IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH : HYDERABAD MONDAY, THE TWENTIETH (20TH) DAY OF SEPTEMBER TWO THOUSAND AND TEN Present: THE HON’BLE SRI JUSTICE D.S.R.VARMA & THE HON’BLE SRI JUSTICE G.V.SEETHAPATHY W.P.No.28538 of 2008 & W.P.No.2091 of 2009 W.P.No.28538 of 2008: Between: ING Vysya Bank Ltd., Hanumakonda Branch Warangal district, rep. by its Authorised Officer … Petitioner And: M/s Balaji Godowns, having its place of business at H.No.2-7-1415, Vasanthanilayam, Vijayapal Colony, Hanamakonda, Warangal, rep. by its Managing Partner Sri M. Suryanarayana Rao & others … Respondents W.P.No.2091 of 2009: Between: M/s Balaji Godowns Vidyanagar Colony, Khammam Road, Warangal, rep. by its Managing Partner Sri M. Suryanarayana Rao & another … Petitioners And: The Cotton Corporation of India Ltd., (A Government of India Undertaking) having its registered office at Navi Mumbai, rep. by its Branch Manager, Pochamma Maidan Area, Warangal & others … Respondents THE HON’BLE SRI JUSTICE D.S.R.VARMA & THE HON’BLE SRI JUSTICE G.V.SEETHAPATHY W.P.No.28538 of 2008 & W.P.No.2091 of 2009 COMMON ORDER: (Per the Hon’ble Sri Justice G.V.SEETHAPATHY) (i) W.P.No.28538 of 2008 is filed by ING Vysya Bank Ltd., Hanumakonda, seeking writ of Certiorari calling for the records pertaining to SA No.195 of 2007 from the 3rd respondent-Debts Recovery Tribunal, Hyderabad and to quash the order dated 26.12.2008 passed by the 3rd respondent as invalid and illegal. (ii) W.P.No.2091 of 2009 is filed by M/s Balaji Godowns and its Managing Partner, Sri M. Suryanarayana Rao, who are the respondents 1 and 2 in WP No.28538 of 2008, seeking writ of Mandamus declaring the action of the first respondent-The Cotton Corporation of India Ltd., sopping utilization of petitioner’s five rural godowns with a total capacity of 25,000 metric tonne situated at Jammikunta, Karimanagar district, on the grounds that the order dated26.12.2008 in SA No.195 of 2007 passed by the Debts Recovery Tribunal, is suspended for a period of eight weeks, as arbitrary, illegal and without jurisdiction and consequently to direct the first respondent to utilize the said godowns in terms of the lease agreement dated 27.12.2008. 2. Heard the learned counsel for the petitioner and the learned counsel for the respondents in both the writ petitions. Perused the records. As both the writ petitions are between the same parties and relate to same subject matter, they are heard together and are being disposed of by this common order. 3. The brief facts of the case to the extent relevant may be stated thus: Mr. M. Suryanarayana Rao, Managing Partner and four other partners of M/s Balaji Godowns, availed term loan of Rs.44 lakhs each from ING Vysya Bank Ltd., for construction of five godowns. As a security for the said loan, the five godowns were mortgaged with the bank. The godowns were to be given to A.P. Warehousing Corporation on lease and it was agreed in the form of a Tripartite Agreement dated 22.03.2002, entered into between the Bank, owners of the godowns and Warehousing Corporation, to the effect that the lease rents shall be appropriated to the loan amount. But due to the disputes between the owners of the godowns and the Warehousing Corporation and Food Corporation of India, the Warehousing Corporation did not occupy the godowns, and they were under the custody of the owners till the possession of the same was taken by the Bank on 13.08.2007. The Corporation did not take possession of the godowns and the lease agreements were not acted upon and no payment was made by the borrowers towards loan and the loan accounts have been classified as NPA accounts in the year 2005. The petitioner bank being secured creditor, invoked the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement Act (for short ‘the Securitization Act’) and issued demand notice dated 15.07.2006 under Section 13(2) of the Securitization Act giving 60 days to the borrowers to discharge the outstanding dues. The total liability under five term loan accounts together was Rs.440.86 lakhs with interest from 01.10.2007. The borrowers and the mortgagors got issued reply notice 23.07.2006, inter-alia, stating that the lessee i.e., Warehousing Corporation has to be put on notice to pay the rents. After considering the said objection, the bank rejected and communicated the same to the borrower. After waiting for about five months, the Bank issued possession notice under Section 13(4) of the Securitization Act on 07.02.2007 and published the same in two newspapers. As no payment was forthcoming, the bank obtained physical possession of the godowns under Section 14 of the Securitization Act. The bank issued a notice of sale on 16.10.2007 under Rule 8(6) of the Rules under Securitization Act, giving 30 days time to the borrower and proposed to sell the property on 30.11.2007. The Bank