THE HONOURABLE SRI JUSTICE P.S.NARAYANA WRIT PETITION No.22635 of 2007 Date: -01-2008 Between: M.Mukund Reddy and others. .. PETITIONERS and State Bank of Hyderabad and another. .. RESPONDENTS ORDER: 1. Notice before admission was ordered on 26-10-2007. Interim stay was granted on condition of the petitioners depositing a sum of Rs.5,00,000/- within a period of two weeks. It is stated that the conditional order had been complied with. 2. Rule Nisi was issued on 18-12-2007. 3. W.V.M.P.No.2970 of 2007 is filed to vacate the interim order. 4. Heard Sri Shekar representing Sri P.Venu Gopal, counsel representing the writ petitioners and Sri Venkataraghu Ramulu, counsel representing the respondents. 5. This writ petition is filed praying for a Writ of Mandamus declaring the action of the respondents in invoking Section 14 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the Act’) in respect of 3rd petitioner’s property, namely Plot No.22 admeasuring 403 sq. yards bearing H.No.2-2-647/77/H, Srinivas Nagar Co-operative Housing Society Limited (T.A.No.256 vide permit No.59/61 dated 09/02/1968), Bagh Amberpet, Hyderabad, bounded by North: Road 40 ft. wide; South: Plot No.23, House No.2-2-647/273; East: Plot No.24, House No.2-2-647/273; West: Plot No.21, as well as the order passed by the learned Chief Metropolitan Magistrate, Hyderabad, dated 05-10- 2007 in Criminal Miscellaneous Petition No.1361 of 2007, as illegal, arbitrary and violative of Articles 14 and 300-A of the Constitution of India and consequently stay all further proceedings including dispossession of the petitioners in respect of the said property of the 3rd petitioner, pending disposal of the writ petition. 6. The 1st petitioner sworn to the affidavit filed in support of the writ petition. Petitioners 1 and 2 approached the respondent Bank seeking financial assistance. In the year 2004, the respondent Bank sanctioned a sum of Rs.30,00,000/- as financial assistance to petitioners 1 and 2 and the Bank had also disbursed the entire amount of Rs.30,00,000/- as agreed to. At the request of the respondent Bank to furnish collateral security for the loan sanctioned by the Bank, petitioner No.3 furnished her immovable property bearing Municipal No.2-2-647/77/H, Plot No.22, admeasuring 403 sq. yards situated at Srinivas Nagar, Bagh Amberpet, Hyderabad, and the same was accepted by the respondent Bank. 7. It is further stated that petitioners 1 and 2 have to clear the loan availed by them by way of equal monthly instalments at the rate of Rs.64,350/- per month in a span of 60 months. Out of the total amount of Rs.30,00,000/-, petitioners 1 and 2 had already repaid to the Bank a sum of Rs.21,70,000/-. 8. It is further stated that the respondent Bank, without re-calling the loan on 18-01-2006, issued notice to the petitioners under Section 13(2) of the Act. After receipt of the said notice, the petitioners had paid the following amounts:- (i) Rs.1,00,000/- in cash on 28/01/2006 (ii) Rs.2,00,000/- in cash on 27/03/2006 (iii) Rs.2,00,000/- by cheque on 31/03/2006 (iv) Rs. 50,000/- in cash on 28/04/2006 (v) Rs.3,60,000/- in cash on 21/03/2007 (vi) Rs. 29,000/- in cash on 22/03/2007 (vii) Rs. 21,000/- in cash on 23/03/2007 (viii) Rs. 25,000/- in cash on 23/03/2007 (ix) Rs.1,00,000/- in cash on 16/05/2007 (x) Rs.3,00,000/- in cash on 01/06/2007 (xi) Rs.2,50,000/- by demand draft on 27/06/2007 9. It is further stated that the respondents bore grudge against the petitioners for the reason that the petitioners had filed a civil suit O.S.No.4896 of 2006 on the file of learned XIX Junior Civil Judge, City Civil Court, Hyderabad, seeking the following relief:- “a) to declare the Notice vide No.P&SB/GO dated 18-01-2006 issued by the defendant as ab-initio null and not binding over the plaintiffs; b) A consequential decree of injunction may be granted restraining the defendant, their men, officials, agents etc. from harassing the plaintiffs, including interfering in any manner in respect of the property bearing Municipal No.2-2-647/77/H, plot No.22, admeasuring 403 sq. yards situated at Srinivas Nagar, Bagh Amberpet, Hyderabad. c) Costs of the suit may be awarded…” 10. It is further stated that subsequently the petitioners had withdrawn the suit O.S.No.4896 of 2006. The filing of the said suit perhaps incurred displeasure of the respondents and therefore, the respondents are hell bent to harass the petitioners and in that pursuit, they issued a notification, which was published on 04-08-2007 in EENADU and in another English Daily Newspaper, wherein it was stated that the 3rd petitioner’s property would be auctioned on 22-08-2007 and in that Notification, it was stated that the petitioners are due a sum of Rs.17,75,600/- which figure is also incorrect. It is stated that as on date, the petitioners are liable to pay only a sum of Rs.15,73,600/-. Even, as per the statement, which the respondents had issued, the amount due according to the respondents is only Rs.15,73,600/-, out of which, the petitioners had paid Rs.60,000/-. Therefore, as on date, they are liable to pay only Rs.15,13,600/-. 