THE HONOURABLE SRI JUSTICE P.S.NARAYANA WRIT PETITION No.17682 of 2007 Date: -01-2008 Between: M.Mukund Reddy and others. .. PETITIONERS and State Bank of Hyderabad and another. .. RESPONDENTS l ORDER: 1. This court while ordering notice before admission on 21-08-2007, stayed the sale proposed to be conducted on 22-08-2007 subject to the condition of the petitioners depositing a sum of Rs.3,00,000/- before the time fixed for sale. It is brought to the notice of the court that the said direction had been complied with. 2. Rule Nisi was issued on 24-09-2007. 3. W.V.M.P.No.2557 of 2007 is filed to vacate the interim order. 4. Heard Sri Shekar representing Sri P.Venu Gopal, counsel representing the writ petitioners and Sri Venkataraghu Ramulu, counsel representing the respondents. 5. This writ petition is filed praying for a Writ of Mandamus declaring the action of the respondents herein in auctioning the 3rd petitioner’s property namely Plot No.22 admeasuring 403 sq. yards bearing H.No. 2-2- 647/77/H, Srinivas Nagar Co-operative Housing Society Limited (T.A.No.256 vide permit No.59/61, dated 09/02/1968), Bagh Amberpet, Hyderabad, bounded by North: Road 40 ft. wide; South: Plot No.23, House No.2-2- 647/273; East: Plot No.24, House No.2-2-647/273; West: Plot No.21, as illegal, arbitrary and violative of Articles 14 and 300-A of the Constitution of India and consequently stay all further proceedings including the auction of the said property to be held on 22-08-2007 or any other date that may be fixed by the bank, pending disposal of the writ petition. 6. The 1st petitioner sworn to the affidavit filed in support of the writ petition. Petitioners 1 and 2 approached the respondent bank seeking financial assistance. In the year 2004, the respondent Bank sanctioned a sum of Rs.30,00,000/- as financial assistance to petitioners 1 and 2 and the Bank had also disbursed the entire amount of Rs.30,00,000/- as agreed to. At the request of the respondent Bank to furnish collateral security for the loan sanctioned by the Bank, the 3rd petitioner furnished her immovable property bearing Municipal No.2-2-647/77/H, Plot No.22, admeasuring 403 sq. yards, situated at Srinivas Nagar, Bagh Amberpet, Hyderabad, and the same was accepted by the respondent Bank. 7. It is further stated that petitioners 1 and 2 have to clear the loan availed by them by way of equal monthly instalments at the rate of Rs.64,350/- per month in a span of 60 months. Out of the total amount of Rs.30,00,000/-, petitioners 1 and 2 had already repaid to the Bank a sum of Rs.21,70,000/-. 8. It is further stated that the respondent Bank, without re-calling the loan on 18-01-2006, issued notice to the petitioners under Section 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the Act”). After receipt of the said notice, the petitioners had paid the following amounts:- (i) Rs.1,00,000/- in cash on 28/01/2006 (ii) Rs.2,00,000/- in cash on 27/03/2006 (iii) Rs.2,00,000/- by cheque on 31/03/2006 (iv) Rs. 50,000/- in cash on 28/04/2006 (v) Rs.3,60,000/- in cash on 21/03/2007 (vi) Rs. 29,000/- in cash on 22/03/2007 (vii) Rs. 21,000/- in cash on 23/03/2007 (viii) Rs. 25,000/- in cash on 23/03/2007 (ix) Rs.1,00,000/- in cash on 16/05/2007 (x) Rs.3,00,000/- in cash on 01/06/2007 (xi) Rs.2,50,000/- by demand draft on 27/06/2007 9. It is further stated that the respondents bore grudge against the petitioners for the reason that the petitioners had filed a civil suit O.S.No.4896 of 2006 on the file of learned XIX Junior Civil Judge, City Civil Court, Hyderabad, seeking the following relief:- “a) to declare the notice vide No.P&SB/GO dated 18-01-2006 issued by the defendant, as ab-initio null and void and not binding over the plaintiffs; b) A consequential decree of injunction may be granted restraining the defendants, their men, officials, agents etc., from harassing the plaintiffs, including interfering in any manner in respect of the property bearing Municipal No.2-2-647/77/H, plot No.22, admeasuring 403 sq. yards situated at Srinivas Nagar, Bagh Amberpet, Hyderabad. c) Costs of the suit may be awarded…” 10. It is further stated that subsequently the petitioners had withdrawn the suit O.S.No.4896 of 2006. The filing of the said suit perhaps incurred displeasure of the respondents and therefore, the respondents are hell bent to harass the petitioners and in that pursuit, they issued a notification, which was published on 04-08-2007 in EENADU and in another English Daily Newspaper, wherein it was stated that the 3rd petitioner’s property would be auctioned on 22-08-2007 and in that Notification, it was stated that the petitioners are due a sum of Rs.17,75,600/-, which figure is also incorrect. It is stated that as on date, the petitioners are liable to pay only a sum of Rs.15,73,600/-. Even, as per the statement, which the respondents had issued, the amount due according to the respondents is only Rs.15,73,600/-, out of which, the petitioners had paid Rs.60,000/-. Therefore, as on date, they are liable to pay only Rs.15,13,600/-. 