IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE TWENTY SEVENTH DAY OF JUNE TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE B.SESHASAYANA REDDY WRIT PETITION NO : 2062 of 2008 Between: 1 Chikkala Subba Rao, S/o. Dorlaiah, Stadium Road, Rajahmundry, East Godavari District. 2 Endri Prakasam, S/o. Kannaya, Lalcheruvu, Rajahmundry, East Godavary District. 3 Mukkapati Anna Rao, S/o. Brahmam, Door No. 20-18-15/1, Thummalava, Aryapuram, Rajahmundry, East Godavari District. 4 Maddhikonda Pushkar Rajahm Babji, S/o. Raja Ratnam, Rampoachodavaram, East Godavari District. 5 Kalamatha Raju, W/o. Varaprasad, Doweleswaram, Rajahmundry, East Godavari District. 6 Yedla Rama Bai, W/o.J. Balram Mohan, Door No. 13-15-66, Kotilingalapeta, Rajahmundry, East Godavary District. ..... PETITIONERS AND 1 State Bank of India Rep. by its Chief Manager (Authorized Officer), Personal Banking Branch, Tilak Road, Rajahmundry, East Godavary District. 2 Branch Manager, Personal Banking Branch, State Bank of India, Tilak Road, Rajahumundry, East Godavary District. 3 Rayudu Suryanarayana, S/o. Ramudu, Post Man Housing Society, Door No. 2-42-3, I.L.T.D. Junction, Rajahmundry, East Godavary District. 4 Danda Sathi Raju, S/o. Venkata Raju, Post Man Housing Society, Door No. 23.20.32/17, Lalithanagar, Rajahmundry, East Godavari District. 5 Pokkuluri Rama Krishna Kumar, S/o. Satyanarayana Murthy, My HOme Construction Associates, Hotel Anand Regency, Jampeta, Rajahmundry, East Godavary District. .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue an appropriate Writ, Order or Direction preferably a Writ in the nature of Mandamus declaring the action of the respondents in seeking to sell the plots of Petitioners in R.S.No. 539, 627/2A of Kolamuru Village, Rajahmundry, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 vide paper notification dated 8th January 2008 is illegal arbitrary and contrary to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and consequently direct the respondents not to take coercive steps in pursuance thereof and pass Counsel for the Petitioners:MR.Y.SUDHAKAR Counsel for the Respondents: . The Court made the following : ORDER: This writ petition has been filed by the petitioners with a prayer to issue a writ, order or direction in the nature of writ of mandamus declaring the action of the respondents in seeking to sell plots of the petitioners in R.S.Nos.539, 627/1 and 627/2A situated at Kolamuru Village, Rajahmundry, as illegal and arbitrary and contrary to the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the Act”). 2. The petitioners are the employees in the postal department and are also members in Postman Housing Society. The society is registered under the Societies Registration Act (A.P. Act No.35 of 2001). Sri Rayudu Suryanarayana-third respondent is the President and Sri Danda Sathi Raju-fourth respondent is the Secretary of the society. Respondents 3 and 4 introduced Pokkuluri Rama Krishna Kumar-fifth respondent as a builder. Respondents 3 and 4 took the petitioners to the Branch Manager-second respondent and got opened accounts for the purpose of availing housing loan. Respondents 3 and 4 entered into an agreement with fifth respondent for construction of houses in the plots owned by the members of Postman Housing Society. The petitioners, being members of the Postman Housing Society, bona fidely believed respondents 3 and 4 and hoped to construct houses in the plots owned by them. While so, they received a notices, dated 14.05.2007, from the State Bank of India represented by Chief Manager-first respondent under Section 13(2) of the Act directing them to pay Rs.2,37,293/-, Rs.3,19,136/-, Rs.3,12,052/-, Rs.2,43,516/-, Rs.3,69,182/- and Rs.3,35,017/-, respectively, with future interest. They approached respondents 3 and 4 and came to know that respondents 3 and 4 played fraud and withdrew the amount from their housing loan accounts sanctioned by the bank for construction of houses. They along with other members of the Postman Housing Society filed a criminal case against respondents 3 to 5. The Police of I-Town Police Station, Rajahmundry, advised them to seek remedy in a civil Court. Thereafter, they filed a complaint under Section 190 Cr.P.C. for the offence under Sections 403, 409, 420 read with 34 I.P.C., before the II Additional Judicial First Class Magistrate, Rajahmundry. The learned Magistrate took the complaint on file and issued process to the accused. The criminal case is stated to be pending. It is averred in the affidavit filed in support of the writ petition that the petitioners have not received the loan amounts, and the respondents 3 and 4 taking advantage of their position in the Postman Housing Society withdrew the amounts. For better appreciation, I may refer para 7 of the writ affidavit, which reads as under:- “We submit that the 3rd, 4th and 5th respondents are hand in glove with each other and misappropriated the amounts from our account sanctioned to us by the Bank without my knowledge. It is submitted that the 3rd and 4th respondents taking advantage of their position as a President and Secretary withdrawn the amount from our account and misappropriated without making constructions to all the members of the society. It is submitted that 5th respondent has only made construction only up to 10% to 20% of the entire construction even though the respondents 3 and 4 withdrew the entire amount from our housing loan account and the 2nd respondent permitted the same without verifying the construction.” According to the petitioners, the action of the respondents-bank is illegal and irregular and therefore, the proceedings issued by them under the provisions of the Act are required to be set aside. 3. Notice before admission came to be ordered on 05.02.2008. There was also an order of interim stay on condition of the petitioners depositing a sum of Rs.50,000/- within four weeks. Thereafter, respondents 1 and 2 filed vacate stay petition in W.V.M.P.No.606 of 2008. They also filed counter in the writ petition. 