IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THURSDAY, THE THIRD DAY OF APRIL TWO THOUSAND AND EIGHT PRESENT HON’BLE THE CHIEF JUSTICE SRI ANIL R. DAVE AND HON'BLE SRI JUSTICE R.SUBHASH REDDY WRIT APPEAL No.296 of 2008 (Writ Appeal under Clause 15 of the Letters Patent against the order dated 14/02/2008 in WP No.21099 OF 2007 on the file of the High Court.) Between: B.T.S. Estate Private Limited, rep. by its Managing Director, Sesham Rao Niranjan, S/o.Venkaiah R/o.HIG34, Sector-1, MVP. Colony, Visakhapatnam. ... APPELLANT AND 1 State Bank of India, rep. by its Branch Manager, Dwarakanagar Branch, Visakhapatnam. 2 State Bank of Indore, rep. by its Branch Manager, Dwarakanagar Branch Visakhapatnam. 3 Kudithipudi Vijaya Prasad, S/o K. Venkateswara Rao R/o D. No. 5-91, Allikhanudupalem, Anakapalle Mandal, Visakhapatnam District. 4 Smt. Muthineni Suseela W/o M. Ramanayya R/o House No. 26, Dairy Colony, Near APHB Colony, Peda Gantyada, Visakhapatnam-12. 5 Nidamanuri Padmavathi W/o N. Subba Rao D.No. 31-58-94 HIG-III-62, Phase-7, Dwarakapuri, Vadlapudi Post, Kurmanapalem, Visakhapatnam-46 6 Saripalli Kishore Kumar S/o S.L. Nooka Raju R/o D.No. 12-8-5, Gandhi Market, Anakapalle, Visakhapatnam District. 7 Konakalla Venkateswara Rao S/o K. Prasad Rao R/o Flat No. 64, Orbit Heights, 33, Gariaghat Road, Kolkata. 8 Tadi Surya Bhaskar Reddy S/o Satyanarayana Reddy R/o Door No. 50-113-3, North Extension, Seethammadara Visakhapatnam. 9 Vusirika Srinivasa Reddy S/o V. Vydi Raju Reddy R/o Flat No.3, SriVidya Paradise, Sector-II, MVP Colony, Visakhaptnam. 10 Vobbilisetty Saraswathi W/o V. Srihari Rao R/o D. No. 23-10-14, Rajappanaidu Street, Visakhapatnam-1. 11 Chilakapaka Venkata Lakshmi D/o Ch. Bennaji Rao R/o D. No. 22-16-37, Bondavari Street, Chengalaraopeta, Visakahapatnam-1. 12 Erramelli Gurunadha Rao Saibaba S/o E.V. Subba Rao R/o D. No. 5-96-4/1/1, Sri Gowri Nilayam, Seethammadara, Visakhapatnam-13. 13 Jogi Ramanjaneyulu S/o J. Balaraj R/o D. No. 6-210 Vinayaknagar, Eluri, West Godavari District. 14 Bheemaraju Venkata Phani Raju S/o B.V. Ramakrishna Rao R/o D. No. 5-21-79/12, Broadipet, Guntur. 15 Bheemaraju Venkata Phani Raju S/o B.V. Ramakrishna Rao R/o D. No. 5-21-79/12, Broadipet, Guntur . 16 Vatsavi Satyanarayana Varma S/o V. Satyanarayana Raju R/o D. No. 9-155, D.R.K. Raju Township, Madhurawada, Visakhapatnam-41. 17 Datla Sudharani W/o Satyanarayana Varma R/o D. No. 9-155, D.R.K. Raju Township, Madhurawada, Visakhapatnam-41. 18 Datla Veera Venkata Satya Suryakonda Raju, S/o D. Atchuta Rama Raju, R/o Q. No. F-147, Sector-V, Ukkumagaram, Visakhapatnam. 19 Dantuluri Venkata Narasimha Raju, S/o Venkatapathi Raju, R/o Polanki Village and Post, Kajuluri Mandalam, Vai Yanam E.G. District. 20 Dantuluri Appala Venkata Sanyasi Raju S/o Seetharama Raju R/o Q. No. D-210, Sector-V, Ukkunagaram, Visakhapatnam. 21 Bupathi Lakshminarasimha Raju, S/o. B.V.S. Ramachandra Raju, Hindu, R/o Bhaskara Suvasa Apartment, D.No. 10-51-13/11, Kailasametta, Visakhapatnam. 22 Karanama Venkata Vijayalakshmi, W/o. K. Dharmasri, Hindu, R/o D.No. 24-111-13/1, Vinayaka Nagar, VUDA Colony, Pedagantyada, Visakhapatnam-44. 23 Smt. Lanka Sridevi, W/o. L. Madusudhan, Hindu, D.No.46-18-23, Dondaparthi, Visakhapatnam-2. 24 Puligedda Venkata Sridevi, W/o. P. Narasimha Murthy, Hindu, R/o. Flat No. 401, Puligedda Towers, D.No.13-28-10, Maharanipeta, Visakhapatnam2. 25 Mirla Lakshmichandra Vijaya Durga, W/o. M. Bhaskar, Hindu, R/o. Vellangi Post, Karapa Mandal, E.G. Dist. 26 I.J.A. Bhaskar Rao, S/o. late I. Yellanna, Hindu, R/o. Flat No. 502, Sri Lakshmi Apartments, beside C.M.R. Function Hall, Venkojipalem, Visakhapatnam-30. 