Nihar Ranjan Bhattacharjee vs Union of India and Ors

The challenge in this writ petition is to the notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The petitioner is a retired State Government employee and he owns a plot of land at Guwahati wherein he has constructed a twostoried building. He stood guarantor for repayment of the loan obtained by the respondent No. 4 from the State Bank of India, by mortgaging the said immovable property. The financial assistance by way of loan rendered to the respondent No. 4 by the Bank was for Rs. 13,50,000/. Apart from the loan agreement by and between the respondent No. 4 and the Bank, the petitioner also entered into a separate agreement undertaking to stand as guarantor in respect of the loan.

The respondent No. 4 after obtaining the loan from the Bank started his business in electric goods in the name and style of M/s. Real Deal Corporation. The respondent No. 5 is the wife of the respondent No. 4 and she has been working in the Bank. According to the petitioner, she taking advantage of her employment in the Bank managed to persuade the authorities of the bank to take over the loan account from the earlier bank i.e. State Bank of India by enhancing the credit limit from Rs. 13,50,000/ to Rs. 22,00,000/. A fresh agreement was entered into by and between the respondent No. 4 and the respondent No. 2 Bank. The

petitioner also entered into a fresh agreement dated 31102001 with the respondent No. 2 Bank undertaking to stand as guarantor in respect of the loan account. The respondent No. 5 also stood as guarantor. He is an employee of the respondent No. 2 Bank.

By Annexure1 letter dated 2412003 the respondent Bank directed the respondent No. 4 to regularize the loan account immediately and submit the audited balancesheet and copy of renewed insurance policy. A copy of the letter was also endorsed to the petitioner for information. According to the petitioner, he had come to know about the aforesaid state of affairs of the loan for the first time on receipt of the copy of the said letter dated 2412003. He wrote a letter dated 2112003 to the respondent No. 4 raising his objection and requested the respondent No. 4 to release his immovable properties mortgaged with the Bank. However, such request of the petitioner did not yield any result. Situated thus, he addressed the Annexure3 letter dated 552003 to the respondent Bank with the request to release his mortgaged properties from the charge by creating charge over the residential flat purchased by the respondents No. 4 and 5.

By Annexure4 letter, the respondent Bank directed the respondent No. 4 to take corrective steps in regularizing the cash credit account as per his earlier commitment made to the bank. As per the said letter the debit balance of the cash credit account as on 3042003 stood at Rs. 23,42,147/ inclusive of interest. A copy of this letter was also endorsed to the petitioner. Situated thus, the petitioner renewed his earlier request to the Bank by letters dated 1062003 and 772003 (Annexure5 and 6). According to the petitioner these letters have been followed by various other letters with the same request, but to no result.

The petitioner has been issued with the impugned notice dated 1912005 under Section 13(2) of the Act making a demand for payment of the amount of Rs. 20,97,566/ from the petitioner. In the notice it has also been indicated that upon failure of the petitioner to do so, action would be taken as per Section 13(3) of the Act. On receipt of the notice, the petitioner by his Annexure8 letter dated 1142005 requested the respondent Bank to recover the loan from the respondents No. 4 and 5. Thereafter the petitioner received the Annexure10 letter from M/s. Kanak Choudhury and Associated (not party to this proceeding), the enforcement agent of the respondent Bank asking the petitioner to hand over possession of the plot of land measuring I Katha 5 Lechas.

On 2232006, the enforcement agent of the respondent Bank went to the residence of the petitioner and asked him to handover possession of his landed property. According to the petitioner he was not aware of engagement of enforcement agent by the Bank as he was never intimated of the same by the Bank. It is further case of the petitioner that the respondent Bank cannot saddle the petitioner with repayment of the loan as according to him it is the respondent Nos. 4 and 5, who are responsible for the same. The petitioner has attributed the foul play on the respondent Bank in not disturbing the respondent Nos. 4 and 5, but only pursuing the matter with the petitioner alone. It is under these circumstances, the petitioner has invoked the writ jurisdiction of this Court for setting aside and quashing of the impugned Annexure7 notice dated 1912005. Further prayer made in the writ petition is for a direction to the respondent Bank to proceed only against the respondent Nos. 4 and 5 towards recovery of the loan.

The writ petition was entertained by order dated 2722006 and the respondent Bank was restrained from taking further action pursuant to the impugned notice dated 1912005. The Bank has filed the application registered and numbered as Misc. case No. 1623/2006 praying for vacating the order dated 2722006. In the application, the Bank has contended that in spite of repeated demands both to the respondent No. 4 and the guarantors including the petitioner, same having not yielded any result, the impugned notice dated 1912005 was issued. It has been stated in the application that the petitioner having stood as guarantor, he is liable to repay the outstanding amount of the loan being jointly and severely liable under the agreement. The respondent Bank has further contended that in case of dues being not fully satisfied with the sale proceeds of the secured assets, the Bank is entitled to take appropriate legal measures for recovery of the balance amounts from the borrower and the guarantor under Section 13(10) of the Act.

