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2012 Supreme(Mad) 4713
High Court of Judicature at Madras
CHITRA VENKATARAMAN & R. KARUPPIAH
K. Sahaja Rao
Versus
State Bank of India Saifabad (SIB) Branch & Another
W.P.No.24733 of 2012
Decided on : 26-11-2012
For the Petitioner:Ms. Ananda Gomathy Sivakumar, V. Niranjan for J. Aditya Reddy, Advocates.
For the Respondents:R1, K. Sankaran, Advocate.
The main legal point established is the requirement for the Tribunal to provide reasoned justifications for fixing the amount payable as a condition for maintaining an appeal under the SARFAESI Act. Additionally, the court emphasized the obligation of the Bank to consider One-Time Settlement offers and adopt a pragmatic approach in debt realization.
Headnote:
SARFAESI Act - Loan Default - Sections 13, 14, 17, 18 - The court discussed the provisions of the SARFAESI Act, particularly Sections 13, 14, 17, and 18, and their application in the case. The court emphasized the requirement of depositing a certain percentage of the debt due for maintaining an appeal and the discretion available to the Appellate Tribunal in fixing the amount payable. The court also highlighted the obligation of the Bank to consider a One-Time Settlement offer and the need for a pragmatic approach in debt realization.
Fact of the Case:
The petitioner, a borrower, defaulted on a loan and faced proceedings under the SARFAESI Act. The petitioner sought relief from the Debts Recovery Tribunal, challenging the proceedings and requesting a stay of auction. The Tribunal directed the petitioner to deposit a sum of Rs.75 lakhs and later Rs.1,14,65,556/- for maintaining the appeal. The petitioner also made a One-Time Settlement offer, which was rejected by the Bank.
Finding of the Court:
The court found that the Tribunal's order requiring the petitioner to deposit 50% of the debt due lacked sufficient justification and set aside the order. The court also criticized the Bank's refusal to consider the One-Time Settlement offer, emphasizing the need for a pragmatic approach in debt realization.
Issues: The issues involved the validity of the Tribunal's order for depositing 50% of the debt due and the Bank's rejection of the One-Time Settlement offer.
Ratio Decidendi: The court held that the Tribunal must provide reasoned justifications for fixing the amount payable as a condition for maintaining an appeal. The court also emphasized the obligation of the Bank to consider One-Time Settlement offers and adopt a pragmatic approach in debt realization.
Final Decision: The writ petition was disposed of, and the Debts Recovery Appellate Tribunal was directed to take up the appeal petition filed by the petitioner and dispose of the same at the earliest. The impleading respondent was allowed to get himself impleaded in the appeal. No costs were awarded, and connected M.P.Nos.1 and 2 of 2012 were closed.
CHITRA VENKATARAMAN, J.
The writ petitioner is a borrower and the owner of the property which was given as security for the loan taken by the petitioner. It is stated that the petitioner intended to construct a building on the property by availing a bank loan and rent it for nonresidential purpose. The Bank is stated to have granted this cash credit loan of an amount of Rs.340 lakhs, repayable in 23 months.
2. In the meantime, there appears to be a dispute pending in W.P.No.25368 of 2008 before the Andhra Pradesh High Court as regards the permissible areas for construction. The petitioner states that on this account, the petitioner could not complete the construction within 23 months. Consequently, there was also a default on the part of the petitioner in complying with the terms of the loan. The petitioner is stated to have paid a sum of Rs.1,10,61,684/- till December, 2010, which consisted of Rs.55 lakhs towards interest till December, 2010 and principal amount of Rs.50 lakhs. Faced with such a situation and the fact that the Bank had refused to accept further interest payment and insisting on the dues to be paid in full, the petitioner requested the respondent Bank to convert the 23 months SME loan to a term loan or for considering one-time settlement. However, proceedings were taken under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter called the SARFAESI Act), which was questioned by the petitioner on the ground that there was no notice served. In spite of written assurance stated to have been given by the Bank through letter dated 08.09.2011 to defer further action, the Bank got an order from the Chief Metropolitan Magistrate, Hyderabad, under Section 14 of the SARFAESI Act to take physical possession of the secured asset on 23.09.2011. Pursuant to that order, on 11.02.2012, the respondent took physical possession of the secured asset through an Advocate Commissioner on 28.02.2012 to bring the property for sale on 29.02.2012. A sale notice was accordingly published by the Bank.
3. In the meantime, the petitioner approached the Debts Recovery Tribunal, Hyderabad, in S.A.No.171 of 2012 under Section 17 of the SARFAESI Act, challenging the proceedings, that the respondent Bank did not issue demand notice under Section 13(2) of the SARFAESI Act; hence, all further proceedings by the Bank were bad and non-est in law. Pending consideration of this, the petitioner sought for a stay of the auction notice dated 28.02.2012, fixing the auction on 04.06.2012.
4. It is stated that the Tribunal passed an order on 22.03.2012, directing the petitioner to deposit a sum of Rs.75 lakhs directly to the Bank within four weeks, out of which Rs.15 lakhs was directed to be paid on or before the auction date i.e., 30.03.2012. There was also a default clause therein that in the event of failure of the borrower to deposit the said sum before the auction date, the Bank would be at liberty to go ahead with the sale.
5. The petitioner is said to have deposited Rs.15 lakhs by way of demand draft on 22.03.2012 and filed a petition for extension of time to deposit Rs.60 lakhs within eight weeks. The matter was posted for hearing on 23.05.2012, as the Presiding Officer did not sit on 27.04.2012. However, the Bank issued an auction notice on 02.05.2012, fixing the date of auction on 04.06.2012. Once again, the petitioner sought for a stay. Since the Presidng Officer was not sitting in the month of May, 2012 at Hyderabad, the petitioner moved the Interlocutory Applications before the In-Charge Presiding, Debts Recovery Tribunal-II. The Debts Recovery Tribunal, however, passed an order on 31.05.2012, permitting the Bank to sell the property, but not to confirm the sale for a period of thirty days. The petitioner was directed to pay the amount under Section 13(8) of the SARFAESI Act. It thereby rejected the petition for extension of time and posted the case for 04.07.2012. The Debt