27 Masina Ravindra, S/o. M. Surya Bhaskar Rao, Hindu R/o. D.No. 16-4-54, Balusuvari Street, Samarlakota, E.G. Dist. 28 Bolla Venkata Lakashmi, W/o. B. Satya Kumar, Hindu, R/o. D.No. 2-1-48/1, Srinagar, kakinada, East Godavari District. 29 Mirla Lakshmichandra Vijaya Durga, W/o. M. Bhakar, Hindu, R/o. Vellangi Post, Karapa Mandal, E.G. Dist. 30 Tammineedi Naga Srinivasa Krishna Kumar, S/o. T. Venkata Narayana, Hindu, R/o. E.W.S./A/8, Sector-VIII, M.V.P. Colony, Visakhapatnam-17. 31 Tammineedi Rupa Bala Jyothi, W/o. T.N.S. Krishna Kumar, Hindu, R/o. E.W.S./A/8, Sector-VIII, M.V.P. Colony, Visakhapatnam-17. 32 Kattamuri Chalam, S/o. Lakshminarayana kondala Rao, Hindu, Door No. 9-7-21-6/1, Sivajipalem, Visakhapatnam-17. 33 Kattamuri Chalam, S/o. Lakshminarayana kondala Rao, Hindu, Door No. 9-7-21-6/1, Sivajipalem, Visakhapatnam-17. 34 Kattipudi Savitri, W/o. K. Sudarsan Rao, Hindu, Residing at D.No.4-65-4, Flat No.401, Dwarapu Madhava Gardens, Lawsonsbay Colony, Visakhapatnam-17 35 Kantipudi Nalini Rama, W/o. K. Rama krishna, Hindu, D.No.4-65-4, Flat No.401, Dwarapu Madhava Gardens, Lawsonsbay Colony, Visakhapatnam-17 36 Meenavilli Vamsi Mohan Chowsary, S/o. Bapi Raju, Hindu, R/o. D.No. 10-16-80, Opposite Gopalakrishna Theatre, Pendurthi Road, Anakapalle, Visakhapatnam District. 37 Datla Rajesh Varma, S/o. D.V. Padmanabha Raju, Hindu, R/o. Flat No. G-7, Chandrateja Apartments, CBM Compound, Visakhapatnam-3. 38 Merla lakshmichandra Vijaya Durga, W/o. M. Bhaskar, Hindu, R/o. Vellangi post, Karapa Mandal, E.G. Dist. 39 Perumalla Venkata Rao, S/o. late P. Sivayya, Hindu, R/o. Boddu Veedhi, V.Madugulla, Visakhapatnam District. 40 Perumalla polisetti, S/o. late P. Sivayya, Hindu, R/o. Boddu Veedhi, V.Madugulla, Visakhapatnam District. 41 Chintakayala Vijayalastsa Patrudu, S/o. Ch. Ayyanna Patrudu, Hindu, R/o. D.No. 14-39, narsipatnam, Visakhapatnam Dist. 42 Dantuluri Venkatapathi Raju, S/o. D.V.V. Satyanarayana, Hindu, R/o. Door No.2-297, Rachapalli Village, Pathipadu Mandal, East Godavari Dist. 43 Dadi Sambasiva Rao, S/o. D. Jagannadham, Hindu, R/o. D.No. 45-46-26/2/9, Flat No.9, 3rd Floor, Srujana Apartments, Akkayyapalem, Visakhapatnam - 16. 44 Dadi Satyanarayana, S/o. D. Jagannadham, Hindu, Plot No. 315, Visalakshnagar, Visakhapatnam - 43. 45 Dadi iravathamma, D/o. D. Jagannadham, Hindu, Plot No. 315,Srujana Apartment, Akkayyapalem, Visakhapatnam – 16. 46 Boddu Atchuta Rama Gupta, S/o. Ramayya, Hindu, R/o. Flat no.201, I & J, Block, Sea Shell Enclave, Dasapalla Hills, Visakhapatnam. 47 Nalluru Nooka Raju S/o Radha Krishna, R/o D. No. 25-12-18, Ganugulavari Veedhi, Visakhapatnam-1, 48 Nalluru Lakshmi W/o Nooka Raju R/o D. No. 25-12-18, Ganugulavari Veedhi, Visakhapatnam-1. 49 Kaligarla Nirmala, W/o KKV.T. Ramakrishna R/o D. No. 25-8-183, Main Road, Visakhapatnam 50 Jonnalagadda Aruna W/o J. Ranga Sai R/o D. No. 29-42-11, S.B.I Colony, Opposite Judge Court, Prakasaraopeta, Visakhapatnam-2 51 Jonnalagadda Ranga Sai S/o J. Padma Raju R/o D. No. 29-42-11, SBI Colony, Opposite Judge Court, Prakasaraopeta, Visakhapatnam-2 52 Gotumukkala Vandana W/o G.V.S. Chandrasekhara Varma, R/o D. No. 16-4-6, Official Colony, Maharanipeta, Visakhapatnam. 53 Tadi Surya Bhaskar Reddy S/o T.Satyanarayana Reddy D. No. 50-113-3, North Extension, Seethammadara, Visakhapatnam-13. 54 Jogi Ganesh S/o J. Bala Raju R/o d. No. 6-210, Vinayaka Nagar, Eluru, West Godavari District. 55 Challagolla Jalachandra Rao S/o Ch. Koteswara Rao R/o D. No. 3-110, Peda Kadimi Village, Peda Veedhi Mandal, West Godavari District. 