IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE TWENTY SECOND DAY OF OCTOBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE B.SESHASAYANA REDDY WRIT PETITION NO : 20249 of 2008 Between: 1 M/s. Balaji Silk Fabrics, rep. by its Proprietor, C.V.Narayana, S/o. Krishnappa at D.No. 5/1316-2, Dorasanipalle Road, Proddatur, Kadapa District. 2 Smt. C.Lakshmi Devi W/o. C.V.Narayana R/o. 26/624, Vasanthapet, Proddutur, Kadapa District. 3 C.Venkatesh S/o. C.V.Narayana R/o. 26/624, Vasanthapet, Proddutur, Kadapa District. ..... PETITIONER(S) AND 1 The Brach Manager, Karur Vysya Bank, Proddutur, Kadapa District. 2 the Senior Manager, Karur Vysya Bank, Hyderabad, Chirag Ali Lane, Hyderabad. 3 Kadapa Rami Seei, S/o. Singarappa, R/o. D.No.26/60, Vasanthapet, Proddatur- 516360, Kadapa District. 4 The Chief General Manager, Reserve Bank of India, Rural Planning and Credit Department, Garment House, Worli, Mumbai, .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Aﬃdavit ﬁled herein the High Court will be pleased to to issue an order or direction or writ more particularly one in the nature of writ of Mandamus declaring the action of the Respondent No.1 and 2 Bank Authorities in issuing the notiﬁcation, dt. 29-07-2008 published in Eenadu Daily News Paper, Dated 31-07-2008, Kadapa Edition, as illegal, improper, arbitrary and unconstitutional and it amounts violative of Articles 14, 16 and 21 of the Constitution of India, and set aside the same, and consequently direct Respondent No.1 and 2 Bank Authority to accept for One Time Settlement for realization of loan amounts, in the interest of justice. Counsel for the Petitioner:MR.P.LAKSHMANA RAO Counsel for the Respondent No.: MR.K.V.SUBRAHMANYA NARUSU The Court made the following : THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY WRIT PETITION NO. 20249 OF 2008 ORDER: 1. This writ petition has been ﬁled by the petitioners who are three in number assailing the action of the respondents 1 and 2 in issuing Notiﬁcation dated 29-7-2008 published in Eenadu Daily News Paper, dated 31-7-2008. 2. The petitioner No.1 is the proprietary concern. It raised a loan of Rs.14,00,000/-from the respondents No.1 and 2 Bank. Consequent on failure of the installments, the loan account came to be treated as ‘non-performing assets’ and proceedings have been initiated under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (for short ‘Securitization Act’ ). Initially a notice under Section 13(2) of Securitization Act came to be issued to the petitioners and followed by an order under sub-Section 4 of Section 13 of the Securitization Act. Since the petitioners failed to liquidate the liability, the secured property is proposed to be auctioned. The auction notice is under challenged in this writ petition. 3. Notice before admission came to be ordered on 16-9- 2008. The respondents 1 and 2 entered appearance and ﬁled counter affidavit. One T.B. Venkateswara Rao has sworn to the counter aﬃdavit. The steps taken by the respondents 1 and 2 bank for realisation of the amount from the petitioners have been detailed in the counter aﬃdavit. For better appreciation I may refer para 7 of the counter aﬃdavit, which reads as hereunder. ”I submit that, the allegations made in paragraph 6 of the aﬃdavit are absolutely false and the petitioners are put to strict proof of the same. And with regard to the averments that the petitioner obtained APGST CST and VAT certiﬁcates from the Commercial Tax Department and he regularly paying the Tax to the Municipality are not concerned to the Respondent Bank. It is true that the petitioner ﬁrm opened current, Account in Respondents Branch in the year 2000 and it is not correct to say that the 1st respondent bank authorities approached the petitioner and oﬀered to provide ﬁnance to his firm for development of his business in the year 2002. In fact, the petitioner ﬁrm approached the Respondent Bank and requested to sanction Rs. 14.00 lakhs as a loan and undertaking to pay loan installments regularly to the 1st respondent Bank. But, the petitioner failed to pay the loan installments and he committed defaults to pay the interest and loan amount and there were no transactions in the said account continuously for a period of 3 months. In the result, the dues in the petitioner’s loan account as of the date of auction notiﬁcation dated 29-7- 2008 is Rs. 15,39,900/- as on 30-11- 2007 with interest thereon, I submit that the 1st Respondent Bank issued notice to the petitioner on 21-07-2007 and informed that the petitioner has no transactions and not remitted any interest in the said account for the last 2 months and requested the petitioner to pay the installments and operate the Account regularly. But, he failed to do so. The petitioner is