B.Shanmugam v. Union Bank of India

remaining due was remitted by effecting a total payment ofRs.17,85,000/- on 17.05.1999 through the sale of a property,which was already mortgaged with the respondent Bank. Evenafter remitting the balance amount, the respondent Bankarbitrarily adjusted a sum of Rs.5,00,000/- towards penalinterest. (iii)This being the position, in the year 2002, therespondent Bank filed O.A.No.118 of 2002 in DRT-I against thetwo firms, the partners and guarantors for a total claim ofRs.1,03,86,184.78 paise, inclusive of interest up to 08.03.2002.The property which was already sold was also wrongly included as'B' Schedule property in the said O.A.No.118 of 2002 and thesame was amended in an application filed by the respondent Bankin I.A.No.159 of 2003 vide order dated 10.03.2005. (iv)In a meeting that took place among the borrowers andthe respondent Bank on 10.11.2006, an OTS offer was made and asum of Rs.30,00,000/- was insisted to be paid by the respondentBank towards OTS, and though the petitioner expressed hiswillingness to pay Rs.30,00,000/- as OTS before 10.03.2007, therespondent Bank demanded 25% of the offer amount as downpayment. Subsequently thereto, the borrower arranged therepayment of Rs.5,00,000/- and in the accompanying coveringletter dated 13.03.2007, promised to pay the remaining amount ofRs.25,00,000/- towards full and final settlement by 31.03.2007.Despite the balance down payment of Rs.2.5 lakhs being made bythe petitioner on 29.05.2007 through Registered Post, therespondent Bank contemplated further action based on the noticedated 02.01.2007 issued under Section 13(2) of the SARFAESI Act.(v)Since the respondent Bank initiated steps against himin contravention of Section 13(3A) of the SARFAESI Act, afterhaving failed to communicate within one week of the receipt ofthe representation dated 13.03.2007, the petitioner has nowapproached this Court for an efficacious remedy. 3.In the counter affidavit, the respondent Bank has negated theaverments of the petitioner and has stated as under:(i)The petitioner is one of the partners of M/s.Adworld,a partnership firm carrying on business in Chennai and also apartner in M/s.Karvin Corporation, another firm started by himalong with other partners. Both the firms are represented bythe petitioner and other partners. M/s.Adworld is engaged inadvertising business and M/s.Karvin Corporation is engaged inthe export of granite and slate materials. In the year 1988,both the firms approached the respondent bank for certaincredit facilities to support their business and the respondentbank considered and granted secured overdraft facility to https://hcservices.ecourts.gov.in/hcservices/ M/s.Adworld and the partners of M/s.Adworld executed therequired loan documents and as per the terms and conditions ofthe loan documents, they undertook to pay interest at the rateof 15.75% per annum compounded with quarterly rests. In turn,the firms have mortgaged their immovable assets. As theyfailed to clear the outstanding dues, the respondent bankinitiated proceedings and filed an Original Application in O.A.No.118 of 2002 before the Debts Recovery Tribunal - I claiminga sum of Rs.17,26,637.44 with further interest at 15.75% p.a.compounded with quarterly rests from the date of filing thesuit, i.e. 08.03.2002 till the date of realisation of the debtalong with the cost of the suit.(ii)Similarly, in respect of M/s.Karvin Corporation, therespondent has claimed a sum of Rs.86,59,547.34 with interestat the rate of 17.75% per annum with quarterly rests in respectof packing credit, foreign bill purchase limit and overdrawings in the current account and initiated proceedings byfiling an Original Application on 08.03.2002. Thus, the totalamount from both the firms as on 08.03.2002 wasRs.1,03,86,184.78 with further interest. That being theposition, the bank omitted to mention about the sale ofproperty described in Schedule B to the O.A. No.118 of 2002.The sale was done by the partners with the approval of the bankand the credit received was properly accounted for by the bankand the O.A. was filed for the outstanding amount as on08.03.2002.(iii)the allegations of the petitioner that therespondent Bank arbitrarily adjusted a sum of Rs.5,00,000/-towards penal interest and further made a wrong debit ofRs.5,00,000/- are not true.(iv)there was no commitment on the part of the Bank toaccept the petitioner's proposal and that by remitting a sum ofRs.7,50,000/-, the petitioner has unilaterally claimed that theamount remitted by him was towards a full and final settlementof their loans in respect of the two partnership firms.(v)there was no commitment on the part of the Bank toaccept Rs.30,00,000/- offered by the petitioner in full andfinal settlement of the loan accounts and the Bank has sent aletter stating that their improved offer of Rs.33,00,000/- wasalso not accepted by the Competent Authority as per their letterdated 02.06.2007 sent by Registered Post Ack. Due. (vi)the matter has to be argued before the DRT, when theO.A. is taken up for trial and that it is true that theguarantors have raised objections regarding the sale of theproperty described in 'B' Schedule to the O.A.118 of 2002. https://hcservices.ecourts.gov.in/hcservices/ (vii)that there was no commitment on the part of theBank to offer to receive only Rs.30 lakhs of the dues, when theliability even as per Section 13(2) notice dated 02.01.2007 wasmore than Rs.1,84,00,000/-.(viii)the issuance of notice dated 02.01.2007 underSection 13(2) of the SARFAESI Act is in contravention of Section13(3A) of the SARFAESI Act.