HON’BLE SRI JUSTICE P.S.NARAYANA + WRIT PETITION No.19790 of 2007 % Dated 02-11-2007 # Between: Kolluri Suresh Rani …. Petitioner And The Andhra Bank, Rep.by its Chief Manager, Dilsukhnagar, Hyderabad and another … Respondents ! Counsel for the Petitioner: Sri K.SUNEEL BABU ^Counsel for Respondent Nos.1 & 2: Sri K.LAKSHMINARASIMHA <GIST: > HEAD NOTE: ? Cases referred 1. (2006) 10 Supreme Court Cases 201 2. 2005-BCR-1-276: 2005 (TLS) 1317360 3. 2004 (4) ALT 4 (SC) IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY THE SECOND DAY OF NOVEMBER TWO THOUSAND AND SEVEN PRESENT THE HON'BLE MR JUSTICE P.S.NARAYANA WRIT PETITION No.19790 of 2007 Between: Kolluri Suresh Rani … Petitioner And: The Andhra Bank, Rep.by its Chief Manager, Dilsukhnagar, Hyderabad and another …Respondents THE HONOURABLE SRI JUSTICE P.S.NARAYANA WRIT PETITION No.19790 of 2007 ORDER: 1. Heard Sri Girishkumar, representing Sri Suneel Babu, and Sri Lakshmi Narasimha, the standing counsel representing the respondents. 2. Sri Girishkumar, the learned counsel, representing the writ petitioner, has taken this Court to the contents of the affidavit filed in support of the writ petition and also the counter affidavit, and would maintain that though certain representations were made, without considering the representations and without passing any order, the further proceedings had been taken and the same is bad in law. The learned counsel also had explained the contents of the better affidavit and would maintain that in the facts and circumstances of the case, the impugned order to be quashed and respondents to be directed to pass reasoned order on the representations and then proceed further with the matter, in accordance with law. The learned counsel also would maintain that in the case of this nature, the availability of alternative remedy may not come in the way. The learned counsel also placed strong reliance on some decisions. 3. On the contrary, Sri Lakshmi Narasimha, the learned standing counsel, representing the respondents, would submit that as far as the movables, if any, are concerned, the petitioner is at liberty to take such movables, since the respondents have nothing to do with the said movables. The learned counsel also further explained that as far as steps to be followed and procedure to be followed had been followed, in accordance with law. Even otherwise, the petitioner is having an effective alternative remedy, and hence the writ petition is not maintainable and the same is liable to be dismissed. 4. Heard the learned counsel on either side and perused the material available on record. 5. The writ petitioner filed the present writ petition for writ of certiorari to quash the impugned notice dated 21.05.2007 issued by the 2nd respondent under Sec.13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “the Act” for the purpose of convenience) declaring the same as arbitrary, illegal, null and void and in violation of the provisions of the Act referred to supra and direct the respondents to deliver possession of the house property bearing House No.18-155/B, situated at Road No.5, Kamalanagar, Dilsukhnagar, Hyderabad which is in possession of the respondents bank and to pass other suitable orders. 6. In the affidavit filed in support of the writ petition, it is stated that the petitioner approached the Karnataka Bank for grant of loan for setting up business of manufacturing coconut oil in the year 2001 and submitted an application for the same. The Manager of the said Bank accepted her application and sanctioned a loan under over cash credit fixing a limit of Rs.8,00,000/-. Thereafter, the petitioner started the business and out of the income, which she derived out of the business, she was paying the amounts borrowed from the Bank regularly without any default. It is further stated that the petitioner never exceeded the limit of Rs.8,00,000/- fixed by the Bank under over cash credit facility and though she has requested the Manager of the said Bank to enhance the limits as she was doing good business and also to diversify her business but the Manager refused to do it. In the year 2006 the 1st respondent Bank has taken over the Karnataka Bank as a result of which all the transactions relating to Karnataka Bank were stood transferred to the Andhra Bank. After such taken over of the Karnataka Bank by the 1st respondent bank, she approached the 2nd respondent and requested him to enhance over cash credit limit to 20 lakhs for the reason that she has established a flour mill for manufacture of various flours and that she has orders on hand of various customers to the tune of 40 lakhs and also requested the 2nd respondent to verify her bank account transactions and only after getting satisfied by the past transactions it can take steps to enhance the over cash credit limit. 