IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 20TH JULY 2009 / 29TH ASHADHA 1931 WP(C).No. 20203 of 2007(E) -------------------------- OA.35/2007 of DEBT RECOVERY TRIBUNAL, ERNAKULAM .................... PETITIONER(S): --------------- SMT.HALEEMA R., W/O.HASSANAR, MPM HOUSE, T.C. 18/2108, MUDUVANMUGAL, POOJAPURA, THIRUVANANTHAPURAM-12. BY ADV. SRI.K.B.PRADEEP RESPONDENT(S): --------------- 1. THE DEBT RECOVERY TRIBUNAL, KERALA AT ERNAKULAM. 2. THE SOUTH INDIAN BANK LTD., REGIONAL OFFICE, HOTEL SAFA INTERNATIONAL BUILDING, P.B.NO.473, MALAYALA MANORAMA ROAD, THIRUVANANTHAPURAM-695 014, REPRESENTED BY THE CHIEF MANAGER. ADV. SRI.GEORGE VARGHESE,SC,SOUTH INDIAN BANK FOR R2 GOVERNMENT PLEADER Mr.P.K.BABU THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20/07/2009,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMACHANDRA MENON, J. ----------------------------------------------- WP(C) NO. 20203 OF 2007 ----------------------------------- Dated this the 20th day of July, 2009 J U D G M E N T The basic question involved in this Writ Petition is, whether the respondent Bank is justified in resorting to the coercive proceedings under the SARFAESI Act, when the over due amount is allegedly less than 20 % of the principal amount. The contention of the petitioner is that, even going by the admitted facts and figures as revealed from Exts. P1 and P2 notices, the outstanding liability at the time of initiation of the proceedings was only Rs.1,36,48,869.80, as against the total loan amount of Rs.1.30 crores, making the 'over due' being less than 5 %. 2. With regard to the sequence of events, the petitioner, a business woman had availed a 'cash credit facility' of Rs. 1 crore from the SBT in the year 2004. In the very same year, she had obtained a 'housing loan' of Rs. 30 lakhs from the second respondent, upon which, the second respondent Bank agreed to meet the entire financial requirements of the petitioner. This led to closing of the loan transaction with the SBT and the respondent Bank, provided a further finance to an extent of Rs. 1 crore, thus making a total principal amount under the two loan transactions as 1.3 WPC NO.20203/2007 2 crores. 3. The learned counsel for the petitioner submits that, the petitioner was very much prompt in effecting the repayments, which is discernible from Exts. P1 and P2 notices issued by the Bank, seeking to realize the entire outstanding liability of Rs.1,36,48,869.80 invoking the provisions under the SARFAESI Act. The learned counsel submits that, the outstanding liability in 2007 was only to an extent of Rs. 6.48 lakhs, i.e., less than 5 %, which did not enable the respondent Bank to pursue the steps under the SARFAESI Act by virtue of the statutory bar under Section 31 (j) of the Act, which stipulates that the amount due required a minimum of 20 % of the principal amount with interest thereof. 4. Met with the said circumstances, the petitioner approached this Court by filing WP(C) 9707 of 2007, which led to Ext.P5 judgment holding that, no interference was possible particularly in view of the nature of the respondent Bank and also since alternate remedy was available to the petitioner, as provided under the Act. Accordingly, the petitioner was permitted to approach the DRT for redressal of the grievance, pursuant to which, necessary proceedings were filed before the DRT as SA 35 of 2007. Since the I.A. moved by the petitioner for interim stay was left in cold storage, the petitioner was constrained to approach this Court again by WPC NO.20203/2007 3 filing WP(C) 17332 of 2007, which lead to Ext.P10 judgment, whereby the DRT was directed to consider the I.A. and appeal and pass orders on 28.6.2007 making it clear that, the petitioner shall not be dispossessed from the house until 29.6.2007. Pursuant to the above verdict, the appeal preferred by the petitioner was considered by the DRT and Ext.P11 order was passed on 28.6.2007, however holding that, the appeal preferred by the petitioner was quite 'pre-mature' in view of the law declared by the Apex Court in Mardia Chemicals Limited Vs. Union of India (2004 (4) SCC 311). It was also on the basis of the endorsement made by the learned counsel appearing for the appellant (petitioner herein) on the SA stating that, the SA could be dismissed in the above circumstances. The petitioner has now approached this Court challenging the said order raising many a ground, legal as well as factual. 5. The primary contention of the petitioner is that the respondent Bank is not at all entitled to resort to the steps under the SARFEASI Act in view of the statutory bar under Section 31(j), whereby it is clearly stipulated that such course is not permissible when the 'amount due' is less than 20% of the principal amount and interest thereon. Learned counsel for the petitioner submits that, even as per Ext.P1 and P2 notices issued by the Bank, the 'over due amount' was only to an extent of Rs.6,48,869.80 as the WPC NO.20203/2007 4 total liability was shown as Rs.1,36,48,869.80 in respect of the total borrowings of 1.30 crores. The over due amount being only Rs.6,48,869.80 i.e., less than 5% of the principal amount, no proceedings will lie; submits the learned counsel for the petitioner. 