11. It is further stated that in fact in accordance with the guidelines issued by the Reserve Bank of India, the petitioners also requested the respondent Bank for one time settlement. The respondent Bank had not chosen to settle the dispute with the petitioners under one time settlement scheme. The fact that the petitioners had approached the respondent Bank for one time settlement was evident on a reading of the communication, dated 09-08-2007 and 14-08-2007. 12. It is further stated that when the residential property of the 3rd petitioner was put to auction, the petitioners herein had approached this Court and filed Writ Petition No.17682 of 2007. This court ordered notice before admission on 21-08-2007 with a condition that the petitioners should deposit a sum of Rs.3,00,000/-. The said amount had been deposited. Subsequently, when the matter came up before this Court on 24-09-2007, this Court continued the interim order and admitted the said writ petition. In the said writ petition, the respondent Bank had also filed a counter affidavit. In the counter affidavit, it had been stated that the petitioners had issued cheque for an amount of Rs.1,00,000/- in the month of February, 2006 and another cheque for an amount of Rs.1,00,00/- in the month of March, 2006 and the said cheques were returned unpaid. It is pertinent to mention that when the petitioners came to know about return of the said cheques, the petitioners had paid Rs.2.00 lacs in cash on 27-03-2006. It is stated that when the petitioners had demanded for return of unpaid cheques, the respondent Bank informed the petitioners that they would return the cheques only at the time of settlement of complete account and hence the respondent Bank had retained the same. It was further alleged in the counter affidavit that subsequently they had issued two more cheques for Rs.1.50 lacs each and the same were also returned unpaid. It is stated that on 31-03-2006, the petitioners deposited Rs.2.00 lacs by way of transfer and on 28-04-2006 another sum of Rs.50,000/- by way of cash. After payment of the said amounts, the petitioners had demanded the respondents to return back the unpaid two cheques of Rs.1.50 lacs each, but the respondent Bank refused to do so. It was further stated in the counter affidavit that the two cheques issued by the petitioners for Rs.5,00,000/- each were returned unpaid. The respondent Bank grossly misrepresented before this Court by stating so, inasmuch as in lieu of the said cheques, the petitioners had deposited a total amount of Rs.10.00 lacs during the period 16-05-2007 to 23-08-2007. Regarding another cheque for Rs.12.00 lacs, which was returned unpaid, the petitioners had requested the respondent Bank to grant some more time for payment in lieu of the said cheque. Without considering the said request, the respondent Bank initiated recovery proceedings hastily. The respondent Bank suppressing these payments only highlighted about the cheques, which were returned unpaid. 13. It is further stated that the respondent Bank approached the court of the learned Chief Metropolitan Magistrate, Hyderabad, and filed a Criminal Miscellaneous Petition No.1361 of 2007 under Section 14 of the Act. The learned Magistrate, by an order, dated 05-10-2007, appointed an Advocate Commissioner by passing the following order: “..Therefore, you are hereby appointed as Advocate Commissioner in the above petition to take physical possession of property and handover the same to the petitioner and you are further directed to take necessary help from the concerned police by giving notice to him. The Commissioner is further directed to take inventory of items lying in schedule premises if necessary by broke open the lock and also directed to hand over the items which are not mortgaged to its owner….” 