Writ Petition No. 21068 of 2011 · Andhra Pradesh High Court

(Per the Hon’ble Sri Justice V.V.S.Rao) The respondent bank provided financial assistance of working capital of Rs.30,00,000/- to M/s. Sree Lorven Credit Solutions (P) Ltd. The petitioners-husband and wife mortgaged immovable property (premises Nos.5 & 6 admeasuring 996 square feet in second floor of Saroja Complex along with undivided share in plot Nos.148 to 151 in Survey No.169 situated at Bhagyanagara Co-operative Housing Society Ltd., Kukatpally Village). The principal borrower committed default in payment of loan. Treating the same as NPA, the respondent issued notice of demand dated

16.05.2011 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter, the SARFAESI Act or the Act) calling upon the principal borrower and the petitioners herein to pay an amount of Rs.24,66,858/- as on 30.04.2011, within a period of 60 days failing which, the bank would initiate action under Section 13(4) of the Act. The petitioners filed the instant Writ Petition assailing the notice under Section 13(2) of the Act. Counsel for the petitioners submits that the petitioners are only guarantors; they already paid some amounts and they are willing to pay monthly instalments of Rs.1,50,000/- and therefore, the bank may be directed to withdraw the notice of demand. A notice of demand under Section 13(2) of the Act is mandatory before the bank/financial institution initiates measures under Section 13(4) of the Act for recovery of NPA, if necessary, by bringing the secured asset to sale as contemplated under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 (the Rules). If any order is passed after issue of notice under Section 13(4) of the SARFAESI Act, often called possession notice, or any steps are taken for auctioning the movable/ immovable property or

confirmation of such auction sale or cancellation of auction sale, the remedy to either borrower or surety, or a third party auction purchaser is only to avail the effective alternative remedies available under Sections 17 and 18 of the SARFAESI Act. A writ petition is not maintainable. In United Bank of India v Satyawati Tondon [1] it was held. themselves inasmuch as Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person.

Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. … It is a matter of repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and 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. that despite concern serious In a recent judgment in Kanaiyalal Lalchand Sachdev v State of Maharashtra [2] referring to Sadhana Lodh v National Insurance Co. Ltd. [3] , Surya Dev Rai v Ram Chander Rai [4] , Mardia Chemicals Ltd. v Union of India [5] , State Bank of India v Allied Chemical Laboratories [6] , Transcore v Union of India [7] , City and Industrial Development Corporation v Dosu Aardeshir Bhiwandiwala [8] , Indian Overseas Bank v Ashok Saw Mill and Satyawati Tondon, the Supreme Court held that the Debts Recovery Tribunal would have jurisdiction to consider and adjudicate post Section 13(4) events and an order passed under Section 14 would be within the ambit of Section 17(1) of the SARFAESI Act.

It was also held that when the Act contemplates an efficacious remedy to the borrower or any person affected by an action under Section 13(4) of the SARFAESI Act, a writ petition would be barred. As the petitioners have an effective alternative remedy, the Writ Petition is misconceived. If the amount is not paid within 60 days, the bank has every right to proceed under Section 13(4) of the Act read with Rules 8 and 9 of the Rules. The Writ Petition is, accordingly, dismissed. Consequently, miscellaneous petitions shall also stand dismissed. There shall be no order as to costs. _______________ (V.V.S.RAO, J) _________________________________ (G.KRISHNA MOHAN REDDY, J) 13th February 2012 RRB [1] [2] [3] [4] [5] [6]