7. It is further stated that the 2nd respondent on being satisfied with the past record of the petitioner, enhanced the over cash credit limit to 15 lakhs and also a term loan was granted to her to the tune of Rs.3,00,000/-. Ever since the petitioner established the flourmill and she was availing the facilities granted by the 2nd respondent Bank. The petitioner was doing good business and was paying the borrowed amounts without any default. While so, due the sudden unfortunate turn of events, the petitioner had to shut down her flour mill and had to shift the same to another premises due to which she could not carry on her business as a result of which she incurred heavy loss. In fact, the petitioner gave in writing a representation to the 2nd respondent Bank of the above unfortunate events but the 2nd respondent Bank without considering the same started issuing notices for repayment of the loan amount which culminated into issue of Notice dated 17.04.2007 under Sec.13 of the Act read with Rule 4(5)(c)(iii) of Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as “the Rules” for the purpose of convenience) directing her to deliver the possession of the property mentioned interest he said notice immediately. On receipt of the said notice, the petitioner approached the 2nd respondent bank to grant her some time for payment of the demanded amount but the 2nd respondent refused to grant the same and instead issued Notice under Sec.13(2) of the Act on 21.05.2007 calling upon her to repay the loan amount of Rs.12,13,216.64 ps. in over cash credit and amount of Rs.2,69,664/- in term loan totaling Rs.14,82,880-64 ps as on 30.04.2007 or else they will take over the possession of the property as per the provisions of the Act. Again on receipt of the said notice, the petitioner approached the 2nd respondent Bank and requested him to grant some more time to repay the borrowed amount and further requested him to consider the above said facts. The 2nd respondents assured her that they will not take any coercive steps and that sufficient time will be granted to her for repayment of the said loan amount. It is further stated that after receiving the said notice, the petitioner has brought down the outstanding amounts from Rs.14,00,000/- to Rs.11,00,000/- and she was taking every possible steps to repay the borrowed amounts. In fact, the petitioner has hypothecated valuable assets worth Rs.60,00,000/- to the respondent bank and requested them that in the event of her inability to repay the amount they can take necessary steps for realizing the loan amount. 8. It is further stated that the respondents without considering the petitioner’s request on 24.08.2007 the 2nd respondent deputed four officials of the bank who high handedly dispossessed the petitioner from the house in inhuman manner at 1 PM in the afternoon and locked the house property. It is also stated that the respondent bank officials in an inhuman way thought the petitioner pleaded that her two children are coming for having lunch, did not allow her to stay in her house and physically pushed her out and locked the house without allowing her to collect her belongings. The petitioner was thrown out of her house with just clothes on her body and in the result, the petitioner, her husband and her two daughters aged about 11 and 15 are on roads and are in depressed state and even if she has to settle the account all the records are inside the house. 9. It is stated that the notice issued by the 2nd respondent is not in accordance with law, since the 2nd respondent is not an authorized officer. Further it is stated that the respondents did not comply with the formalities prescribed under Rules 4 and 8 of the Rules for taking possession and hence the action taken by the respondent Bank is illegal. Further the impugned notice did not contain the calculation of the amount and no statement of accounts had been enclosed so as to enable the petitioner to verify the same. It is further stated that the notice under Sec.13(2) of the Act should be published in two widely circulated newspapers of which one should be in vernacular language before actual possession of the property is taken and this was not complied with the respondent bank. It is also stated that under the Act the secured creditor can invoke the provisions for enforcement of the security interest only after registration of security interest in Central Registry set up for the purpose. Since the registration of the security was not created over the properties of the petitioner, the proceedings initiated under the Act are null and void. 10. It is further stated that as per Sec.14 of the Act the respondent bank has to make a representation to the District Magistrate to issue order to take possession of the property from the defaulter and to deliver the possession of their officials by enforcing the powers conferred under Sec.14 of the Act. In such circumstances, it is stated that the petitioner has left with no other option except to approach this Court by praying appropriate reliefs. 