IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No 14077 of 2008 HUSNE ARA, wife of Md Naseem, resident of Dariyapur, Bari Road Opp - Patna Collegiate School, P S - Pirbahoure, Dist - Patna - Petitioner Versus 1 THE CHAIRMAN, UCO BANK, 10 Bitlabi Trailikya Maharaj Sarani (Brabourne Road), Kolkata 2 The Regional Manager, UCO Bank, Maurya Lok Complex, 4th Floor, Dak Bungalow Road, Patna 3 The Chief Manager, UCO Bank, Main Branch, Exhibition Road, Patna 4 The Assistant General Manager, Strategic Planning Department, UCO Bank Head Office - Respondents *** For the petitioner : M/s Mrigank Mauli, Vibhay Mistry & Abhijeet Maijorwar For the B a n k : Mrs Nilu Agrawal & Mr Zaki Haider *** 2 24.10.2008 The present writ application has been filed by the petitioner for quashing the communication dated 25.06.2007 of the respondent- United Commercial Bank (“Bank” for brevity) by which the Bank has recalled the housing loan, “UCO Shelter” and directed the petitioner to repay the disbursed installment and for a direction to the Bank to disburse the balance loan out of the sanctioned loan and consequently restrain the Bank from taking any action under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Bank has appeared and filed a counter affidavit, petitioner has filed a rejoinder, pleadings being complete, the parties are in agreement for disposal of the writ application at the stage of admission itself. Heard the parties at length. Very briefly stated, the petitioner’s case is that she had applied for “UCO Shelter” loan for making her new residential house 2 after demolishing her old residential house on land bought by her. The loan of Rs 15 lacs having been sanctioned, after initial disbursement of Rs 4 lacs, Bank stopped further disbursement and after two years and after petitioner had demolished her old house, it not only refused to disburse the balance but recalled the loan already disbursed on grounds which are not sustainable in fact or in law and are de hors the contract between the parties. The legality and propriety of the action of the Bank is in question, petitioner having acted to her detriment. On 20.10.2001, petitioner purchased for her residence a piece of land with an old house thereon by registered sale deed. On or about 06.10.2005, she applied to the Bank for loan under “UCO Shelter” for constructing a new house on the said land so purchased. The loan applied for was of Rs 15 lacs. Alongwith the loan application, petitioner had given an affidavit dated 16.09.2005 clearly stating that the said land was neither charged nor subject matter of litigation in any case signifying that she had a clear title over the land. The loan application and the affidavit are Annexures-A and B to the counter affidavit of the respondent-Bank. The petitioner had offered to mortgage the land in question and had also given an independent guarantor for the loan. On 08.10.2005, the application was appraised by the Bank and on 25.10.2005, the said loan of Rs 15 lacs was duly sanctioned by the Chief Manager of the Bank. As per the sanction letter, the period of repayment was 180 months (15 years) with a moratorium of one year and interest of 8% chargeable with monthly rest. The land in question on which the house had to be built was to be 3 mortgaged. Petitioner was required to pay a processing fee of Rs 7,500/- which, on intimation, the petitioner paid on 09.11.2005. All formalities having been completed, on 15.11.2005, the first disbursement of Rs 4 lacs was made. Petitioner totally demolished the old residential house in which she was staying for making the new construction and moved to rented premises. This, apart from inconvenience to the petitioner, entailed heavy expenses. Thereafter, the petitioner kept moving the authorities of the Bank for further disbursement which did not come about. She complained to various authorities of the Bank which ultimately led to the impugned letter dated 25.06.2007 (Annexure-7 to the writ application and Annexure-C to the counter affidavit of the Bank). By the said letter, the Bank recalled the loan and directed the petitioner to deposit the disbursed amount of Rs 4 lacs with interest failing which action would be taken to recover the same purportedly under the SARFAESI Act. The ground, as disclosed therein, was that on inspection of the site, no construction activity was found to be carried out and the gravamen of charge was that the Bank had come to know that a Title Partition Suit being Title Partition Suit No 216 of 2004, as instituted by the petitioner and her husband, was pending in the Court of Sub Judge I, Patna in which one of the subject matters allegedly was the land in question and that being so, the Bank was of the opinion that the petitioner had furnished a wrong and false affidavit which formed the basis for the sanction and, as such, sanction was wrongly obtained. It is the correctness of this basis of action that is in question. 4 At this stage, I deem it necessary to notice the specific stand of the Bank in their counter affidavit. In paragraph-8 of their counter affidavit, Bank has stated thus : 8 That the property which was secured with the respondent bank was a subject matter of litigation before the Sub-Judge I, Patna in T S No 216 of 2004. Thus the petitioner had supplied false and misleading information regarding the primary security charged with the Bank. In paragraph-10, they have stated thus : 9 That the petitioner on receipt of letter dated 25.06.2007 sent a letter dated 26.06.2007 and subsequently the typed copy of order dated 26.06.2007 passed by Sub Judge I, Patna alongwith the joint compromise petition that the said secured property has been partitioned on the basis of compromise entered between the parties in favour of the petitioner. In paragraphs-11 & 12, they have stated thus : 11 That upon inquiry the respondent Bank found the order dated 26.06.2007 passed by Sub Judge I Patna to be a forged document as the order of compromise between the parties was passed on 27.09.2007 by the learned Sub Judge I, Patna. 