THE HON’BLE SRI JUSTICE P.S.NARAYANA WRIT PETITION NO. 22997 OF 2007 BETWEEN: M/s Kura Homes Pvt Limited represented by its Executive Director ------ PETITIONER AND Central Bank of India, R.P.Road, Secunderabad and one another ----- RESPONDENTS THE HON’BLE SRI JUSTICE P.S.NARAYANA WRIT PETITION NO. 22997 OF 2007 ORAL ORDER: 1. Heard Sri D.V. Sitharam Murthy, learned counsel appearing for the petitioner and Sri Vasudeva Rao, learned counsel representing the first respondent. 2. This Court ordered notice before admission on 1.11.2007 and granted interim suspension for a limited period, which is being extended from time to time. A counter affidavit is filed by the first respondent and a reply affidavit also had been filed. 3. The counsel on record had taken this court through the respective pleadings of the parties and made submissions in elaboration relying on certain decisions as well. 4. The Writ Petition is filed for issuance of an appropriate writ, order or direction more particularly one in the nature of Writ of Certiorari to call for the records relating to and connected with Criminal M.P.No. 1413 of 2006 on the file of the Chief Metropolitan Magistrate, Hyderabad and quash or set aside the same, as also consequential proceedings i.e., Possession Notice issued by the Authorized Officer of the first respondent-Bank as being in contravention of the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short ‘the Securitization Act) and pass such other or further order or orders as are deemed fit and proper in the circumstances of the case. 5. The petitioner is a Private Limited Company with its registered office at Secunderabad. The petitioner undertakes construction of residential flats. The petitioner-Company undertook construction of residential flats known as Sri Sai Residency in an extent of 5500 sq.yds of land, covered by premises bearing D.No. 2-3- 421 to 451 and 451/H1 to H112, Nallagutta, Secunderabad. The second respondent entered into an agreement for construction of flat bearing No. C-103 in the first floor of Sri Sai Residency admeasuring 1375 S.ft in the land of 75 Sq.yds, out of the demarcated land. The said agreement was registered as Document No. 290 of 2003 in the office of the Sub-Registrar, Secunderabad. The said agreement was executed on 27.2.2003. It is respectfully submitted that the construction agreement and subsequent work order/agreement for completion of the flat as above between the petitioner and the second respondent was preceded by a transaction of sale in respect of the land in which the construction is to take place. The said transaction borne out of registered document bearing No. 289 of 2003 executed on 27.2.2003 is between the owners of the said land and the 2nd respondent in respect of the 75 sq.yds of land. 6. The petitioner in pursuance of the construction agreement and subsequent Work Order/Agreement for completion of the flat, fulfilled its part of the obligation under the contract by duly constructing the flat bearing No. C-103 in accordance with the specifications agreed to between parties. However, the 2nd respondent acted contrary to Clauses 16 and 20 of the Construction Agreement by not releasing the amounts due to the petitioner towards the cost of the flat. Certain other disputes also arose between the petitioner and the 2nd respondent since the amounts due were not paid in full and on time by the 2nd respondent . It appears that the 2nd respondent had obtained a loan duly mortgaging the land and title documents with the Central Bank of India, the first respondent herein. 7. Further, it is stated that unless the entire amount is paid as per the Clauses 16 and 20 of the construction agreement, neither the 2nd respondent nor the 1st respondent would acquire any interest in the flat. Since the 2nd respondent was also involved in the disputes with the 1st respondent in regard to loan transaction apprehending that the respondents one and two would alienate the flat, the petitioner filed suit in O.S.No. 448 of 2006 on the file of the Court of First Junior Civil Judge, City Civil Court, Secunderabad for protection of the above property from any alienation compromising its interest. The title in the constructed portion of the flat not having been passed on to the 2nd respondent, neither of the respondents had acquired any interest or title in the subject property and the said suit is pending. 8. Further, it is stated that the first respondent initiated proceedings against the second respondent under the Securitisation Act, the details of which, the petitioner is not aware. On noticing that the first respondent was trying to take possession of the flat with the help of the police of Ramgopalpet Police Station and on enquiring with the officers of the first respondent , the petitioner came to know that the Chief Metropolitan Magistrate, Hyderabad in Criminal M.P.No. 1413 of 2006 appointed an Advocate Commissioner to take physical possession of the property and handover and to take necessary help from the concerned police. The Commissioner was further directed to take inventory of the items lying in the schedule premises if necessary by breaking open the lock. The said warrant was issued on 25.10.2007 and was returnable by 21.11.2007. 