Back
IN THE HIGH COURT OF ANDHRA PRADESH
VENKATESWARLU NIMMAGADDA, J.
K. Nagaraj, S/o. K. Subbappa - Petitioner
Versus
A.P. State Financial Corporation Ltd. & Ors. - Respondents
Writ Petition No. 20447 of 2019
Decided On : 05-03-2025
(A) Constitution of India - Article 226 - State Financial Corporations Act, 1951 - Andhra Pradesh Revenue Recovery Act, 1864 - Writ petition challenging the attachment of property as collateral security for a loan - The petitioner claimed that the attachment was illegal and arbitrary, arguing that he did not execute any mortgage for his wife's loan. The court found that the petitioner had executed a Guarantee Agreement and a Sworn Affidavit, which established his liability as co-extensive with that of the principal debtor. The court ruled that the respondent Corporation was entitled to proceed against the petitioner's property for recovery of dues. (Paras 1, 18, 24, 27)
(B) Principle of Estoppel - The petitioner cannot deviate from his promise or plead contra to his undertaking, as he accepted the liability of his wife as co-extensive. (Paras 23, 27)
(C) Limitation - The court held that the mortgage rights can be exercised within 12 years from the last date of creation of mortgage, and the action taken by the respondents was within the limitation period. (Paras 25, 26)
Facts of the case:
The petitioner availed loans and provided his property as collateral security. After the loans were declared NPA, the respondents initiated attachment proceedings against the petitioner's property.
Findings of Court:
The court found that the petitioner had validly executed documents creating a mortgage and was liable for the debts of his wife.
Issues: Whether the petitioner was liable for the debts of his wife and whether the attachment of his property was lawful.
Ratio Decidendi: The court emphasized the binding nature of the Guarantee Agreement and the Sworn Affidavit, affirming that the petitioner’s liability was co-extensive with that of the principal debtor.
Result: Writ petition is dismissed.
ORDER :
1. The writ petition is filed under Article 226 of the Constitution of India, claiming the following relief:
“To issue writ of mandamus, declaring the action of the 1st and 2nd respondents in issuing a notice for attachment (Form No.5) i.e AFC/RR AT/32G/AAR/716 dated 28.11.2019 attaching my property and also notices dated 05.11.2019 & 06.05.2019 as illegal, arbitrary and contrary to the provisions of the State Financial Corporations Act, 1951 and Andhra Pradesh Revenue Recovery Act, 1864 and violative of Articles 14 & 300-A of the Constitution of India and consequently direct the 1st and 2nd respondents to release my property mentioned, as it is illegal to keep it in their custody.”
2. The brief facts of the case are that, Respondent Nos.1 & 2 Corporation has sanctioned a Term Loan of Rs.30 lakhs on 28.11.2012 to Dr. A. Anusha Rani/Respondent No.3 under Practicing Doctor's Scheme to purchase medical equipment for Nursing Home. One third party Gundra Srinivasa Reddy S/o Sundara Rami Reddy, R/o Nellore offered his property admeasuring an extent of 458.72 sq.yds as collateral security, by depositing original title deed in respect of the property and created equitable mortgage in favour of the Corporation. The petitioner has also availed Term loan of Rs.15 lakhs separately on 08.10.2010 vide Loan Account No.65874201 and offered collateral security i.e. house plot covering an extent of 57 Ankanams in Sy.Nos.25/1, 25/2 and 25/3, Patta No.87 & 84 located at Plot No.20, D.No.26-2-1979, Autonagar, Vedayapalem within the limits of Nellore Municipal Corporation, Nellore. The petitioner deposited original title deeds and created equitable mortgage in favour of the Corporation vide Registered Memorandum of Deposit of Title Deed Document No.14098/2010.
3. As per the terms and conditions of loan sanction letter, petitioner and his wife executed “Agreement of Guarantee” and Covenant of Co-obligant in favour of the Corporation on 23.01.2013. Further, executed a notarized “Sworn Affidavit” on 06.02.2013 to the effect that the petitioner will not ask for return of original title deeds already deposited towards his loan account until closure of the loan account of his wife Dr. A. Anusha Rani/Respondent No.3. The petitioner availed additional term loan of Rs.19.94 lakhs, totally revaluing both the loan accounts to Rs.36.60 lakhs. The petitioner closed both the loan accounts on 01.07.2017 and 06.01.2018 respectively. Since the petitioner has executed guarantee agreement, covenant of co-obligant and given the sworn affidavit for the loan account of Respondent No.3, the title deed documents pertaining to the property of the petitioner were mortgaged to the loan accounts and were not released in view of non-closure of loan account of Dr. A. Anusha Rani and that her loan account was declared as NPA by that time and proceeding were initiated under SARFAESI Act, 2002 by issuing Notice for attachment dated 28.11.2019 attaching the property of the petitioner. Questioning the action of Respondent Nos.1 & 2 in attaching the property of the petitioner, the present writ petition is filed.
4. Respondent Nos.1 & 2 filed counter affidavit denying material allegations. It is submitted that, it has come to the notice of the respondent Corporation that some part of the land in Sy.No.295 i.e. collateral security offered by Sri Gundra Srinviasa Reddy in favour of Respondent No.3 has been put in prohibited properties list and some part of the land in Sy.No.295 is also a subject matter of litigation pending before the District Court in O.S.No.240/2010 and O.S.No.70/2011. In view of the hurdles to proceed against the collateral security offered, the respondent Corporation has left with no option except to proceed against the property of the petitioner who has executed Guarantee Agreement, covenant/co-obligation and also given notarized affidavit consenting to retain the deposited collateral security title deeds in the custody of Corporation until closure of the loan a
The petitioner is liable for his wife's loan as per the Guarantee Agreement and cannot contest the attachment of his property, which is valid under the law.
A bank cannot exercise a general lien to retain title deeds for debts where the mortgagor is not a borrower and has cleared the outstanding loan.
A bank cannot retain a title deed for a different transaction not covered by the mortgage, and a formal agreement is necessary for guarantees.
Respondent-bank has committed an error by withholding the original documents of the petitioner in respect of the term loan of Rs. 9.80 lakh which is fully paid by the petitioner.
Point of law: rights of a secured creditor to realise secured debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues i....
The court established that a prior judicial attachment order supersedes subsequent government actions regarding property attachment under the relevant acts.
The SARFAESI Act, 2002 has overriding effect over state laws, ensuring secured creditors' rights are prioritized in debt recovery.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