56 Challagolla Jalachandra Rao S/o Ch Koteswara Rao R/o d. No. 3-110, Peda Kadimi Village, Peda Veedhi Mandal, West Godavari District. 57 The Superintendent of Police, Visakhapatnam (Rural), Visakhapatnam. 58 The Station House Officer, Bheemunipatnam Police Station, Bheemunipatnam, Visakhapatnam District. ...RESPONDENTS Counsel for the Appellant: Mr. VLNGK MURTHY Counsel for Respondent No.1: Mr. DEEPAK BHATTACHARJEE Counsel for Respondent No.2: Mr. R. Raghunandan Counsel for Respondents 3 to 56: Mr. V.V.N. Narasimham Counsel for Respondents 57 & 58: G.P., Home The Court made the following: Judgment: (Per RSR, J) This writ appeal, under Clause 15 of the Letters Patent, is filed by the appellant aggrieved by the order of the learned single Judge, dated 14-02-2008, passed in W.P.No.21099 of 2007. 2. The aforesaid writ petition is filed seeking directions by way of Mandamus to declare the action of respondents 1 and 2, banks, in invoking the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as illegal and ultra vires and to consequently declare the sales effected in favour of respondents 3 to 56 as null and void. The learned single Judge, having regard to the fact that there are several factual disputes, declined to go into merits of the claim of the appellant and while dismissing the writ petition, reserved liberty to the appellant to pursue such lawful remedies available to it under law. 3. The appellant is a company, registered under the Companies Act, 1956, mainly involved in the business of construction of multistoried buildings. For its business purpose, it had acquired land in S.No.26/P of Madhurawada village in Visakhapatnam District for construction of multistoried residential building complex consisting of 55 units in all the floors, in the name and style of ‘B.T.S. Estates’. The appellant executed sale deeds conveying the undivided share of land in favour of the purchasers and also entered into construction agreements with them. The purchasers, numbering about 55, approached respondents 1 and 2, banks, to avail loan facilities, offering security, by way of mortgage, of the undivided portion of land, which was conveyed to them by registered sale deeds. Respondents 1 and 2, banks, by collecting margin money of 15% of the total cost of the units, released entire money by way of banker cheque in favour of the appellant, who is the builder. But, however, when the purchasers defaulted in paying the loan amounts, respondents 1 and 2, banks, have initiated proceedings, under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to realize their money. On the ground that the purchasers of the flats/borrowers did not pay the loan amounts, respondents 1 and 2, banks, have taken possession of the flats by following due procedure under the provisions of the aforesaid Act and put the said flats to auction, to realize the loan amount. Respondents 3 to 56 herein participated in the auction conducted by the banks and being the highest bidders, deposited the bid amounts. There are also some civil suits pending before the civil courts. One such suit is filed by the appellant herein against the purchasers of the flats and the banks on the ground that there is interference by them and there are also other suits filed by the banks for recovery of money alleging that, further amounts are due even after realizing the sale proceeds by way of auction of the secured assets. So far as the present writ petition is concerned, it is filed alleging that the purchasers of the flats have also entered into separate construction agreements with the appellant and in terms of the said agreement, the appellant is entitled to retain possession of such flats in view of the charge created in favour of the appellant, and, as such, respondents 1 and 2, banks, had no valid right to invoke the provisions under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and to put the said flats for sale. 4. The case of the appellant is that as much as it is not a borrower and cannot be treated as a debtor within the meaning of the provisions of the said Act, as such, the sale of such flats in favour of respondents 3 to 56 is illegal. 