12 That under the facts and circumstances since the petitioner had submitted false and misleading information about the primary security the respondent Bank was justified in recalling the entire loan amount with accrued interest disbursed and the writ petition is fit to be dismissed outright. From the pleadings in the counter affidavit of the Bank, two specific grounds have been taken to justify their action in recalling the loan. First, the affidavit filed was wrong as the property was in 5 litigation in the Title Partition Suit and secondly after the loan was recalled by order dated 25.06.2007, petitioner submitted a letter dated 26.06.2007 (Annexure-D to the counter affidavit) alongwith order of the Civil Court accepting compromise alongwith compromise decree which were found to be forged as the order accepting compromise and the compromise decree were in fact passed after two months and, as such, those orders and compromise decree were forged. I would first like to deal with the second ground that is that on 26.06.2007, petitioner had submitted a letter alongwith order of Civil Court and compromise decree which were found to be forged. I regret and I must note that respondent-Bank is a Public Sector Bank and, as such, a plea being raised by it making such serious allegations against the petitioner in the manner in which they have been made does not behove of them. It only goes to show how desperate the Bank is to justify its wrongful action at whose behest and with what purpose I do not know. I say so because firstly, the loan was rejected by letter dated 25.06.2007 when, admittedly, on Bank’s own showing neither petitioner’s letter dated 26.06.2007 was with them nor the alleged forged order and decree, as allegedly appended to the letter, was with them. These were not and could not be mentioned in the letter of recalling loan which was issued before even these were submitted. Therefore, these could never have formed basis for recalling the loan. They have been set up only to justify their otherwise wrongful action. Why I used the expression “set up” would be evident if one reads the letter dated 26.06.2007 of the petitioner which is Annexure-D to the 6 counter affidavit. The said letter nowhere states that she was annexing copy of any order or decree of Civil Court rather the letter clearly mentions that the petitioner had succeeded upto the High Court in the injunction matter and, thereafter, the parties are trying to compromise the matter. The Court’s order on compromise would be filed as soon as certified copy is available. When we look at the so-called order of the Court which is purported to have been filed alongwith this letter, its order dated 26.06.2007 itself and is not a certified copy. It was apparently filed on 03.08.2007 by somebody. Then when we look at the copy of the decree that again is not a certified copy and surely it was not filed alongwith the letter (Annexure-D) inasmuch as it is purported to be signed by various Court officials on 09.07.2007. Thus, it is evident that these two documents were not furnished alongwith petitioner’s letter dated 26.06.2007 (Annexure-D). I may note that the petitioner denies having submitted those documents. I may also note here that in fact subsequently compromise petition was undisputedly filed on or about 10.09.2007 which was accepted by the Court on 27.09.2007 and compromise decree accordingly passed. To the query of the Court from the counsel for the Bank as to who was supplying information about the litigation to the Bank, the clear stand was that it was the defendants in the suit which, in my view, lets the cat out of the bag and shows that it was the defendants in the suit who were influencing the Bank to take such a decision to the detriment of the petitioner and the Bank, without seriously verifying the facts, took adverse decision to the severe prejudice of the petitioner. 7 Now coming to the question of the alleged wrong/false affidavit with regard to the primary security. As noted earlier, the affidavit was dated 16.09.2005 and was furnished to the Bank alongwith the loan application on 06.10.2005. The loan was sanctioned on that basis on 25.10.2005 and the first disbursement was made on 15.11.2005. These dates are important because from the stand of the Bank, it is clear that they hold the petitioner responsible for suppressing the litigation in respect of the plot of the land in question in its affidavit aforesaid. Thus, the question is was the land subject matter of the suit? The basis on which Bank had formed the opinion that it was subject matter of the suit right from 2004 when the suit was instituted is that the land formed part of the compromise decree which, as noted above, was in fact passed several months after the loan was recalled. The Bank took no steps to verity as to how it formed part of the compromise decree. The petitioner’s stand is that she and her husband had instituted Title Partition Suit No 216 of 2004 in the Court of Sub Judge I, Patna on 06.02.2004 against the petitioner’s husband’s brother and wife for partitioning various properties. The plaint of the suit has been produced in the Court which clearly shows that the property in question was not the subject matter of the suit. Regrettably, the learned counsel for the Bank had to concede that at no point of time, Bank either asked for the plaint or took the trouble of looking into the plaint. The property in question was brought into litigation when the defendants appeared in the suit and filed their written statement with