(ix)the Bank is given the statutory right to proceedagainst the secured assets when the loan becomes a NonPerforming Asset (NPA).According to the respondent Bank, the petitioner and the borrowersare intentional defaulters and they are adopting delaying tactics toprevent the Bank from recovering the legitimate dues and hence, prayed fordismissal of the writ petition.4.Heard Mr.K.M.Vijayan, learned Senior Counsel for the petitionerand Mr.N.V.Srinivasan, learned Counsel appearing on behalf of therespondent Bank.5.Learned Senior Counsel for the petitioner contended that so faras the petitioner has satisfied the requirement of the respondent Bank bypaying the down payment of 25% of the agreed OTS amount, the respondentBank cannot approbate and reprobate on their exercise of power underSection 13 of the SARFAESI Act. It was his further contention that therespondent Bank has violated Section 13(3A) of the SARFAESI Act, byfailing to communicate within one week of the receipt of the petitioner'srepresentation dated 13.03.2007. 6.Learned Senior Counsel further contended that there is astatutory duty contemplated under Section 13(3A) of the SARFAESI Act,which has not been followed by the respondent Bank; therefore, thepetitioner has a judicial remedy before this Court to enforce the right asit is statutorily provided. He submitted that the certificate of postinghas been sent only on 21.06.2007 and it is not on 02.06.2007 as contendedby the respondent. Therefore, there is no compliance of the provisionunder 13 (3A) of the Act. 7.Learned counsel further contended that as per Section 34 of theSARFAESI Act, a Civil Court does not have jurisdiction in respect of anymatter which a Debts Recovery Tribunal or the Appellate Tribunal isempowered by or under the Act to determine in respect of any action takenor to be taken in pursuance of any power conferred by or under the Act orunder the Recovery of Debts Due to Banks and Financial Institutions Act,1993. It is also his contention that as per Section 35, the provisions ofthe Act override other laws and therefore, the statutory rights providedunder this Act under Section 13(3-A) have to be enforced only before this https://hcservices.ecourts.gov.in/hcservices/ Court and not before any other forum and the petitioner has got everyright to agitate the same before this Court and therefore, the respondenthas violated its statutory duty. 8.In support of his contentions, learned counsel for thepetitioner has placed reliance on :(i)a decision of this Court reported in 2007 (4) MLJ 245 in thecase of Misons Leather Ltd., rep. by its Managing Director vs. CanaraBank, Chennai, the relevant portion reads, as under:"10.We are afraid that the contention is totally mis-conceived. The provisions of Section 17(1) of the Act providesremedy for the borrower/guarantor/mortgagor to challenge theaction of the Bank under Section 13(4) of the Act before theDebt Recovery Tribunal. The Debt Recovery Tribunal is requiredto decide whether the action of the Bank/Financial Institutions,under Section 13(4) is in accordance with the provisions of theAct and the rules framed thereunder. It is open to theborrower/guarantor/mortgagor to demonstrate before the DebtRecovery Tribunal that resort to Section 13 of the Act is notpermissible by law. In a given case, the claim of theBank/Financial Institutions may be barred by limitation or theremay be cases, where the adjustment of the amount paid is notreflected in the notice or the calculation of interest may notbe in accordance with the contract between the parties.Needless to say that all such grounds, which render the actionof the Bank/Financial Institutions illegal can be raised in theproceedings under Section 17 of the Act before the Debt RecoveryTribunal."(ii)yet another decision of this Court reported in 2007(2) CTC 397in the case of Industrial Development Bank of India Ltd., Chennai - 15 vs.Kamaldeep Synthetics Ltd., Chennai, the relevant portion reads as follows:"8.In Mardia Chemicals case, the Supreme Court held thatunder Section 13(2) of the SARFAESI Act, it is incumbent uponthe secured creditor to serve sixty days notice beforeproceeding to take action under sub-section (4) of Section 13 ofthe SARFAESI Act. After service of notice, if the borrowerraises any objection or places facts for consideration of thesecured creditor, such reply to the notice must be consideredwith due application of mind and the reasons for not acceptingthe objections, howsoever brief that may be, must becommunicated to the borrower. The reasons so communicated shallonly be for the purposes of the information/knowledge of theborrower without giving rise to any right to approach the DRTunder Section 17 of the SARFAESI Act, at that stage. The Courtexplained that communication of reasons not to accept theobjections of the borrower is for the purpose of his knowledgewhich would be a step forward towards his right to know as towhy his objections have not been accepted by the secured https://hcservices.ecourts.gov.in/hcservices/ creditor, who intends to resort to harsh steps of taking overthe management/business of namely, the secured assets withoutintervention of the Court. Such person in respect of whom stepsunder Section 13(4) of the SARFAESI Act are likely to be takencannot be denied the right to know the reason for non-acceptanceof his objections. This will be in keeping with the concept ofright to know the lender's liability of fairness to keep theborrower informed particularly of the developments before takingmeasures under sub-section (4) of Section 13 of the SARFAESIAct. The