IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC FRIDAY, THE 18TH APRIL 2008 / 29TH CHAITHRA 1930 WP(C).No. 4457 of 2008(E) ------------------------- PETITIONERS: --------------------- 1. V.N.BABY, S/O.NARAYANAN, UDAYANILAYAM KURUPPANKULANGARA P.O., CHERTHALA. 2. M.D. SHYLA, W/O.V.N.BABY UDAYANILAYAM, KURUPPANKULANGARA P.O., CHERTHALA. BY ADV. SRI.JOBY CYRIAC. RESPONDENTS: ------------------------ 1. THE ASSISTANT GENERAL MANAGER, STATE BANK OF INDIA, ALAPPUZHA. 2. STATE BANK OF INDIA, ARTHUNKAL BRANCH ALAPPUZHA DISTRICT, REP. BY ITS BRANCH MANAGER. BY ADV. SRI.P.GOPINATHA MENON, S.C. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18/03/2008,THE COURT ON 18/04/2008 DELIVERED THE FOLLOWING: ANTONY DOMINIC, J. ------------------------------------ W.P.(C) 4457 of 2008 ------------------------------------- Dated: APRIL 18, 2008 JUDGMENT The prayer sought for in this writ petition is to direct the respondents to return the mortgage deed and other documents relating to the property of the petitioners and mortgaged to the respondent bank. 2. Petitioners had availed of a housing loan from the 2nd respondent bank by depositing the title deeds with respect to a property having an extent of 11.045 cents acquired by them as per sale deed No.529/1999 dated 5.2.1999. Consequent on the defaults committed by the petitioners, the bank filed O.S.No.29/2003 before the Sub Court, Cherthala, for realising an amount of Rs.5,28,263/- with interest and costs. The suit was decreed as prayed for and the bank filed E.P.No.270/2004. 3. While the execution petition was pending, proceedings WP(C) 4457/08 Page numbers were simultaneously initiated by the bank invoking the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and possession of the residential building of the petitioners along with the land were taken over. This action of the bank was challenged by the petitioners by filing S.A. No.72/2007 before the Debt Recovery Tribunal, Ernakulam. Though the appeal was dismissed by Ext.P1 order, the petitioners were directed to pay Rs.2,50,000/- towards the liability on or before 31.12.2007 and the balance on or before 28.2.2008. On such condition the bank was directed to keep further proceedings for sale of the secured assets in abeyance till the expiry of the time granted for discharging the liability. 4. At the same time, ignoring the time that was granted to the petitioners by Ext.P1, the bank proceeded with the execution petition and apprehending sale of the property, the petitioners approached this court by filing WP(C) No.35186/2007. The writ petition was disposed of by Ext.P2 judgment directing the court below not to proceed with the execution petitions until the period WP(C) 4457/08 Page numbers allowed by the DRT, Ernakulam, expired. In the meantime, according to the petitioners, they entered into an agreement for sale of the property and utilising the portion of the amount that was received, the decretal amount was deposited before the Execution Court and on 29.1.2008 the Sub Court, by Ext.P3 order, dismissed the Execution Petition recording full satisfaction of the decree. 5. Once the decree was satisfied as above, the petitioners approached the bank for returning the mortgage deed and other documents, but the bank demanded that the petitioners should pay additional amounts towards expenses incurred by the bank towards the litigation and counsel fee before the DRT and the High Court, Commission to enforcement to agents etc. etc. which was around Rs.1 lakh. Aggrieved by the demand so made by the bank, petitioners filed Ext.P4 representation and there was no response from the bank. It is in this background , the writ petition was filed. 6. Counter affidavit has been filed by the bank seeking to justify the demand made by them. They are relying on sec.13(7) and (8) of the Securitization and Reconstruction of Financial Assets WP(C) 4457/08 Page numbers and Enforcement of Security Interest Act, 2002. According to them these provisions entitled them to all costs, charges and expenses which have been incurred by them and any expenses incidental thereto. It is stated that in view of the aforesaid statutory provision, the bank is entitled to demand from the petitioner the costs it incurred towards the proceedings initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 7. In the aforesaid factual background, what is to be decided is whether the bank was justified in demanding the costs incurred by it for returning the documents in relation to the mortgage created by the petitioners. 8. Section 13(7) and (8) being relevant are extracted for reference.- “(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which WP(C) 4457/08 Page numbers is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests. (8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.” 9. True, as contended by the counsel for the bank, sec.13(7) and (8) provides for recovery of the costs incurred by the bank. Sec.13(7) provides that where any action has been taken against a borrower under the provisions of sec.13(4), all costs, charges and expenses, which in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall WP(C) 4457/08 Page numbers be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto. Sec.13(8) also provides that if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for sale or transfer of that secured asset. These sections, thus entitle the secured creditor to realise the costs, charges and expenses which have been properly incurred by him where any action has been taken under sec.13(4) against a borrower. 10. In this case, as already noticed, simultaneously proceedings continued for the execution of the decree obtained by the bank and also in terms of the provisions contained under the WP(C) 4457/08 Page numbers Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. When proceedings were initiated under the Securitization Act, the petitioners filed appeal before the DRT which disposed of the appeal by Ext.P1 order fixing a schedule for paying the amount due from the petitioners. However, instead of paying as above, petitioners chose to deposit the decree amount before the Execution Court which included costs awarded by the Civil Court as well. Therefore, though proceedings were initiated under the Securitization Act, that did not result in recovery of the amount due from the petitioners, but, on the other hand, the amount was realised only in execution of the decree obtained by the bank. 11. In my reading, to apply sec.13(7) or (8) of the Securitization Act, money should be realised by the secured creditor, by invoking the machinery provided under the Securitization Act itself. This is fairly clear from the wording of the section itself. In this case, no amount has been realised by the bank in pursuance to the provisions under the Securitization Act, WP(C) 4457/08 Page numbers while, on the other hand, recovery has been only in pursuance to the execution proceedings that was initiated and continued by the bank despite the progress that it had made in the proceedings under the Securitization Act. Therefore, in the absence of any receipt of money or recovery of money in pursuance to the action under the Securitization Act, the bank cannot demand costs, expenses etc. incurred by it for the action initiated under the said Act. 12. That apart, in this case, at the time when the bank demanded payment of the costs and other expenses allegedly incurred by it for the steps it had taken under the Securitization Act, the liability of the petitioner was already discharged by satisfying the decree. Therefore, nothing remained to be paid to the bank. If so, there is no justification for the bank to make demand on the petitioner for payment of costs, expenditure etc. and sec.13 (7) or (8) can have no application in such a situation. Even otherwise, in my view, though law does not stand in the way of the bank initiating simultaneous proceedings under the Securitization Act, the bank cannot be permitted to saddle the borrower with the WP(C) 4457/08 Page numbers liability to pay costs both in the civil court and also for the proceedings under the Securitization Act. That will be penalising the borrower and that cannot be the reasonable way of applying the provisions of the Act itself. 12. In view of this, I do not think that there was any justification for the bank to demand costs and other expenses from the petitioner based on section 13(7) and (8) of the Securitisation Act when they sought release of the documents deposited with it while creating the equitable mortgage. 13. Therefore, there will be a direction to the respondents to release the mortgage deed and other documents in relation to 11.045 cents of land situated in Sy.No.109/2A/1 deposited by the petitioners within three weeks of production of a copy of this judgment. Writ petition will stand allowed as above. ANTONY DOMINIC, JUDGE WP(C) 4457/08 Page numbers mt/-