11. WPMP No.26211/2007 is filed praying to grant leave to the petitioner to file better affidavit and leave was granted on 27.09.2007. In the better affidavit filed, the petitioner narrated the particulars, no doubt furnishing certain further details. However, certain factual details relating to sanction of loan and other particulars may not be very essential. 12. In paragraph-6 of the better affidavit, the writ petitioner had stated that she used to pay the term loan instalments regularly from the date of allotment till March, 2007. It is stated that in the month of January, 2007 the petitioner was issued a notice under the Act asking her to repay the entire amount under over cash credit account. The husband of the petitioner met the Chief Manager of the bank and requested him to provide the time to repay the amount. The Chief Manager of the Bank was pleased and agreed to make the payment later. The petitioner paid an amount of Rs.1,10,000/- on 25.01.2007, Rs.10,000/- on 23.03.2007, Rs.40,000/- on 25.03.2007 and Rs.93,000/- on 30.03.2007. After receiving these amounts the Bank seized the over cash credit account of the petitioner for the reasons best known to them and the same was not informed either to the petitioner or her husband. 13. It is further stated that on 17.04.2007 the Chief Manager Mr.K.S.Janardhan Rao issued a notice under Sec.13 of the Act read with Rule 4(5)(c)(iii) of the Rules to the petitioner, her husband and her brother, asking them to hand over the position of the properties which gave as collateral security. It is stated that the husband of the petitioner went to the Bank and met the Chief Manager of the Bank and enquired about the notice dated 17.04.2007. The Chief Manager said that these are all formal notices and also said that they need not worry about these notices and asked them to pay an amount of Rs.2,00,000/- and the balance amount may be paid later. The husband of the petitioner requested some time to pay that amount. The Chief Manager agreed for the same and gave a time up to the end of September, 2007. The husband of the petitioner is in segregating the funds of Rs.2,00,000/- to pay. Having agreed and granted time till September, 2007 for part payment of Rs.2,00,000/-, the Chief Manager again issued a possession notice dated 21.05.2007 arbitrarily with an ulterior motive. After receiving the notice, the husband of the petitioner again met the Chief Manager and asked about the notice. The Chief Manager again said that this is a formal notice and asked her husband to run the business promptly and repay the amount of Rs.2,00,000/-. The husband of the petitioner also met the higher authorities of the Bank in head office regarding the same and they also said the same and asked them to follow the Chief Manager. Having belief over the words of the Chief Manager, her husband was doing business and raising the funds to repay the amount to the over cash credit account. 14. It is also stated that even after paying an amount of Rs.2,53,000/- after issuing the notice on 17.01.2007 to prove the bona fide of the petitioner to pay the loan amount and clear her over cash credit limits which were used, on 23.08.2007 at 8.30 a.m. about 5 persons came to her home and directed them to vacate the premises and they want to attach the property. It was a shock to them and surprise to hear those words from them. They said that this action of attachment is only to heat up the issue and if she had a talk with chief manager the problem will be solved. Having known that the chief manager is not in the bank and was on leave they misguided her and forcibly took a request letter seeking time to vacate till 24.08.2007. Having no other option, her husband wrote a request letter. 15. It is further stated that on 24.08.2007 at about 13 hours when the husband of the petitioner is in the zonal office of the bank, 5 persons along with panel advocate by name Mr.Madhusudanacharlu came to her house and dragged her out from the house and locked the house. Though she asked them why they are doing all these things and who are they, then they informed her that they came from the Bank and they are attaching the house. When they came to her house, she was performing pooja as it was the last Friday and doing the Varalakshmi Vratam. Though she requested them to give her some time to provide lunch to her two daughters as it is the time to come from school for lunch and meanwhile her husband also will come from Zonal office as he went to settle the issue with the bank higher officials. 