Court, however, made it clear that as per theprovisions of the SARFAESI Act, the borrower will not beentitled to challenge the reasons communicated or the likelyaction of the secured creditor at the stage of communication ofreasons, unless his right to approach the DRT as provided underSection 17 of the SARFAESI Act matures on any measure havingbeen taken under sub-section (4) of Section 13 of the SARFAESIAct.9.The Proviso to sub-section (3-A) of Section 13 of theSARFAESI Act makes it abundantly clear that the reasons socommunicated or the likely action of the secured creditor at thestage of communication of reasons shall not confer any rightupon the borrower to prefer an application to the DRT underSection 17 of the Court of District Judge under Section 17-A ofthe Act. Thus, the basic object of sub-section (3-A) of Section13 of the SARFAESI Act is to ensure the element of transparencyand fair play in the implementation of the provisions of theSARFAESI Act. Learned counsel for the respondent is unable todemonstrate prejudice or loss that is likely to be caused to therespondent by reason of the possession notice given to it,earlier to the communication of the reasons for non-acceptanceof the objections raised by the borrower. In our opinion, atthe most, it would amount to a mere irregularity and havingregard to the facts and circumstances of the case, we aresatisfied that the appellant-bank has substantially compliedwith the provisions of Section 13(3-A) of the SARFAESI Act."9.Mr. N.V. Srinivasan, learned counsel for the respondent bank, atthe outset, contended that the writ petition is not maintainable in viewof the settled proposition laid down by the Supreme Court as well as thisCourt. He has strongly contended that in the absence of any pleading inrespect of Section 13(3-A) of the SARFAESI Act, whether such a plea can beconsidered when there is a reply under Section 13(3-A) of the Act. Learnedcounsel further contended that on receipt of the notice, the petitioner aswell as the other guarantors/mortgagors did not respond to the notice andas the stipulated period of 60 days is already over, the respondent Bankis empowered to issue possession notice under Section 13(4) of theSARFAESI Act, 2002 and take appropriate steps. According to the learnedcounsel, when there is alternative remedy of approaching the DebtsRecovery Tribunal as per the provisions of Section 17 of the SARFAESI Act https://hcservices.ecourts.gov.in/hcservices/ 2002, the petitioner ought not to have approached this Court andtherefore, he prayed for dismissal of the writ petition.10.Learned counsel for the respondent also assailed the argumentadvanced by the learned Senior Counsel appearing for the petitioner thatthere is no question of invoking the Civil Court's jurisdiction underSection 34 of the Act and also the over-riding effect under Section 35 ofthe Act as the proceedings initiated under Section 13(2) have already beenproceeded with against the petitioner and the same are pending. Lastly,he submitted that all the provisions contemplated under the Act have beenscrupulously followed by the respondent bank; notices were issued underSection 13(2), 13(3-A) and also 13(4) of the Act and therefore, the scopeof prayer cannot be granted without any pleading or specific averment asthe petitioner has not established his legal right and he can very wellcontest the matter before the Debts Recovery Tribunal.11.In support of his contentions, learned counsel for therespondent Bank has placed reliance on the following decisions :(i)The Supreme Court, in a decision reported in AIR 2004 SC 2371in the case of Mardia Chemicals Ltd. etc. vs. Union of India (UOI) andothers etc. has held as under:40.Now coming to Section 17, it provides for filing of anappeal to the Debt Recovery Tribunal within 45 days of anyaction taken against the borrower under sub-section (4) Section13 of the Act. It reads as under:"17.Right to appeal: (1) Any person (includingborrower), aggrieved by any of the measures referred toin sub-section (4) of section 13 taken by the securedcreditor or his authorized officer under this Chapter,may prefer an appeal to the Debts Recovery Tribunalhaving jurisdiction in the matter within forty-five daysfrom the date on which such measures had been taken.(2)Where an appeal is preferred by a borrower,such appeal shall not be entertained by the DebtsRecovery Tribunal unless the borrower has deposited withthe Debts Recovery Tribunal seventy-five per cent of theamount claimed in the notice referred to in sub-section(2) of section 13:Provided that the Debts Recovery Tribunal may, forreasons to be recorded in writing, waive or reduce theamount to be deposited under this section. (3)Save as otherwise provided in this Act, theDebts Recovery Tribunal shall, as far as may be, disposeof the appeal in accordance with the provisions of the https://hcservices.ecourts.gov.in/hcservices/ Recovery of Debts Due to Banks and Financial InstitutionsAct, 1993 (51 of 1993) and rules made thereunder."It is thus clear that an appeal under sub-section (1) ofSection 17 would lie only after some measure has been takenunder sub-section (4) of Section 13 and not before the stage oftaking of any such measure. According to sub-section (2), theborrower has to deposit 75% of the amount claimed by the securedcreditor before his appeal can be entertained.41.So far jurisdiction of Civil Court is concerned wefind that there is a bar to it as provided under Section 34 ofthe Act quoted below :"34.Civil Court not to have jurisdiction – No CivilCourt shall have jurisdiction to entertain any suit orproceeding