the DRT u/s 17 of the Act at that stage. It would be open to the borrower to file an appeal u/s 17 of the Act before the DRT on measures having been taken under Sub-section (4) of Section 13 and before the auction of the property by the secured creditors.

Accordingly, the present writ petition is disposed of with liberty to the petitioner to file a detailed representation u/s 13(3A) of the SARFAESI Act against the notice dated 16.11.2011 within 20 days from the receipt of a certified copy of this order and the Bank shall take into consideration the objections and communicate its decision within one: week of the receipt of such representation or objections. The parties, thereafter, shall be free to take further steps in accordance with law.