9. It is further stated that the first respondent could not have made an application under Section 14 of the Act having regard to the facts and circumstances of the present case, of which it is well aware the first respondent in the guise of the suit in O.S.No. 448 of 2006 filed by the petitioner, could not have acted in pursuance of ‘Security Interest”, allegedly created by the second respondent since the very right, title or interest on the subject property in the second respondent is itself sub judice in the suit in O.S.No. 448 of 2006. The debt, if any contracted by the second respondent with the first respondent, in the context of the facts and circumstances of the case, cannot be ‘secured debt’ nor is the subject property liable to be considered as ‘secured asset’ of the Bank. The application under Section 14 of the Act could be maintained only if it is determined that the property sought to be taken possession of is the secured asset of the Bank and the same being a subject matter of a legally instituted civil proceedings in O.S.No. 448 of 2006, the filing of the present application by the Bank without impleading the petitioner is clearly an abuse of process of law. 10. Further it is averred that physically and factually, the possession in pursuance of the order impugned is liable to be taken from the petitioner and therefore, the petitioner ought to have been put on notice in the facts and circumstances of the case. The petitioner is neither a guarantor nor a borrower, as defined under 2(f) of the Act and thus the Bank cannot legally seek to oust the petitioner from possession of the subject property in the guise of proceedings against its alleged borrower, the second respondent herein. 11. It is also stated that the provisions of the Act have no application as the sale in favour of the 2nd respondent is a conditional sale and the bar under Section 31(e) of the Act operates. Further it is stated that the petitioner had not been put on notice at any stage of the proceedings and under cover of the order that is impugned, the Advocate Commissioner is seeking to forcibly take possession of the property. At any rate, a Civil Court of competent jurisdiction is already seized of the matter and there is an injunction in operation. Hence, the impugned order is contrary to the injunction order. 12. It is also stated that in pursuance of the impugned order, respondent- Bank is allowed to take possession of the same and deal with it in accordance with Section 14 of the Act and the petitioner would be put to severe jeopardy. The said consequence would also lead to absurd results since when the rights if any of the 2nd respondent in relation to the subject property are sub judice in O.S.No. 448 of 2006, a Bank claiming to be a secured creditor in respect of that subject property would get to deal with the property, which is not the intent or the object of the Act. The petitioner is not a party to the proceedings in the Court of the Chief Metropolitan Magistrate, Hyderabad, hence, it could not obtain certified copy. In such circumstances, dispensing with the filing of the certified copy has also been prayed for, which had been ordered by this Court. In the light of the facts and circumstances, the relief, as specified supra, has been prayed for in the present Writ Petition. 13. In the counter affidavit filed by the first respondent, it is stated that the second respondent had borrowed a sum of Rs.21 lakhs from the Bank as housing loan for purchasing Flat No. C-103 in Sri Sai Residency at Nallagutta, Secunderabad on 24.2.2003. The amount was to be released to the builder/petitioner for construction of the flat. The borrower executed the loan documents and availed the loan. A sum of Rs. 20,50,000/- was paid to the Writ Petitioner by the bank from time to time. The above Flat No. C-103 was mortgaged to the bank as security for repayment of the loan by way of equitable mortgage. The said loan was repayable in monthly instalments of Rs. 21,708/- commencing from 28.2.2004. As the borrower defaulted in payment of the instalments, this bank has taken action under provisions of the Securitisation Act and issued notice on 27.10.2005 and demanded payment within the statutory period of 60 days. A paper publication was also made. 14. It is further stated that as the borrower failed to comply with the said notice, the bank was compelled to file a petition under Section 14 of the Securitisation Act, in the Court of Chief Metropolitan Magistrate, Hyderabad. When the officials went to serve possession notice, they were informed of the injunction orders passed in O.S.No. 448 of 2006, now re-numbered as O.S.No. 1381 of 2007 in the Court of Principal Rent Controller-cum-XVIII Junior Civil Judge at Secunderabad. 15. It is also stated that in the above background, it is clear that the suit was filed by the builder obviously in collusion with the borrower to stall the recovery proceedings and to defeat the claims of the bank. 16. It is also further stated that the second respondent- borrower informed the bank by his letter dated 24.2.2003 that a sum of Rs. 5.60 lakhs was paid by him to the petitioner as margin money and enclosed the receipt of the plaintiff dated 7.2.2003 for the said payment. Thus the Writ Petitioner having already received the amount of margin money has no cause of action to file the suit also. 17. It is stated that the Bank is having a first charge on the property in view of the mortgage created in their favour and the Writ Petitioner cannot claim any precedence over the rights of the bank. 18. Further, it is stated that the Writ Petitioner filed O.S.No. 448 of 2006 on the file of first Junior Civil Judge, Secunderabad and obtained interim injunction against the bank in I.A.No. 404 of 2006. The said injunction petition was dismissed by the court on 12.10.2006, again the petitioner filed CMA.No. 1 of 2007 in the Court of first Additional Chief Judge, City Civil Court, Secunderabad, and obtained interim injunction. After contest, the injunction was vacated and the appeal was dismissed on 16.7.2007. Now the petitioner has filed the Writ Petition only to prolong the litigation. The petitioner is also guilty of laches and the affidavit of the petitioner is also vague. 