neither made any transactions in the said account nor paid the interest continuously for 3 months; the said account became out of order and hence classified as non-performing asset on 30- 9-2008 by the respondent bank as per the RBI guidelines. I submit that, the 1st respondent Bank has also issued recall notice to the petitioner dated 7-12-2007 recalling the outstanding amount and requested the petitioner to repay the dues immediately. Even then also, the petitioner did not pay the due amount to the Bank and not operated the Account regularly. I submit, that 1st respondent Bank issued legal notice dated 14- 11-2007 and also issued notice under Section 13(2) of Securitization Act on 15-12-2007 and the 1st respondent Bank has taken symbolic possession of the secured property on 10-4-2008 in the presence of petitioner and the petitioner given a trust letter to that eﬀect. The petitioner has given a letter dated 10-4-2008 requested that he admitted his liability and to repay the outstanding amount without 3 months and requested to postpone the auction for 3 months. Even then he has not responded to repay the amount and consequently the respondent Bank has no other option except to proceed with further action under Securitization Act and published publication of Tender cum auction notice on 31-7-2008 and connected corrigendum dated 23-8-2008 informing to conduct tender cum auction on 9-9-2008 and also informed the general public regarding second registered mortgage on 8-9- 2008 and the same was informed to the petitioners by the respondent bank. I submit that the petitioner issued legal notice on 30-8-2008 for OTS of Rs. 9.00 lakhs the same was rejected by the respondent bank by its reply dated 6-9-2008 as the said oﬀer is low comparing with total outstanding in the account. It is not correct to say that the Bank never accepted OTS and it is correct to say that the petitioner paid an amount of Rs. 1.00 lakh on 4-9-2008 and the same was kept in separate account. It is not correct to say that the 1st respondent Bank has hurriedly issued auction notice. The respondent bank has given ample opportunity to the petitioners to repay the amount due to the bank, but the petitioners has not chosen to repay the amount due to the respondent bank and approached this honourable Court with false allegations and unclean hands”. 4. Heard learned counsel appearing for the petitioners, learned counsel appearing for respondents 1 and 2 and learned counsel appearing for the Respondent NO.3. 5. Learned counsel appearing for the petitioners submits that the 1st petitioner has been paying the installments regularly and due to ﬁnancial constrains, it did not pay some installments and it is not a willful default. A further submission has been made that overdue installments are only three installments and therefore, initiation of proceedings under the provisions of the Securitization Act basing on three overdue installments is unwarranted. 6. Learned counsel appearing for the respondents 1 and 2 submits that the petitioners have a statutory remedy by way of an appeal to challenge the order passed under sub Section 4 of Section 13 of Securitization Act and therefore, writ petition ﬁled by the petitioners invoking jurisdiction under Article 226 of the Constitution of India is wholly misconceived. 7. Learned counsel appearing for the 1st respondent submits that the 3rd respondent has already paid 1/4th of the auction amount and the balance amount he is ready to pay, because of this writ petition the respondent bank has not received the money. 8. A fact remains that the respondents 1 and 2 initiated proceedings against the secured property after treating the loan account of the petitioners as non-performing asset. A notice under Sub Section 2 of Section 13 came to be issued to the 1st Petitioner calling upon it to pay the amount due. Consequent on its failure to pay the amount due, an order under sub-Section 4 of Section 13 came to be passed. A Division Bench of this Court in K. Bala Krishna Vs. Debts Recovery Tribunal, Hyderabad[1] held that writ petition is not maintainable in view of the statutory alternative remedy of appeal available to the borrower. Such is the legal position, the writ petition ﬁled by the petitioners invoking jurisdiction under Article 226 of the Constitution of India is wholly misconceived. 9. Accordingly, this writ petition is dismissed reserving liberty to the petitioners to avail the alternative remedy of appeal as provided under Section 17 of the Securitization Act. No order as to costs. ______________________________ Justice B. Seshasayana Reddy 22nd October, 2008. KM THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY WRIT PETITION NO. 20249 OF 2008 22nd October,2008. [1] 2006 (6) ALT 695