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2006 Supreme(Mad) 2589
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE M. THANIKACHALAM
A. Venkatramani - Appellant
Versus
LIC Housing Finance Limited - Respondents
WRIT PETITIONS NO.34022, 35859 & 40817 OF 2005, AND 12407 TO 12410, 12841 AND 16513 TO 16515 OF 2006 AND W.P.M.P.NOS.36939, 38676, 41939, 43792 OF 2005
Decided On : 28 September 2006
Important Points
Subject
Civil Law - Debt Recovery
Act Referred
SECNRITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT : S.13(4)
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT : S.19(1), S.13(2), S.37
Headnote
SARFAESI Act - Demand Notices - Section 13(2) - Summary of Acts and Sections: The court discussed the applicability of the SARFAESI Act, specifically Section 13(2), to the cases involving demand notices issued by financial institutions. It highlighted the legal provisions of the SARFAESI Act, the interpretation of Section 13(2), and the impact of the Act on the rights of borrowers, guarantors, and subsequent purchasers. The court also addressed the issue of jurisdiction and the remedies available to the parties under the SARFAESI Act and other laws.
Fact of the Case:
The writ petitions challenged demand notices issued by financial institutions under Section 13(2) of the SARFAESI Act. The petitioners, including borrowers, guarantors, and subsequent purchasers, contested the notices on various grounds, such as the competence of the financial institutions to invoke the SARFAESI Act, the pendency of civil suits, and the applicability of the Act to their cases.
Finding of the Court:
The court found that the financial institutions were entitled to issue notices under Section 13(2) of the SARFAESI Act, despite the pendency of civil suits. It held that the doctrine of election did not apply, as the remedies available under the SARFAESI Act and other laws were essentially different. The court also ruled that the writ petitions were not maintainable, as the notices under Section 13(2) were in the nature of show-cause notices, and the appropriate remedy for the parties was to challenge further action under Section 13(4) before the Debts Recovery Tribunal.
Issues: The main issues addressed by the court included the competence of the financial institutions to invoke the SARFAESI Act, the pendency of civil suits, the applicability of the Act to subsequent purchasers, and the availability of remedies under the SARFAESI Act and other laws.
Ratio Decidendi: The court held that the financial institutions were competent to issue notices under Section 13(2) of the SARFAESI Act, even with pending civil suits, and that the writ petitions were not maintainable. It emphasized that the remedies available under the SARFAESI Act and other laws were essentially different, and the doctrine of election did not apply.
Final Decision: The court dismissed all the writ petitions and ordered the parties to bear their respective costs. It also dismissed all other connected petitions and closed the related matters.
(All the Writ Petitions have been filed under Article 226 of the Constitution of India. In W.P.No.34022 of 2005, the petitioner prays to issue a Writ of Certiorari to call for the records of the respondent relating to the impugned notice dated 31.8.2005 issued by the respondent to the petitioner and others, and quash the same.)
Common Order:
With the consent of either counsel, the main writ petitions themselves have been taken up for final disposal.
2. In all these writ petitions, the petitioners are challenging the Demand Notices issued by the financial institutions under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (in short “SARFAESI Act”). Since common questions of law have been raised in all these writ petitions, they are all disposed of by this common order.
3. These writ petitions have been filed either by the borrowers/debtors of the financial institutions or the purchasers from the debtors of the financial institution, to whom the financial institutions have marked a copy of the Demand Notice, while sending the demand notices to the original creditors; or by the guarantors.
4. While W.P.Nos.34022 of 2005, 35859 of 2005, 40817 of 2005 have been filed by the guarantors, W.P.Nos.12407 to 12410 of 2006 and 12841 of 2006 have been filed by the purchasers of the secured property from the debtors of the financial institution and W.P.Nos.16513 to 16515 of 2006 have been filed by the debtors themselves.
5. In W.P.No.34022 of 2005, the petitioner submits that the impugned notice has been issued to him, under the guise that he offered his residence, as security, for the loan obtained by Kaashyap Radiant Systems Limited. This petitioner submits that he never offered his immovable property as security for the loan sanctioned by the respondent/LIC Housing Finance Limited to the said Kaashyap Radiant System Limited. When the said company approached the respondent with a request to sanction a Corporation Loan of Rs.200 lakhs, this petitioner offered his immovable property as security for the said Corporate Loan alone, but the said corporate loan was not sanctioned and was not availed by the said Company. But, sanction was made unilaterally by the respondent only under the scheme for construction-finance for developing and building housing units. In Article 3 of the loan agreement, under the caption “security” it has been clearly mentioned that his immovable property was not meant to be a security for repayment of the loan sanctioned and availed under the said agreement.
6. In W.P.Nos.35859 of 2005 and 40817 of 2005, it has been mentioned that the second respondent therein viz.New ERA Urban Amenities Limited, represented by its Managing Director Mr.S.Thiyagaraja Chettiar, the third respondent herein, had agreed to develop the properties by building flats on the lands belonging to the petitioner, but the second respondent never turned up afterwards. The second respondent, with the active collusion and abatement with the officials of the fourth respondent/LIC Housing Finance Limited had forged, misrepresented and fabricated documents, to show as if the petitioner had executed mortgage in favour of the fourth respondent, whereas the true fact remains, that the petitioners had never executed any mortgage in favour of the first respondent/IND Bank Housing Limited. The 4th respondent has claimed, in the impugned notice, that they had advanced a project loan, as a consortium, with the first respondent, but the fact remains that the petitioners had never executed any mortgage in favour of the first respondent or the fourth respondent, nor stood as guarantor for the alleged loan availed by the second respondent.
7. In W.P.Nos.12407 to 12410 and 12841 of 2006, the petitioners would project a similar case that they all have purchased flats from Mohammed Yaseen, Proprietor of Coronet Constructions, by entering into sale agreements, in January 1994. T
