Writ Petition No. 2136 of 2009 · Andhra Pradesh High Court

(per the Hon’ble Sri Justice V. Eswaraiah) Heard the counsel for the petitioner as well as the learned counsel for the 2nd respondent. The petitioner questions the impugned order of the Debts Recovery Appellate Tribunal, Chennai, dated 07-01-2009 made in SARFAESI- 877/2008. It is the case of the petitioner that he filed S.A.No.164 of 2008 challenging the action of the second respondent herein in initiating proceedings under Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”). He also filed I.A.No.635 of 2008 seeking redelivery of the petition schedule property and the same was allowed on 04.08.2008, against which, the 2nd respondent filed SARFAESI-877/2008 before the Debts Recovery Appellate Tribunal, Chennai, which was allowed on 07.01.2009.

Aggrieved by the same, the present writ petition is filed. The grievance of the petitioner is that he is a guarantor in respect of the loan facility extended to the principal debtor, i.e. M/s.Ranganatha Traders to the tune of Rs.2,00,000/- only, but not for the subsequent enhanced loan facilities. Learned counsel for the respondent-Bank denied the said contention stating that the petitioner himself had given letter dated 03-07-2000 requesting for sanctioning of credit facility of Rs.4,00,000/- and thereafter another letter dated 15-09-2001 for a total sum of 5.75 lakhs. We are not inclined to express any opinion with regard to the merits of the case, as admittedly, S.A.No.164 of 2008 filed by the petitioner is still pending before the Debts Recovery Tribunal, Hyderabad. But, the petitioner questions the impugned order on the ground that the Debts Recovery Appellate Tribunal, Chennai, passed the same without issuing any notice to him.

Therefore, the only question that arises for consideration before this court is as to whether any notice was served on the petitioner in SARFAESI- 877 of 2008 or not? The action of the Debts Recovery Tribunal, Hyderabad, in passing the interim order restoring possession in favour of the petitioner was questioned and the same question was raised before the Full Bench of the Madras High Court in LAKSHMI SHANKAR MILLS (P) LIMITED Vs. AUTHORISED OFFICER, INDIAN BANK [1] , which held as follows:- “The petitioners availed open cash credit facility and working capital turnover limit on various occasions since 1991 from the first respondent Indian Bank. The Bank issued a demand notice under Section 13(2) of the Securitisation Act and took possession of the mortgaged properties. Aggrieved by the action of the Bank, the petitioners approached the Debts Recovery Tribunal and in the I.A. for interim relief taken out by the petitioners the Debts Recovery Tribunal directed the petitioners to deposit a sum of Rs.28.25 lakhs within three weeks from the date of receipt of its order and allowed the Bank to proceed with the auction, but defer further proceedings including the confirmation of sale, etc. till further orders.

It was further directed by the Tribunal that the stay would stand automatically vacated if the petitioners fail to comply with the condition imposed in the order. The Bank, thereafter, conducted auction and the second respondent herein emerged as the highest bidder. Since the petitioners failed to deposit the amount as per the condition imposed by the Tribunal, the Bank proceeded with issuing confirmation letter to the purchaser and subsequently issued sale certificate to the purchaser. The petitioners then, preferred an appeal to the Debts Recovery Appellate Tribunal, Chennai (in SARFAESI) No.744 of 2007 wherein stay of further proceedings was granted on condition that the petitioners shall deposit a sum of Rs.30 lakhs in two instalments. The Debts Recovery Appellate Tribunal ultimately vacated the interim relief by order dated 28th November, 2007. Aggrieved by the order of the Debts Recovery Appellate Tribunal, the present petition has been filed. The said question was answered in para 18, which read as follows:-

This question concerns the jurisdiction of the Debt Recovery Tribunal to pass any interim mandatory order relating to restoration of possession or restoration of management, pending the proceedings under Section 17 of the Securitisation Act. In Marida Chemials case, the Supreme Court has held that the proceedings under Section 17 are not appellate proceedings, it is an initial action, which is brought before the forum as prescribed under the Act raising grievances against the action or measures taken by one of the parties to the contract. It is a stage of initial proceedings like filing a suit in the civil Court. Proceedings under Section 17 of the Act are in lieu of the civil suit which remedy is ordinarily available, but for the bar under Section 34 of the Securitisation Act. Section 17 (3) provides that if the Tribunal comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor are not in accordance with the provisions of the Act and the Rules made thereunder, it can declare such action as invalid and restore possession of the secured assets to the borrower or restore the management of the possession to the borrower, as the case may be.