4. Counter-affidavit of the respondents 1 and 2 in brief is as under:- The petitioners having availed housing loan failed to pay the amounts and thereupon, the bank invoked the provisions of the Act and served demand notices under Section 13(2) of the Act on 14.05.2007 for recovery of the amounts due. Thereafter, the bank took possession of the property under Section 13(4) of the Act and brought the property for sale by invoking the provisions of the Act. The respondents-bank issued notices under Section 13(1) of the Act and the petitioners addressed representation on 17.09.2007 through society and a suitable reply came to be issued on 08.10.2007 to the petitioners by way of registered post. For better appreciation, I may refer para 7 of the counter-affidavit, which reads as under:- “With regard to the allegations made in para 9 of the writ petition, it is true that this respondent have issued notice under Section 13(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the petitioner addressed representation dated 17.09.2007 through the society which was replied by this respondent by reply dated 8.10.2007 by way of registered post. Therefore, the allegation that the respondent bank authorities have not considered the objections as contemplated under Section 13(3-A) of the Act issued the impugned notification is incorrect. The respondent bank clearly followed the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the representation of the petitioner as per Section 13(3-A) of the Act has been complied with. The allegation that the impugned notification is unsustainable is incorrect. The petitioner also issued 1st notice on 22.5.2007 through PARISHKRUTHI consumer welfare Association i.e. after issuance of 13(2) notice dated 14.5.2007 for which the Bank through their counsel Shri DVV Trinadh issued reply on 23.06.2007, which was acknowledged by the chairman of Parishkruthi welfare association. Again the petitioner issued notice on 17.9.2007 as a Postman Housing Society members for which the bank replied on 8.10.2007 by Speed Post.” 5. When the vacate stay came up for consideration, both the counsel consented for disposal of the writ petition itself. 6 . Heard learned counsel appearing for the petitioners and learned counsel appearing for respondents 1 and 2. 7. Learned counsel appearing for the petitioners submits that respondents 1 and 2 have not considered the representation submitted by the petitioners to the notices issued under Section 13(2) of the Act and their non-consideration amounts to violation of Section 13 of the Act. He further submits that the criminal case filed by the petitioners against the respondents 2 to 5 is pending consideration and any action of the proceedings for recovery of the amount would cause great prejudice to the petitioners in pursuing the criminal case. In support of his contentions, reliance has been placed on the judgment of Supreme Court in Mardia Chemicals Limited v. Union of India[1]. 8. Learned counsel appearing for respondents 1 and 2 submits that the petitioners have an effective alternative remedy provided under Section 17 of the Act and therefore, the writ petition is liable to be dismissed at the stage of admission. He further submits that the proceedings have been initiated by respondents 1 and 2 in accordance with the provisions of the Act and therefore, the proceedings impugned in the writ petition are not liable to be set aside. In support of his submissions, reliance has been placed on the decision of this Court in K.Balakrishna v. Debts Recovery Tribunal[2], wherein it has been held that since the Act is a special legislation enacted for the purpose of expeditious recovery of the dues of Banks, other financial institutions and secured creditors and Sections 17 and 18 provide for filing of application and appeal by the aggrieved person, the remedy available to the petitioner under Section 18 of the Act must be treated as an effective alternative remedy. 9. The principal grievance of the petitioners is that their representation submitted, on service of notice, as contemplated under sub-section (2) of Section 13 of the Act is not effectively considered and therefore, it amounts to violation of Section 13 of the Act. For better appreciation, I may refer sub-sections (1) to (3) of Section 13 of the Act and they are as under: “13. Enforcement of security interest:- (1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of Court or Tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section(4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.” 10. A plain reading of the above-referred provision shows that within 60 days of issuance of notice under sub-section (2) of Section 13 of the Act, an order is required to be passed under sub-section (4) of Section 13 of the Act. Notice under sub-section (2) of Section 13 of the Act came to be issued to the petitioners on 14.05.2007. Within 60 days as provided for under the above-referred provision, the petitioners did not choose to make any representation. After passing of the order, under sub-section (4) of Section 13 of the Act, the petitioners choose to give a representation i.e. on 17.09.2007. Even that representation was also considered and a reply came to be issued by the respondent bank on 08.10.2007. Therefore, it cannot be said that the respondents contravened the provisions of sub- section (3) of Section 13 of the Act. Since the order passed under sub-section (4) of Section 13 of the Act is appelable under Section 17 of the Act, the petitioners are at liberty to work out their remedies as provided for under the Act. 11. Reserving liberty to the petitioners, the writ petition is dismissed at the stage of admission. No costs. _________________________ B.SESHASAYANA REDDY ,J Dated:27.06.2008 GJ [1] (2004) 4 SCC 311 [2] I (2008) BC 447 (DB)