IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE TENTH DAY OF NOVEMBER TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE A.GOPAL REDDY and THE HON'BLE MR JUSTICE SAMUDRALA GOVINDARAJULU WRIT PETITION NO : 24193 of 2009 Between: Sreedhar Sreekakulam ..... PETITIONER AND The City Union Bank Limited having its Central Office at No.149, T.S.R. (Big) Street, Kumbakonam, Tamilnadu, rep. by its Chairman & Managing Director & Another. .....RESPONDENTS The Court made the following : HON’BLE SRI JUSTICE A. GOPAL REDDY AND HON'BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU WRIT PETITION No. 24193 OF 2009 ORDER: (Per Hon’ble Sri Justice A. Gopal Reddy) Petitioner who is the guarantor for the loan borrowed by his father from the respondent-Bank filed this writ petition to declare the proceedings of the 2nd respondent, dated 19.10.2009 rejecting the objections filed by him, dated 7.10.2009 pursuant to the notice issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘Act’), dated 13.7.2009 as arbitrary, illegal and contrary to the law laid down by the Supreme Court in Mardia Chemicals Ltd. V. Union of India ((2004) 4 SCC 311) and consequently set aside the same and to issue a direction to the respondent-Bank to grant six months time to the petitioner to repay the loan amount. It is not disputed that the account of the borrower viz., the father of the petitioner was declared as non-performing asset and thereby a notice under Section 13(2) of the Act was issued by the respondent- Bank calling upon the borrower to pay the outstanding amount specified therein with subsequent interest at the rate mentioned in the table with monthly rest from 1.6.2009 till realization within 60 days. Pursuant to the said notice, the petitioner claiming to be the guarantor for the loan account issued a notice to the respondent-Bank on 7.10.2009 contending that in the notice issued by the Bank though it is stated that the loan account has been declared as non-performing asset in accordance with the guidelines issued by the Reserve Bank of India, the proceedings of the Reserve Bank of India have not been cited in the notice, and that his father-principal borrower is willing to close the loan account by paying the appropriate amount in accordance with the one- time settlement scheme framed by the Reserve Bank of India. The mortgaged property is worth of Rs.50.00 lakhs and his family members are residing therein and that if the possession of the said property is taken, they will become shelterless. In the said notice, the petitioner also offered the bank that his father is willing to give the commercial space from out of his share on sale or rental basis to the Bank. He also undertook to close down the account by repaying the amounts before the expiry of three months from the date on which he receives the communication from the Bank about the one time settlement scheme. On receipt of the said notice, the authorized officer by the impugned reply, dated 19.10.2009 informed the petitioner that there was delay in repayment of equal monthly instalments and the account shows arrears from August, 2008 which necessitated the bank to classify the account as non-performing asset in accordance with the norms of Reserve Bank of India. Since the petitioner had already been provided sufficient time to settle the account, the Bank informed that it is unable to consider the request of the petitioner and advised to settle the dues failing which, it would proceed in accordance with the provisions of the Act. Questioning the same, the present writ petition is filed. Learned counsel for the petitioner strenuously contends that as per the ratio laid down by the Apex Court in the decision referred to supra, the Bank is under obligation to consider the objections raised in the letter addressed by the petitioner pursuant to the notice issued under Section 13(2) of the Act by reasoned order, and that inasmuch as the reasons assigned by the Bank do not clearly indicate whether the petitioner is entitled for one time settlement scheme as envisaged by the Reserve Bank of India or not, it can be said that the Bank has not considered his objections in proper perspective. The Apex Court in the decision referred to supra in para 77 only pointed out that ‘the secured creditor must bear in mind the say of the borrower before such a process of recovery is initiated so as to demonstrate that the reply of the borrower to the notice under Section 13(2) of the Act has been considered applying mind to it. The reasons, howsoever brief they may be, for not accepting the objections, if raised in the reply, must be communicated to the borrower’. A reading of the letter, dated 7.10.2009 addressed by the petitioner to the bank pursuant to the notice issued under Section 13(2) of the Act goes to show that no tenable objection has been raised with regard to the default committed by the borrower or the amounts due as mentioned in 13(2) notice nor it is stated that as per the scheme prepared by the Reserve Bank of India, as a matter of fact, the petitioner or his father is entitled to one time settlement. Proviso to Section 13 (3A) of the Act also mandates that on communication of the reasons or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A of the Act. From the said provision it is clear that after rejecting the objections, if any, further action would be taken under Section 13(4) of the Act and then only, a right of appeal under Section 17 of the Act can be exercised by the petitioner. If that be the case, as and when the follow-up action is initiated by the respondent-Bank by issuing possession notice under Section 13(4) of the Act, the petitioner can also demonstrate that he is entitled to one time settlement and the same was not considered by the Bank. In that view of the matter, it is not a fit case where this Court can interdict the impugned notice before initiation of any follow-up action by the respondent-Bank. The writ petition is accordingly dismissed. No order as to costs. _________________ (A. GOPAL REDDY, J.) ____________________ (SAMUDRALA GOVINDARAJULU, J.) NOVEMBER 10, 2009 TSR