issued paper publication of proclamation of sale on 27.10.2007 under Rule 9(1) in two newspapers. Questioning the action of the bank, the Balaji godowns and its partners filed SA No.195 of 2007 before the Debts Recovery Tribunal and obtained stay of further proceedings. The petitioner bank filed a petition for vacating stay. The main case taken up for enquiry and the Managing Partner was examined as AW.1. The authorised Officer of the bank was examined as RW.1 and certain documents were marked on both sides. Thereafter, the impugned order was passed by the Debts Recovery Tribunal on 26.12.2008 allowing SA No.195 of 2007 with costs and appointing an Advocate Commissioner one Mr. Deshpande, directing him to take possession of the godowns from the bank and to re-deliver the same to the applicants with the police aid, and to break open the locks etc. and to file compliance report on or before 30.12.2008. Challenging the said order, WP No.28538 of 2008 is filed by the Bank. 4. The respondents 1 and 2 M/s Balaji Godowns and its Managing Partner, Sri Suryanarayana Rao, filed counter contending in brief as follows: The writ petition is not maintainable, since an appeal is provided against the impugned order under Section 18 of the Securitization Act to the Debts Recovery Appellate Tribunal and without exhausting the statutory remedy, the bank is not entitled to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Under Grameena Bhandaran Yojana Scheme, the Government of India announced 25% subsidy for construction of the godowns and the loan availed by the participants would be re-financed by NABARD up to 95%. Acting under the scheme, A.P. Warehousing Corporation invited tenders for construction of godowns at the identified places. Five partners of Balaji Godowns participated in the tender process for construction of godowns at Jammigunta village of Karimnagar district. The partners individually purchased an extent of Ac.1.11 guntas of land in Sy.Nos.1598 and 1600 of Chelpur village, Huzurnagar Mandal. They also purchased an extent of Ac.1.00 of land in the name of the Firm. The Warehousing Corporation entered into an agreement on 19.09.2001 with Food Corporation of India, whereunder, Food Corporation of India agreed to take over the godowns for seven years under lease guarantee scheme. The partners of the firm agreed to construct godowns each of a capacity of 500 MTs and handed over the same to Warehousing Corporation at stipulated rent. They approached the petitioner bank for grant of loan facility, and as the guidelines for grant of subsidy were not finalized, the petitioner bank agreed to lend half of the project cost i.e., Rs.44,00,000/- as loan. The construction of the godowns commenced and tripartite agreement was entered on 22.03.2002 with Warehousing Corporation as a lessee and the partners of the firm being investors as lessors and the petitioner bank as a third party. The lessee agreed to make payment of rent to the bank to be liquidated against the loan account. The petitioner bank, however, failed to realize the amounts at one go and made payments on piecemeal basis and the final payment was made on 17.07.2004. The loans granted by the petitioner bank are re-financed by NABARD. The godowns were not completed within the stipulated time. The Warehousing Corporation and the Food Corporation of India defaulted in taking godowns. In May 2004, the godowns were completed and certified as ready for occupation. The bank instituted OA No.159 of 2007 before the Debts Recovery Tribunal, Hyderabad for recovery of the amount covered by the loan. The bank also initiated proceedings under Securitization Act. To the demand notice dated 15.07.2006 issued by the bank, the respondents sent a reply referring to the tripartite agreement. Instead of putting the Warehousing Corporation on notice, the bank wrongly took possession of the godowns and notified the same for sale. At that stage, the respondents filed SA No.195 of 2007 before the Debts Recovery Tribunal under Section 17 of the Securitization Act and obtained stay of proceedings. After recording the evidence, the Debts Recovery Tribunal by order dated 26.12.2008 allowed SA No.195 of 2007 and appointed Advocate Commissioner, who delivered possession of the godowns to the respondents on 27.12.2008. The fact that the Warehousing Corporation had not taken over possession of the godowns in terms of the tripartite agreement does not absolve it of its obligations under the agreement. Admittedly, under the scheme, the bank has availed subsidy amount and instead of giving credit to the said amount, even the said portion is also shown as outstanding together with interest. Further the bank has charged the abnormal rate of interest as against stipulated 8%. If the subsidy amount is adjusted to the loan account and if the interest is scaled down and if the amounts already paid by the respondents are given credit in a sum of Rs.2.10 crores, there will be no outstanding amount payable to the bank. The total loan amount is Rs.220 lakhs. If 25% subsidy in a sum of Rs.93.75 lakhs is deducted, the actual loan would be Rs.126.26 lakhs, which is payable with interest at 8% per annum, as against which, the respondents have paid Rs.210 lakhs. 