counter claim on 8 25.05.2006 that is long after the loan was applied for, sanctioned and part disbursement made. The defendants having claimed this property to be joint property, though in the name of the petitioner and purchased by her by registered sale deed, and sought an injunction against the petitioner and her husband, the plaintiffs in the suit from constructing upon the said land which prayer for injunction was undisputedly rejected by the trial Court by its order dated 17.07.2006 and in the Miscellaneous Appeal preferred by the defendants against the order of rejection before this Court being M A No 339 of 2006, the order was confirmed and the Miscellaneous Appeal dismissed by this Court by order dated 09.01.2007. I may note that this Court held that so far as Muslims are concerned, there cannot be partition of properties standing in the name of ladies. Thus seen, it would be clear that when the suit was filed, this property was not in dispute or was not subject matter of litigation and it became for the first time a litigated property in the year 2006 long after the first disbursement of land and the affidavit was filed on 16.09.2005. Thus, by no stretch of imagination, can it be said that the affidavit was wrong or false in any manner. Then we come to the question of how it became part of the compromise petition and compromise decree. The reason is obvious. In the written statement filed on 25.05.2006, the defendants had raised a counter claim bringing this property into litigation. Thus, a cloud was in fact created in relation to the said property even though injunctions were refused by all Courts including this Court. Thus, parties 9 advisedly, when decided to compromise the matter, included this property in the compromise petition dated 10.09.2007 and consequently the compromise decree was prepared. Thus, merely because defendants sought injunction in respect of the said property or that compromise decree contained the said property did not mean that the property was in dispute since the year 2004 and more pertinently on 16.09.2005 when the affidavit was sworn. Thus on both counts, the action of the Bank is wholly misconceived in fact and in law. The title of the petitioner to the property was clear when the loan application was made and the loan was sanctioned and even now it remains undisputed. I may only note one other fact which has been pleaded by the petitioner. Bank, from time to time, sought legal opinion from its lawyer as and when disclosures were made to it by the defendants and each time their lawyer advised the Bank that petitioner’s title was clear still the Bank chose to take such a drastic step of recalling the loan which was obviously at the instance of the defendants who was trying to lay a wrongful claim on the said property and intended to create nuisance for the petitioner. Thus, the action of the Bank was highly arbitrary. The Bank acted totally unmindful of the predicament in which petitioner was left. She had totally demolished her old house in the hope of getting the balance loan to be able to construct her new house. She had changed her possession adversely on the strength of the sanction of loan and now being out of the house, suddenly the loan is rescinded leaving her high and dry. If this is not arbitrary then what else is it? 10 I may only refer to the decision of the Apex Court in the case of Gujarat State Financial Corporation -Versus- M/s Lotus Hotels Private Limited since reported in AIR 1983 Supreme Court 848 wherein, under similar circumstances, the Apex Court held that the Corporation could not commit breach of a solemn undertaking on which the other side has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract. It further held that the Corporation was State and in view of judgment of R D Shetty -Versus- International Airports Authority of India Limited, AIR 1979 Supreme Court 1628, the rule prohibiting arbitrary action would equally apply. The Apex Court held that a petition under Article 226 of the Constitution will certainly lie in such a situation. I may here usefully refer to the decision of the Apex Court in the case of M/s Hyderabad Commerce -Versus- Indian Bank & Others, AIR 1991 Supreme Court 247. In that case, Indian Bank had wrongly debited the account of the writ petitioner with a huge sum of money and transferred to another account. It initially accepted its wrong actions but then refused to correct the same. When the writ petitioner there filed a writ petition, the Bank took the plea that it had so done on oral instructions of the petitioner. The writ petition was dismissed by the High Court as not maintainable. The Apex Court held to the contrary. It held that there was no disputed question which cannot be resolved in a writ proceeding. Their Lordships held that the action of the Bank was clearly arbitrary and wrong even though in a 11 purely contractual field. The Supreme Court held that the writ petition was entertainable and directed the Bank to refund the money to the writ petitioner with interest. It must be remembered that Banks and, in particular, Public Sector Banks cannot act at their whims and fancies. Their actions have serious repercussions on the citizens. They have drastic powers conferred on them by various enactments to force recovery of loans. They cannot be permitted to act in such an arbitrary manner and then resort to drastic stringent provisions of Acts for recovery of their loans to the detriment of the citizens as is exemplified in the present case. In the result, the writ application is allowed and the decision of the Bank to recall the loan is quashed. The Bank would, thus, be liable to complete the disbursement and it cannot take any action consequent to recalling the loan for its recovery. M.E.H./ (Navaniti Prasad Singh)