IN THE HIGH COURT OF JUDICATURE ANDHRA PRADESH AT HYDERABAD FRIDAY, THE FIRST DAY OF JULY TWO THOUSAND AND ELEVEN PRESENT THE HON’BLE MR. JUSTICE GHULAM MOHAMMED AND THE HON’BLE MR. JUSTICE K.G. SHANKAR WRIT PETITON No. 18216 OF 2010 Between: R.Eswar Rochiram Hiranandani … Petitioner V/s. The Sind Co-operative Urban Bank Ltd., Represented by its Chief Executive Officer, 1-6-50/7, Prenderghast Road, Secunderabad & Anr. … Respondents Counsel for the Petitioner : Sri Kasa Jaganmohan Reddy Counsel for the Respondents: Sri P.A.V. Balaprasad (caveator) The Court made the following : (Order follows next page) THE HON’BLE MR. JUSTICE GHULAM MOHAMMED AND THE HON’BLE MR. JUSTICE K.G. SHANKAR WRIT PETITON No. 18216 OF 2010 O R D E R : { Per the Hon’ble Mr.Justice Ghulam Mohammed) This writ petition is filed seeking a writ of mandamus to declare the sale Notification dated 25-5-2011 issued by the first respondent in respect of Schedule “A” and Schedule “B” properties for the other default amount of second respondent not covered by the mortgage deed as arbitrary, illegal, contrary to the purport of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 and abuse of rights conferred by Section 13 of the said Act and violative of Articles 14 and 21 of the Constitution of India and consequently to set the same and grant such other suitable relief as this Court may deem fit and proper in the circumstances of the case. 2. The case of the petitioner is that the second respondent got acquaintance and friendship with him and obtained hand loan of Rs.15 lakhs pleading urgent family and business requirement by undertaking to repay the same. The petitioner paid the said amount through banker’s cheques. The second received the said amounts and voluntarily promised to pay interest @ 24% p.a. on the said amount. It is stated that on persistent demand the second respondent promised to pay the amount in the month of October 2009 and issued cheques towards repayment of part payment of said debt and requested the petitioner to present the same as per due dates and promised to arrange the funds to honour the same. Originally the second respondent issued cheque bearing No. 130000, dated 27-12- 2009 for Rs.2,50,000/-, cheque bearing No.148712, dated 28-12- 2009 for Rs.3,50,000/-, cheque No. 136975, dated 29-12-20090 for Rs.5,00,000/-, cheque No.129998, dated 09-1-2010 for Rs.3,50,000/- drawn on SND Bank, Seunderabad, respectively towards security for repayment of Rs.14,50,000/- and he also voluntarily promised to pay interest @ 24% p.a. On 27-10-2009 when the petitioner requested the second respondent to repay the debt along with interest accrued thereon till date, he paid an amount of Rs.2,61,000/- towards interest and further executed a promissory note for a balance amount of Rs.16,03,000/- and agreed to pay same rate of interest. 3. While things stood thus, when the petitioner presented the said cheques for collection through his banker as per dates but the same were returned by the Banker of the second respondent on the ground of insufficient funds/exceed arrangements. Thereafter, he immediately informed the same to the second respondent about the dishonour of cheques and demanded to pay the amount in cash. But the second respondent failed to pay the amounts with some lame excuse and avoided the payment and closed his business in the end of December 2009. Hence, the petitioner filed OS.No. 46 of 2010 before the Court of IV-Additional Chief Judge, City Civil Court, Hyderabad for recovery of money and also filed an application for attachment of the property being 5/6th undivided share of a specified share in the entire first floor admeasuring 1207 sq.ft. and eastern portion of the third floor admeasuring area 532 sq.ft., including common area in Ploto No./ 1-8-303/8 together with undivided share of the land to an extent of 111 sq.yards comprising cellar, ground plus upper two floors situated at Sindhi Colony. It is stated that the second respondent contested the matter and pleaded that the property was already mortgaged for Rs.22 lakhs with the first respondent. The III- Additional Chief Judge, City Civil Court was pleased to order second attachment of the said property in IA.No.392 of 2010 dated 23-6- 2010. 