5. The respondents 4 and 5, the partners of Balaji Godowns, got themselves impleaded by filling WP MP No.19735 of 2009, which was ordered on 04.08.2009, and filed separate counter contending in brief as follows: The first respondent-Balaji Godowns, Hanumakonda is the name of the registered partnership and it is neither borrower nor a guarantor. Sri Balaji Godowns is a collective name for five godowns at Chelpur village in Karimanagar district. The respondents 4 and 5 have strong objection to use the firm name in these proceedings. The bank has already filed OA No.159 of 2007 before the Debts Recovery Tribunal, Hyderabad, for recovery of amount due and for enforcement of the securities. The petitioner bank has not taken possession of any of the secured assets and they continued under the possession of the guarantors. The Cotton Corporation of India (for short ‘CCI’) is presently in occupation of the godowns as per the lease agreement with the godown owners. After the termination of the lease, CCI is bound to deliver the godowns back to the respective owners. The demand notice dated 15.07.2006 issued by the bank under Section 13(2) of the Securitization Act is invalid. The bank has taken wrongful possession of the movables also. The alleged proclamation of sale issued and published are not in compliance with the mandatory requirements of Rule 8(5) of the Rules. The order of 3rd respondent- Debts Recovery Tribunal is valid. The bank if aggrieved by the said order, has remedy by way of appeal before the Debts Recovery Appellate Tribunal. The present writ petition is not maintainable. 6. While admitting the writ petition on 27.12.2008, this Court in WP MP No.3738 of 2008 granted interim suspension of the order of the Debts Recovery Tribunal for a period of eight weeks. 7. Subsequently, M/s Balaji Godowns and its partner Mr. Suryanarayana Rao, filed WP No.2091 of 2009, contending that the Debts Recovery Tribunal by order dated 26.12.2008 allowed SA No.195 of 2007 and appointed Mr. G.K. Deshpande, Advocate as Commissioner for effecting redelivery of five godowns to the petitioners and the Advocate Commissioner executed warrant on 27.12.2008 under a panchanama. The CCI executed a lease agreement on the same day i.e., 27.12.2008 and took possession of the godowns. Forty percent of the godowns were already utilized with the stocks. On 28.01.2009 the CCI stopped utilization of the godowns and also 150 Hamali labourers and Forklift machine provided by the petitioners stating that the High Court passed an order of suspension of the orders of the Debts Recovery Tribunal for eight weeks. Aggrieved by the same, Balaji Godowns filed W.P.No.2091 of 2009 seeking writ of Mandamus, declaring the action of the CCI in stopping utilization of the godowns as illegal and consequently to direct the CCI to utilize the godowns in terms of the lease agreement dated 27.12.2008. 8. The 2nd respondent-ING Vysya Bank, filed counter-affidavit, reiterating the contentions raised by them in W.P.No.28538 of 2008. 9. Admitted facts may be stated thus: The 2nd respondent in WP No.28538 of 2008 and 4 four others availed term loan of Rs.44 lakhs each from the petitioner bank for construction of five godowns and by way of security, they mortgaged the said godowns in favour of the petitioner bank. There was a tripartite agreement dated 22.08.2002 between the bank, owners of the godowns and A.P. Warehousing Corporation-lessee, where under, it was agreed that the lease amounts payable by the Corporation be appropriated towards the amounts due under the loan account. The loan accounts were classified as NPA account in the year 2005 and the bank being secured creditor invoked the provisions of Securitization Act and issued notice under section 13(2) thereof on 15.07.2006 demanding the borrowers to discharge the outstanding dues in a sum of Rs.440.86 lakhs. The borrowers issued a reply notice dated 23.7.2006 contending that the lessee is to be put on notice to pay the amount. The bank rejected the said objection and proceeded further and issued possession notice under Section 13(4) of the Securitization Act on 07.02.2007 and published the same in two newspapers. Subsequently, the bank obtained physical possession of the godowns, which are secured assets with the aid of the revenue authorities under Section 14 of the Securitization Act. The Bank also issued sale notice on 16.10.2007 under rule 8(6) of the Rules proposing to sell the property on 30.11.2007 and issued proclamation by way of publication on 27.10.2007. Questioning the action of the bank, the respondents filed SA No.195 of 2007 and obtained stay of further proceedings from the Debts Recovery Tribunal. After recording of evidence and hearing both sides, the Debts Recovery Tribunal by order dated 26.12.2008 allowed SA and appointed an Advocate Commissioner, Mr. Desh Pande, directing him to take possession of the godowns from the bank and redeliver the same to the applicants i.e., borrowers with police aid and further directed to report compliance before 30.12.2008. Impugning the said order, the present writ petition is filed. 