in respect of any matter which a Debts RecoveryTribunal or the Appellate Tribunal is empowered by orunder this Act to determine and no injunction shall begranted by any court or other authority in respect of anyaction taken or to be taken in pursuance of any powerconferred by or under this Act or under the Recovery ofDebts Due to Banks and Financial Institutions Act, 1993(51 of 1993)".50.It has also been submitted that an appeal isentertainable before the Debt Recovery Tribunal only after suchmeasures as provided in sub-section (4) of Section 13 are takenand Section 34 bars to entertain any proceeding in respect of amatter which the Debt Recovery Tribunal or the appellateTribunal is empowered to determine. Thus before any action ormeasure is taken under sub-section (4) of Section 13, it issubmitted by Mr.Salve one of the counsel for respondents thatthere would be no bar to approach the civil court. Therefore,it cannot be said no remedy is available to the borrowers. We,however, find that this contention as advanced by Shri Salve isnot correct. A full reading of section 34 shows that thejurisdiction of the civil court is barred in respect of matterswhich a Debt Recovery Tribunal or appellate Tribunal isempowered to determine in respect of any action taken "or to betaken in pursuance of any power conferred under this Act". Thatis to say the prohibition covers even matters which can be takencognizance of by the Debts Recovery Tribunal though no measurein that direction has so far been taken under sub-section (4) ofSection 13. It is further to be noted that the bar ofjurisdiction is in respect of a proceeding which matter may betaken to the Tribunal. Therefore, any matter in respect ofwhich an action may be taken even later on, the civil courtshall have no jurisdiction to entertain any proceeding thereof. https://hcservices.ecourts.gov.in/hcservices/ The bar of civil court thus applies to all such matter which maybe taken cognizance of by the Debt Recovery Tribunal, apart fromthose matters in which measures have already been taken undersub-section (4) of Section 13.80.Under the Act in consideration, we find that beforetaking action a notice of 60 days is required to be given andafter the measures under Section 13(4) of the Act have beentaken, a mechanism has been provided under Section 17 of the Actto approach the Debt Recovery Tribunal. The above notedprovisions are for the purposes of giving some reasonableprotection to the borrower. Viewing the matter in the aboveperspective, we find what emerges from different provisions ofthe Act, is as follows:1.Under sub-section (2) of Section 13 it isincumbent upon the secured creditor to serve 60 days noticebefore proceeding to take any of the measures provided undersub-section (4) of Section 13 of the Act. After service ofnotice, if the borrower raises any objection or places factsfor consideration of the secured creditor, such reply to thenotice must be considered with due application of mind andthe reasons for not accepting the objections, howsoeverbrief they may be, must be communicated to the borrower. Inconnection with this conclusion we have already held adiscussion in the earlier part of the judgment. The reasonsso communicated shall only be for the purpose of theinformation/knowledge of the borrower without giving rise toany right to approach the Debt Recovery Tribunal underSection 17 of the Act, at that Stage.2.As already discussed earlier, on measures havingbeen taken under sub-section (4) of Section 13 and beforethe date of sale/auction of the property it would be openfor the borrower to file an appeal (petition) under Section17 of the Act before the Debts Recovery Tribunal.3.That the Tribunal in exercise of its ancillarypowers shall have jurisdiction to pass any stay/interimorder subject to the condition as it may deem fit and properto impose.4.In view of the discussion already held on thisbehalf, we find that the requirement of deposit of 75% ofamount claimed before entertaining an (petition) underSection 17 of the Act is an oppressive, onerous andarbitrary condition against all the canons ofreasonableness. Such a condition is invalid and it isliable to be struck down. https://hcservices.ecourts.gov.in/hcservices/

5.As discussed earlier in this judgment, we findthat it will be open to maintain a civil suit in civilcourt, within the narrow scope and on the limited grounds onwhich they are permissible, in the matters relating to anEnglish mortgage enforceable without intervention of theCourt."(ii)In 2005 (1) LW 58 in the case of TIIC vs. Millenium BusinessSolutions Pvt. Ltd., this Court has held as under:"5.It is alleged that the petitioner came forward toraise funds by disposing of the properties offered as collateralsecurities and its Managing Director presented a proposal toTIIC for one time settlement. The petitioner further allegedthat it offered a proposal to pay Rs.2 crores against therelease of all the collateral securities, and was awaiting forthe approval and confirmation from TIIC. The petitioner alsoalleged that this proposal of one time settlement of Rs.2 croresagainst the release of collateral properties has not beenconsidered by the TIIC till date. The petitioner prayed forrescheduling of the repayment of the loan and interest.8.No doubt Article 226 on its plain language states thata writ can be used by the High Court for enforcing a fundamentalright or for 'any other purpose'. However, by judicialinterpretation the words 'any other purpose' have beeninterpreted to mean the enforcement of any legal right orperformance of any legal duty, vide