4. It is pertinent to mention here that the second respondent obtained loan of Rs.22 lakhs from the first respondent on “A” and “B” schedule properties mentioned in the impugned notification and also by hypothecation of shop including the stocks in M/s. Asha Electrical and Engineering Company and open land at Chilkur under different documents. While the petitioner was trying to realize his money, the first respondent initiated proceedings under section 13 of the Act and the rules made thereunder. Though when there was charge of hypothecation on M/s. Asha Electricals and Engineering Company including stocks therein, the Officers of the first respondent allowed the second respondent to dispose of the stocks and close the shop. According to the deed of mortgage dated 03-9-2007, the second respondent borrowed a sum of Rs.22 lakhs on the property situated in Sindhi Colony, Secunderabad. It is stated that the second respondent have separately obtained loans on the shop as well as the land in Plot No.42 and 49 in Survey No. 275 admeasuring 377.77 sq.yards situated at Chilkur village, Moinabad Mandal, Ranga Reddy district. Now the petitioner is the unsecured creditor of the second respondent and obtained attachment of immovable property from the competent civil court. It is stated that the first respondent is the secured creditor of the second respondent and it has charge over “A” and “B” schedule properties for Rs.22 lakhs. In the impugned notification, the first respondent clubbed both the properties and fixed the reserve price at Rs.45 lakhs and showed the default amount as Rs.62,62,525/-. But the charge of mortgage and hypothecation in favour of the first respondent are different and distinct transactions. The schedule “A” and “B” properties mentioned in the sale notification were mortgaged for securing repayment of Rs.22 lakhs. They are entitled to realize the said amount with interest thereon from the sale proceeds of the schedule “A” and “B” properties and the petitioner have acquired right for realization of his debt from the remaining amount. By virtue of joint action notice and by virtue of not enforcing the hypothecation of shop and stocks, the interest of the petitioner is being jeopardized. By virtue of attachment order in OS. No. 442 of 2010 all the sale proceedings of the schedule “A” and “B” properties over and above 22 lakhs of the secured amount and interest should be deposited in the court for realization of debt under OS.No.42 of 2010. 5. It is stated that the auction was scheduled to 01-7-2011. If the public auction is allowed and the third party interest will come into operation and the petitioner will be put to irreparable damage. Section 13 of the Act confers privileges on the secured creditors. The security of the first respondent in respect of “A” and “B” schedule properties is only for Rs. 22 lakhs. The action of the respondents in clubbing different properties in the sale notification for realization of its various debts not secured in the mortgage deed is contrary to the purport of Section 13 of the Act and Article 14 and 21 of the Constitution of India. 6. Heard the learned counsel for the petitioner as well as learned standing counsel for the respondents-caveator. 7. The petitioner is neither a borrower nor a guarantor and moreover there is no privity of contract. The petitioner contends that he filed a civil suit and obtained attachment before judgment. In the circumstances of the case, when there is no privity of contract between him and the first respondent, this Court cannot go into the disputed questions of fact while exercising the jurisdiction under Article 226 of the Constitution of India and the Hon’ble Supreme Court recently observed that this Court cannot exercise its jurisdiction under Article 226 of the Constitution of India to decide the disputed questions of this nature. 8. In the circumstances, the writ petition fails and the same is accordingly dismissed without costs. ______________________________ JUSTICE GHULAM MOHAMMED _______________________ JUSTICE K.G. SHANKAR 01-07-2011 I s L THE HONOURABLE MR.JUSTICE GHULAM MOHAMMED AND THE HONOURABLE MR. JUSTICE K.G. SHANKAR WRIT PETITION No. 18216 OF 2011 ORDER : Per the Hon’ble Mr.Justice Ghulam Mohammed Circulation No.159 Date: 01-07-2011 Court Master: I s L Computer No. 43