14. In furtherance to the said order, the Advocate Commissioner came to the premises on 24-10-2007 afternoon and threw away all the samans in the premises and stated that within three days they would be dispossessed from the property. The Advocate Commissioner also obtained certain undertakings from the tenants of the said premises without furnishing copies of the same to the petitioners. 15. It is further stated that out of the total amount of loan that had been sanctioned by the respondent Bank, as on date, an amount of Rs.12,13,600/- is only payable. The petitioners are willing to pay the said amount within a reasonable breathing period. If the petitioners were dispossessed from the property, their valuable property rights guaranteed under Article 14 of the Constitution of India would be at peril. 16. It is further stated that the respondent Bank, pending Writ Petition No.17682 of 2007, ought not to have invoked the jurisdiction of the Chief Metropolitan Magistrate, Hyderabad, under Section 14 of the Act. The said action of the respondent Bank as well as the order passed by the Chief Metropolitan Magistrate, Hyderabad, are being assailed in the instant Writ Petition as illegal, arbitrary and violative of Article 14 of the Constitution of India. 17. In the counter affidavit filed by respondents 1 and 2 along with stay application, referred to above, specific stand had been taken that the petitioners cannot invoke the provisions of Article 226 of the Constitution of India, since they are having alternative remedy of filing an appeal before the Debt Recovery Tribunal. Sanctioning of the loan and other particulars had been averred and it is also stated that the 3rd petitioner stood as guarantor for the amount availed by petitioners 1 and 2 and the 3rd petitioner created an equitable mortgage of the property bearing H.No.2-2-647/77/H, Plot No.22, Srinivas Nagar, Bagh Amberpet, Hyderabad. 18. It is further stated that petitioners 1 and 2 have to clear the loan amount in 60 equal monthly instalments at the rate of Rs.64,350/- p.m. It is stated that the petitioners were not regular in repaying the loan amount. After availing the loan amount, petitioners 1 and 2 had failed to repay the stipulated instalment amounts regularly. In the month of December, 2005, the account of the petitioners had been declared as NPA. When there was no response from the petitioners, the respondent Bank had issued a demand notice to the petitioners on 18-01-2006 and called for the loan amount. On 24- 01-2006, the 1st petitioner had approached the respondent Bank and promised that he will pay the amount of Rs.2,00,000/- by the end of January, 2006, Rs.3,00,000/- by 15-02-2006 and the balance amount will be paid by the end of March, 2006. After repeated persuasions, petitioners 1 and 2 had paid an amount of Rs.1,00,000/- on 28-01-2006. In the month of February, 2006, the petitioners had issued a cheque for an amount of Rs.1,00,000/-. When the respondent Bank had presented the cheque for encashment, the said cheque was returned as bounced. Likewise, in the month of March, 2006, petitioners 1 and 2 had issued one more cheque for an amount of Rs.1,00,000/-. Again, the said cheque was returned unpaid. In the month of March, 2006, petitioners 1 and 2 had issued two cheques amounting to Rs.1,50,000/- each, the said cheques were returned as bounced. It is stated that all the while the respondent Bank was persuading the petitioners to regularize the loan account. 19. It is further stated that again on 02-09-2006, the 1st petitioner had approached the Respondent Bank and assured that by 15-09-2006, he would pay an amount of Rs.5,00,000/- and the balance amount would be paid by the end of September, 2006. Likewise, in the month July, 2006, the 1st petitioner had approached the Respondent Bank and assured that he would clear the balance outstanding amount by 15-08-2006. Despite repeated persuasions by the respondents, the petitioners had failed to keep of the repayment schedule. It is stated that without paying the instalment amounts, the petitioners had filed O.S.No.4896 of 2006 on the file of XIX Junior Civil Judge, City Civil Court, Hyderabad and sought the decree of injunction and declaration to declare the notice, dated 18-01-2006, issued by the respondent Bank as null and void. Along with the suit, the petitioners had filed I.A.No.1549 of 2006 and sought an ad-interim injunction restraining the respondents from interfering with the mortgaged property. 