10. Learned counsel for the respondents would contend that the remedy for the petitioners if aggrieved by the order passed by the Debts Recovery Tribunal under Section 17 of the Securitization Act is to prefer an appeal under Section 18 of the Securitization Act to the Debts Recovery Appellate Tribunal and hence, the present writ petition invoking the jurisdiction of the Court under Article 226 of the Constitution is not maintainable without exhausting the statutory remedy available. 11. Learned counsel for the petitioner would submit that the impugned order was passed by the Debts Recovery Tribunal on 26.12.2008 and the Advocate Commissioner was permitted to take police aid and also to break open the locks of the godowns and redeliver possession to the borrowers with further direction that the Commissioner shall file his report on 30.12.2008 and thus, the Debts Recovery Tribunal has virtually denied the fair opportunity to the petitioner bank to challenge the order by way of appeal before the Debts Recovery Appellate Tribunal and in view of the short interregnum of three days between the date of impugned order and the date fixed for compliance by the Advocate Commissioner, the petitioner bank was constrained to rush to this Court and invoke extraordinary jurisdiction under Article 226 of the Constitution of India. 12. This writ petition was filed on the very next day of passing of the impugned order i.e., 27.12.2008 and this Court granted interim suspension. On 30.01.2009 it was represented that even after communication of the interim suspension, the Advocate Commissioner has taken possession from the petitioner bank and delivered the possession of the godowns to the respondents on 27.12.2008. As the possession was handed over to the respondents, the petitioner bank filed MA No.156 of 2008 in SA No.195 of 2007 for redelivery of the possession of godowns. It was complained that the said M.A.No.156 of 2008 was not taken up for disposal for one reason or other by the Debts Recovery Tribunal. Therefore, the petitioner bank filed WP MP No.1655 of 2009 seeking direction to Debts Recovery Tribunal to dispose of the MA No.156 of 2008. This Court by order dated 30.01.2009 issued a direction to Debts Recovery Tribunal to consider and dispose of MA No.156 of 2008. Subsequently, the said application was dismissed by the Debts Recovery Tribunal. Questioning the same, the petitioner bank filed WP MP No.3675 of 2009 seeking suspension of the order dated 05.02.2009 in MA No.156 of 2008. This Court by order dated 13.02.2009 suspended the said order dated 05.02.2009 observing as follows: “Having gone through the order of the Debts Recovery Tribunal dated 05.02.2009 we are, prima facie, of the opinion that the order of the Debts Recovery Tribunal in M.A.No.156 of 2008 dismissing the said application and in refusing to implement the interim order of this Court dated 27.12.2008 is without any jurisdiction. Whether it is a final order or interim order, an order passed by a Constitutional Court while exercising its powers under Article 226 of the Constitution of India is binding on the Tribunals, Subordinate Courts and the parties to the proceedings. The Debts Recovery tribunal cannot ignore the orders of this Court. In fact, this Court indicated in its earlier order dated 30.01.2009 that ‘when once the order of the Tribunal is suspended, position obtaining as on the date of passing of the order of the High Court shall be maintained.’ Accordingly, we suspend the order dated 05.02.2009 in M.A.No.156 of 2008 in S.A.No.195 of 2007 of the Debts Recovery Tribunal, Hyderabad.” 