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Before the Madurai Bench of Madras High Court
THE HONOURABLE MR. JUSTICE S. MANIKUMAR
R. Latha
Versus
The Authorised Officer & Another
W.P.(MD).No.435 of 2008 & M.P.(MD)No.1 of 2008
Decided On :Decided on : 03-09-2010
SARFAESI Act - Recovery of Debts due to Banks and Financial Institutions - Section 2(f), Section 2(j), Section 2(k), Section 2(o), Section 2(zc), Section 13, Section 17 - The court discussed the applicability of the SARFAESI Act to the petitioner's housing loan and the legality of the bank's actions under the Act. The court interpreted the definitions of 'debt', 'default', 'financial assistance', 'non-performing assets', and 'secured asset' under the Act. It also considered the provisions related to enforcement of security interest and the right to appeal. The court's decision upheld the bank's actions and dismissed the writ petition.
Fact of the Case:
The petitioner challenged the bank's rejection of her request for rescheduling the outstanding housing loan amount and the bank's actions under the SARFAESI Act. The petitioner argued that the housing loan, granted at a concessional rate of interest, should not be considered a 'debt' under the Act. The bank had issued notices demanding repayment and warning of enforcement of security interest.
Finding of the Court:
The court found that the housing loan fell within the definition of 'debt' under the SARFAESI Act and upheld the bank's actions under the Act. The court dismissed the writ petition, allowing the bank to take appropriate action under the Debt laws.
Issues: The main issues were the applicability of the SARFAESI Act to the petitioner's housing loan, the legality of the bank's actions under the Act, and the interpretation of key provisions of the Act.
Ratio Decidendi: The court's decision was based on the interpretation of the definitions of 'debt', 'default', 'financial assistance', 'non-performing assets', and 'secured asset' under the SARFAESI Act. The court also considered the provisions related to enforcement of security interest and the right to appeal.
Final Decision: The court upheld the bank's actions under the SARFAESI Act, dismissing the petitioner's writ petition and allowing the bank to take appropriate action under the Debt laws.
1. Communication of the Chief Manager and Authorized Officer of the Andhra Bank, Chennai, dated 12.01.2008, rejecting the request of the petitioner for rescheduling the outstanding loan amount of Rs.5,07,309.12ps., due as on 31.12.2007, together with further interest till the date of payment in full and a further direction to deliver vacant physical possession of the secured asset (symbolic possession of which was already taken on 24.10.2005), and a further direction that if the petitioner does not deliver, the respondent would be constrained to take appropriate steps to secure physical vacant possession of the secured asset and to sell the same for recovering their dues, as per the provisions of SARFAESI Act, without any further reference to him, is under challenge in this writ petition.
2. Following disciplinary action, the petitioner was inflicted with a penalty of compulsory retirement on 16.08.2004. Legality of the enquiry and the punishment imposed is under challenge in W.P.No.9720 of 2005.
3. It is the further case of the petitioner that in the year 2000, she availed staff Housing Loan to the tune of Rs.3,00,000/-and two years thereafter, she availed another sum of Rs.1,50,000/-. Housing loan was provided as one of the service benefits of employment with the respondent Bank. As per the schedule, the loan amount has to be repaid on monthly instalments of Rs.2700/-, for a period of 20 years. With the housing loan, she purchased a house and the instalments were deducted periodically. The petitioner was suspended from service on 12.09.2003. Due to mental agony, she could not pay attention to the loan transaction and the bank also did not deduct any amount from the subsistence allowance. The petitioner bona fide believed that the subsistence allowance would be adjusted against the repayment of housing loan.
4. While that be so, in July 2005, the petitioner received a notice from the Authorized Officer, Andhra Bank, Chennai, the first respondent herein, purportedly issued under the provisions of SARFAESI Act, by which, the petitioner was directed to pay a sum of Rs.4,95,381.81/-, within a period of 60 days and in default, the Bank would take over possession of the house. The petitioner was entitled to Leave Encashment amount together with retirement benefits. Therefore, she bonofidely believed that the said amount would have been adjusted to clear the arrears of loan. In such circumstances, she filed a Writ Petition in W.P.No.9721 of 2005, challenging the notice dated 14.10.2005 of the first respondent purportedly issued under the provisions of SARFAESI Act. The writ petition was admitted on 27.10.2005 and during the pendency she continued to deposit Rs.2,000/-per month and now for the past six months, the petitioner has been depositing a sum of Rs.2,700/-,from the date of filing of the present writ petition.
5. The above said writ petition was disposed of on 18.07.2007, with a direction to the respondents therein to consider her entitlement of leave encashment and for rescheduling of loan amount without going into the merits of the case. But, by letter dated 29.08.2007, the respondents informed the petitioner that as per the Regulations, an officer whose exist by way of punishment is not entitled leave encashment and hence, she made another representation dated 01.01.2004 to the first respondent dated 01.01.2008 to the first respondent, requesting for rescheduling of loan. The said request has been rejected by a letter dated 12.01.2008, with a further direction to the petitioner to pay an alleged outstanding loan of Rs.5,70,309.12p., immediately and in default, vacant possession would be taken.
6. Taking this Court through the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and in particular to Section 3(g) of the Recovery of the Debts due to the Bank and Financial Institution Act, 1993, Mr.Prabu Rajadurai, learned counsel for the writ petitio
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