11. It is further stated that in fact in accordance with the guidelines issued by the Reserve Bank of India, the petitioners also requested the respondent Bank for one time settlement. The respondent bank had not chosen to settle the dispute with the petitioners under one time settlement scheme. The fact that the petitioners had approached the respondent Bank for one time settlement was evident on a reading of the communication, dated 09-08-2007 and 14-08-2007. 12. It is further stated that in the event if the auction as proposed by the respondent Bank takes place, the valuable property would go for a song. The petitioners submit that they are willing to pay a sum of Rs.5.00 lacs within a period of six weeks from today and the balance will be paid within one year from today in equal monthly instalments with interest. By such a course, the Bank’s interest as well as the 3rd petitioner’s property would be protected. The bank’s concern is only to receive the balance money and the petitioners are ready and willing to pay the amounts as stated above. 13. It is further stated that whenever properties are put to public auction, the properties are sold for a song and there is every possibility of a cartel being formed and by such course, the valuable right of the 3rd petitioner would be at jeopardy. The 1st petitioner submits that the respondent Bank ought to have accepted one time settlement and without passing any orders on the application of the petitioners for one time settlement, cannot straight away auction the property of the 3rd petitioner. Even assuming, without admitting that in the year 2006, securitization proceedings were initiated, even after securitization proceedings initiated, the respondent Bank received the amounts as stated supra. This would go to show that the respondent Bank had waived its rights under the Act having accepted the amounts. 14. It is further stated that the amount payable as on date is only Rs.15,13,600/-, out of which, the petitioners are willing to pay Rs.5,00,000/- within six weeks from today and the balance will be paid within one year together with interest as agreed to. By such a course, the bank’s interest as well as the 3rd petitioner’s property would also be protected. 15. In the counter affidavit filed by respondents 1 and 2 along with stay application, referred to above, specific stand had been taken that the petitioners cannot invoke the provisions of Article 226 of the Constitution of India, since they are having alternative remedy of filing an appeal before the Debt Recovery Tribunal. Sanctioning of the loan and other particulars had been averred and it is also stated that the 3rd petitioner stood as guarantor for the amount availed by petitioners 1 and 2 and the 3rd petitioner created equitable mortgage of the property bearing H.No. 2-2-647/77/H, Plot No.22, Srinivas Nagar, Bagh Amberpet, Hyderabad. 16. It is further stated that petitioners 1 and 2 have to clear the loan amount in 60 equal monthly instalments at the rate of Rs.64,350/- p.m. It is stated that the petitioners were not regular in repaying the loan amount. After availing the loan amount, petitioners 1 and 2 had failed to repay the stipulated instalment amounts regularly. In the month of December, 2005, the account of the petitioners had been declared as NPA. When there is no response from the petitioners, the respondent Bank had issued a demand notice to the petitioners on 18-01-2006 and called for the loan amount. On 24-01-2006, the 1st petitioner had approached the respondent Bank and promised that he will pay the amount of Rs.2,00,000/- by the end of January, 2006, Rs.3,00,000/- by 15-02-2006 and the balance amount will be paid by the end of March, 2006. After repeated persuasions, petitioners 1 and 2 had paid an amount of Rs.1,00,000/- on 28-01-2006. In the month of February, 2006, the petitioners had issued a cheque for an amount of Rs.1,00,000/-. When the respondent Bank had presented the cheque for encashment, the said cheque was returned as bounced. Likewise, in the month of March, 2006, petitioners 1 and 2 had issued one more cheque for an amount of Rs.1,00,000/-. Again the said cheque was returned unpaid. In the month of March, 2006, petitioners 1 and 2 had issued two cheques amounting to Rs.1,50,000/- each, and the said cheques were returned as bounced. It is stated that all the while the respondent bank was persuading the petitioners to regularize the loan account. 17. It is further stated that again on 02-09-2006, the 1st petitioner had approached the Respondent Bank and assured that by 15-09-2006, he will pay an amount of Rs.5,00,000/- and the balance amount will be paid by the end of September, 2006. Likewise, in the month of July, 2006, the 1st petitioner had approached the Respondent Bank and assured that he would clear the balance outstanding amount by 15-08-2006. Despite repeated persuasions by the respondents, the petitioners had failed to keep of the repayment schedule. It is stated that without paying the instalment amounts, the petitioners had filed O.S.No.4896 of 2006 on the file of XIX Junior Civil Judge, City Civil Court, Hyderabad and sought the decree of injunction and declaration to declare the notice, dated 18-01-2006, issued by the respondent Bank as null and void. Along with the suit, the petitioners had filed I.A.No.1549 of 2006 and sought ad-interim injunction restraining the respondents from interfering with the mortgaged property. 