B.G. Neelamma and Others vs State Bank of Mysore, Byadgi Branch and Others

Anand Byrareddy, J.—Heard the learned counsel for the petitioners.

The petitioner No. 1 is said to be the erstwhile director of M/s. Anjanadhari Cold Storage Private Limited at Byadgi and 2nd and 3rd petitioners were the directors of the said company and had obtained Agricultural Term Loan of Rupees Two Crore for the construction of a cold storage plant and to install machinery. The 1st petitioner is said to have hypothecated the machinery to the respondent No. 1 - Bank while sanctioning the loan. The bank is said to have collected the original documents of property bearing No. 123, Assessment No. 2216/3, Ward No. 13, Kudligi Road, Sandur, belonging to the 1st petitioner.

Thereafter it transpires that the business could not be successfully continued and the entire business was said to have been transferred to one Dada Peer under a memorandum of understanding. Accordingly the petitioners and respondent No. 4 had approached one Mr. Dada Peer M. Bhooshi who is the present Managing Director of respondent No. 2, to take over the company along with its liabilities. Even the liability insofar as the bank is concerned was also taken over by the said individual and it was agreed that the original property documents would be released in favour of the 1st petitioner, on the said Peer providing other security. In this connection petitioners and the 4th respondent and Dada Peer are said to have entered into a Memorandum of Understanding and Agreement dated 1/1/2009. On the basis of the said agreement, the respondent-bank is said to have issued a notice to the petitioners demanding repayment of Rs. 1,94,80,990/-, with interest. Mr. Bhooshi was acknowledged as the borrower in terms of the arrangement aforesaid. The petitioners and respondent No. 4 were treated as guarantors of the said credit. Thereafter the bank having issued a sale notice in respect of the property offered as security, the petitioner No. 1 had preferred an appeal in S.A. No. 357/13 before the Debt Recovery Tribunal which was ultimately dismissed and pursuant to which the bank had brought the property belonging to the 1st petitioner to sale, which was a commercial building consisting of a hospital, medical shops and other shops. Though the 1st petitioner had made a plea with the bank not to proceed against item No. 2 of the schedule property, which was offered as collateral security, all efforts went in vain. The bank - respondent No. 1 auctioned item No. 2 without taking any steps to sell the primary property item No. 1, of the schedule property. Thereafter the bank had filed Original Application No. 261/13 for issuance of recovery certificate against the petitioners. The property item No. 2 having been sold for Rs. 61,55,000/- and having recovered the amount and adjusted towards the loan amount, the petitioners were no longer liable towards the loan amount and that item No. 1 of the schedule property being available to the bank, the petitioners have been embroiled in forced recovery proceedings and are seriously jeopardized in having to meet the liability twice over, especially petitioner No. 1 having lost his property namely item No. 2 of the schedule.

It further transpires that in the course of the proceedings, parties have tendered documentary evidence before the Tribunal and the petitioner had made an application seeking permission to cross-examine the witness on behalf of the Bank. The Tribunal, however, has taken a view that insofar as the said application is concerned, the reasons assigned by the petitioner have been examined at paragraphs 14 and 15. After examining the provisions of the Recovery of Debts due to Banks and Financial Institutions Act as regards the procedure to be followed insofar as the permission sought for by the petitioner, the Tribunal has expressed the following as being reason t reject the application:

"14. Defendants intend to cross-examine on the aspects pertaining to the sale of the property belonging to defendant No. 4 held under the SARFAESI Act proceedings. It is relevant to place on record that said sale proceedings admittedly have been challenged under SA 357/2013 and same came to be dismissed upholding the right of the bank to initiate proceedings against the property of defendant No. 4 and also upheld the sale proceedings and sale certificate, etc pertaining to the property of defendant No. 4. By virtue of these factors, cross-examination of witness pertaining to proceedings under the SARFEASI Act which was subject matter of SA 357/2013 cannot be allowed in the eye of Law in this case. Defendants cannot cross-examine regarding validity or otherwise of the sale proceedings in this case posing them to AW-1 as the order in SA 357/2013 has become final. Therefore grounds urged by defendants seeking cross-examination on that aspect cannot be allowed.

Added to it, it is contended that defendants No. 2 to 5 have resigned and defendant No. 1 company was handed over to one Dada Peer, etc are all subject matter of the records. All these factors have to be derived from the documentary evidence which are placed by both the parties. It is relevant to place on record that documents placed by both the parties themselves speak regarding alleged resignation, liability, etc. hence cross-examination is not necessary. Added to it, it must be placed on record that when both the parties have led evidence and when both he parties placed documentary evidence, there is no scope for oral evidence unless there are allegations of fraud, cheating etc. In the case on hand absolutely defendants do not attribute any allegation of fraud, cheating, etc., but on the other hand the contentions raised by the defendants in the affidavit of defendant No. 4 will be derived by the documents itself hence cross-examination is not at all necessary.

I must place on record that absolutely essential ingredients have not been placed by the defendants. I must also place on record that right of cross examination is not inherent as noted above in the proceedings like on hand as proceedings in question are summary proceedings. Further as noted above essential ingredients have not been established as prescribed under the Law and also laid down by the Hon''ble Supreme Court of India in the above referred rulings, hence present IA is to be rejected."

Given that the Tribunal has applied its mind and exercised its discretion in rejecting the application, it would not be appropriate for this court to micromanage the manner in which the Tribunal conducts its proceedings, except to observe that if there is inadequate material and if it is the allegation of the petitioner that the bank has deliberately withheld certain particulars, especially as regards the adjustment of the accounts or the proceeds recovered from the sale of item No. 2 of the schedule property, it would be open for the petitioner to elaborate in his arguments on that aspect which the Tribunal may take into consideration.

The learned counsel for the respondent - Bank would point out that it is incorrect to state that there are no such particulars available, the affidavit of the manager who was a witness on behalf of the respondent-bank has categorically mentioned that the amount recovered by such sale and the manner in which it has been accounted. Therefore if there is no such further material which the petitioner claims, this aspect of the matter shall be kept in view by the Tribunal at the time of addressing the controversy. With that observation, the petition stands rejected.