THE HON'BLE SRI JUSTICE K.C.BHANU APPEAL SUIT No.23 OF 2008 JUDGMENT: 1 This appeal is directed against the judgment and decree dated 28.03.2007 passed by the learned IV Additional Senior Civil Judge (FTC), Vijayawada in O.S.No.1182 of 2004 whereunder and whereby the suit filed by the appellant/plaintiff – Bank was decreed against the respondents/defendants 1 to 4 and 6 for an amount of Rs.5,09,516-24 ps, but was dismissed in so far as the respondent/defendant No.5 is concerned. 2 For the sake of convenience the parties to the appeal are referred to as they are arrayed in the trial court. 3 Brief facts for disposal of this appeal are that the first defendant represented by defendants 2 and 3 approached the plaintiff bank for sanction of loan to a tune of Rs.7,00,000/- for its business purpose in the year 1999. Second defendant is the Managing Partner, and the third defendant is another partner of the first defendant Firm. The defendants 4 to 6 agreed to stand as guarantors. The plaintiff-Bank sanctioned the loan of Rs.7,00,000/- on 14.09.1999 to the first defendant under cash credit hypothecation account. The defendants executed necessary documents in favour of the plaintiff. The first defendant revived the loan on 28.9.2001 and the defendants also executed fresh loan documents. At the request of the first defendant, the limits were increased from 7.00 to 8.00 lakhs. So on 24.11.2001 the defendants executed fresh loan agreements again in favour of the plaintiff in pursuance of the increase of limits. A demand pronote for a sum of Rs.8.00 lakhs was also executed by defendants 1 to 3 in favour of D.4 to D.6, and the same has been endorsed in favour of the plaintiff. Demand Pronote delivery letter and the letter of waiver were executed on 24.11.2001 along with agreement of hypothecation and guarantee. That as the defendants did not choose to repay the amount inspite of repeated demands made by the plaintiff, the plaintiff invoked the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SURFACIE Act"). The plaintiff sold away the mortgaged property of the defendants 5 and 6 and recovered a sum of Rs.5,69,000/-. After adjusting the said amount, the defendants are still due a sum of Rs.5,09,516-24 ps to the plaintiff. In spite of repeated demands the defendants did not clear the debt. Hence plaintiff instituted the said suit against the defendants 1 to 6 for recovery of Rs.5,09,516-24 ps which includes interest up to the date of filing of the suit and incidental charges thereto. 4 The defendants 1 and 2 were set ex parte. Defendant Nos.3 to 5 filed their written statements. Third defendant inter alia contended that the fourth defendant is a student at the time of borrowing the loan by defendants 1 and 2, as such the suit is not maintainable against him. Defendants 1 and 2 hypothecated the stock, raw material and also furnished sufficient collateral security of fifth defendant and vacant site of the sixth defendant. The plaintiff had already recovered the amount by disposing of the apartment and the vacant site and so the suit is not maintainable. The third defendant unit was closed long back because it has sustained loss and the unit has become sick. Fourth defendant has got no fixed assets and as such he cannot repay the amount. Fourth defendant adopted the written statement filed by the third defendant. 5 Fifth defendant filed a separate written statement contending that as per the documents filed by the plaintiff there is hypothecation of movables of the first defendant over which the plaintiff bank has got charge. The plaintiff has to approach the court only after exhausting the right of recovering the amount against the hypothecated movables. Because the plaintiff did not attempt to recover against the movables, the plaint is premature one. That this defendant is working at Mahaboobnagar beyond 400 Km from Vijayawada and as such it is highly impossible for him to come on the working day that too when this defendant was attending his duties at Mahaboobnagar. So this defendant never filled the revival letters nor consented for the revival and he did not agree to continue the alleged loan. This defendant is not aware with regard to the earlier loan and enhancing the limit to Rs.8.00 lakhs. This defendant had never executed a fresh loan agreement in the year 2000 and he never did the business in the name of the first defendant and he was not the partner of the firm, as such there is no chance for this defendant to execute agreement of hypothecation. This defendant delivered the title deeds to the plaintiff at the time of granting of the loan