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IN THE HIGH COURT AT CALCUTTA
Dipankar Datta, J.
Metsil Exports Private Ltd. & anr. - Petitioners
v.
Punjab National Bank & anr. - Respondents
W.P. No. 862 of 2015
Decided On : 10-11-2016
SARFAESI - PUBLICATION OF DEMAND NOTICE - [SEC. 13(2)] - Publication of demand notice under section 13(2) of the Act together with the photograph of the director/guarantor in the newspapers is not in accordance with law unless the secured creditor has reasons to believe that such publication is imperative having regard to the facts and circumstances before it.
Fact of the Case:
The petitioners challenged a demand notice dated March 17, 2015 issued under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as ‘the Act’) by the Authorized Officer, Punjab National Bank (hereafter the second respondent), and the rejection of the petitioners’ objection dated May 16, 2015 to such demand notice by the second respondent by his letter dated May 30, 2015. The demand notice published in the newspapers at the instance of the second respondent revealed that he had reasons to believe that the “borrowers/directors of the borrowing company are avoiding service of demand notice issued to them”.
Finding of the Court:
The court held that the publication of the demand notice under section 13(2) of the Act together with the photograph of the second petitioner in the newspapers was not in accordance with law, as the secured creditor did not have “reasons to believe” that such publication was necessary to take the proceedings initiated under the Act to its logical conclusion.
Issues: Whether publication of a demand notice under section 13(2) of the Act in two newspapers having wide circulation with the photograph of a director/guarantor is legal?
Ratio Decidendi: 1. The statute does not conceive conferring power on a secured creditor/its authorized officer to publish a demand notice in a newspaper without having “reasons to believe” that such publication is imperative having regard to the facts and circumstances before it and that at such stage, there is no question of reading a power of publication of photograph in the newspapers along with the demand notice. 2. Publication of the demand notice in the newspapers was made by the second respondent upon invocation of such power. 3. If the statute requires a particular act/thing to be performed/done in a particular manner, it has to be performed/done in that manner alone or not at all.
Final Decision: The writ petition was disposed of with the direction that the respondents shall publish an apology in the said newspapers (Ananda Bazar Patrika and The Times of India) expressing regret for having published the photograph of the second petitioner, within 30 days from the date of the judgment. The petitioners were also entitled to costs of proceedings assessed at Rs.50,000/- to be paid within the same period as aforesaid.
1. This writ petition dated July 8, 2015, mounts a challenge to a demand notice dated March 17, 2015 issued under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as ‘the Act’) by the Authorized Officer, Punjab National Bank (hereafter the second respondent), and the rejection of the petitioners’ objection dated May 16, 2015 to such demand notice by the second respondent by his letter dated May 30, 2015.
2. At the time the writ petition was first considered by this Bench, it was found to be unusual that the demand notice under section 13(2) of the Act, apart from being served on the petitioners, was also published in two daily newspapers (the respective editions of ANANDA BAZAR PATRIKA and THE TIMES OF INDIA, dated April 5, 2015) with the photograph of, inter alia, the second petitioner, a director of the first petitioner. Such publication also contained photographs of two other directors of the first petitioner.
3. The demand notice published in the newspapers at the instance of the second respondent revealed that he had reasons to believe that the “borrowers/directors of the borrowing company are avoiding service of demand notice issued to them”. Queerly, the impugned rejection letter dated May 30, 2015 referred to receipt of the demand notice by the petitioners on March 18, 2015 (as per track report of the postal department). It also revealed invocation of power by the second respondent conferred on him by rule 3 of the Security Interest (Enforcement) Rules, 2002 (hereafter the Rules). Since the proviso to rule 3(1) ordains “reason to believe” that the borrower or his agent had been avoiding service as a precondition for publication of a demand notice issued under section 13(2) of the Act in two newspapers having wide circulation, by an order dated July 22, 2015 the Bench had called upon Ms. Rao, learned advocate for the respondents to show how the second respondent had formed the opinion that publication of the demand notice in its entirety in two daily newspapers with the photographs of the directors of the first petitioner was necessary to take the proceedings initiated under the Act to its logical conclusion. On July 29, 2015, Ms. Rao submitted that there was no record from which formation of opinion could be discerned. Such submission was recorded in the order that was passed on that day. Having regard thereto, Mr. Huda, learned advocate for the petitioner was also requested to obtain instructions from the petitioners as to whether an apology of the first respondent (hereafter the PNB), printed in the same newspapers, would satisfy them or not. On the next date i.e. August 12, 2015, Mr. Joy Saha, learned senior advocate for the respondents regretted the respondents’ inability to apologize.
Hearing progressed and the writ petition was heard-in-part. The Bench having been prima facie satisfied that publication of the demand notice under section 13(2) of the Act together with the photograph of the second petitioner in the newspapers was not in accordance with law, the Chairman and Managing Director of the first respondent (hereafter the CMD) was requested to consider the desirability of adequately compensating the petitioners for the perceived irresponsible act of the second respondent. The CMD, after seeking an adjournment, filed an affidavit. Relevant portion thereof is quoted below:-
“2. Preliminary Submissions
With due respect to this Hon’ble Court and its judgment rendered in the matter of Ujjal Kumar Das vs. State Bank of India, the Deponent wishes to state, after legal consultation, the following submissions:
(a) That the bank renders financial assistance to the borrowers and expects the borrowers/guarantors to honour their commitment as per the contractual terms.
(b) That the Banking Industry underwent substantial changes with the nationalization of banks but thousands of crores of public money got locked up in litig
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