IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWENTY SIXTH DAY OF JUNE, TWO THOUSAND EIGHT ONLY PRESENT: THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION No.11902 of 2005 Between: Varada Sesha Naga Venkata Harish Kumar … Petitioner AND The District Collector, Krishna at Machilipatnam & others. … Respondents Counsel for the petitioner : Sri Sricharan Telaprolu Counsel for respondents 1&2: GP for Revenue Counsel for respondent No.3: Sri Addepalli Suryanarayana Counsel for respondent No.5: Sri Rama Rao Mavidi This Court made the following: THE HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY WRIT PETITION. No.11902 of 2005 ORDER:- The petitioner, who is the son of respondent No.4- borrower of respondent No.3 Bank, filed this writ petition, being minor through his mother, to declare the action of respondent Nos.1 to 3 in trying to dispossess him from the first floor of the premises bearing door Nos.7/315 and 7/316 of Godugupeta, Machilipatnam, as illegal and unconstitutional apart from being violative of principles of natural justice. The petitioner’s mother in her affidavit averred that the petitioner is the only son to her and respondent No.4, that she is taking care of the petitioner through the help of her paternal family members, that respondent No.4 due to bad vices neglected the family, that she filed O.S.No.537 of 2000 on the file of the Principal Junior Civil Judge, Machilipatnam, on behalf of the petitioner for partition of the joint family property, which was referred to Lok Adalat and that a compromise decree dated 02.11.2002 was passed, according to which, upstairs of the property bearing door Nos.7/315 and 7/316 was allotted to the share of the petitioner and the ground floor to respondent No.4. She further stated that according to the said compromise decree, respondent No.4 shall pay a sum of Rs.2,50,000/- towards permanent alimony on or before 02.03.2002 and in case he fails to pay the said amount, she shall be free to realize the same by sale of the share of the property allotted to respondent No.4. She further averred that respondent No.3 filed O.S.No.70 of 2002 on the file of Senior Civil Judge, Machilipatnam against respondent No.4 for recovery of debt payable by the latter and on coming to know about the same, she caused a legal notice served to respondent No.3 – Bank informing it about the decree obtained by her, apart from filing an I.A. to implead the petitioner as defendant in the said suit and that the said I.A. was coming up for enquiry on 27.07.2005. That during the pendency of the said suit, when respondent No.3 sought to sell the petitioner’s share, she got issued a legal notice on 03.11.2004 to which respondent No.3 gave a reply on 16.11.2004, that respondent No.3 conducted auction on 18.11.2004 by erroneously including the share of the property of the petitioner in the sale and that immediately the petitioner filed a petition before respondent No.1 to stay his dispossession till the disposal of O.S.No.70 of 2002 and that respondent No.1 has not passed any order thereon. It is further averred that respondent No.2 visited the petitioner’s house on 30.05.2005 at 11.00 a.m. and informed her and the petitioner that they should vacate the first floor of the premises within three days and when they tried to convince them to desist from the said action, the said respondents have not relented, forcing the petitioner to file this writ petition. On behalf of respondent No.3, Sri P. Suryanarayana, Bank Manager, Machilipatnam branch, filed counter affidavit wherein he denied the claim of the petitioner that he has become the owner of the property in question under the decree passed by the Lok Adalath. It is stated therein that respondent No.4 availed the loan facility from respondent No.3 Bank. As security for repayment, he mortgaged building bearing door Nos.7/315 and 7/316 of Godugupeta, Machilipatnam on 10.02.1994 by depositing the title documents and that thus the bank became the secured creditor, which has a right to sell the said property in default of repayment of loan amount of Rs.7,22,584=50 ps. It is alleged that O.S.No.537 of 2000 filed by the petitioner for partition is a collusive one between the petitioner and respondent No.4 and that the same is filed only to avoid the liability of respondent No.3. It is further pleaded that under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘the Act’) the Bank has got statutory power for sale of mortgaged properties in default of amounts due to the financial institutions and that respondent No.3 Bank issued notice dated 20.10.2003 for sale of the property. Respondent No.4 filed WP.No.19725 of 2003 questioning the vires of the provisions of the Act and for consequential direction to declare the sale notice as illegal and that the said writ petition was dismissed on 2.04.2004 with liberty to the petitioner therein to avail his remedy under Section 17 of the Act. Following the dismissal of the said writ petition, the property in question was auctioned by the Bank on 18.11.2004 in which one Sri P.Nageswara Rao became the highest bidder for Rs.10,65,000/- and that the said amount was deposited by him. It is stated that when the Authorized Officer of the Bank requested respondent No.1 i.e., District Collector, Krishna to take possession under Section 14 of the Act, the petitioner filed the present writ petition. It is alleged that the petitioner was set up by respondent No.4 having been unsuccessful in WP.No.19725 of 2003 filed by him in order to stall delivery of the properties to the auction purchaser. The auction purchaser filed WPMP.No.2759 of 2007 to implead him as respondent No.5. By a separate order passed today, the said application has been allowed. In his affidavit respondent No.5 stated that he participated in the auction held on 18.11.2004 and