M/S.Sre Gugan Textile Mills, v. The Chief Manager & Authorized

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 21.03.2016

CORAM:

THE HON'BLE MR. JUSTICE SATISH K. AGNIHOTRI and THE HON'BLE MR. JUSTICE M. VENUGOPAL W.P. No.10409 of 2016 and W.M.P. Nos.9179 and 9180 of 2016 Sree Gugan Textile Mills represented by Partner S. Shelvarajen No.19, Kumaranathapuram Behind Bishop HS School Grounds Tirupur 641 602 Petitioner Vs.

The Chief Manager & Authorised Officer Bank of India No.324, Star House Oppanakara Street Coimbatore 641 001 Respondent Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus to call for the records of the respondent bank's demand notice dated 25.11.2015 and possession notice dated 06.02.2016 and quash the same and consequently, direct the respondent bank to consider the petitioner's representation dated 22.01.2016 and 10.02.2016 in relation to the OCC loan account no.820065410000029 and another term loan no.820065610000002.

For petitioner Mr. S. Muthukrishnan

ORDER

(delivered by SATISH K. AGNIHOTRI, J.) This writ petition is filed, calling in question the legality and validity of the demand notice dated 25 November 2015 issued under Section 13(2) of the Securtisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the SARFAESI Act") and also the possession notice dated 06 February 2016 issued under Section 13 (4), ibid and consequently, for a direction to the respondent bank to consider the petitioner's representations dated 22 January 2016 and 10 February 2016.

The petitioner, a partnership firm, availed loans to the tune of Rs.5,97,57,000/- from the respondent bank. Since the petitioner committed default in repayment of the said loans, its account was classified as a Non Performing Account. Following such classification, demand notice and possession notice, as aforestated, came to be issued by the respondent bank, against which the instant writ petition is filed. The issue that emerges for consideration of this Court in this writ petition is as to whether this writ petition is maintainable against demand notice issued under Section 13(2) of the SARFAESI Act and possession notice issued under Section 13(4), ibid. This issue is no longer res integra. The Supreme Court in United Bank of India Vs.

Satyawati Tondon and others1, referring to various judicial pronouncements made in Modern Industries Vs. Sail 2, Raj Kumar Shivhare Vs. Directorate of Enforcement 3, Industrial Investment Bank of India Ltd. Vs. Biswanath Jhunjhunwala4, City and Industrial Development Corpn. Vs. Dosu Aardeshir Bhiwandiwala5, CCT Vs. Indian Explosives Ltd.6, Mardia Chemicals Ltd. Vs. Union of India7, Harbanslal Sahnia Vs. Indian Oil Corpn. Ltd.8, Punjab National Bank Vs. O.C.Krishnan9, Whirlpool Corpn. Vs. Registrar of Trade Marks10, SBI Vs. Indexport Registered11, CCE Vs. Dunlop India Ltd.12, Titaghur Paper Mills Co. Ltd. Vs. State of Orissa13, Baburam Prakash Chandra Maheshwari Vs. Antarim Zila Parishad14, Bank of Bihar Ltd. Vs. Dr.Damodar Prasad15, Thansingh Nathmal Vs. Supdt. of Taxes16, Secy. Of State Vs. Mask & Co.

17, AttorneyGeneral of Trinidad and Tobago Vs. Gordon Grant & Co. Ltd.18 and Neville Vs. London Express Newspapers Ltd.

(2010) 8 SCC 110 (2010) 5 SCC 44 (2010) 4 SCC 772 (2009) 9 SCC 478 (2009) 1 SCC 168 (2008) 3 SCC 688 (2004) 4 SCC 311 (2003) 2 SCC 107.

(2001) 6 SCC 569 10 (1998) 8 SCC 1 11 (1992) 3 SCC 159 12 (1985) 1 SCC 260.

13 (1983) 2 SCC 433 14 AIR 1969 SC 556 15 AIR 1969 SC 297 16 AIR 1964 SC 1419 17 (1939-40) 67 IA 222.

18 1935 AC 532 (PC) 19 1919 AC 368 ; (1918-19) All ER Rep 61 (HL)

"12. Section 13 of the SARFAESI Act contains detailed mechanism for enforcement of security interest. Sub-section (1) thereof lays down that notwithstanding anything contained in Sections 69 or 69-A of the Transfer of Property Act, any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. Subsection (2) of Section 13 enumerates first of many steps needed to be taken by the secured creditor for enforcement of security interest. This subsection provides that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non-performing asset, then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice with an indication that if he fails to do so, the secured creditor shall be entitled to exercise all or any of its rights in terms of Section 13(4).

13. Sub-section (3) of Section 13 lays down that notice issued under Section 13(2) shall contain details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank or financial institution. Sub-section (3-A) of Section 13 lays down that the borrower may make a representation in response to the notice issued under Section 13

(2) and challenge the classification of his account as non-performing asset as also the quantum of amount specified in the notice. If the bank or financial institution comes to the conclusion that the representation/objection of the borrower is not acceptable, then reasons for non-acceptance are required to be communicated within one week."

Consequently, taking a strong view of the adjudication of matters under the SARFAESI Act by High Courts, the Supreme Court, in Satyawati Tondon (supra), observed as under: "55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under

Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."

In line with the aforestated observation, in Kanaiyalal Lalchand Sachdev and others Vs. State of Maharashtra and others20, the Supreme Court held as under :

"25. In the instant case, apart from the fact that admittedly certain disputed questions of fact viz. non-receipt of notice under Section 13(2) of the Act, non-communication of the order of the Chief Judicial Magistrate, etc. are involved, an efficacious statutory remedy of appeal under Section 17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution."

In view of the foregoing, we are of the considered view that this writ petition is not maintainable, at this stage, after issuance of possession notice, since, theregainst, the only remedy available is to take recourse to the jurisdiction exercised by the Debts Recovery Tribunal under the provisions of law.

Accordingly, the writ petition stands dismissed with the above observation.

No costs. Consequently, connected Miscellaneous Petitions are closed.

cad -s/d- Assistant Registrar(J) True Copy Sub-Assistant Registrar To The Chief Manager & Authorised Officer Bank of India, No.324, Star House Oppanakara Street,Coimbatore 641 001 + 1 cc to Mr.Muthukrishnan,Advocate, SR 18004 vd(co) prk4/4 W.P. No.10409 of 2016 20 (2011) 2 SCC 782