Tirupati Cold Storage VS United Commercial Bank

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

PATNA HIGH COURT
Jayanandan Singh, J.
M/s. Tirupati Cold Storage —Petitioner
versus
United Commercial Bank —Respondent
Jurisdiction Case No. 15468 of 2012
Decided on 19.10.2012

Counsel for the Parties:
For the Petitioner:Mr. Sanjay Singh, Mr. Gautam Kejriwal & Mr. Akash Chaturvedi, Advocates.
For the Respondent:Mr. Ranjeet Kumar Pandey, Advocate.

Headnote:(i) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Sections 13, 17 and 18—Constitution of India—Article 226—Recovery of debt—Measures taken by a secured creditor or his authorized officer under sub-section (4) of Section 13 can only be challenged before Debt Recovery Tribunal by any person, including a borrower—Debt Recovery Tribunal cannot, on its own, go into and examine and entertain the allegations of violations of provisions of sub-section (2), (3) and (3-A) by secured creditor in an appeal filed before it by any person, including a borrower, in exercise of its powers under Section 17—Remedy to any person, including a borrower, under Section 17 and 18 does not envisage a remedy to him, also against non-compliance of provisions of sub-section(2), (3) and (3-A) by secured creditor—A borrower, alleging breach of any of provisions of sub-sections (2), (3) and (3-A), independently or collectively, has no remedy available under the Act to ventilate his grievances, except to move High Court under Article 226 of Constitution of India. (Para 9)
       (ii)Security Interest (Enforcement) Rules, 2002—Rule 13—Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Section 13(2)—Demand notice—Sub-section (2) of Section 13 calls for its strict compliance—Demand Notice has to be served upon borrower, strictly in manner prescribed in Rule 3—Sixty days period, for borrower to discharge in full his liability, starts running only from the date of service of such notice, and not from any earlier date—Expiry of sixty days from such service of notice is a precondition for initiation of a proceeding by a secured creditor under sub-section (4). (Para 15)
       (iii) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Section 13(2)—Security Interest (Enforcement) Rules, 2002—Rule 13—Demand notice—Notice issued under sub-section (2) must contain all necessary details leading to determination of final amount by secured creditor found payable by borrower and not only figure of final amount payable—This is all the more necessary because, non-payment of this amount give secured creditor right under law to enforce its security interest in the manner prescribed under sub-section (4) of Section 13. (Para 18)
       (iv) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Section 13—Enforcement of security interest—Procedure laid down under Section 13 for enforcing a security interest by a secured creditor, is somewhat in the nature of execution of a money decree, and not in the nature of an executive/administrative action/ decision—In the matter of classification of a debt as non-performing asset and enforcing its security interest, a secured creditor has no discretion—Once a debt is classified as non-performing asset, he has only to further follow RBI guidelines at every stage, together with provisions of the Act, to recover his secured debt. (Para 25)
       Result: Writ application dismissed.

ORDER

Jayanandan Singh, J.—From the very beginning of his submissions, Mr. Sanjay Singh, learned counsel for the petitioners, restricted himself to the legal issues being raised by him in the case, and rightly so, because, had he entered into the thickets of the disputed facts, it might have been difficult for him to successfully ward off the charge of under utilization, non-utilization and diversion of fund, made available to the petitioner by the Bank in phases, as per its policy, more particularly in the light of the approved valuer’s report dated

16.02.2012, annexed with the counter affidavit as Annexure - K. But, before crystallizing his submissions into questions of law arising in the matter, the essential facts of the case, appearing from the pleadings of both the parties, which may require reference in this judgment, are only appropriate to be noticed first, in chronological order at one place. They are:-

25.04.2003 – Letter of National Horticultural Research & Development Foundation, informing the Sr. Manager, U.C.O. Bank, Fraser Road, Patna that proposal of petitioner holds promise and appears technically sound. (Annexure-1) - N.B.C. office of the respondent Bank at Calcutta sanctioned a term loan of Rs.2.46 crores. (pleading para 4 W.P.)

08.10.2003 – Senior Manager issued letter of sanction of term loan of Rs.1.53 crores with terms and conditions including schedule of repayment by petitioner. Loan to be released in phases upon works completion and after site/job inspection. (Annexure-2 & Annexure-A).

15.03.2004 – Bank released first installment of Rs.30 lacs. (Annexure-3) - Small amount disbursed by Bank in phases.

07.02.2006 – Request of petitioner to Bank for release of rest of the 92 lacs. (Annexure-4/1). - Petitioner‘s account classified N.P.A. But subsequently some amount was deposited. Hence account became performing. As such some loan amount was disbursed. But statutory auditor at the time of audit, found account unsatisfactory and as such declared the account N.P.A. with effect from

31.03.2007. (pleading para 22 C.A.)

19.03.2008 – Bank sanctioned loan to petitioner under UCO Shelter and UCO Mortgage Schemes. (Annexure-E series). - Petitioner paid interest upto 2008 from the loan sanctioned. (pleading para 23 Writ Application)

05.03.2009 – Request of petitioner for rescheduling/restructuring. (Annexure-6)

06.03.2009 – Demand Notice u/s 13(2) of the Act issued by registered post. (Annexure-F) - Registered letter returned un-served. (pleading para 23 Counter Affidavit) 23.04.2009 – Letter of Bank. Enquiry about certain facts regarding progress of project and requirement of funds in view of revised project report submitted by petitioner. (Annexure-7) - Other correspondences after 13(2) notice between Bank and petitioner in respect of project, fund, offer of compromise, its response etc.

20.06.2011 – Possession Notice issued u/s 13(4) (Annexure – 17)

21.06.2011 – Possession Notice issued u/s 13(4) (Annexure – 17/A) - Representations and objections of the

petitioner. Never received 13(2) notice.

27.08.2011 – Bank‘s final reply to petitioner. Informed that term loan was classified on

31.03.2007 and notice under the Act was issued by Authorized Officer on

06.09.2009, copy enclosed. (Annexure-22) - Filed objection again. Expressed intention to settle. Deposited critical amount of the two accounts. Requested to regularize the accounts. - Bank asked for 25% down payment with proposal. Filed. But petitioner‘s cheque bounced.

05.03.2012 – Writ petition presented first time in High Court office for filing after service of copy. 22.08.2012 – Writ petition filed again after removing defects. 24.08.2012 – Writ petition registered.

24.08.2012 – Proposal of petitioner dated 21.08.2012 rejected. (Annexure-J)

25.08.2012 – Auction Sale Notice u/s 13(4) issued. (Annexure-I)

2. In the back drop of the above facts, the questions, which emerged from the submissions of Mr. Singh, for consideration by this Court can be formulated in the

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Judicial Analysis

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PATNA HIGH COURTJayanandan Singh, J.M/s. Tirupati Cold Storage —PetitionerversusUnited Commercial Bank —RespondentJurisdiction Case No. 15468 of 2012Decided on 19.10.2012

Cases Referred (5)

Judicial Analysis

PATNA HIGH COURT
Jayanandan Singh, J.
M/s. Tirupati Cold Storage —Petitioner
versus
United Commercial Bank —Respondent
Jurisdiction Case No. 15468 of 2012
Decided on 19.10.2012