Sonu Grover And Ors. vs Allahabad Bank And Ors.

Ranjit Singh, J

The appellants had filed an S.A. before the Tribunal below seeking direction to restrain the respondent Bank from taking further steps under the SARFAESI Act. The S.A. filed by the appellants stands dismissed by the Tribunal below, holding that no suitable ground is raised by the appellants in the said S.A. Aggrieved against this order, the appellants have filed the present appeal. The appellant No. 1 is the owner of the property bearing No. 13/2, Shop No. 1-7, Basement, WEA, Karol Bagh, New Delhi. Appellant No. 2 is her husband. M/s. Kailash Trading Company (respondent No. 3), which is proprietorship concern of one Mr. Ashok Kumar had availed credit facilities to the tune of Rs. 55 lac from the respondent Bank. To secure the said facilities, respondent No. 3 had hypothecated stocks, book debts and other, movable assets in terms of memorandum of arrangement letter dated 23.7.2010. The appellants stood as guarantor-cum-mortgagor to the aforesaid facilities. The appellants would contend that the arrangement was for sanction of credit facility of Rs. 55 lac and, therefore, the respondent Bank has no right to give any financial arrangement or other type of facilities or benefit to respondent No. 3 beyond these facilities agreed upon as per letter of arrangement dated 23.7.2010. As per the appellants, if any financial arrangement has been permitted beyond this, it was without knowledge and his consent.

The appellants came up with the plea before the Tribunal below that they would have no objection if the Bank proceeded to recover of its due by the sale of the assets/properties of respondent No. 3 who was the principal borrower. As per the appellants, these securities were sufficient to satisfy the claim of the Bank. The appellants accordingly challenged the action of the Bank in initiating proceedings under the SARFAESI Act which were termed as wholly illegal and unenforceable in law.

The appellants also alleged that no notice under Section 13(4) of the Act was served upon them. They had also challenged the action of the Bank in classifying the account as NPA which, as per them, was done without adhering to any of the norms and circular issued by the Reserve Bank of India. Appellants also made a grievance against the rate of interest charged and thus the action of the Bank to proceed against the property of the appellants was termed to be wholly illegal and untenable which was liable to be set aside.

The Bank filed reply and prayed for dismissing the S.A. As per the stand of the Bank, S.A. filed by the appellants was not maintainable and was filed just to delay and drag the proceedings which were meant to recover public money. The stand of the Bank further was that respondent Mr. Ashok Kumar had approached the Bank for loan facility of Rs. 55 lac and to secure the loan amount and the interest due, an equitable mortgage was created in regard to the property of the appellants by deposit of title deed. The Bank had accordingly issued notice on 14.11.2011 raising a demand of Rs. 83,10,671/- with interest from Ashok Kumar asking him to pay this amount within 60 days. Respondent Ashok Kumar had failed to make payment when the Bank had taken steps under Section 13(4) of the SARFAESI Act.

The plea of the appellants before the Tribunal primarily was that the Bank may recover its dues from the prime security, i.e. stock and machinery lying in the premises which would be sufficient to recover the dues of the Bank. Respondent No. 3 came forward with the plea that he was ready and willing to hand over the stocks lying in the premises. The other ground pleaded by the appellants was that the Bank had not followed the Reserve Bank of India guidelines while classifying the account as NPA.

The Tribunal did not find any substance in any of the submissions and dismissed the S.A.

Counsel for the appellants submits that even as per the showing by the Bank the principal borrower had executed documents creating charge over the movable assets in favour of the Bank. The Counsel for the appellant has relied upon the following observation of the Hon'ble Supreme Court in Transcore v. Union of India & Anr., VIII (2006) SLT 617 : 135 (2006) DLT (SC) 151 : I (2007) BC 33 (SC):

"Therefore, apart from obligation to repay, the borrower undertakes to keep the margin and the value of the securities hypothecated so that there is no mismatch between the asset-liability in the book of the Bank/FI. This obligation is different and distinct from the obligation to repay."

The Court has also observed that the value of the pledged property/asset depreciates on day-to-day basis with inflation in the economy and if the borrower does not provide additional asset and the value of the asset pledged keeps on falling then to that extent the account becomes non-performing. The Court has, therefore, observed that Bank/FI is required to move under the NPA Act expeditiously by taking one of the measures under Section 13(4) of the Act.

The Counsel would refer to the fact that the appellants had deposited a sum of Rs. 20 lac pursuant to the order dated 9.3.2012 and the Bank statedly has received a sum of Rs. 30,73,165/-. Referring to the stock statement filed by respondent No. 3, it is urged that Bank was first required to exhaust the remedy to recover the amount from the pledged security. The plea of the Counsel also is that the Tribunal below has not recorded any finding on the plea that the Bank had granted additional facility after execution of documents on 23.7.2010.

I have considered the submission made by the Counsel for the appellants The main plea by the Counsel ultimately is that the amount should be recovered from the principal security i.e. stock, etc. The plea by the Counsel that the liability of the appellants would be of Rs. 55 lac with interest apparently is misconceived. Once the appellants had agreed to give guarantee for the amount of loan advanced which included the payment of interest on the said amount, they now cannot plead that his liability be restricted to the amount of Rs. 55 lac with interest @ 13% p.a. simple. The Counsel has also not been able to show any law whereby his plea for recovery first from the principal borrower would be the norm. Since the loan advanced to respondent No. 3 was secured by the guarantee given by the appellants, the right of the Bank to recover the dues from the security which is a mortgaged property cannot be restricted. I do not see any merit in any of the pleas raised by the appellants. The Bank is well within its right to recover this amount from the mortgaged property and the order passed by the Tribunal below does not call for any interference in the present appeal. The appeal is accordingly dismissed.