5. Counter affidavits are filed by respondents 1 and 2 and the purchasers of the flats. It is the case of the respondents that as much as the appellant has already sold the undivided share in favour of the intending purchasers and the original purchasers of the flats have obtained loans by mortgaging the said properties, they have rightly invoked the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It is stated that after completion of construction of flats, appellant has handed over the flats in favour of the purchasers and as the purchasers have defaulted in paying the loan amounts, respondents 1 and 2, duly following the provisions under the said Act and the rules made thereunder, had taken possession of the said flats and put them to auction and respondents 3 to 54, are bona fide purchasers in such auction. 6. Heard Sri VLNGK Murthy, learned counsel for the appellant, Sri Deepak Bhattacharjee, learned counsel for respondents 1 and 2, Sri V.V. Narasimham for the unofficial respondents and learned G.P. for Home for respondents 57 and 58. 7. It is submitted by Sri VLNGK Murthy, learned counsel for the appellant, that in view of the provisions under Section 34 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the jurisdiction of the civil court is barred and hence there is no other remedy available to the appellant. It is further submitted that though there is a remedy of appeal under Section 17 of the said Act, the same is confined only to a borrower but not to a third party like the appellant herein. It is submitted that a composite reading of the provision under Sections 17(1) and 17(3) of the said Act would go to show that the remedy of appeal provided under the said Act is only to a borrower and not to any other person. Though several other contentions are also advanced by learned counsel for the appellant, namely that appellant is not a borrower and respondents 1 and 2, banks, ought not to have sold the properties without due notice to the appellant, etc., as much as we are of the opinion that several factual disputes arise for consideration and in view of the alternative remedy of appeal available to the appellant, we are not inclined to deal with such contentions on merits. At this juncture, it is relevant to extract Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the same, to the extent relevant, reads as follows: “17. Right to appeal.- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed] to the Debt’s Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken: (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub- section (4) of section 13 taken by the securedcreditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and required restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.” 