M/s.Sri Vaishnavi Pulvarising Mills Ltd. v. State Bank of India Stressed Assets Management Branch

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 27.08.2009CORAMTHE HONOURABLE MR.JUSTICE T.SUDANTHIRAMCriminal Revision Petition No.738 of 20091.M/s.Sri Vaishnavi Pulvarising Mills Ltd.,represented by its Managing DirectorM.G.Suriprakash2.M/s.Sri Kumaran Roller Flour Mills (P) Ltd.,represented by its DirectorM.G.Suriprakash..PetitionersVersusState Bank of IndiaStressed Assets Management BranchSBI Buildings 8th Floor,157-A, Anna SalaiChennai 600002.represented by itsAssistant General ManagerV.Natarajan..RespondentCriminal revision Petition filed under Sections 397 and 401Cr.P.C against the Order dated 08.06.2009 passed in CMP.No.298 of2009, on the file of the Chief Judicial Magistrate, Coimbatore.For petitioners: Mr.T.Munirathinam NaiduFor Respondent: Mr.K.Balamurali for Mr.Shivakumar ORDERThe petitioners herein are the borrowers of the loan amount fromthe respondent-State Bank of India. The learned Chief JudicialMagistrate, Coimbatore, passed an order under Section 14 of theSecuritisation and Reconstruction of Financial Assets and Enforcementof Security Interest Act, 2002 (hereinafter called as 'SARFAESIAct'), for taking possession of the assets. Aggrieved by the order,the petitioners have preferred this revision.2. The learned counsel for the petitioner submitted that therevision is maintainable against the order passed by the Chief https://hcservices.ecourts.gov.in/hcservices/ Judicial Magistrate, Coimbatore, under Section 14 of SARFAESI Act andhe also relied on the decision reported in 2009(1) CTC 341 (IndianOverseas bank v. Sree Aravindh Steels Ltd.,).3. The learned counsel for the respondent submitted that theremedy available to the petitioners who are borrowers is only underSection 17 of SARFAESI Act and they have to file an appeal before theDebt Recovery Tribunal.4. It is true that when an application under Section 14 ofSARFAESI Act preferred by the bank was not entertained by the learnedChief Judicial Magistrate, this Court has held that a revision couldbe preferred. That observation was made in the said decision inrespect of the party who prefers an application under Section 14 ofSARFAESI Act. At the same time, this Court has held that no noticeis necessary to the borrowers for passing an order under Section 14of SARFAESI Act. After an order being passed under Section 14 of theAct, the remedy open to the borrowers or to the aggrieved persons isunder Section 17 of SARFAESI Act.5. Section 17 of SARFAESI Act reads as follows:17.Right to Appeal:- (1) Any person (includingborrower), aggrieved by any of the measures referred to insub-section (4) of Section 13 taken by the secured creditoror his authorised officer under this Chapter, (may make anapplication along with such fee, as may be prescribed,) tothe Debts Recovery Tribunal having jurisdiction in thematter within forty-five days from the date on which suchmeasures had been taken:[Provided that different fees may be prescribed formaking the application by the borrower and the personother than the borrower.][Explanation:- For the removal of doubts, it is herebydeclared that the communication of the reasons to theborrower by the secured creditor for not having acceptedhis representation or objection or the likely action of thesecured creditor at the stage of communication of reasonsto the borrower shall not entitle the person (includingborrower) to make an application to the Debts RecoveryTribunal under this sub-section."6. It is also held by the Honourable Division Bench of theBombay High Court in Trade Well, a Proprietorship Firm and Mr.SunielK.Mehta, Proprietor of Trade Well vs. Indian Bank, a Body Corporateconstituted under the Banking Companies (Acquisition and Transfer ofUndertaking) Act, 1970 and The State of Maharashtra, Crl.W.P.Nos.2767of 2006 and 27, 124 and 343 of 2007, as follows: https://hcservices.ecourts.gov.in/hcservices/ "67. When the Bank takes any measures under Section13(4), on account of failure of the borrower to repay theliability is already crystallized. Similarly when thesecured creditor approaches the CMM/DM for assistance totake possession of the secured asset, the liability havingbeen crystallized, there can be no adjudication about it atthat stage. Possession has to be taken by non-adjudicatoryprocess. There is no question of pointing out to theCMM/DM at that stage that the person who is to bedispossessed is a tenant, or that he has a priorregistered sale deed or that in case of simple mortgage,ownership rights are not transferred; that the mortgagee isonly entitled to an obligation to pay and, hence,possession cannot be taken or that such a course willimprove or change the contract, etc. Grievance thatreasons for not accepting the objections were notcommunicated can also not be raised at that stage becauseconsideration of reply is in the realm of adjudicationwhich cannot be done under Section 14. Besides as perproviso to Section 13 (3-A) and explanation to Section 17,non- communication of reasons to the borrower does notconfer on the borrower or any person right to prefer anApplication under Section 17 at the stage of communication.This is the scheme of the NPA Act. It is so framed toachieve its object. At first blush this may appear harsh.But it is not so. The borrower and the third party is notremedy-less. Remedy is provided in Section 17 whereappropriate relief can be given to them. It is aftermeasures under Section 13(4) are taken that an Applicationunder Section 17 can be filed by a borrower or any personand in that Application, all grievances including thegrievance that reasons were not communicated can bevoiced. Prior to that, at no point of time any grievancescan be raised. Section 17 offers an adequate remedy. Weshall advert to Section 17 a little later."7.This Court also held in the decision cited supra, as follows:"1.The Bank or financial institution shall, before makingan Application under Section 14 of the NPA Act, verify andconfirm that notice under Section 13(2) of the NPA Act isgiven and that the secured asset falls within thejurisdiction of CMM/DM before whom Application underSection 14 is made. The Bank and financial institutionshall also consider before approaching CMM/DM for an orderunder Section 14 of the NPA Act, whether Section 31 of theNPA Act excludes the application of Section 13 and 14thereof to the case on hand. https://hcservices.ecourts.gov.in/hcservices/

