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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ARAVIND KUMAR, J.
M/s. Mohan Bhandar A Partnership Firm Nageetha Complex and Ors - Petitioners
Versus
Vijaya Bank Kuvempunagar Branch Mysore, Represented By Its Branch Manager and Ors - Respondent
Writ Petition Nos. 27975-77 of 2018 (GM-DRT) C/W W.P. Nos. 48475 of 2016 and 37112-37117 of 2016 (GM-RES)
Decided On : 23-07-2018
Recovery of Debts and Bankruptcy Act, 1993 - Section 25(aa) - Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 - Section 14 - DRT Act - Section 25(aa) - Transfer of Property Act - Section 65A – Physical possession of secured asset - Recovery of Debts - Transfer of Property - Whether secured creditor would be empowered and entitled to take possession of secured asset by initiating proceedings simultaneously both under DRT Act and SARFAESI Act - Whether banks or financial institutions having elected to seek their remedy in terms of DRT Act, 1993 can still invoke NPA Act, 2002 for realizing secured assets without withdrawing or abandoning OA filed before DRT under DRT Act - Whether reasons assigned by him is genuine or otherwise - Whether Section 14 of SARFAESI Act would do away with mandate of following principles of natural justice - Tenants of property bearing No. Y named Complex situated at 2nd Stage, and they have sought for quashing of order Annexure-C passed by fourth respondent under Section 25(aa) of Recovery of Debts and Bankruptcy Act, 1993 in TRC and in alternate they have prayed for a direction to fourth respondent to consider review application preferred by them vide Annexure-F and pending consideration of same to direct respondents 1 to 4 not to interfere with possession of secured asset - Petitioners are also seeking for a declaration that petitioners leasehold rights over schedule property are not regulated by and/or covered by Debt Recovery Tribunal Act, 1993 and for further direction to respondents 1 and 4 not to interfere with their possession of secure asset – Held, Perusal of pleadings as well as documents produced would clearly establish that insofar as three petitioners are concerned tenancy came to be created by borrower namely subsequent to mortgage - In fact loan account of borrower was declared as Non Performing Asset and secured creditor has obtained Recovery Certificate respectively - Merely because secured creditor was receiving rents from tenants would not amount to secured creditor validating such tenancy or it would not amount to waiver of its right under SARFAESI Act or DRT Act - Secured creditor having been induced to hand over possession to debtor after he made a show of settling the dispute by filing a memo of undertaking to the said effect having not complied with said undertaking neither secured creditor can be allowed to weep on shoulder of his tenants nor tenants can be heard to contend that they were required to be issued with notice by secured creditor or their alleged tenancy is protected under prevailing tenancy laws or provisions of Transfer of Property Act - None of these grounds would be available to tenants in instant case particularly when it is an admitted fact that lease in their favor have been created subsequent to mortgage and that too without consent of secured creditor - As could be seen from records secured creditor at all times have made bonafide attempts to salvage situation by agreeing and consenting for any offer that was coming in way of settlement as its last straw and this is evident from fact that secured creditor though had taken possession of secured asset yet with fond hope of settling dispute and giving a quietus to all pending litigations agreed to hand over possession of premises which are now in occupation of three petitioners which was at behest of debtor - On same day one more affidavit came to be filed by first petitioner stating there under that in event of auction taking place floor wise of entire building first petitioner would be willing to participate in auction process to purchase ground floor to an extent of sq mtrs and in event of first petitioner being unsuccessful it would voluntarily handover vacant and peaceful possession of portion of premises in its occupation to first respondent – Bank within two months from date of confirmation of sale and till then it may be permitted to be in occupation of premises and continue its business activity - Keeping these affidavits filed by respective parties and factual scenario as discussed herein above which is existing this Court is of considered view that there are no merits in these writ petitions to be examined - However in order to balance equities between parties certain directions deserves to be issued and accordingly it is hereby issued - Writ petitions are disposed of
ORDER :
1. These petitions are taken up together and disposed of by a common order, since issues involved in these writ petitions would overlap each other while being adjudicated, apart from parties as well as subject property of these writ petitions are one and the same.
2. W.P.Nos.27975-77/2018 is filed by the tenants of property bearing No. ‘Y’ named Nageetha Complex situated at Saraswathipuram, Tonachikoppal 2nd Stage, Mysuru (hereinafter referred to as ‘secured asset Saraswathipuram’) and they have sought for quashing of the order dated 13.06.2018 Annexure-C passed by fourth respondent under Section 25(aa) of Recovery of Debts and Bankruptcy Act, 1993 (for short ‘DRT Act’) in TRC No.339/2017 (DCP No.2933) in O.A.No.620/2001 and in alternate they have prayed for a direction to the fourth respondent to consider the review application preferred by them vide Annexure-F and pending consideration of the same to direct respondents 1 to 4 not to interfere with the possession of the secured asset-Saraswathipuram. Petitioners are also seeking for a declaration that petitioners leasehold rights over the schedule property are not regulated by and/or covered by Debt Recovery Tribunal Act, 1993 and for further direction to respondents 1 and 4 not to interfere with their possession of secure asset.
3. W.P.Nos.37111-117/2016 have been filed by the same petitioners namely, who are petitioners in earlier referred writ petitions and they are calling in question order dated 21.03.2016–Annexure-C passed by second respondent (hereinafter referred to as ‘District Magistrate’) under Section 14 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short ‘SARFAESI’ Act) whereunder first respondent-Bank has been permitted by District Magistrate to take physical possession of the secured asset Saraswathipuram (i.e., portions) in occupation of the petitioners. They have also sought for quashing of notice dated 13.06.2016 Annexure-E to E3 issued by first respondent – Vijaya Bank (hereinafter referred to as ‘Secured creditor’ or ‘Bank’) whereunder the Bank has intimated the petitioners that if possession of secured asset (portions of property in occupation of petitioners) is not handed over to Bank, it would take vacant possession of said property with the assistance of law enforcement officials as per Court order dated 21.03.2016.
4. W.P.No.48475/2015 has been filed by Sri.M.Nagaraja (hereinafter referred to as borrower/debtor) whereunder he has sought for issue of writ of certiorari to quash notice dated 13.06.2016– Annexure-A issued by respondent-Bank calling upon the petitioner to handover possession of secured asset as indicated in the said notice; with a further direction to respondent-Bank to handover or return the original title deeds concerning mortgaged residential property, which is described in the impugned notice dated 13.06.2016Annexure-A; and petitioner has also sought for a writ of mandamus to the respondent-Bank to make a fair and reasonable offer of One Time Settlement in the manner prescribed by Reserve Bank of India and to permit the petitioner to settle the liability by way of sale or conveyance of rights in the secured property, subject to mandates of mortgage etc.,
5. The facts which are not in dispute are as under:
Petitioner in W.P.No.48475/2016–debtor had borrowed certain amounts from the respondent-Bank and said loan having been classified as a non performing asset, on 31.03.2000 respondent-Bank initiated proceedings for recovery of the amounts due and two Original Applications came to be filed and an application under Section 19 of DRT Act being filed before the jurisdictional Debts Recovery Tribunal it resulted in recovery certificates being issued on 11.08.2004 and 31.11.2003 for a sum of Rs.39 Crores. At the time of borrowing the amounts, debtor had secured said amounts by offering the immovable properties (3 numbers) as a security. Said three properties are;
(i) Immov
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