20. It is further stated that the petitioners are liable to pay balance amount along with upto date interest, expenses, etc. It is denied that if the property of petitioner No.3 is auctioned, the valuable rights of the petitioners would be effected. The Respondent Bank gave reply to the petitioners disagreeing for the terms of one time settlement. It is stated that on mere receipt of the amount from the petitioners, there will be no waiver of rights of the respondent Bank for the auction of the property under the Act. It is stated that the petitioners were not bonafide in keeping their promises. The relief sought by the petitioners cannot be granted under the law. In the month of February, 2007, petitioner Nos.1 and 2 had issued a cheque for an amount of Rs.5,00,000/-. Likewise, petitioners 1 and 2 had issued a cheque for an amount of Rs.5,00,000/-, However, the said cheques were returned as bounced. In the month of December, 2005, the account of the petitioners had been declared as NPA. On 24-03-2007, petitioners 1 to 3 had approached the respondent Bank and made a representation confirming that petitioner No.3 stood as guarantor for repayment of the loan availed by petitioner Nos.1 and 2 and the 3rd petitioner created an equitable mortgage of the property bearing H.No.2-2-647/77/H, Plot No.22 of Srinivas Nagar, Bagh Amberpet, Hyderabad. The 3rd petitioner further confirmed that petitioner Nos.1 and 2 had failed to pay the loan amount, that she received all the notices issued by the bank under the Act and that Bank gave paper publication for auction of the mortgaged property. 21. It is further stated that in pursuance of the letter, dated 24-03-2007, petitioners 1 to 3 requested the respondent Bank to defer the auction of the mortgaged property for a period of two months. The petitioners further stated that in case, if they fail to clear the loan amount within the above said period, then the bank will be at liberty to auction the mortgaged property under the Act. Along with the request, the petitioners had issued cheques vide 1) Cheque No.285645, dated 25-04-2007, for an amount of Rs.5,00,000/-, 2) cheque No.285646, dated 15-05-2007, for an amount of Rs.5,00,000/- and 3) Cheque No.285647, dated 30-05-2007 for an amount of Rs.12,00,000/-. When the above said cheques were presented for encashment, the same were returned as bounced. 22. It is further stated that in view of the request made by the petitioners, the auction of the mortgaged property, which was scheduled to be held on 26-3-2007, was deferred for the time being. Since the year 2005, the petitioners are prolonging the matter for one reason or the other and they are chronic defaulters. 23. It is further stated that in the month of March, 2007, the petitioners withdrew the suit O.S.No.4896 of 2006 from the file of XIX Junior Civil Judge, City Civil Court, Hyderabad, stating that they had filed the suit on the wrong advise. It is stated that the petitioners approached the respondent Bank and assured that they will clear the outstanding loan amount. It is stated that a cheque for an amount of Rs.5,00,000/- was issued by petitioners 1 and 2 in the month of April, 2007. When the said cheque was presented, the same was returned as dishonoured. In the month of August, 2007, petitioners 1 and 2 had approached the respondent Bank and requested for one time settlement. On 14-08-2007, the respondent Bank did not agree for the terms of offer made by the petitioners. A reply to that effect was communicated to the petitioners. It is denied that filing of suit by the petitioners against the respondents got the displeasure of the respondents. It is denied that the respondents are bent upon to harass the petitioners. It is denied that without recalling the loan amount, the respondent bank had issued a notice U/s.13(2) of the Act. It is stated that with great difficulty, the respondent Bank could recover the amounts, as mentioned in para 4 of the affidavit under reply. In payment of the above said amounts, several cheques issued by petitioner No.1 were returned as bounced. The petitioners failed to clear the loan amount to the respondent Bank, as such the respondent Bank was forced to initiate steps for sale of the mortgaged property on 22-08-2007. To that effect, a paper notice was published in the newspapers. The amounts, which had been mentioned in the newspapers, are absolutely correct. The respondent Bank had to add interest as agreed by the petitioners to the due amount. It is stated that as per the guidelines of the Reserve Bank of India, once the