Smt. Lalitha and Sri Siddaraju Gowda vs Authorised Officer under The Provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Karnataka Industrial Co-operative and Karnataka State Co-operative Bank Ltd.

A.S. Bopanna J.

The Petitioners in W.P. No. 45382/2004 (GM RES) are before this Court in this intra-Court appeal claiming to be aggrieved by the order dated 04.03.2005. By the said order, the learned Single Judge has declined to grant the relief sought in the petition, but has reserved the liberty to approach the appropriate forum as provided u/s 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ''the Act'' for short).

The brief facts which are relevant for the disposal of this appeal alone are noticed. In this regard, it is seen that the Appellants and the second Respondent-Cooperative Bank entered into certain loan transaction which ultimately resulted in the issue of notice dated 02.09.2004 u/s 13(2) of the Act. and possession notice dated 02.09.2004 to the Petitioners by the Respondent. The Petitioners responded to the same by their application dated 30.09.2004 by way of objection to the said notice. The Respondents by their communication dated 29.10.2004 however directed the Petitioners to approach the appropriate forum, if they are aggrieved and as such did not advert to the details of the objection raised. The Appellants accordingly assailed the notice dated 02.09.2004, possession notice dated 02.09.2004 and the communication dated 29.10.2004 which were impugned at Annexures-D, H and L to the writ petition. The Appellants also sought for issue of mandamus to the Respondents to consider their objections filed to the show cause notice. The learned Single Judge, on noticing the decision of the Hon''ble Supreme Court in the case of Mardia Chemicals Ltd. Vs. Union of India (UOI) and Others Etc. Etc., has relegated the Appellants to the alternative forum without deciding the correctness or otherwise of the action of the Respondents which has resulted in this appeal.

Heard Sri N.K. Gupta, learned Counsel for the Appellant and Ms. J. Kaladeepa, learned Counsel for the Respondents and perused the appeal papers.

Since the learned Single Judge has merely relied on the decision of the Hon''ble Supreme Court and relegated the Appellants to the alternate forum, the only question for consideration in this appeal is as to whether the course adopted by the learned single Judge is justified in the present facts, though there can be no quarrel with regard to the proposition of law laid down in the said decision and the binding nature of the same in a case where the facts are analogous. The very perusal of the portion of judgment in Mardia Chemicals extracted by the learned Single Judge would indicate that the objection filed to the notice issued u/s 13(2) of the Act should be considered by the secured creditor by application of mind and the result should be communicated, though for information without giving rise to any right to approach the Debt Recovery Tribunal since the subsequent procedure adopted alone would provide for appeal.

From the above, it is clear that in a case where the objections filed to the notice u/s 13(2) of the Act is considered with due application of mind and thereafter the process as contemplated u/s 13(4) of the Act is adopted, there would be no other option for the borrower except to approach the Debt Recovery Tribunal by way of appeal provided u/s 17 of the Act. In fact the said position has now been made implicit by inserting Sub-section (3A) to Section 13 by Act No. 30 of 2004. The factual matrix in the instant case would however reveal that apart from the fact the show cause notice u/s 13(2) of the Act and the possession notice u/s 13(4) of the Act being contemporaneous as issued on 02.09.2004, there is no material on behalf of Respondents to demonstrate that the objection filed by the Appellants has been considered by the Respondents in the manner contemplated. On the other hand the communication dated 29.10.2004 (Annexure-L) would indicate the disinclination, rather the refusal to consider the objections. Hence, in the instant facts, the course adopted by the learned Single Judge is not appropriate since the subsequent action ought to have been set aside with a direction to consider the objections and thereafter proceed in accordance with law as otherwise a valuable right of consideration of the objection would get by-passed. The subsequent action could have been only as a result on the rejection of the objections.

In view of the above, it would have been sufficient for us to adopt that course alone. However, having regard to the fact that a long time has lapsed from the date of issue of show cause notice dated 02.09.2004 u/s 13(2) of the Act and also considering the fact that this Court had by interim order dated 21.04.2005 stayed the alienation subject to the deposit of Rs. 1,50,000/- which is deposited by the Appellants, the notice itself would loose its efficacy. Hence, all subsequent events will have to be noticed by the Respondents and action will have to be initiated from that stand point after proper accounting and indicating the present outstanding. As such, the show cause notice dated 02.09.2004 is also liable to be set aside, reserving liberty to the Respondents to proceed afresh in accordance with law. All contentions of the parties regarding law as well as facts relating to the transaction are left open to be urged, if the Respondents choose to initiate fresh proceedings against the Appellants.

In the result, the following:

ORDER

(i) Writ Appeal is allowed and the order dated 04.03.2005 passed in W.P. No. 45382/2004 (GM-RES) is set aside.

(ii) Consequently, the notice dated 02.09.2004, possession notice dated 02.09.2004 and the communication dated 29.10.2004 at Annexures -D, H and L to the Writ Petition stand quashed.

(iii) Liberty is reserved to the Respondents to initiate such proceedings afresh in accordance with law.

(iv) Parties to bear their own costs.