deposited the entire bid amount of Rs.10,65,000/- and that though more than two years elapsed, delivery of possession was not given to him in view of interim stay granted by this Court. At the hearing, Sri Sricharan Telaprolu, learned counsel for the petitioner submitted that by virtue of the decree of Lok Adalat the petitioner became the lawful owner of the property in question and hence respondent No.3 has no power to sell the property. He also submitted that the petitioner’s application for impleadment in O.S.No.537 of 2000 filed by respondent No.3 is pending and even before adjudication of the petitioner’s rights in the property in question in the said suit, respondent No.3 illegally sold the property and is seeking to dispossess the petitioner, which cannot be sustained in law. No one appeared for respondent Nos.1, 2 and 4. Sri Addepalli Suryanarayana, learned counsel for respondent No.3 and Sri Mavidi Rama Rao, learned counsel for the impleaded respondent (respondent No.5) submitted that in view of the encumbrance created by respondent No.4 in favour of respondent No.3 by mortgaging the property in question, respondent No.3 is entitled to enforce its statutory right. They submitted that since the property was already under mortgage, no rights came to be vested in the petitioner over the mortgaged property under the decree of the Lok Adalat, which is a collusive one and that the petitioner is set up by respondent No.4 having been unsuccessful in his writ petition in stalling the sale. I have given my serious consideration to the respective submissions of the learned counsel for the parties and perused the record. The fact that the property was mortgaged by respondent No.4 in favour of respondent No.3 as far back as the year 1994 is not in dispute. Though respondent No.3 filed O.S.No.70 of 2002 for recovery of the debt due from respondent No.4, evidently in view of commencement of the Act, it has exercised its option of enforcing the security interest by invoking the provisions of Section 13 of the Act, without waiting for passing of decree in the pending suit. In my considered opinion, this approach of respondent No.3 is perfectly legal and valid. This view of mine is fortified by the judgment of Supreme Court in Transcore v. Union of India[1], wherein the Apex Court held that by applying the doctrine of election, the Banks and Financial institutions are entitled to enforce the security interest under the provisions of the Act without withdrawing the proceedings already initiated under the provisions of the Recovery of debts due to Banks and Financial Institutions Act, 1993. This is exactly what respondent No.3 has done by invoking the provisions of Section 13 of the Act and selling the property in auction. In order to give effect to the sale, respondent No.3 invoked Section 14 by approaching respondent No.1 for taking possession of the property. These facts thus clearly reveal that respondent No.3 exercised its statutory power vested in it by Section 13 of the Act to enforce its security interest. The contention of the learned counsel for the petitioner that the petitioner became the owner of the first floor of the property in question by virtue of the Lok Adalat decree has no legal basis and hence cannot be accepted. Respondent No.3 is not a party to the suit in which the said decree was passed and the same is therefore not binding on him. Whether the said decree is collusive or not, as alleged by respondent Nos.3 and 5, the fact remains that the petitioner filed the suit for partition and obtained a decree in respect of the property, which was already under a valid mortgage. Hence, such a decree does not obliterate the statutory charge held by respondent No.3 and vest the property in the petitioner free from encumbrance already created by respondent No.4. Viewed from this angle, the assertion of the petitioner that he has become the lawful owner of the property by virtue of the decree passed by the Lok Adalat is wholly meritless. It is not in dispute that respondent No.4 questioned the proceedings initiated by respondent No.3 under the provisions of the Act and did not succeed in his said effort with the dismissal of WP.No.19725 of 2003. After the auction was held and respondent No.5 purchased the property, the petitioner filed the present writ petition. These facts do suggest that respondent No.4 might have set up the petitioner to stall the delivery of possession, as alleged by respondent Nos.3 and 5. Be that as it may, without questioning the measures taken under Section 13 (4) of the Act by respondent No.3 by availing the remedy under Section 17 of the Act, the petitioner cannot claim protection from dispossession of the property, which was already sold. The petitioner neither availed the said remedy nor sought for invalidation of the sale already held in favour of respondent No.5. Therefore, in my considered view, this writ petition, which is filed for a relief, which is more in a nature of an injunction against the petitioner’s dispossession, is without any substance. Unless the measures taken under Section 13 (4) of the Act and the consequent sale in favour of respondent No.5 are invalidated by the appropriate forum, the relief claimed in this writ petition cannot be granted. For the abovementioned reasons, the writ petition, which is shorn of any merit, is dismissed. For indulging in vexatious litigation and stalling delivery of possession to respondent No.5 despite his depositing the entire auction amount of Rs.10,65,000/- for more than three years, the petitioner is saddled with exemplary costs of Rs.25,000/- recoverable by respondent No.5. As a sequel to dismissal of the writ petition, WPMP.No.15159 of 2005 and WVMP.No.3280 of 2005 are disposed of as infructuous. C.V. NAGARJUNA REDDY, J Date: 26.06.2008. ES [1] (2008) 1 SCC 125