16. It is further stated that even after the request made by the petitioner, they behaved very rudely and behaved like gundas and used very filthy language and scolded her and her husband with very ugly words and made lot of mess in the street. They have not behaved at least as human beings and did not allow her to take clothes and also did not allow her to serve food to her hungry children. They threatened her life and forced her to sign on the white blank papers and thrown her out of the house and locked the house. It is stated that there are so many perishable items and valuables in her house and so many articles in her house. Her husband brought an amount of Rs.1,00,000/- before night to make the part payment in the bank on Saturday and the same was kept in the house in puja room and they are so many gold articles also. They did not even allow her to take that amount also. When she informed about that to Mr.Madhusudhanacharlu, he scolded her in filthy language and want to open the lock and enter into the house and lock it from inside the house and do not want to allow them to do their work. They did not even noted down the articles lying in the house and not done the panchanama at all. Though she asked them to provide the attachment papers they refused to give a single paper of attachment and the orders of attachment but physically thrown her out of her house and locked it. The action of the people who came to her house on that day is very high handed and untenable and they are liable to be punished under law. They did not even follow the procedure under the law to attach the property. 17. Further it is stated that the petitioner, her two daughters who came from school were standing on road till her husband came from zonal office and after his arrival they took shelter in one of our relative’s house. The husband of the petitioner approached the police station to lodge a complaint against the barbaric action of the people who came on 24.08.2007. Though her husband requested the station house officer, Saroornagar to take complaint but the station house officer refused to take complaint for the reasons best known to them. As the police is not taking complaint, her husband sent the same through the registered post to the Circle Inspector, Saroornagar Police Station, Hyderabad. 18. Further it is stated that the petitioner also approached the Borrowers Association to complain about the issue. The association in turn directed her to meet M/s.Janardhana Associate Bangalore. M/s.Janardhana Associates gave a notice dated 27.08.2007 to the Chairman and Managing Director, Andhra Bank Head Office, Hyderabad stating all the facts and barbaric action taken by their bank staff in guidance of their Chief Manager Mr.Janardhana Rao, Dilshuknagar branch. But till date the bank higher officials did not take any action against the persons who misbehaved with her and physically thrown her out of her house or the person who guided them to do so. The bank gave an evasive reply dated 02.09.2007. 19. Several factual details are narrated in paragraphs-13, 14 and 15. It is also stated that the notice under the Act was given in the month of January, 2007 without even marking her account NPA or seize the over cash credit account. As on date of notice under the Act her account was a running account and the transactions were doing and the bank did not close her account or made it NPA. In those circumstances, her husband believed the words of Mr.Janardhan Raod who is the Chief Manager of the Bank, Dilshuknagar Branch who assured them that it was only a formal notice and if she keep on paying the amounts he will not take any steps on it and since the account was in operation and not been closed, they have not issued any reply to that notice and paid Rs.2,53,000/- to over cash credit account till March,2007. 