Calcutta Gas Company vs.State of West Bengal, MANU/SC/0063/1962. In the present case,the writ petitioner has really prayed for a mandamus to theCorporation to grant it a one time settlement, but no violationof any law has been pointed out. In our opinion, no suchmandamus can be issued in this case, and hence the writ petitionshould not have been entertained. A mandamus is issued onlywhen the petitioner can show that he has a legal right to theperformance of a public duty by the party against whom themandamus is sought.10...."Therefore, there must be legal right with theparty asking for the writ to compel the performance of somestatutory duty cast upon the authorities. The petitioners havenot been able to show that there is any statute or rule havingthe force of law which casts a duty on the UPFC to accept theproposal of one time settlement made by a borrower whereunder hehas given his own terms. It is important to note that at thetime when the loan was disbursed to the petitioners, a contractwas entered into by them which provided for the rate of interestand mode and manner of payment. The amount of instalment andthe date by which it had to be paid was also mentioned therein.The UPFC is not acting contrary to the terms of the contract https://hcservices.ecourts.gov.in/hcservices/ which has been entered into between the parties. What thepetitioners want now is that their proposal for one timesettlement which contains terms advantageous to them, speciallya rate of interest lesser than what they had agreed upon at thetime of entering into the contract and disbursement of the loan,be accepted. The State Financial Corporations Act, whichgoverns the working of the UPFC, does not contain any provisionfor entering into a one time settlement. A Court cannot issueany direction to a party to enter into a compromise orsettlement. By the very nature of things a settlement involvesconsent and it is a voluntary act of the party. In a matterwhere a creditor is enforcing its liability upon the debtor, thedebtor has no legal right to claim that the claim be settled onfavourable terms proposed by him whereby the claim of thecreditor is reduced. Therefore, in our opinion, the prayer madeby the petitioners that this Court should issue a writ ofmandamus to the respondents to accept the proposal of one timesettlement made by them cannot be granted as it does not comewithin the principles on which a writ of mandamus can be issuedunder Article 226 of the Constitution.13.It was further held in Haryana Financial CorporationCase, (supra) that :"The relationship between the Corporation and the borroweris that of creditor and debtor. That basic feature cannot belost sight of. A Corporation is not supposed to give loan andthen to write off as a bad debt and ultimately to go out ofbusiness. As noted above, it has to recover the amounts due sothat fresh loans can be given. In that way industrializationwhich is the intended object can be promoted. It certainly isnot and cannot be called upon to pump in more money to reviveand resurrect each and every sick industrial unit irrespectiveof the cost involved. That would be throwing good money afterbad money. As was rightly observed in Gem Cap's case,MANU/SC/0481/1993, promoting industrialisation does not servepublic interest if it is at the cost of public funds. It mayamount to transferring public money to private account."18.Before parting with the case we would like to mentionthat recovery of tens of thousands of crore rupees of loans ofbanks and financial institutions has been held up by Courtorders under Article 226 proceedings which were reallyunwarranted. However, much sympathy a Court may have for aparty, a writ Court must exercise its jurisdiction on wellsettled principles, and not on mere sympathy or compassion. Nodoubt, there may be hardship to a party, but unless violation oflaw is shown the Court cannot interfere. Holding up recoveriesof loans by unwarranted Court orders is causing incalculableharm to our economy, since unless the loan is recovered a fresh https://hcservices.ecourts.gov.in/hcservices/ loan cannot be granted to needy persons. The Courts must keepthese considerations in mind.(iii)This Court, in 2006 (2) MLJ 134 in the case ofD.Ravichandran vs. Manager, Indian Overseas Bank, Coimbatore and another,has held as under:"13.In a sense the notice under section 13(2) of theSecuritisation Act is really a show cause notice, and ordinarilythis court does notice interfere with show cause notice. Thenotice under Section 13(2) of the Securitisation Act really doesnot affect any right or liability of the action because byitself the notice does not affect any right or liability of theborrower. Hence, challenge to the notice under section 13(2) ofthe Securitisation Act is premature, since it is possible thatthe secured creditor may be satisfied with the reply of theborrower to the aforesaid notice and may drop the proceedings.Hence all the writ petitions challenging the notice underSection 13(2) of the Securitisation Act are dismissed on theground that the writ petitions are premature, and thepetitioners have an alternative remedy of raising all the pointswhich they are raising in these writ petitions in their reply tothe Page 778 notice under Section 13(2) of the SecuritisationAct. As already stated above, the secured creditor must decidethe objection of the borrower to the notice under Section 13(2)of the Securitisation Act by a reasoned order, and if theobjection is rejected the rejection order must be communicated.From the above observations, it is clear that the borrowercannot approach the court or any other forum at theinterlocutory stage of the proceedings, that is from the issueof notice under Section 13 (2) till the final action taken underSection 13(4) of the Act. If the Supreme Court wants to givethat scope of approaching the courts or other forum even at theinterlocutory stage itself, it could have spelt out in the orderitself, but there is no such observations from the SupremeCourt. Therefore, I am unable to appreciate the contention ofthe learned senior counsel for the petitioner that the writpetition is maintainable even as against a notice issued underSection 13(2) of the said Act."