18. It is further stated that the respondent Bank had filed counter and opposed for granting interim order. In the month of March, 2007, the petitioners withdrew the suit O.S.No.4896 of 2006 from the file of XIX Junior Civil Judge, City Civil Court, Hyderabad, stating that they had filed the suit on the wrong advise. It is stated that the petitioners approached the respondent Bank and assured that they will clear the outstanding loan amount. It is stated that a cheque for an amount of Rs.5,00,000/- was issued by petitioners 1 and 2 in the month of April, 2007. When the said cheque was presented, the same was returned as dishonoured. In the month of August, 2007, petitioners 1 and 2 had approached the respondent Bank and requested for one time settlement. On 14-08-2007, the respondent Bank did not agree for the terms of offer made by the petitioners. A reply to that effect was communicated to the petitioners. It is denied that filing of suit by the petitioners against the respondents got displeasure of the respondents. It is denied that the respondents are bent upon to harass the petitioners. 19. It is further stated that the petitioners are liable to pay the balance amount along with upto date interest, expenses etc. It is denied that if the property of the 3rd petitioner is auctioned, the valuable rights of the petitioners would be effected. The respondent Bank gave reply to the petitioners disagreeing for the terms of one time settlement. It is stated that on mere receipt of the amount from the petitioners, there will be no waiver of rights of the respondent bank for the auction of the property under the Act. It is stated that the petitioners were not bonafide in keeping their promises. The relief sought by the petitioners cannot be granted under law. In the month of February, 2007, petitioners 1 and 2 had issued a cheque for an amount of Rs.5,00,000/-. Likewise, petitioners 1 and 2 had issued a cheque for an amount of Rs.5,00,000/-. However, the said cheques were returned as bounced. In the month of December, 2005, the account of the petitioners had been declared as NPA. On 24-03-2007, petitioners 1 to 3 had approached the respondent Bank and made a representation confirming that the 3rd petitioner stood as guarantor for repayment of the loan availed by petitioners 1 and 2 and the 3rd petitioner created an equitable mortgage of the property bearing H.No.2-2-647/77/H, Plot No.22 of Srinivas Nagar, Bagh Amberpet, Hyderabad. The 3rd petitioner further confirmed that petitioners 1 and 2 had failed to pay the loan amount, that she received all the notices issued by the Bank under the Act and that the Bank gave paper publication for the auction of the mortgaged property. 20. It is further stated that in pursuance of letter, dated 24-03-2007, petitioners 1 to 3 requested the respondent Bank to defer the auction of the mortgaged property for a period of two months. The petitioners further stated that in case, if they fail to clear the loan amount within the above said period, then the Bank will be at liberty to auction the mortgaged property under the Act. Along with the request, the petitioners had issued cheques vide (1) Cheque No.285645, dated 25-04-2007 for an amount of Rs.5,00,000/-, (2) Cheque No.285646, dated 15-05-2007, for an amount of Rs.5,00,000/- and (3) cheque No.285647, dated 30-05-2007, for an amount of Rs.12,00,000/-. When the above said cheques were presented for encashment, the same were returned as bounced. 21. It is further stated that in view of the request made by the petitioners, the auction of the mortgaged property, which was scheduled to be held on 26-03-2007, was deferred for the time being. It is stated that since the year 2005, the petitioners are prolonging the matter for one reason or the other and they are chronic defaulters. 22. These are the respective stands taken by the parties. 23. It is no doubt true that the interim order passed by this court had been complied with and the rest of the amount due to the banking Institution also is not heavy. However, in the light of the respective stands taken by the parties, this court is of the considered opinion that the writ petition be disposed of permitting the petitioners to make a representation to the respondents praying for a reasonable time to clear off the debts and let the respondents take appropriate decision in this regard. In the light of the facts and circumstances of the case, except making this observation, no other relief can be granted in the present writ petition. It is needless to say that the writ petitioners are at liberty to file an appeal, in the event of the writ petitioners being advised to do so. 24. Accordingly, the writ petition is disposed of. There shall be no order as to costs. __________ -01-2008 Prv