6. Learned counsel for the respondent Bank, with specific reference to paragraph 7 of the counter affidavit submits that, the proceedings under the SARFEASI Act are liable to be pursued under Section 13(2) of the Act, once the borrower commits default in repayment of the secured debt or any instalment thereon and his account in respect of such debt is classified by the Bank as 'NPA'. The term NPA has been defined under Section 2(O) of the Act as follows:- “non-performing asset”means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset” 7. Learned counsel for the Bank, with reference to Section 2(b) submits that, by virtue of the directions and guidelines issued by the RBI, if the borrower commits default in paying the due instalments exceeding a period of 90 days, the account is liable to be declared as NPA and once this is done, the course under Section 13(2) is very much sustainable. Learned counsel further submits that, there is no dispute with regard to the stipulations under Section 31(j) and that the Bank will be justified in WPC NO.20203/2007 5 resorting to such exercise only if the 'amount due' is not less than 20% of the principal amount and interest. But then the learned counsel further submits that, 20% of the amount due, means 20% of the entire outstanding liability, when the account is declared as NPA. In the instant case, the 'amount due' as shown in Ext.P1 and P2 is Rs.1,36,48,869.80 which obviously is more than 20% of the principal amount and interest and hence that the proceedings are very much sustainable. 8. This Court does not propose to go into the merits of the case obviously for the reason that interference by this Court was found as not sustainable and declined while passing Ext.P5 judgment, holding that the petitioner could pursue the matter by approaching the DRT. The petitioner approached the DRT by filing appeal; which however was dismissed as per Ext.P11 holding that the apprehension expressed by the petitioner was pre- mature at that time. That apart, the legal position in this regard was rather conceded from the part of the petitioner as well and it was pursuant to the endorsement made by the learned counsel appearing for the petitioner in the concerned S.A., that the interference was declined as per Ext.P11 order. The learned counsel for the petitioner submits that, the position as on date is entirely different and that the Bank has already taken legal possession of the property and the physical possession is sought to be WPC NO.20203/2007 6 taken through the interference of the Chief Judicial Magistrate's Court availing the assistance as provided under Section 14 of the Act and hence that the petitioner is very much having the necessary cause of action. But then, the question is whether it is liable to be entertained by this Court, which can only be answered in the negative, in view of the declaration given by this Court in Ext.P5 judgment and in view of the observation made by the DRT in Ext.P11, where interference was declined only for the reason that the issue was pre-mature as on that date. 9. If the petitioner is aggrieved in any manner, she is at liberty to approach the DRT with specific reference to subsequent cause of action now stated as available. Learned counsel for the petitioner submits that, pursuant to the interim order passed by this Court earlier i.e., before the finalisation of Ext.P5, the petitioner had effected deposits of different amounts and that the Bank is liable to give credit to such deposits made, including the sum of Rs.5,13,000/- appropriated by the Bank from the account maintained by the surety with the respondent Bank. It is made clear that if any payment is effected as above, the Bank shall give credit to the same before the final liability is fixed against the petitioner. The petitioner is free to move the DRT by filing appropriate proceedings, if she is having the necessary cause of action, which in turn will be dealt with by WPC NO.20203/2007 7 the DRT in accordance with law. 10. Considering the fact that the above Writ Petition was admitted by this Court on 02.07.2007 and was pending all these years, this Court finds it fit and proper to permit the petitioner to file appropriate proceedings before the DRT on or before 31.07.2009. If such proceedings are filed on or before the said date, the same shall be deemed as within time and the matter shall be considered and dealt with on merits in accordance with law. So as to enable the petitioner to pursue the matter before the DRT and also to seek for appropriate interim orders, the coercive steps (Ext.P12) now stated as being pursued shall be kept in abeyance for a period of one month, provided the petitioner pays a sum of Rs.1,00,000/- on or before the 31st of this month. The Writ Petition is disposed of accordingly. P.R.RAMACHANDRA MENON JUDGE dnc