13. Meanwhile, on 05.02.2009 the borrowers filed WP No.2091 of 2009 seeking declaration that the action of the CCI in stopping utilization of the godowns as per the lease agreement dated 27.12.2008 on the ground that the order dated 26.12.2008 in SA No.195 of 2008 is suspended, is arbitrary and illegal. Along with the said writ petition, the borrowers filed WP MP No.2642 of 2009 seeking interim direction to the CCI to utilize the five godowns in terms of the lease agreement dated 26.12.2008. It is stated that meanwhile the CCI expressed its readiness to take the godowns on lease and executed the lease agreement on 27.12.2008 and took possession of the godowns and started its operation from 29.12.2008. It is alleged by the borrowers who are petitioners in WP No.2091 of 2009 that from 28.01.2009, the CCI has stopped utilization of the godowns on the ground that the order of the Debts Recovery Tribunal was suspended. This Court while passing the interim order dated 13.02.2009 in WP MP No.2642 of 2009 directed as follows: “Insofar as the interim relief claimed by the borrower seeking a direction to the Cotton Corporation of India Limited to utilize all the five godowns is concerned, Sri S. Lakshma Reddy and Sri Nataraj Sarma, learned counsel appearing for all the partners of the firm and Sri A.K. Jaya Prakash Rao, learned counsel appearing for Cotton Corporation of India Limited and Sri S.R.Ashok, learned senior counsel appearing for the bank, agreed for the following order: (1) The firm and its partners have no objection for making utilization of the five godowns by lessee-Cotton Corporation of India, with total capacity of 25,000 M.T. (1,25,000 sq.ft.) at Rs.3.50 per sq. ft. per month from 27.12.2008. (2) The lease shall be tentatively for a period of nine months and it will be subject to further orders; (3) That the Cotton Corporation of India Limited shall deposit the lease amount with the ING Vysya Bank from 27.12.2008 onwards up to end of February 2009 by the first of March, 2009 and the successive rents by the first of every succeeding month in equal proportion in each of the five accounts after deducting the statutory T.D.S. The said lease amount payable by the Cotton Corporation of India Limited is on behalf of M/s Balaji Godowns and it will be subject to further orders that will be passed in these two writ petitions as well as in any other relevant proceedings; (4) Further, if there are any minor repairs that are required to be undertaken to the godowns, the Cotton Corporation of India Limited shall carry out the same by putting the borrower as well as the creditor bank on advance notice and furnish account of such godown; (5) The parties are at liberty to approach this Court for any clarification or for further directions.” 14. It is stated that after expiry of nine months lease, the CCI vacated the premises and as the godowns were lying vacant and were not fetching any income by way of rents, the petitioners filed WP MP No.7033 of 2010 to implead the Central Warehousing Corporation, which came forward to take the godowns on lease for the benefit of Food Corporation of India, at the rate of Rs.2/- per sq. ft. per month. 15. There is a dispute between the parties regarding the amounts allegedly due to the bank by the borrowers. While the bank claims that a total amount of Rs.440.86 lakhs was due from the borrowers, the borrowers made a counter-claim against the bank stating that the bank has availed subsidy amount, but failed to give credit for the said amount and charged abnormal rate of interest as against the stipulated rate of 8% even after obtaining refinance by NABARD. It is not disputed that during pendency of the proceedings, certain amounts were remitted by way of rentals by the lessee. According to the borrowers, if the subsidy amount is adjusted towards the loan amount and the interest is scaled down in accordance with the scheme and the amounts paid, during the pendency of the proceedings are given credit to, there will be no outstanding amount due to the bank and the proceedings under the Securitization Act are not maintainable. 16. At one stage of the proceedings, during the course of hearing on 25.02.2010 both parties agreed to explore the possibilities to settle the matter amicably to avoid litigation and unnecessary financial burden to both and they were directed to report the out come of such effort and in the meanwhile, it was directed that there shall not be any creation of any third party interest over the five godowns. No such amicable settlement is reported. 17. The dispute as to the quantum of the amount allegedly due by the borrowers or as to the counter-claim made by the borrowers does not fall for consideration in the present proceedings under Article 226 of the Constitution. 18. The prayer in WP No.28538 of 2008 is for quashing the order passed by the Debts Recovery Tribunal in SA No.195 of 2007 under section 17 of the Securitization Act. The Securitization Act is a special Act and a self-contained enactment providing for necessary machinery for implementation of the provisions of the said Act. Section 18 of the Act provides remedy by way of appeal to the party aggrieved by the orders passed by the Debts Recovery Tribunal. When specific descriptive statutory remedy is thus made available under the provisions of the Special Act, invoking extraordinary jurisdiction of this Court under Article 226 of the Constitution is not called for. 19. Learned counsel for