(iv)In AIR 2007 SC 712 in the case of Transcore vs. Union of India,the Supreme Court has held as under:"8.... After the judgment of this Court in MardiaChemicals, the amending Act 30 of 2004 was inserted. By thesaid Act 30 of 2004, Section 19(1) of the DRT Act was recastedsimultaneously with Section 13 of the NPA Act, 2002. Theseamendments were made in order to enable the banks/FIs to https://hcservices.ecourts.gov.in/hcservices/ withdraw with the permission of DRT , the O.As. made to it andthereafter take action under the NPA Act. In the judgment inMardia Chemicals (supra) this Court observed that, in caseswhere a secured creditor has taken action under Section 13(4),it would be open to the borrower to file an application underSection 17 of the NPA Act. In the said judgment, this Courtfurther observed Page 5328 that if the borrower, after serviceof notice under Section 13(2) of the NPA Act, raises anyobjection or places facts for consideration of the securedcreditor, such reply to the notice must be considered by thebank/F1 with due application of mind and reasons for notaccepting the objections briefly must be given to the borrower.In the said judgment, it is further stated that the reasons socommunicated shall only be for the purposes ofinformation/knowledge of the creditor and such reasons will notgive him any right to approach the Tribunal under Section 17 ofthe NPA Act. The appellant herein (M/s.Transcore) mainly reliedon the said reasons given by this Court in Mardia Chemicals(supra) in support of his contentions that the Notice dated06.01.2003 under Section 13(2) of NPA Act was merely a showcause notice and it did not constitute "action" under the NPAAct and, therefore, the said Bank was obliged statutorily toapply for withdrawal of O.A.No.354/99 before invoking the NPAAct.18.... The NPA Act comes into force only when both theseconditions are satisfied. Section 13(2) proceeds on the basisthat the debt has become due. It proceeds on the basis that theaccount of the borrower in the books of bank/FI, which is anasset of the bank/FI, has become non-performing. Therefore,there is no scope of any dispute regarding the liability. Thereis a difference between accrual of liability, determination ofliability and liquidation of liability. Section 13(2) dealswith liquidation of liability. Section 13 deals withenforcement of security interest, therefore, the remedies ofenforcement of security interest under the NPA Act and the DRTAct are complementary to each other. There is no inherent orimplied inconsistency between two remedies under the twodifferent Acts. Therefore, the doctrine of election has noapplication in this case. Section 13(3) inter alia states thatthe notice under Section 13(2) shall give details of the amountpayable by the borrower as also the details of the securedassets intended to be enforced by the bank/FI. In the event ofnon-payment of secured debts by the borrower, notice underSection 13(2) is given as a notice of demand. It is verysimilar to notice of demand under Section 156 of the Income TaxAct, 1961. After classification of an account as NPA, a lastopportunity is given to the borrower of sixty days to repay thedebt. Section Chemicals (supra), whereby the borrower ispermitted to make representation/objection to the secured https://hcservices.ecourts.gov.in/hcservices/ creditor against classification of his account as NPA. He canalso object to the amount due if so advised. Under section 13(3-A), if the bank/FI comes to the conclusion that suchobjection is not acceptable, it shall communicate within oneweek the reasons for non-acceptance of therepresentation/objection. A proviso is added to Section 13(3-A)which states that the reasons so communicated shall not conferany right upon the borrower to file an application to the DRTPage 5334 under Section 18. The scheme of Sub-sections (2), (3)and (3-A) of Section 13 of NPA Act shows that the notice underSection 13(2) is not merely a show cause notice, it is a noticeof demand.In our view, Section 17(4) shows that the secured creditoris free to take recourse to any of the measures under Section 13(4) notwithstanding anything contained in any other law for thetime being in force, e.g., for the sake of argument, if in thegiven case the measures undertaken by the secured creditor underSection 13(4) comes in conflict with, let us say the provisionunder the State land revenue law, then notwithstanding suchconflict, the provision of Section 13(4) of the NPA Act whichstates that the provisions of NPA Act shall override all otherlaws which are inconsistent with the NPA Act. Section 35 isalso important from another angle. As stated above, the NPA Actis not inherently or impliedly inconsistent with the DRT Act interms of remedies for enforcement of securities. Section 35gives an overriding effect to the NPA Act with all other laws ifsuch other laws are inconsistent with the NPA Act. As far asthe present case is concerned, the remedies are complimentary toeach other and, therefore, the doctrine of election has noapplication to the present case.