2. CMM/DM acting under Section 14 of the NPA Act is notrequired to give notice either to the borrower or to the3rd party.3. He has to only verify from the Bank or financialinstitution whether notice under Section 13(2) of the NPAAct is given or not and whether the secured assets fallwithin his jurisdiction. There is no adjudication of.4. It is only if the above conditions are not fulfilledthat the CMM/DM can refuse to pass an order underSection 14 of the NPA Act by recording that the aboveconditions are not fulfilled. If these two conditionsare fulfilled, he cannot refuse to pass an order underSection 14.5. Remedy provided under Section 17 of the NPA Act isavailable to the borrower as well as third party.6.Remedy provided under Section 17 is an efficaciousalternative remedy available to the third party as wellas to the borrower where all grievances can be raised.7. In view of the fact that efficacious alternativeremedy is available to the borrower as well as to thethird party, ordinarily, Writ petition under Articles 226and 227 of the Constitution of India should not beentertained.8. In exceptional cases of gravest injustice, a WritPetition could be entertained by this Court.9. Great care and caution must be exercised whileentertaining a Writ Petition because in a given case itmay result in frustrating the object of the NPA Act.10. Even if a writ petition is entertained, as far aspossible, the parties should be relegated to the remedyprovided under Section 17 of the NPA Act before the DRTby passing an interim order which will protect thesecured assets. Adjudication and final order should beleft to the DRT as far as possible."8. In view of the proposition laid down by this court against anorder passed under Section 14 of the SARFAESI Act, no revision couldbe filed either by the borrower or by the third party and his remedyis only under Section 17 of the SARFAESI Act. https://hcservices.ecourts.gov.in/hcservices/

9. This revision petition is dismissed as not maintainable.Consequently M.P.No.1 of 2009 is closed. Sd/-Asst.Registrar/True Copy/Sub.Asst.RegistrarksrTo1.The Chief Judicial MagistrateCoimbatore.+ 1 cc to M/s.Shivakumar & Suresh,Advocate,SR.42235+ 1 cc to Mr.T.Munirathinam Naidu,Advocate,SR.42444Crl.R.C.No.738 of 2009SSK(CO)EM/18.9