19. Further, it is averred that the above suit O.S.No. 448 of 2006 was dismissed against the 2nd respondent, for non-prosecution. The case is now transferred to the court of Principal Rent Controller, Secunderabad. Even though the petitioner claimed that Rs. 5.60 lakhs is due to him, the petitioner did not pay court fee on the said amount but paid only nominal court fee and filed an injunction suit. 20. As regards the contention in the Writ, it is denied that the petitioner has to get any amount towards the cost of the flat. The bank has paid Rs. 20,50,000/- to the petitioner and another sum of Rs. 5,60,000/- was paid by the second respondent . The petitioner having failed in his attempt to obtain injunctions in the lower court has filed the Writ Petition on untenable grounds. 21. It is also averred that the petitioner is only a licencee and does not have any right over the immovable property. The second respondent having purchased undivided share of land and got the flat constructed, is having right, title and interest in the property, and the same is mortgaged in favour of the bank. 22. The bank is entitled to proceed under Securitisation Act for recovery of their dues, and Writ Petition is totally misconceived and untenable. Since the second respondent is the borrower, the bank can proceed against him. The petitioner has to proceed under Section 17 of the Securitisation Act to challenge any action taken under the said Act, and as such Writ Petition is not maintainable. 23. Further, it is stated that the bank had taken action as per Securitisation Act and obtained orders of Chief Metropolitan Magistrate as per Section 14 of the said Act. The relief sought in O.S.No. 448 of 2001 is only to grant an injunction, and it is not correct to say that the right, title or interest in the property is sub judice. It is denied that the debt is not a secured debt, or the asset is not a secured asset. Further averments also had been pleaded. 24. In the reply affidavit filed in paragraph (5), it is stated that it is true that the second respondent borrowed Rs.20,50,000/- and it is also true that the said amount was paid for the purpose of construction of the flat. However, the balance of Rs. 5,25,000/- is outstanding from the second respondent and as per the construction agreement and as per Clause 16 of the Construction Agreement, the second respondent shall not sell, transfer, convey, mortgage, charge or in any manner encumber or deal with or dispose of the said flat or parking area or any part thereof till all the dues are fully paid to the petitioner and the second respondent obtains previous consent to do so in writing. As per Clause 20, the possession shall not be given till complete payment is made. Hence, no security interest has been created in favour of the first respondent and therefore the provisions of the Securitization Act have no application in terms of Section 31(e) of the Act. The other averments relating to the second respondent becoming defaulter etc., are not admitted for want of knowledge. 25. Further a specific stand had been taken that the petitioner could not collude with the second respondent as alleged. It is also stated that the second respondent did not pay the margin money of Rs. 5,60,000/- as alleged. He obtained a receipt dated 7.2.2003 by issuing a cheque for the said amount and the cheque was duly presented but dishonoured on account of insufficient funds. 26. Further it is averred that the second respondent was not competent to create a mortgage in favour of the first respondent and inasmuch as he cannot be said to be owner of the flat. The land owners entered into a development agreement for construction of flats. No sale deed was executed in respect of the flat in favour of the second respondent . He merely purchased proportionate extent of 75 sq.yds. He therefore, cannot be said to be the owner of the flat as no sale deed was executed in his favour. He therefore, could not have created a security interest in favour of the Bank. Hence, the Bank cannot have any charge or claim over the property and the alleged claim of the bank cannot take precedence over the rights of the petitioner. 27. Further it is stated that an application was filed for setting aside the default order in O.S.No. 448 of 2006 and the same is pending. Inasmuch as the suit was filed for bare injunction, there is no requirement to pay any Court fee on Rs. 5,60,000/-. 28. Further it is averred in paragraphs 12 and 13 that the petitioner is only a licensee and does not have any right over the property, is not correct. Purchase of undivided share of land by the second respondent does not create ownership over the flat in the absence of the sale deed executed by the land owner. The second respondent could not have crated a mortgage in favour of the bank having regard to Clause 16 of the Construction Agreement. It cannot be said that the second respondent created a security interest in favour of the bank entitling it to invoke the provisions of the Securitisation Act. Inasmuch as the bank has acted in violation of the provisions of the Securitisation Act, the Writ Petition is maintainable and there is no requirement to file an Appeal under Section 17 of the Act. At any rate, existence of an alternative remedy cannot, in the facts and circumstances of the case, be a bar in filing the above Writ Petition. 29. The allegations and contentions in paragraphs 14 to 16 also had been denied. 30. Strong reliance was placed on decision reported in BRANCH MANAGER, STATE BANK OF INDIA VS. CHINIGEPALLI LATHANGI[1] and in K. BALA KRISHNA VS. DEBTS RECOVERY TRIBUNAL[2]. 31. In the light of the respective stand taken by the parties, liberty is given to the petitioner to agitate his rights if any, in the suits said to have been pending or pursue the other remedies available to him under law. Except making this observation, no further positive direction as such can be given in the present Writ Petition, especially in the light of the decisions of the Division Benches specified supra. 32. With the above observation, the Writ Petition is hereby dismissed. No order as to costs. __________________ P.S. NARAYANA, J DATE: 17--01--2008. KA [1] 2006 (1) ALT 20 (DB) [2] 2006 (6) ALT 695 (DB)