IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE THIRD DAY OF NOVEMBER TWO THOUSAND AND NINE PRESENT HON'BLE SRI JUSTICE A.GOPAL REDDY AND HON'BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU WRIT PETITION Nos.15651 of 2009 and 6066 of 2009 WRIT PETITION Nos.15651 of 2009 Between: P.Ashwin Kumar & three others. … Petitioners And Andhra Bank, Karimnagar main branch, represented by its authorised officer & chief Manager & two others. … Respondents WRIT PETITION Nos.6066 of 2009 Between: Kacham Kondaiah … Petitioner And Andhra Bank, Karimnagar main branch, represented by its authorised officer & chief Manager & six others. … Respondents This Court made the following: HON'BLE SRI JUSTICE A.GOPAL REDDY AND HON'BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU WRIT PETITION Nos.15651 of 2009 and 6066 of 2009 COMMON ORDER: - (per the Hon’ble Sri Justice A.Gopal Reddy) Since the issues involved in both the writ petitions are one and the same and interconnected with each other, they are being heard and disposed of by this common order, at the stage of admission itself. Brief facts of the case, in nutshell, are that the petitioners in W.P.No.15651 of 2009 are one of the partners of (1)M/s.P.Neelakantam & Sons, (2) M/s.Neelakantam Raymond Shop and (3) M/s.Sri Sai Saree Centre. The above said firms availed loans from Andhra Bank by mortgaging (1)M/s.Neelakantam & Sons situated at D.No.2-6-19, Vegetable Market Road, Karimnagar and (2) Residential house situated at H.No.4-6-131, 132 & 133, Fatehpura, Karimnagar. The petitioner in W.P.No.6066 of 2009 is a co-obligant to the said loans availed by the firms. A composite agreement was also entered in favour of the bank on 14.09.2007 by the firm for open cash credit of Rs.24 lakhs, which was signed by the petitioners in W.P.No.15651 of 2009. The above properties were mortgaged in favour of the Bank and the outstanding dues payable on the four loan accounts is as under: 1. A/c No.030613046010425 O.C.C. – P.Neelakantam & Sons – Limit Rs.24 Lakhs Liability Rs.31,22,796.81 ps as on 31.07.2009. Balance of liability minus limit is interest component. 2. A/c.030613046011276 O.C.C. – Neelakantam’s Raymonds Retail Shop Limit Rs.24 Lakhs liability Rs.23,69,879.54 ps. as on 31.07.2009. 3. A/c.030613046010539 O.C.C. – Sri Sai Saree Centre Limit Rs.24 Lakh liability Rs.26,48,637 as on 31.07.2009 Balance of liability minus limit is interest component. 4. A/c.030630004000237 Housing Loan Prodduturi Sai Baba and Srinivas A/c closed on 11.04.2009. Since three accounts were declared as non-performing Asset, the bank invoked the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, “the Act”), by issuing notices under Section 13(2) of the Act to all the concerned; on 26.11.2008 for default of payment of housing loan account only; on 15.01.2009 for default of payment of the O.C.C. Account in respect of M/s.Neelakantam & Sons, situated at D.No.2-6-19, vegetable Market Road, Karimnagar demanding to pay an amount of Rs.28,08,621/-; on 15.07.2009 for default of payment of the O.C.C. Account in respect of M/s.Sri Sai Saree Centre demanding payment of Rs.26,10,433/-. Petitioners though received the said notices have not chosen to give any reply. The Co-obligant i.e., Kacham Kondaiah filed W.P.No.6066 of 2009 questioning the demand notice dated 26.11.2008 for recovery of the housing loan of Rs.28,79,795/- contending that he made a representation on 27.02.2009 agreeing to purchase the property bearing house No.4-6-131, 132 and 133 situated at Fathepura, Karimnagar by taking into consideration of the reserve price fixed by the Bank or by taking into consideration of the agreements of sale dated 03.04.2008 executed in his favour by P.Aswini Kumar, the 1st petitioner in W.P.No.15651 of 2009 and P.Srinivas, sons of Saibaba, which was also consented by the petitioners in the said writ petition. He also filed a suit in O.S.No.21 of 2008 for specific performance of the agreement of sale against seven defendants on the file of III Additional District Judge, Karimnagar. As per the terms and conditions of the sale agreements, two properties were agreed to be sold for Rs.One crore and Rs.One crore five lakhs and he paid an amount of Rs.1,02,000/- in cash i.e., Rs.51,000/- under each agreement; that he is supposed to pay Rs.40 lakhs and Rs.45 lakhs by 18.05.2008 and the remaining consideration by 03.07.2008. Therefore, he is agreeable to pay the amount payable towards sale consideration to discharge the housing loan amount. But the bank without disposing of the representation made by him, proceeded to auction the above mentioned property, which is the subject matter of O.S.No.21 of 2008 and hence seeks stay of all the auction sale proceedings. This court in W.P.No.6066 of 2009 by order dated 24.03.2009 stayed the auction on condition of petitioner depositing half of the entire loan amount of Rs.28,79,795/- as per notice dated 26.11.2008 issued under Section 13(2) of the Act, along with interest as on that day within one week and the remaining half of the loan amount with interest shall be paid within three weeks therefrom. In default, the interim stay stands vacated. The petitioner complied the conditional order passed by this court and deposited the entire housing loan amount