HON'BLE MR JUSTICE GHULAM MOHAMMED AND HON'BLE MR JUSTICE G. CHANDRAIAH WRIT PETITION NO. 20571 OF 2009 Between: Medapati Sathi Reddy ..... PETITIONER AND 1. Asset Reconstruction Company (India) Limited and one another .....RESPONDENTS ORDER: (Per Hon'ble Sri Justice Ghulam Mohammed) This Writ Petition has been filed challenging the action of the respondents in interfering with the peaceful possession and enjoyment of the House Property bearing D.No. 3-29 (old 3-31) Dwajastambam Street, G. Mamidada Village, Peddapudi Mandal. Eat Godavari District pursuant to the notice dated 16.7.2009 issued by the respondents under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SRFAESI Act”) as illegal and arbitrary. Brief facts of the case are that the petitioner borrowed an amount of Rs. 60,000/- on 14.5.1992 from India Housing Finance and Development Limited, Kakinada Branch for construction of house. Out of the sanctioned amount the IHFC Company has released total amount of Rs. 47,000/- on different dates. It is stated that apart from his repayment the said IHFD company insisted for deposits and accordingly he deposited total amount of Rs. 12,000/- in the year 1992 with cumulative deposit of 5 years. It is stated that after a lapse of one and a half decade the petitioner received a notice dated 10.9.2007 from ITCOT Consultancy Services Limited, Chennai demanding to pay Rs. 83,799/- as they were appointed as Court receiver in O.A.No. 738 of 2001. After that the first respondent also issued notice under SRFAESI Act demanding an amount of Rs. 2,16,898/- for which he got issued a reply on 24.8.2009. Being aggrieved by the same, the present Writ Petition has been filed. The learned counsel appearing for the petitioner contended that the petitioner is aged about 70years and after lapse of more than 17 years and for the mistake of the then finance company he is facing troubles now and the respondents are not supposed to enforce the provisions of the SRFAESI Act for the time barred debt if any. We have heard the learned counsel and perused the material made available on record. This Writ Petition is misconceived inasmuch as there is no cause of action to entertain the Writ Petition since the respondents have not taken any measures for the last 17 years under Section 13(4) of the SRFAESI Act and it is obligatory and mandatory on the part of the respondents to furnish reasons to the petitioner as required under Section 13(3)(a) of the SRFAESI Act. In similar circumstances, the Supreme Court in MARDIA CHEMICALS LIMITED AND OTHERS VS. UNION OF INDIA AND OTHERS[1], at paragraphs 44, 45, 47, 48, 50,51, and 54 held as under: “44. As a matter of fact, the Narasimham Committee also advocates for a legal framework which may clearly define the rights and liabilities of the parties to the contract and provisions for speedy resolution of disputes, which is a sine qua non for efficient trade and commerce, especially for financial intermediation. Even the guidelines of the Reserve Bank of India in relation to classifying the NPA's while stressing the need of expeditious steps in taking a decision for classifying and identification of NPA's says, a system be evolved which should ensure that the doubts in asset classification are settled through specified internal channels within the time specified in the guidelines. It is thus clear that while recommending speedier steps for recovery of the debts it is envisaged by all concerned that within the legal framework, such provisions may be contained which may curtail the delays. Nonethelss dues or disputes regarding classification of NPAs should be considered and resolved by some internal mechanism. In our view, the above position suggests the safeguards for a borrower, before a secured asset is classified as NPA. If there is any difficulty, or any objection pointed out by the borrower by means of some appropriate internal mechanism it must be expeditiously resolved. 45. In the background we have indicated above, we may consider as to what forums or remedies are available to the borrower to ventilate his grievance. The purpose of serving a notice upon the borrower under sub-section (2) of Section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under sub-section (4) of Section 13 in case of non-compliance of notice within 60 days. The creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. There may be some meaningful @page-SC2391 consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under sub-section (4) of Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it would only be conducive to the principles of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon them before proceeding to take measures under sub-section (4) of Section 13. Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. It will only be in fulfillment of a requirement of reasonableness and fairness in the dealings of institutional financing which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavoury steps contained under sub-section (4) of Section 13. At the same time, more importantly we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why his objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management/business of viz. secured assets without intervention of the Court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of non-acceptance and of his objections. It is true, as per the provisions under the Act, he may not be entitled to challenge the reasons communicated or the likely action of the secured creditor at that point of time unless his right to approach the Debt Recovery Tribunal as provided under Sction 17 of the Act matures on any measure having been taken under sub-section (4) of Section 13 of the Act. 47. This will also be in keeping with the concept of right to know and lender's liability of fairness to keep the borrower informed particularly of the developments