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2012 Supreme(Mad) 2005
High Court of Judicature at Madras
VINOD K. SHARMA
G. Palanisamy
Versus
The Branch Manager State Bank of India B.P. Agraharam Branch
W.P. No.23670 of 2011
Decided On : 23-04-2012
For the Petitioner:R.S. Anandan for D. Balachandran, Advocates.
For the Respondent:P.D. Audikesavalu, Advocate.
The main legal point established is that the possession of the vehicle, though hypothecated, cannot be taken illegally by force, and recovery actions must adhere to due process of law.
Headnote:
Mandamus - Recovery of Agricultural Loan - Indian Penal Code - Agricultural Debt Relief and Debt Waiver Scheme, 2008 - Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks - Supreme Court Judgments
Fact of the Case:
The petitioner, an agriculturist, availed an agricultural loan for purchasing a tractor. Due to natural calamities, the petitioner could not repay the loan regularly, leading to the respondent seizing the tractor. The petitioner alleged criminal offense and false document creation by the respondent.
Finding of the Court:
The court found that the respondent's seizure of the tractor was illegal and not sustainable in law, citing various Supreme Court judgments and guidelines on fair practices in loan recovery.
Issues: The main issue was whether the respondent was bound to follow due process of law for recovery and seizure, or could seize the tractor on its own.
Ratio Decidendi: The court held that the possession of the vehicle cannot be taken illegally by force and directed the respondent to return the tractor to the petitioner within one week, while allowing the respondent to take steps to recover the outstanding amount in accordance with the law.
Final Decision: The writ petition was allowed, and a writ of mandamus was issued directing the respondent Bank to return the tractor to the petitioner, while also allowing the respondent to take lawful steps for recovering the outstanding amount.
1. The petitioner has invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, for issuance of a writ in the nature of mandamus, directing the respondent to hand over the possession of the seized tractor to the petitioner.
2. The petitioner is an agriculturist who availed agricultural loan of Rs.7,74,000/-(Rupees seven lakhs seventy four thousand only) for purchase of Tractor in November 2005. The loan was to carry interest @ 9% per annum and was to be repaid in 9 years. The petitioner was to pay a sum of Rs.15,000/- (Rupees fifteen thousand only) quarterly. To secure the loan, the petitioner mortgaged land measuring 7 acres and 15 cents valued at Rs.20,00,000/- (Rupees twenty lakhs only). The petitioner paid the instalments regularly till the year 2010.
3. In view of the loss suffered by the petitioner due to heavy rain and other natural calamities, the petitioner could not repay the loan amount regularly after 2010. The petitioner against the total payable amount of Rs.2,40,000/- (Rupees two lakhs forty thousand only) paid a sum of Rs.1,50,000/- (Rupees one lakh fifty thousand only).
4. The State Government was considering waiver of agricultural loan of the farmers due to the loss suffered on account of heavy rain. The respondent Bank did not waive the loan, and directed the petitioner to pay the outstanding loan amount. Instead of proceeding to recover the loan amount in accordance with law, the respondent Bank seized the tractor of the petitioner bearing registration No.TN – 33, AE – 8834 n 21.07.2011 through agents.
5. The submission of the petitioner is that this act of the respondent amounts to a criminal offence punishable under the Indian Penal code. It is also the case of the petitioner that the respondent is taking steps to sell the Tractor by creating false documents.
6. The petitioner issued legal notice on 22.07.2011 to hand back the possession of the Tractor. In response to the legal notice, a reply was sent to the petitioner stating that the tractor was seized with the help of police in exercise of right vested under the agreement.
7. The submission of the petitioner is that the respondent could have invoked the arbitration proceedings or to take steps to recover the amount, but, it was not open to the respondent to seize the vehicle forcibly without following due process of law.
8. The stand of the petitioner is also that he is willing to repay the dues in instalments.
9. The writ petition is opposed by the respondent by raising preliminary objection, with regard to the maintainability of the writ petition as the petitioner is alleged to be guilty of suppressing material and vital facts.
10. The stand of the respondent in the counter is that the petitioner was advanced a term loan of Rs.7,74,000/- (Rupees seven lakhs seventy four thousand only) on 29.11.2005, and the petitioner agreed to repay the loan amount along with interest in 9 yearly instalment of Rs.86,000/- (Rupees eighty six thousand only).
11. The petitioner had executed a hypothecation agreement dated 29.11.2005 creating first charge on the Tractor along with mortgage of land. In the terms of the agreement, the respondent has the right to take over the possession of the security in the event of default, and sell the vehicle to recover its dues.
12. It is admitted in the counter that the security by way of equitable mortgage was also given to the bank. The petitioner was irregular in repayment right from the beginning and failed to pay six instalments. The respondent/Bank issued legal notice on 11.08.2010 recalling the total loan, and directing the petitioner to pay a sum of Rs.13,18,428.72 (Rupees thirteen lakhs eighteen thousand four hundred and twenty eight and paise seventy two only). The amount was directed to be paid on or before 19.08.2010. It was stated in the notice that the failure to repay the loan would result in seizure and sale of hypothecated tractor for realisation of the