(v)In the case of Sri Lakshmi Products vs. State Bank of India,decided by this Court on 23.02.2007, it was held as follows :"4.The SARFAESI Act is enacted to regulate securities andreconstruction of financial assets and enforcement of securityinterest and for matters connected therewith. The Act enablesthe banks and FI to realise long term assets, manage problems ofliquidity, asset liability mis-match and to improve recovery ofdebts by exercising powers to take possession of Securities,sell them and thereby reduce non-performing assets by adoptingmeasures for recovery and reconstruction. The Act furtherprovides for setting up of asset reconstruction companies whichare empowered to take possession of secured assets of theborrower including the right to transfer by way of lease,assignment or sale. The said Act also empowers the said assetreconstruction companies to take over the management of thebusiness of the borrower. The constitutional validity of thesaid Act has been upheld in the case of Mardia Chemicals Limitedvs. Union of India. In the judgment in Mardia Chemicals, the https://hcservices.ecourts.gov.in/hcservices/ Supreme Court held that, in cases where the secured creditor hastaken action under Section 13(4), it would be open to theborrower to file an Appeal (Application) under Section 17 of theAct. In the said judgment, the Court further observed that ifthe borrower, after service of notice under Section 13(2) of theAct, raises any objection or places facts for consideration ofthe accused creditor, such reply to the notice must beconsidered by the Bank/FI with due application of mind andreasons for not accepting the objections briefly must be givento the borrower. In the said judgment, it is further held thatthe reasons so communicated shall only be for the purposes ofinformation/knowledge of the borrower and such reasons will notgive him any right to approach the Tribunal under Section 17 ofthe Act.25.In our view, Section 17(4) shows that the securedcreditor is free to take recourse to any of the measures underSection 13(4) notwithstanding anything contained in any otherlaw for the time being in force, e.g. For the sake of agreement,if in the given case the measures undertaken by the securedcreditor under Section 13(4) comes in conflict with, let us saythe provision under the State land and revenue law, thennotwithstanding any conflict, the provision of Section 13(4)shall override the local law. This position also standsclarified by Section 35 of the NPA Act which states that theprovisions of NPA Act shall override all other laws which areinconsistent with the NPA Act. Section 35 is also importantfrom another angle. As stated above, the NPA Act is notinherently or impliedly inconsistent with the DRT Act in termsof remedies for enforcement of securities. Section 35 gives anoverriding effect to the NPA Act with all other laws if suchother laws are inconsistent with the NPA Act. As far as thepresent case is concerned, the remedies are complimentary toeach other and, therefore, the doctrine of election has noapplication to the present case. (Emphasis supplied)12.I have given careful consideration of the material factsrelevant for consideration and also the submissions made by the learnedcounsel on either side and upon perusing the documents in support of thecase, it is seen that the petitioner approached the bank for certaincredit facilities and in the transaction, they have the liability. It isalso seen that two of the firms have borrowed loans for their businessactivities and as on 08.03.2002, the total liability was claimed asRs.1,03,86,184.78 paise; on their failure to discharge their liabilities,the respondent bank has approached the Debts Recovery Tribunal-I and filedO.A. No.118 of 2002 and the same was allowed vide order dated 10.03.2005.There was also a proposal by the borrowers and they approached therespondent bank on 10.11.2006 for a One Time Settlement. There were https://hcservices.ecourts.gov.in/hcservices/ certain discussions about payments and the petitioner expressed hiswillingness to pay Rs.30 lakhs as One Time Settlement before 10.03.2007,whereas the respondent bank demanded 25% of the offer amount as downpayment. Thereafter, the borrowers arranged repayment of Rs.5 lakhs andin the accompanying letter dated 13.03.2007, the petitioner promised topay the remaining sum of Rs.25 lakhs towards full and final settlement by31.03.2007. However, there was a balance amount not paid by thepetitioner and the respondent bank has contemplated further action andissued notice under Section 13(2) of the Act on 02.01.2007. At thisstage, the petitioner has chosen to contest the matter to raise whateverthe claim and counter claim in respect of payment and the balanceconsideration. Instead of contesting the matter, the petitionerapproached this Court contending that the respondent has acted incontravention of Section 13(3-A) of the Act which reads as under:"If, on receipt of the notice under sub-section(2), theborrower makes any representation or raises any objection, thesecured creditor shall consider such representation orobjection and if the secured creditor comes to the conclusionthat such representation or objection is not acceptable ortenable, he shall communicate within one week of receipt ofsuch representation or objection the reasons for non-acceptanceof the representation or objection to the borrower."13.The learned Senior Counsel for the petitioner submitted that inresponse to the notice dated 