The respondent Bank has also questioned

the maintainability of the writ petition there being alternative remedy under the Act. It has been stated that the petitioner is entitled to prefer appeal under Section 17 of the Act if he is aggrieved by the impugned notice issued under Section 13(2) of the Act.

I have heard Mr. K. N. Choudhury, learned Sr. Counsel, assisted by Mr. S. Shyam, learned counsel for the petitioner as well as Mr. P.C. Goswami, learned counsel representing the respondent bank. While Mr. Choudhury, learned counsel for the petitioner highlighting the above aspects of the matter has contended that the impugned notice is uncalled for in the given fact situation of the case, Mr. Goswami, learned counsel for the bank placing reliance on the decisions of the Apex Court and this Court submitted that the writ petition is not maintainable and that the action of the respondent Bank being in accordance with the provisions of the Act, the writ Court will be reluctant to interfere with the said action. He has placed reliance on the decisions reported in (2004) 4 SCC 311 : AIR 2004 SC 2371 (Mardia Mechicals Ltd. v. Union of India), 2006 (4) GLT 492, (Kanak Udyog (India) 2006 (4) GLT 601 (Sushil Kumar Agarwalla v. State of Assam) and the unreported judgment of the Apex Court dated 29112006 in Civil Appeal Nos. 908/2006 (Transcor v. Union of India).

In the impugned notice dated 1912005, the detailed particulars of the properties in respect of which security interest has been created and the total outstanding liabilities as on 3062004 have been indicated. The notice has been issued to the petitioner being the guarantor indicating his liability. It has further been indicated that upon failure of the petitioner to repay the amount indicated with future interest and incidental expenses, cost etc. in terms of the impugned notice, the Bank would proceed as per the provisions of the Act. There is no dispute that the Bank is entitled to issue the notice and the same has been done as per the provisions of the Act and in accordance with the terms and conditions of the agreement by which the petitioner stood guarantor towards repayment of the loan by mortgaging his immovable property. The plea, which has been raised by the petitioner is beyond the scope of the agreement he voluntarily entered with the Bank. In Mardia Chemicals Limited, the Apex Court has upheld the provisions of the Act.

The Bank has complied with the necessary requirements of Section 13(2) of the Act. It has also dealt with the objection raised by the petitioner. Now upon failure to discharge his liability in full, within the period specified in the notice, it will be open for the Bank to take recourse to one or more of the measures as indicated in Section 13(4) of the Act to recover the secured debt. In the event of being dissatisfied with the action taken under Section 13(4) of the Act, it will be open for the petitioners to prefer an appeal under Section 17 of the Act. This statutory remedy cannot be by passed invoking the writ jurisdiction. Moreover, the stage has not yet ripened for initiating any proceeding. It is only at the notice stage and it will be open for the Bank to take action as per the provision of the Act upon failure of the petitioners to comply with the requirement under Section 13(2) of the Act.

Under somewhat similar circumstances, this Court by judgment and order dated 1392006 passed in M/s. Barak Valley Tea Company v. Union of India, reported in 2006 (133) Com Cas 937 (Gau) has dismissed the writ petition. In that case, the decision dated 222006 of the Madras High Court in W.P. No. 250/2006 (D. Ravichand v. Manager, Overseas Bank) has also been referred to. In the decision of the Madras High Court, which has been passed placing reliance on the earlier Division Bench judgment, it has been held that the writ petition of this nature is premature as the case as in the instant case was only at the stage of Section 13(2) notice.

In view of the above. I am of the considered opinion that the writ petition does not disclose any material warranting interference under Article 226 of the Constitution of India. It fails on all counts i.e. there being statutory remedy of appeal in case of initiation of proceeding under Section 13(4) of the Act and also on merit, in view of the own admission of the petitioner regarding its liability as guarantor to the loan. In this connection, the observation of the Apex Court in Punjab National Bank v. O. C. Krishnan, reported in 2001 AIR SCW 2993 : AIR 2001 SC 3208 are quoted below :

"5. In our opinion, the order which was passed by the Tribunal directing sale of mortgaged property was appealable under S. 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short the Act). The High Court ought not to

have exercised its jurisdiction under Art. 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the tribunal was correct or not has to be decided before an appropriate forum.

The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is hierarchy of appeal provided in the Act, namely, filing of an appeal under S. 20 and this fast track procedure cannot be allowed to be derailed either taking recourse to proceedings under Arts. 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the Court under Arts. 226 and 227 of the Constitution, nevertheless when there is an alternative remedy available judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Art. 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."

Writ petition is dismissed. There shall be no order as to costs.

Petition dismissed.