Orkay Tobacco Dealers and Another vs State Bank of India and Others

A. Gopal Reddy, J.—By means of this Writ Petition under Article 226 of the Constitution, the petitioners seek a declaration that the auction notice in Tender No. EA/Thorredu BR/2009, dated 29-8-2009 proposing to sell the secured assets mentioned therein as illegal, arbitrary and violative of principles of natural justice and also in contravention of Sub-rule (6) of Rule 8 of the Security Interest (Enforcement) Rules, 2002. They further seek a consequential direction to set aside the said tender notice dated 29-8-2009.

The second petitioner earlier filed Writ Petition No. 25535 of 2007 complaining action of the respondents in dispossessing him from his house property without issuing any prior notice or passing any orders under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity ''the Act''). This Court, by order dated 12-3-2009 dismissed the said writ petition observing that inasmuch as the petitioner availed loan by mortgaging the property in question, the respondent has got every right to proceed against the said property u/s 13 of the Act in the event of liability was not liquidated. It was further observed therein that it is not open for the petitioners to contend that the respondent-bank is not entitled to initiate action under the Act merely because it has filed a civil suit for recovery of the amount and that it is always open for the respondent to proceed against the secured assets of the principal loanee and the guarantor irrespective of the pendency of any suit or decree obtained by the bank. It was also observed that if there is any non-compliance of the provisions of Section 13 of the Act, it is open for the petitioners to approach the Debts Recovery Tribunal u/s 17 of the Act.

It is not in dispute that the second petitioner has obtained loan of Rs. 9,00,000/-during the year 1998 under cash credit limit from the respondent-bank to run the first petitioner proprietary concern, namely, M/s. Orkay Tobacco Dealers, and to the said loan amount, the family members of the second petitioner, Mutuku Chandra Kumari and others, stood as guarantors by depositing their title deeds with the bank. It is also stated that there was some dispute with regard to the settlement of the said property and the same was settled in favour of the second petitioner vide settlement deed dated 29-3-2006. As the loan amount was not repaid by the second petitioner-loanee, it is stated, the respondent-bank filed civil suit in O.S. No. 524 of 2006 on the file of the I Additional Senior Civil Judge, Rajahmundry for recovery of the sum of Rs. 5,91,287.40 Ps. together with further interest from 20-10-2006 till the date of realization. During the pendency of the said suit, the petitioner filed CRP No. 3822 of 2009 against the dismissal of IA Nos. 877 and 878 of 2009 in O.S. No. 524 of 2006, which were filed seeking to recall P.W.I and D.W.I to furnish certain documents, and, in the said CRP, this Court by order dated 21-8-2009 granted stay of pronouncement of judgment, and, however, permitted the parties to proceed with arguments in the suit. After dismissal of the Writ Petition No. 25535 of 2007 filed by the petitioner, the respondent has issued the impugned tender notice dated 29-8-2009 proposing to sell the property under its mortgage by conducting public auction.

This Court while ordering notice before admission on 22-9-2009 granted stay of all further proceedings pursuant to the notice dated 29-8-2009 subject to the condition of the second petitioner depositing Rs. 1,00,000/-within a period of four weeks from the date of the said order.

The main contention of the learned Counsel for the petitioners is that no prior notice as required under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 is issued and therefore, the proposed sale of immovable property is illegal and in contravention of the said rule.

The respondent-bank filed counter, narrating the events took place from the date of filing the suit till the date of disposal of the Writ Petition No. 25535 of 2007. It is stated in the counter-affidavit that the respondent-bank is entitled to proceed under the Act against the property mortgaged to it though the same is the subject matter of the suit in O.S. No. 524 of 2006 and that in the event the petitioner is aggrieved by the action of the respondent bank, it is open for the petitioner to avail remedy u/s 17 of the Act. It is further stated that as observed by this Court in Writ Petition No. 25535 of 2007, against the notice issued u/s 13(4) of the Act, the petitioner has to invoke the jurisdiction of the Debts Recovery Tribunal u/s 17 of the Act, and not the jurisdiction of this Court under Article 226 of the Constitution.

One Smt. Chitturi Chandrakanthamma, who stood as guarantor by depositing the title deeds of her house property, for the loan taken by the second petitioner filed WPMP No. 30407 of 2009 to implead her as party-Respondent No. 3 in the Writ Petition, contending that she has no objection to take possession of the property and to sell it by way of public auction. It is further contended that if any amount she gets from the auction proceeds, she would enjoy the same during her life time. Having heard the learned Counsel for the implead petitioner and as there is no objection from the other side, we felt it appropriate to allow WPMP No. 30407 of 2009 as prayed for and accordingly ordered the same.

This Court while dismissing the Writ Petition No. 25535 of 2007 made a reference to the decision of the Supreme Court in Transcore Vs. Union of India (UOI) and Another, and observed that if the second petitioner complains non compliance of the provisions u/s 13 of the Act, the only course left open for him is to approach the Debts Recovery Tribunal u/s 17 of the Act. Even if the petitioner complains that he was not issued 30 days notice as required under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, the only course left open for him is to approach the Debts Recovery Tribunal u/s 17 of the Act. Pertinent to note this Court stayed the auction pursuant to the tender notice 29-8-2009. Therefore, it is always open for the petitioner to file his objections against the auction notice dated 29-8-2009 before the Recovery Officer appointed for the purpose of the sale of the secured properties. He can also file an appeal, if aggrieved, against the order to be passed by the Recovery Officer thereon. In view of the same, and as no other ground is urged, we do not see any merit in the Writ Petition.

The Writ Petition is dismissed. No order as to costs.