Back
2025 Supreme(Online)(MAD) 9899
HIGH COURT OF MADRAS
Mrs.JUSTICE L.VICTORIA GOWRI, J
velvizhi – Appellant
Versus
the regional manager / autho – Respondent
W.P.(MD)No.13777 of 2024
For Petitioner:Mr.A.Joseph Jerry For Respondents: Mr.N.Dilipkumar Standing Counsel
The bank must provide adequate notice regarding loan status before classifying loans as NPA and initiating auction proceedings.
Headnote:(A) SARFAESI Act - Indian Contract Act, 1872 - Sections 171 and 148 - Writ Petition to quash auction sale notice and allow redemption of jewelry loan - Petitioner, an agriculturalist, challenged the bank's classification of loans as NPA and subsequent auction notice for jewelry loans before the expiry of redemption period - Court found the bank acted hastily without proper notice regarding the tractor loan's NPA status. (Paras 2, 6, 8)
(B) Contractual Obligations - The jewelry loan agreement binds the petitioner to keep jewelry as security for all debts, including tractor loan - The bank's right of lien under Section 171 of the Indian Contract Act is acknowledged. (Paras 7, 8)
Facts of the case:
The petitioner obtained agricultural loans from the bank, which were classified as NPA, leading to an auction notice for jewelry loans issued before the redemption period expired.
Findings of Court:
The auction notice was quashed due to the bank's failure to provide adequate notice regarding the tractor loan's NPA status and the total amount due.
Issues: Whether the bank's actions were justified in classifying loans as NPA and issuing an auction notice before the redemption period expired.
Ratio Decidendi: The court emphasized the need for the bank to provide clear communication regarding the NPA status and the amounts due before proceeding with auction actions.
Result: Writ Petition allowed.
ORDER
This Writ Petition is filed, to quash the invoked auction sale notice published in Dinamalar newspaper dated 15.06.2024 and to direct the second respondent to allow the petitioner to redeem all the jewelry loan.
2.The petitioner is an agriculturalist and she obtained an agricultural vehicle loan from the Indian Overseas Bank, T.Kallupatti Branch, Madurai District, bearing loan No.023103911400001, based on cash and credit facilities in the year 2014, by mortgaging an agricultural property. On 04.03.2024, demanding to pay a loan amount of Rs.9,37,601.23/-, classifying the loan in loan account No.023103911400001 as a non- performing asset (NPA), the said bank directed the petitioner to fully satisfy her loan forthwith, in failure to do so, further action would be initiated under SARFAESI Act . During 2023, the petitioner had availed four jewelry loans for emergency/agricultural purposes in loan jewel loan account No. 219903214007376 dated 19.05.2023, 219903214007524 dated 07.06.2023, 219903214007900 dated 26.07.2023 and 219903214008827 dated 17.11.2023, with the Indian Overseas Bank Srivilliputur branch, that is, the second respondent. The redemption period for those agricultural jewelry loan is one year and even before the aforesaid loans fell due, for full satisfaction of the same, on 05.03.2024, the second respondent called upon the petitioner to repay all the aforesaid four jewelry loans and the tractor loan dated 03.02.2014, availed by the petitioner. In the said notice dated 05.03.2024, the second respondent mentioned that the petitioner's present liability would stand to Rs.16,27,198/- inclusive of undebited interest and other charges. For which, the petitioner by reply notice dated 23.04.2014, duly informed that the currency period for redemption of the jewelry loan has not expired. As far as the tractor loan is concerned, the same is a hypothecation tractor loan. The jewelry loan and the tractor loan are fully different in its nature and the agreement between the borrower and borrowee with respect to the hypothecated tractor loan and the jewelry loan are completely different in its scope and as such, the petitioner called upon the second respondent bank to withdraw the issued recovery notice dated 05.03.2024 and to issue a notice afresh as far as the tractor loan is concerned. However, negating the petitioner's reply, the impugned auction notice dated 15.06.2024, came to be issued with respect to the four jewelry loan of the petitioner, challenging the same the writ petitioner is before me.
3.The learned Standing Counsel appearing for the second respondent bank placed before me the application for loan/cash credit on the security of gold jewelry made by the petitioner for availing the four jewelry loans. Relying upon condition Nos.9.13 and 9.14 of the conditions on the basis of which the loans/cash credit were advanced, on the security of ornaments and jewelry pledged with the bank, the learned counsel submitted that the bank shall have a lien on jewels in respect of any other money which the borrower may be liable to pay to the bank and on that basis, the learned counsel submitted that there is no wrong on the part of the bank for having brought the jewelry loan, under NPA category after the petitioner's tractor loan has been declared as NPA and on that basis, he pressed for dismissal of the Writ Petition.
4.Heard the learned counsels on either side and carefully perused the entire materials available on record.
5.The recall notice for payment of pending dues dated 04.03.2020, caused by the Senior Manager of the Indian Overseas Bank, T.Kallupatti Branch, has cautioned the petitioner calling upon her to pay the entire dues totaling to Rs.9,37,601.23/- plus interest payable to them with immediate effect, failing which the petitioner's account would be classified as NPA for non-payment of installments and interest to the tractor loan bearing No. 023103911400001 and further cautioning her that the bank would initiate cour