immediately before taking measures under sub-section (4) of Section 13 of the Act. It will also cater the cause of transparency and not secrecy and shall be conducive in building an atmosphere of confidence and healthy commercial practice. Such a duty, in the circumstances of the case and the provisions is inherent under Section 13(2) of the Act. 48. The next safeguard available to a secured borrower within the framework of the Act is to approach the Debt Recovery Tribunal under Section 17 of the Act. Such a right accrues only after measures are taken under sub-section (1) of Section 13 of the Act. 50. It has also been submitted that an appeal is entertainable before the Debt Recovery Tribunal only after such measures as provided in sub-section (4) of Section 13 are taken and Section 34 bars to entertain any proceeding in respect of a matter which the Debt Recovery Tribunal or the Appellate Tribunal is empowered to determine. Thus before any action or measure is taken under sub-section (4) of Section 13, it is submitted by Mr. Salve, one of the counsel for respondents that there would be no bar to approach the Civil Court. Therefore, it cannot be said no remedy is available to the borrowers. We, however, find that this contention as advanced by Shri Salve is not correct. A full reading of Section 34 shows that the jurisdiction of the Civil Court is barred in respect of matters which a Debt Recovery Tribunal or Appellate Tribunal is empowered to determine in respect of any action taken "or to be taken in pursuance of any power conferred under this Act". That is to say the prohibition covers even matters which can be taken cognizance of by the Debt Recovery Tribunal though no measure in that direction has so far been taken under sub-section (4) of Section 13. It is further to be noted that the bar of jurisdiction is in respect of a proceeding which matter may be taken to the Tribunal. Therefore, any matter in respect of which an action may be taken even later on, the Civil Court shall have no jurisdiction to entertain any proceeding thereof. The bar of Civil Court thus applies to all such matters which may be taken cognizance of by the Debt Recovery Tribunal, apart from those matters in which measures have already been taken under sub-section (4) of Section 13. 51. However, to a very limited extent jurisdiction of the Civil Court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or their claim may be so absurd and untenable which may not require any probe, whatsoever or to say precisely to the extent the scope is permissible to bring an action in the Civil Court in the cases of English mortgages. We find such a scope having been recognised in the two decisions of the Madras High Court which have been relied upon heavily, by the learned Attorney General as well appearing for the Union of India, namely V. Narasimhachariar (supra) at pp. 141 and 144, a judgment of the learned single Judge where it is observed as follows in para 22 : AIR 1955 Madras 135 "The remedies of a mortgagor against the mortgagee who is acting in violation of the rights, duties and obligations are twofold in character. The mortgagor can come to the Court before sale with an injunction for staying the sale if there are materials to show that the power of sale is being exercised in a fraudulent or improper manner contrary to the terms of the mortgage. But the pleadings in an action for restraining a sale by @page-SC2393 mortgagee must clearly disclose a fraud or irregularity on the basis of which relief is sought : 'Adams v. Scott, (1859) 7 WR (Eng) 213 (249). I need not point out that this restraint on the exercise of the power of sale will be exercised by Courts only under the limited circumstances mentioned above because otherwise to grant such an injunction would be to cancel one of the clauses of the deed to which both the parties had agreed and annul one of the chief securities on which persons advancing moneys on mortgages rely. (See Rashbehary Ghose Law of Mortgages, Vol. II, Fourth Edn., page 784). 54.In so far the argument advanced on behalf of the petitioners that by virtue of the provisions contained under sub-section (4) of Section 13 the borrowers lose their right of redemption of the mortgage. In reply it is submitted that rather such a right is preserved under sub-section (8) of Section 13 of the Act. Where a borrower tenders to the creditor the amount due with costs and expenses incurred, no further steps for sale of the property are to take place. In this connection, a reference has also been made by the learned Attorney General to a decision reported in 1977 (3) SCC 247, Naraindas Karsondas v. S. A. Katam, which provides that a mortgagor can exercise his right of redemption any time until the final sale of the property by execution of a conveyance. Sri Sibal, however, submits that it is the amount due according to the secured creditor which shall have to be deposited to redeem the property. May be so, some difference regarding the amount due may be there but it cannot be said that right of redemption of property is completely lost. In cases where no such dispute is there, the right can be exercised and in other cases the question of difference in amount may be kept open and got decided before sale of property. AIR 1977 SC 774” As there is no cause of action arises and the respondents have not taken any measures under Section 13(4) of the SRFAESI Act, respondents are directed to follow the instructions given in the judgment of the Supreme Court referred to above, and discharge the obligatory and mandatory duty cast upon them. Accordingly, the Writ Petition is dismissed. There shall be no order as to costs. _______________________ GHULAM MOHAMMED,J _________________________ G. CHANDRAIAH ,J DATE: 25.06.2010 KA ... REGISTRAR // TRUE COPY // SECTION OFFICER To 1. 2 CD copies. [1] (2004) 4 SCC 311