IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THURSDAY, THE TWENTY FOURTH DAY OF APRIL TWO THOUSAND AND EIGHT PRESENT HON'BLE THE CHIEF JUSTICE SRI ANIL R. DAVE And HON'BLE MR JUSTICE R.SUBHASH REDDY WRIT APPEAL No.243 of 2008 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 31/12/2007 in W.P.No. 16310 OF 2007 on the file of the High Court.) Between: M/s. Asset Reconstruction Company (India) Ltd., having its office at 17th Floor, Express Towers, Nariman Point, Mumbai, Rep. by its Special Power of Attorney Holder M/s,. APITCO Limited, having its Office at Parisrama Bhavan, Basheerbagh, Hyderabad. ... APPELLANT AND 1 Shashi Agro Food (P) Limited, 4-45/12, Lawsons Bay Colony Post, Visakhapatnam, Rep. by its Managing Director, Smt. Ravipati Umadevi W./o. Sri R.R.K. Murthy 2 Andhra Bank, SSI Branch, Gajuwaka, rep. by its Branch Manager. ...RESPONDENTS Counsel for the Appellant: Mr. S. NIRANJAN REDDY Counsel for Respondent No.1: Mr.S.RAJAN Counsel for Respondent No.2: Dr. Lakshminarayana The Court made the following: Judgment: (Per RSR, J) This writ appeal, under Clause 15 of the Letters Patent, is filed by the second respondent in the writ petition, aggrieved by the order of the learned single Judge, dated 31-12-2007, passed in W.P.No.16310 of 2007. 2. The aforesaid writ petition was filed by the first respondent, a Private Ltd. Company, questioning the steps taken under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘the Act’ for brevity) and for consequential directions not to interfere with the possession of the properties which were given as security to the second respondent bank. The learned single Judge, by the impugned order, while disposing of the writ petition, granted directions to give further notice in accordance with law, allowed to proceed further in the matter as per the provisions of the Act and further ordered for continuance of the interim order till such directions are carried out. 3. The first respondent, a Private Ltd. Company, is engaged in the business of food processing and its unit was set up in the year 1997 in the Special Economic Zone at Visakhapatam. The said company availed loan facilities from the second respondent, Andhra Bank, to the tune of Rs.1.61 crores during the years 1998-2002, for various purposes, namely term loan, further term loan for expansion, working capital facilities etc. It is the case of the first respondent that though it had paid an amount of Rs.1.10 cores at various intervals, it could not pay the balance amount on account of market conditions and the drop in the volume of business. In view of the default in repayment of loan, the said account was declared as a Non-Performing Asset (NPA) on 31-03-2003 by the second respondent bank and consequently proceedings were initiated under the provisions of the Act and notice, as contemplated under Section 13(2) of the Act, was issued on 04-03- 2004, demanding an amount of Rs.1,67,06,814/-, within a period of 60 days from the date of receipt of the notice. Further notice was also issued under Section 13(4) of the Act. But, however, during the month of September, 2004, the second respondent, Andhra Bank, assigned the debt payable by the first respondent in favour of the appellant company and the appellant company approached the first respondent for discharge of the dues payable to the second respondent bank. The appellant company, through its authorized Power of Attorney, i.e. M/s.APITCO Ltd., entered into a Memorandum of Understanding on 21-04-2005 in terms of which the appellant company agreed to receive a sum of Rs.87,00,000/- in full and final settlement and further agreed to waive the balance subject to condition of payment of amounts as per the schedule agreed to thereunder. It is also not in dispute that pursuant to such Memorandum of Understanding entered by the appellant company with the first respondent, the first respondent had paid a sum of Rs.15,00,000/- on 21-04-2005, but, however, further payments were not made as per the schedule. When further payments were not made in terms of the Memorandum of Understanding, in favour of the appellant company, it has proceeded by filing an application as contemplated under Section 14 of the Act, before the Chief Metropolitan Magistrate, Visakhapatnam, for taking possession of the secured assets. At that stage, the writ petition was filed. 4. Primarily, before the learned single Judge, it was the case of the first respondent, writ petitioner, that steps were being taken under Section 14 of the Act without following due process of law and without even issuing notice as contemplated under Section 13(2) of the Act. However, the said plea was resisted by the appellant company on the ground that as much as the earlier notice was issued under Section 13(2) of the Act, on 04-03-2004, demanding an amount of Rs.1,67,06,814/-, further notice need not be issued. But, however, the learned single Judge, while disposing of the writ petition, directed the appellant company to take further steps only after issuing further notice as contemplated under law. 5. Heard learned counsel appearing for the appellant company as well as the learned counsel for respondents. 6. In this writ appeal, it is submitted by Sri S. Niranjan Reddy, learned counsel for the appellant company, that as much as the first respondent has defaulted in paying the loan amounts, the loan account was declared as Non-Performing Asset and notices, as contemplated under Sections 13(2) and 13(4) of the Act, were issued and in that view of the matter, no further notice need be issued before taking further steps. 7. Though it is not in dispute that earlier a notice, as contemplated under Section 13(2) of the Act, was issued after declaring the account of the first respondent, writ petitioner, as Non-Performing Asset, on 04-03-2004, demanding an amount of Rs.1,67,06,814/-, within a period of 60 days from the date of receipt of the notice, but, however, it is to be noted that subsequent to notice issued under Section 13(2) of the Act, and further notice issued under Section 13(4) of the Act, the second respondent, Andhra Bank, which advanced loans to the first respondent, subsequently assigned the debt in favour of the appellant, M/s. Asset Reconstruction Co. (India) Ltd., by entering into an agreement. In the capacity of assignee, the appellant company had further entered into Memorandum of Understanding in the month of September, 2004 to receive a sum of Rs.87,00,000/- as one-time settlement and further agreed to waive the balance subject to condition of payment of amounts as per the schedule agreed to thereunder. It is also agreed in the counter affidavit filed on behalf of the appellant company that in pursuance of such agreement, the appellant had received a sum of Rs.15,00,000/-. As much as subsequent to issuance of notices under Sections 13(2) and 13(4) of the Act, by the second respondent, Andhra Bank, as there was an assignment of debt in favour of the appellant company, having entered into agreement for settlement and having received an amount of Rs.15,00,000/-, it is not open for the appellant company take further steps without issuing fresh notice as contemplated under Section 13(2) of the Act. Though the account of the first respondent was declared as a Non-Performing Asset, but, however, in view of the assignment of debt in favour of the appellant company and subsequent agreement entered by the appellant company with the first respondent, writ petitioner, and receipt of a sum of Rs.15,00,000/-, pursuant to such Memorandum of Understanding by the appellant company, the quantum of liability is changed. 8. In that view of the matter, unless the first respondent company is put on notice, notifying the liability which exists as on today, it cannot be allowed to proceed straightaway under Section 14 of the Act by approaching the Chief Metropolitan Magistrate for taking possession of the secured assets. Hence, we are of the view that the learned single Judge has rightly directed issuance of fresh notice before taking further steps in accordance with law. For the foregoing reasons, we are in agreement with the view taken by the learned single Judge and as such we do not find any merit in this writ appeal. 9. The writ appeal is accordingly dismissed. No order as to costs. _________________ ANIL R. DAVE, CJ. April 24, 2008 MRR _____________________ R. SUBHASH REDDY, J.