8 . Section 13 (1) of the said Act empowers the secured creditor to enforce the security credited in his favour without the intervention of the Court or Tribunal, in accordance with the provisions of the said Act. In case even after issuance of notice under Sections 13(2) and 13(3) of the said Act, the borrower fails to discharge his liability in full within the period specified in subsection (2), it empowers the secured creditor to take possession of the secured assets of the borrower and sell the same to recover the debt. 9. In this case, it is not in dispute that the appellant, company, which had entered into construction agreements with intending purchasers of the flats had already conveyed title with regard to the undivided portion of the land in favour of the purchasers by way of registered sale deeds and such properties were given as security by way of mortgage to the respondent banks. The purchasers of the flats have obtained loans from respondents 1 and 2 by depositing 15% towards margin money and respondents 1 and 2, banks, have released entire loan amounts along with such margin money in favour of the appellant, which had entered construction agreements, by way of banker cheque. Though it is the case of the appellant that a charge is created in its favour to retain possession under the construction agreements and it had not handed over the possession of the flats to the purchasers, but, however, prima facie, in view of the provisions under Section 70 of the Transfer of Property Act, 1882, if there is accession to the mortgaged property after the date of mortgage, the mortgagee is entitle to such accession. Further it is also the case of the respondent banks that after completion of construction, flats were handed over the borrowers and possession was taken from them when they defaulted to repay the loan amounts. It is also submitted by learned counsel appearing for the respondent banks that construction agreements cannot be taken into consideration as much as they were not properly stamped in accordance with the provisions of the Indian Stamp Act, 1899 and also not registered as required under the Registration Act, 1908. But, however, as we are of the view that a remedy of appeal is also available to the appellant under the said Act, we are not recording any finding on such contentions. From various contentions raised by the learned counsels, several factual disputes arise for consideration. Even, the appellant can avail the remedy of appeal as contemplated under Section 17 of the said Act. Though it is contended by learned counsel for the appellant that remedy of appeal is available only to a borrower, but a comprehensive reading of the provision under Section 17(1) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, would make it clear that any person can file an appeal including the borrower. Even from a perusal of the proviso to Section 17(1) of the said Act, it prescribes different set of fee to the borrower and to the person other than the borrower. It also makes it clear that the appellant as well can file an appeal under Section 17(1) of the said Act. 10. For the aforesaid reasons, we are of the view that the learned single Judge rightly rejected to entertain the writ petition in view of the availability of alternative remedy of appeal to the appellant. 11. Accordingly, this writ appeal is also dismissed, granting liberty to the appellant to avail remedy of appeal, if it is so aggrieved, for redressal of its grievance, if any. It is clarified that any observations made in this order or in the order of the learned Single Judge shall not be taken as an expression of opinion on any issues, which arise for consideration. If any such appeal is filed by the appellant, the same shall be considered independently without being influenced by any such observations. No order as to costs. _______________ ANIL R. DAVE, CJ. 3rd April, 2008 MRR _____________________ R. SUBHASH REDDY, J.