POINT OF LAW: Appellant – Bank under the provisions of SARFAESI in respect of other loan accounts and in such circumstances, petitioner cannot seek any remedy before the Debts Recovery Tribunal

JUDGMENT :

T.S. SIVAGNANAM, J

(Prayer: Writ Appeal filed under Clause 15 of Letters Patent to set aside the order, dated 08.07.2019, passed in Rev.Apl.W.(MD) No.57 of 2019 in W.P.(MD) No.3852 of 2019, on the file of this Court.)

1. This writ appeal by the REPCO Bank is directed against the order dated 08.07.2019, passed in Rev.Apl.W.(MD) No.57 of 2019 in W.P.(MD) No. 3852 of 2019, filed by the respondent herein.

2. For the sake of convenience, the parties shall be referred to as the “appellant – Bank” and “petitioner” respectively.

3. The petitioner filed the writ petition praying for issuance of a writ of certiorarified mandamus to quash the communication issued by the appellant – Bank, dated 04.02.2019, informing him that his father Late.Sri.A.Pazhanivel had made five fixed deposits in the Bank and appointed the petitioner as a nominee. The details of the account, amount, date of deposit and date of maturity were also given. Further, the petitioner was informed that his father was the guarantor / co-borrower in respect of five loan accounts and that a general lien has been marked by the Bank over the fixed deposits of the petitioner's father for the loan accounts, wherein he was the borrower / co-borrower and guarantor. The petitioner was informed that the loan account SDL No.45, wherein his father was the guarantor, has become an NPA (Non Performing Asset) and for the said loan, a sum of Rs.6,01,890/- including interest and others upto 31.01.2019 and further interest from 01.02.2019 is to be paid for the closure of the loan account. Therefore, the petitioner, as a nominee mentioned in the fixed deposits, was advised to close the loan account SDL No.45 immediately, or else, the loan account will be closed by appropriating the amount from the fixed deposits, if the loan account is not closed within fifteen days.

4. The petitioner challenged the above communication by contending that the loan account SDL No.45 having become NPA and the appellant – Bank having initiated proceedings under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, SARFAESI Act) and taken steps to bring the mortgaged property for auction, cannot issue the impugned communication, more particularly, when the borrower had paid a sum of Rs.1,00,000/-. Further, the other borrower, namely, Rajeswaran has given a representation requesting the appellant – Bank not to deduct the loan amount from the account of the petitioner's father, thereby meaning that he will settle the outstanding and should not be adjusted from the deposits maintained by the appellant's father. Further, it was contended that the provisions of Section 171 of the Indian Contract Act are not applicable for the reason that the main borrowers are discharging the loan amount and there is sufficient property of the borrowers securing the loan transaction, which are under the control of the appellant – Bank.

5. The writ petition was initially disposed of by order dated 25.03.2019, with an observation that under the guise of enforcing the banker's lien under Section 171 of the Contract Act, the appellant – Bank is not justified in retaining all the fixed deposit amounts and the Court directed the appellant – Bank to pay the balance amount after adjusting the over all loan liability. In these terms, the writ petition was allowed.

6. The petitioner filed a review petition stating that the Court had only directed retention and the expression “adjustment” was to mean “retention” only and the appellant – Bank cannot appropriate the same towards the loan account. The review application was disposed of by stating that “adjustment” would only mean “retention” and not “appropriation” and whether the liability of the petitioner's father would actually come to Rs.13,08,000/- or not is the matter to be thrashed out in independent proceedings. Aggrieved by the same, the appellant – Bank is before this Court by way of this appeal.

7. We have