of Rs.28,79,795/- and the respondent in the additional counter- affidavit also admitted that the said account has been closed on 11.04.2009. Pending the above writ petition, the borrowers/partners of the firm filed W.P.No.15651 of 2009 questioning the demand notices issued by the bank under Section 13(2) of the Act, dated 26.11.2008 only to housing loan account and not to other O.C.C. Accounts, the demand notice dated 15.01.2009 under Section 13(2) of the Act in respect of O.C.C. Account of M/s.Neelakantam, demanding to pay an amount of Rs.28,08,621/- followed by a possessory notice under Section 13(4) of the Act on 09.07.2009, in respect of commercial shop bearing D.No.2-6-19, Vegetable Market Road, Karimnagar, that the notice also includes the possession of item No.2 i.e., the housing property which is the subject matter of housing loan and another demand notice U/s.13(2) of the Act on 15.07.2009 in respect of M/s.Sai Sri Centre demanding to pay an amount of Rs.26,10,433/- including the commercial shop at D.No.2-6-19, Vegetable Market Road, Karimnagar and the house property once again. On receipt of the notices, petitioners approached the 1st respondent not to proceed on piece meal basis and to close all the accounts by auctioning the house property which is the subject matter of the suit in O.S.No.21 of 2008, which itself worth more than Rs.two crores, whereas the outstanding dues in all the accounts is less than Rs.80 lakhs. To the said effect, a representation was also made on 20.07.2009 and the said representation has not been considered so far. Therefore, the respondents should be restrained from dispossessing the petitioners from the commercial shops and close the account by selling the house property. This court by order, dated 02.09.2009 directed the respondent- Bank to proceed with the sale of the three items of the properties which have been mortgaged by the petitioners in terms of the mortgage deed, but shall not confirm the sale and furnish the offers received in pursuance of the issuance of the public auction to the Court to pass appropriate orders in both the writ petitions. The Bank now furnished the offers received pursuant to the auction notice with regard to the house property where two persons participated in the auction, Aita Ravinder offered Rs.1.02 Crores and P.Chandra Reddy offered at rupees 1.01 Crores. Sri V.Ravi Kiran Rao, learned counsel for the petitioner in W.P.No.6066 of 2009 contends that the petitioner entered into an agreement of sale agreeing to purchase the house property for a sum of Rs.1.05 crores and in fact he has already cleared the house loan account pursuant to the interim order of this Court by depositing Rs.28,79,795/- and agreeable to discharge the entire loan amount of all the remaining three loans, hence, some time may be granted for payment of the same, so that the bank may be directed to return the mortgaged document to the petitioner. Whereas Sri S.Satyam Reddy, learned counsel for the petitioners in W.P.No.15651 of 2009 contends that the mortgage deeds executed by them with the bank cannot be delivered to the petitioner in W.P.No.6066 of 2009, unless the suit for specific performance is decreed in his favour. If they are agreeable to deposit the highest sale price offered by the bank and after adjusting the said amount by the bank the balance amount, out of the sale proceeds has to be returned to the petitioners. In view of the above submissions, the petitioner in W.P.No.6066 of 2009 who is a co obligant to the various housing loans availed by the petitioners under a composite agreement dated 14.09.2007 is aware of the mortgage of the property and entered into an agreement of sale subsequent to the mortgage deed on 30.04.2008. When the petitioner succeeds in obtaining a decree for specific performance, then only he enters into the shoe of the mortgager and can redeem the property under the mortgage on payment of the amount. Unless the suit is decreed, he is not entitled to refund all the documents in his favour. Therefore, we accordingly direct the respondent-Bank that on petitioner paying the highest sale price of Rs.1.02 crores offered by Aieta Ravinder, after giving credit to the amounts already deposited by him with the bank within four weeks from today, the Bank has to adjust the said amount towards all the loans and refund the balance of sale amount received under the head, if any, to the petitioners in W.P.No.15651 of 2009. If there is any balance due on the above loan accounts, the Bank can retain the title deeds with it. But the bank shall retain the title deed with regard to the house property until the petitioner succeeds in the suit filed by him and thereafter, he is entitled to take back the title deed of the house property from the Bank. Petitioner is at liberty to avail the remedies with regard to the recovery of rents received on the house property in the suit filed by him. In default of payment of the balance amount by the petitioner, the bank is at liberty to proceed with the auction. Accordingly, both the writ petitions are disposed of with the above direction. There shall be no order as to costs. _____________________ (A.GOPAL REDDY, J) ___________________________________ (SAMUDRALA GOVINDARAJULU, J) 03.11.2009. Lmv