account had been declared as NPA, the interest will not be added in the statement of account. It is stated that the petitioners had filed W.P.No.17682 of 2007 before this court and sought stay of sale, which was proposed to be held on 22-08-2007. On 01-08-2007, this Court stayed the sale, which was proposed to be conducted on 22-08-2007, on condition of deposit of Rs.3,00,000/- on or before 22-07-2007. It is denied that the respondent Bank had initiated recovery proceedings hastily without considering the payments made by the petitioners. On 31-01-2007, the respondent Bank had approached the Chief Metropolitan Magistrate, Hyderabad, U/s.14 of the Act and sought an order to take physical vacant possession of the mortgaged property. Accordingly, on 23-03-2007, the Chief Metropolitan Magistrate, Hyderabad, appointed the Advocate-Commissioner to take physical vacant possession of the mortgaged property and to handover the same to the respondent Bank. The Commissioner was directed to return warrant by 24- 04-2007. In view of the request made by the petitioners, the said order could not be executed within the time. On 28-09-2007, the petition was filed before the Chief Metropolitan Magistrate, Hyderabad, for extension of time for execution of the warrant. On 05-10-2007, the Chief Metropolitan Magistrate, City Criminal Courts, Hyderabad, in Crl.M.P.No.1361 of 2007 appointed one Sri K.Moghulappa as an Advocate-Commissioner to take physical possession of the property to hand over the same to the respondent Bank. On 24-10-2007, the Advocate-Commissioner visited the mortgaged property and took possession of three rooms and postponed execution of the warrant in view of the request made by petitioner No.3. On 27-10-2007, the Respondent had received Telegraphic order in respect of stay of all further proceedings including dispossession of the petitioners from the mortgaged property. In view of the orders of this Court, the Advocate Commissioner could not execute the warrant in full. It is stated that the Advocate- Commissioner took possession of three rooms only and locked the same. It is denied that the Advocate-Commissioner threw all the samans in the mortgaged property and stated that within three days petitioner No.3 would be dispossessed from the mortgaged property. In the month of December, 2005, the account of the petitioners had been declared as NPA, since then the petitioners are making false promises and not clearing the loan account. It is stated that the petitioners are filing one case after another and dodging the repayment. It is stated that all the while the respondent Bank gave sufficient opportunity to the petitioners for clearing the loan amount. It is stated that the cheques issued by petitioner No.1, dated 30-05-2007 and 15- 05-2007 for an amount of Rs.12,00,000/- and Rs.5,00,000/- were returned as bounced on 01-10-2007, a notice to that effect was issued to petitioner No.1 on 10-10-2007, having acknowledged the notice, petitioner No.1 failed to pay the cheque amounts. The respondent bank had issued possession notice to the petitioners under Secs.8(1) and (2) of the Act and took possession of the mortgaged property in exercise of the powers conferred under the Act. It is stated that the respondent Bank contemplated to take physical possession of the mortgaged property by approaching the Chief Metropolitan Magistrate, City Criminal Courts, Hyderabad. It is stated that the petitioners are chronic defaulters and they are prolonging the matter for one reason or the other. 24. These are the respective stands taken by the parties. 25. It is no doubt true that the interim order passed by this Court had been complied with and the rest of the amount due to the banking Institution also is not heavy. However, in the light of the respective stands taken by the parties, this court is of the considered opinion that the writ petition be disposed of permitting the petitioners to make a representation to the respondents praying for a reasonable time to clear off the debts and let the respondents take appropriate decision in this regard. In the light of the facts and circumstances of the case, except making this observation, no other relief can be granted in the present writ petition. It is needless to say that the writ petitioners are at liberty to file an appeal in the event of the writ petitioners being advised to do so. 26. Accordingly, the writ petition is disposed of. There shall be no order as to costs. ___________ -01-2008 Prv