initially in the year 1999. Later he never visited the plaintiff bank. This defendant came to know that the plaintiff had auctioned the security without the notice and knowledge of this defendant and that too at lower price. At the time of borrowing the loan the value of the property was Rs.7.00 lakhs as per the report of the valuer of the plaintiff bank itself. Surprisingly the plaintiff has recovered only Rs.3,70,000/- as against that value. Had the plaintiff given an opportunity to this defendant before auctioning the movable property, this defendant would have got the property sold to its maximum price, which can wipe of the alleged debt and further would have retained some part of the sale consideration. The act of the plaintiff in disposing the property for a meager amount indicates the collusive act of the plaintiff, and the plaintiff itself is liable to compensate the loss. The plaintiff bank must take steps against the first defendant and only in case of its failure the plaintiff can proceed against others. The plaintiff bank has not claimed the personal decree against defendants 3, 4 and 6. Further more, since the proportionate amount was already recovered, the claim made by the plaintiff is incorrect and hence the suit may be dismissed. 6 Basing on the above pleadings, the trial court framed the following issues for trial: a. Whether the plaint is prematured as the plaintiff has not exhausted the right of hypothecated immovables? b. Whether the revival letter dt:28.9.2001 under which limit of loan was increased on 24.11.2001 is true valid and binding on the defendants? c. Whether the suit documents are true, valid and binding on the defendants? d. Whether the plaintiff is entitled to recover the suit amount from defendants? e. To what relief? 7 During the course of trial, on behalf of the plaintiff Bank one witness was examined as P.W.1 and Exs.A.1 to A.13 were marked. On behalf of the defendants D.5 was examined as D.W.1, but no documents were marked. 8 As stated supra, the trial court decreed the suit against defendants 1 to 4 and 6 only for an amount of Rs.5,09,516-24 ps and the suit was dismissed against the fifth defendant on the ground that the entire proceedings of auction held by the plaintiff bank in respect of the property of the fifth defendant appears to be not proper. Challenging the dismissal of the suit against the fifth defendant the plaintiff filed this appeal. 9 Now the point for consideration is whether the fifth defendant is liable to pay the suit amount?. 10 In spite of giving several opportunities, none appeared for first respondent, who is the fifth defendant. Heard the learned counsel for the appellant. 11 The learned counsel for the appellant contended that proceedings under the SURFACIE Act have become final and the civil court cannot determine the correctness or validity of the sale conducted by the competent authority under the SURFACIE Act and as the proceedings under the SURFACIE Act have become final, he prays the court to decree the suit against the fifth defendant also. 12 The factual matrix is not in dispute. On the ground that the competent authority sold the property for lesser price than the actual value of the property the sale cannot be said to be improper and cannot be said that the upset price fixed was very low. If the value of the property was fixed very low, and in the said sale the property fetched half of the value of the property, the remedy if any available to the fifth defendant is to challenge the sale conducted by the competent authority. If the fifth defendant is aggrieved by the order passed by the competent authority under the Act, he could have filed an appeal before the Debt Recovery Tribunal and thereafter a further appeal to Debt Recovery Appellate Tribunal. When the order of sale has become final, the sale proceedings cannot be challenged in a civil suit because a separate remedy is available for challenging the order passed by the competent authority under the SURFACIE Act. Therefore, the finding of the trial court that the fifth defendant is not liable to pay the decretal amount is unsustainable and it is devoid of merit as sale conducted by the competent authority under the Act has attained finality. 13 Hence, the impugned judgment, in so far as dismissal of the suit against the fifth defendant is concerned, is liable to be set aside and is accordingly set aside. 14 In the result, the appeal is allowed and the suit is decreed against the fifth defendant also. Parties are directed to bear their own costs in this appeal. -------------------- K.C. BHANU, J 08.08.2011 Kvsn