02.01.2007 issued under Section 13(2) of theAct, a reply letter dated 18.04.2007 was sent by the petitioner, for whichthe respondent Bank did not respond to. However, the petitioner hasproduced the letter dated 02.06.2007 sent by the respondent bank and therelevant portion of the said letter is as below:"Sub:One Time Settlement Proposal of your a/cM/s. Adword and M/s. Karvin Corporation:This has reference to your letter dated 18.04.2007addressed to us on the captioned subject. In this regardwe would like to inform you that the improved offer ofRs.33.00 lacs in respect of the settlement of above twoa/cs under OTS scheme is not acceptable by the bank. Wehave been instructed by our higher authorities to bring theE.M. properties for sale/auction under the SecuritisationAct, immediately to recover our dues."He also disputed the date of communication of the above reply sent bythe respondent and that as per the said document furnished by thepetitioner in the additional typed set of papers, the respondent cannotproceed with a notice for possession under Section 13(4) of the Act and itcan be issued by the bank only for reasons of non-acceptance and thesettlement. https://hcservices.ecourts.gov.in/hcservices/

14.I am unable to accept the argument of the learned Senior Counselappearing for the petitioner as Section 13(3-A) of the Act which wasincorporated by the Amending Act 30 of 2004, provides that if, on receiptof the notice under Section 13(2), the borrower makes any representationor raises any objection, the secured creditor must consider suchrepresentation or objection and if the secured creditor comes to theconclusion that such representation or objection is not acceptable ortenable, he shall communicate within one week of receipt of suchrepresentation or objection the reasons for non-acceptance of therepresentation or objection to the borrower. This provision has beenobviously incorporated in the light of the decision of the Supreme Courtin Mardia Chemicals case. In the Mardia Chemicals case, the Supreme Courtheld that under Section 13(2) of the Act, it is incumbent upon the securedcreditor to serve sixty days notice before proceeding to take action undersub-section (4) of Section 13 of the Act. After service of notice, if theborrower raises any objection or places facts for consideration of thesecured creditor, such reply to the notice must be considered with dueapplication of mind and the reasons for not accepting the objectionshowsoever brief that may be must be communicated to the borrower. Thereasons so communicated shall only be for the purposes of theinformation/knowledge of the borrower without giving rise to any right toapproach the Debts Recovery Tribunal under Section 17 of the Act, at thatstage. The Court explained that communication of reasons not to acceptthe objections of the borrower is for the purpose of his knowledge whichwould be a step forward towards his right to know as to why his objectionshave not been accepted by the secured creditor, who intends to resort toharsh steps of taking further action. Such person in respect of whomsteps under Section 13(4) of the Act are likely to be taken cannot bedenied the right to know the reason for non-acceptance of his objections. 15.This is with an object to provide a fair opportunity to thepetitioner to know the developments immediately before taking measuresunder Section 13(4) of the Act. However, it is made clear that as per theprovisions of the Act, the borrower will not be entitled to challenge thereasons communicated or the likely action of the secured creditor at thestage of the communication of the reasons, unless his right to approachthe Debts Recovery Tribunal as provided under Section 17 of the Actmatures on any measure having been taken under sub-section (4) Section 13of the Act. The proviso to sub-section (3-A) of Section 13 of the Actmakes it abundantly clear that the reasons so communicated or the likelyaction of the secured creditor at the stage of communication of reasonsshall not confer any right upon the borrower to prefer an application tothe Debts Recovery Tribunal under Section 17 or the Court of DistrictJudge under Section 17-A of the Act. Thus, the basic object of Section 13(3-A) of the Act is to ensure the element of transparency and fair playin the implementation of the provisions of the Act. https://hcservices.ecourts.gov.in/hcservices/

16.In the instant case, the respondent bank has complied with theprovisions of the Act and has sent a reply and therefore, when there is asubstantial compliance of the provision under Section 13(3-A) of the Act,the petitioner has no manner of right to claim the non-compliance of theprovision of Section 13(3-A) by the respondent bank. Therefore, I am ofthe considered opinion that the petitioner has not made out any case forconsideration of the prayer for a writ of mandamus to sustain the reliefsought in the petition and accordingly, there is no merit in the writpetition and the same is liable to be dismissed. However, the petitioneris at liberty to approach the Debts Recovery Tribunal of the jurisdictionconcerned within a period of two weeks from the date of receipt of a copyof this order and till such time, the parties are directed to maintainstatus quo as on date. Accordingly, the writ petition is dismissed with the above direction.Consequently, connected M.P.No.1 of 2007 is closed.abeSd/-Asst.Registrar/true copy/ Sub Asst.RegistrarTo,Union Bank of India,Nungambakkam Branch,No.37, College Road,Chennai 600 006.+2 ccs to Mr.Ahmad Associates, Advocate Sr.No.75226.BV(CO)DCP/11.1W.P.No.19445 of 2007