20. Further it is stated that the petitioner paid an amount of Rs.93,000/- on 30.03.2007 the bank had made her account NPA without any further notice or intimation and issued possession notice on 17.04.2007, her husband went to the branch and asked the Chief Manager of the Bank about the notice and to her surprise, her account was made NPA by that time and Mr.Janardhan Rao who is Chief Manager assured them it is only formal notice as per rules but no action will be taken by the bank and directed them to pay another Rs.2,00,000/- by the end of September, 2007 and promised to regularize her account from NPA. 21. Several other grounds just similar to what have been raised in the affidavit filed in support of the writ petition had been reiterated, and the reliefs also had been modified. The petitioner, modifying the relief, prayed for direction to the respondents to deliver possession of the house property in question and for such other suitable orders. 22. In the counter affidavit filed by the respondents, which was sworned by the Chief Manager of the Andhra Bank, it is averred that M/s.S.R.Traders, situated at D.No.18-155/B Road No.5, Kamalanagar, Dilsukhnagar, Hyderabad, a proprietary concern represented by Smt.K.Suresh Rani, the petitioner, has approached the respondent Andhra Bank, Dilsukhnagar Branch, Hyderabad Metro for take over the concern’s credit limits from the Karnataka Bank Ltd. Dilsukhnagar branch and requested for fresh limits with respondent Andhra Bank Dilsukhnagar Branch, Hyderabad. The respondent branch has accepted her request and informed the petitioner vide letter No.0122/18 dated 6.10.2004. The activity with which the petitioner asked for the above loan is for Idly Rava Making Unit. On the petitioner’s request, the said account was taken over with enhancement of limits from Karnataka Bank on 6.10.2004. The limits with Karnataka Bank Ltd. on the said date stood as Rs.8 lacs. The respondent Andhra Bank, Dilsukhnagar Branch sanctioned over cash credit limit of Rs.14 lacs. and term loan of Rs.3 lacs. The terms and conditions for the sanction of the above loan is as under: Cash Credit Term Loan Limit 14 Lacs 3 Lacs Purpose Working Capital Limits New Machinery of Industrial air compressor, Electronic Ejective valves and other accessories (for the proposed second hand imported colour sorter to be purchased) Security Stock in trade i.e. Raw Material of boiled Rice, Finished Goods of Idly Rava, Basin Chakki Atta and other pulses & dalls and packing material and sundry debtors below 90 days Proposed new machinery with the proposed second hand imported colour sorter at an estimated cost of Rs.12 lacs. Margin 25% against stocks, 50% against sundry debtors 25% against proposed new machinery Repayment Due date one year: 5- 10-2005 20 quarterly installments commencing from March, 2005 (interest shall be paid every month as and when the same is debited to the account) Collateral Security Owner Description Value Date of valuation K.Suresh Rani (Proprietor of the firm) House No.18/155B, Road No.5, Kamalanagar, Dilsukhnagar, Hyderabad 13.64 lacs 17-8-2004 Sri V.Rama Mohan Rao Open plots No.718 & 719 with teak plantation of 480 sq.yards in Survey No.63, 64, 67, 68 and 69 at Maruthi Nagar colony, A u s h a p u r village, Ghatkeswar Mandal, R.R.Dt. 2.40 lacs 13-9-2004 The bank has revalued the house property at Rs.16.98 lacs on 19.12.2005 and the open plots at Rs.2.40 lacs on 18.12.2006. The total value of the properties comes to Rs.19.38 lacs. Co-Obligants: 1. Sri K.Venu Babu, Husband of Proprietor of the Firm 2. Sri V.Rama Mohan Rao, Owner of one of the Collateral securities. 23. The cash credit limits were renewed on 3.4.2006 and the due date of the limit is 2.4.2007. As sufficient stocks were not available and the over dues in the term loan account, the Branch has declared the accounts as NPA on 30.12.2006 as RBI Prudential Norms. At the time of NPA the total liability is as under: Account Account Balance (Rs. In lacs) Uncovered interest Total liability (Rs.in lacs) OCC 13.93 0.12 14.06 Term Loan 2.52 0.04 2.56 Total 16.45 0.16 16.62 The recoveries after the date of NPA are as follows: Date of Recovery Amount of Recovery (Rs in lacs) 25-1-2007 1.10 23-3-2007 0.10 26-3-2007 0.40 30-3-2007 0.43 30-3-2007 0.50 Total 2.53 Despite repeated requests the petitioner did not repay the loan taken. They give below the dates on which notices were given to the petitioner which were acknowledged by the petitioner. The respondent bank has served the notices under the Act as follows: Notice Date of Notice Acknowledged by the petitioner Securitisation Notice 10-1-2007 10-1-2007 Possession Notice 17-4-2007 20-4-2007 Hand over of the property refused on -- 22-5-2007 Sec.14 petition filed on 13-6-2007 Date of Advocate Commissioner appointed by the Court Crl.MP No.266 of 2007 dated 16-8- 2007 Possession taken by the Advocate Commissioner Sri N.Krishnaiah appointed by the Court 24-8-2007 Possession given by the Advocate Commissioner to the Bank on 28-8-2007 The outstanding liability as on 28-8-2007 (interest calculated upto 31-7-2007) (Rs.in lacs) Account No. Account Balance Un recovered