IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 25.02.2008 CORAM THE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYA AND THE HONOURABLE MR. JUSTICE M.VENUGOPAL W.A. NO. 178 OF 2008 AND M.P. NO. 1 OF 2008 V.Shanmugam .. Appellant - Vs - Union Bank of India Nungambakkam Branch No.37, College Road Chennai 600 006. .. Respondent Writ Appeal filed against the order dated 19th Dec., 2007, passed by learned single Judge in W.P. No.19445/07. W.P.No.19445/2007 presented under Article 226 of the Constitution of India to issue a Writ of Mndamus, forbearing the respondent from proceeding under Section 13(4) of the Securitigation and Reconstruction of financial assets and enforcement of security interest (SARFAESI) Act, without honouring the petitioner's one time settlement (OTS) offer accepted by the respondent through the letter dated 29.1.2007 in furtherance of which the petitioner effected the payment of Rs.7.5 lacs demanded by the Respondent on 13.3.2007 and 29.5.2007 For Appellant : Mr. K.M.Vijayan, SC, for M/s.Ahmad Associates For Respondent : Mr. N.V.Srinivasan, SC, for M/s.N.V.S. Associates JUDGMENT S.J.MUKHOPADHAYA, J. The appellant has challenged order dated 19th Dec., 2007, passed by learned single Judge in W.P. No.19445/07. By the said order, learned single Judge, while held that there is substantial compliance of provision u/s 13 (3-A) of the Securitisation and https://hcservices.ecourts.gov.in/hcservices/ Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred to as 'SARFAESI Act'), dismissed the writ petition. 2. The main plea taken in the appeal, as argued by the learned senior counsel for the appellant, is that the respondent, Union Bank of India (hereinafter referred to as the 'Bank'), having not taken any decision u/s 13 (3-A) of the SARFAESI Act within one week, had no jurisdiction to take steps u/s 13 (4) of the said Act. 3. Though learned single Judge made detailed discussion with regard to the facts as was highlighted by the appellant, it is not necessary to discuss all the facts, except the relevant ones as noticed hereunder. The respondent-Bank had extended loan of Rs.3 lakhs to M/s.Adworld, a partnership firm. The firm subsequently started a quarry business in Andhra Pradesh under the name and style of "Karvin Corporation". The account of the said partnership firm was also opened with the respondent-Bank. While accounts of both the firms were being operated with various financial facilities, the accounts were classified by the bank as 'NPA' in 1996. On 1st Oct., 1997, the outstanding of M/s.Adworld was arrived at Rs.20,35,000/=. On 31st March, 1998, a sum of Rs.3,37,660/= was repaid, but remaining amount remained due. According to the appellant, entire book balance of M/s.Adworld was remitted by effecting a total payment of Rs.17,85,000/= on 17th May, 1999 as full and final settlement of NP amount, but the respondent-bank, arbitarily adjusted a sum of Rs.5 lakhs towards penal interest and made wrong debit of Rs.5 lakhs on the said account. In effect, the NPA account continued to exist. The bank filed one O.A. No.118/02 before Debts Recovery Tribunal (hereinafter referred to as 'DRT') against the two firms, the partners and guarantors for total sum of Rs.1,03,86,178.78 inclusive of interest upto 8th March, 2002. It is alleged that certain property already sold were also wrongly included as 'B' Schedule property in the said application. The bank filed an application, I.A. No.139/03 before DRT-I seeking to amend O.A. No.118/02 pertaining to wrong inclusion of 'B' Schedule property, which was allowed on 10th March, 2005. Further case of the appellant is that on 10th Nov., 2006, the borrower had a meeting with the Bank's Asst. General Manager (Recovery) from Mumbai and other executives at the Regional office at Broadway, Chennai. In the said meeting, an OTS offer was made by the borrower for Rs.25 lakhs, but the AGM insisted for remittance of Rs.30 lakhs towards OTS. Subsequently, when the bank issued notice u/s 13 (2) with a demand of Rs.1,47,11,309.73 together with interest @ 17.75% on the NPA account of "Karvin https://hcservices.ecourts.gov.in/hcservices/ Corporation" and similar notice for a sum of Rs.36,06,202.94 together with interest @ 15.75% p.a. in respect of NPA account of Adworld, the appellant forwarded a letter to the bank on 27th Jan., 2007, expressing willingness to pay Rs.30 lakhs as OTS before 10th March, 2007 and requested the bank's consent for the said offer. The negotiation was going on pursuant to which the borrower arranged repayment of Rs.5 lakhs and promised to pay the rest of the amount of Rs.25 lakhs by 31st March, 2007, but in the meantime, without responding to the appellant's letter dated 13th March, 2007, as the bank was to take action u/s 13 (4), the writ petition was preferred. 4. The main plea taken by the appellant, as referred to above, that the appellant having filed objection/representation u/s 13 (3- A) of the Act against notice issued u/s 13 (2), the bank having failed to take and communicate decision within one week, no action could be taken by the bank against the appellant u/s 13 (4). 5. Learned counsel appearing on behalf of the appellant submitted that the time frame of one week as prescribed u/s 13 (3- A) being mandatory, on the basis of subsequent decision it cannot be held to be substantial compliance of Section 13 (3-A) and, thereby, learned single Judge failed to notice the same. He placed reliance on a Division Bench decision of this Court in I.D.B.I. Ltd. - Vs – Kamaldeep Synthetics Ltd. reported in 2007 (2) CTC 397, wherein the Court made the following observation :- "9. The Proviso to sub-section (3-A) of Section 13 of the SARFAESI Act makes it abundantly clear that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the DRT under Section 17 or the Court of District Judge under Section 17-A of the Act. Thus, the basic object of sub-section (3-A) of Section 13 of the SARFAESI Act is to ensure the element of transparency and fair play in the implementation of the provisions of the SARFAESI Act. Learned counsel for the respondent is unable to demonstrate prejudice or loss that is likely to be caused to the respondent by reason of the possession notice given to it, earlier to the communication of the reasons for non-acceptance of the objections raised by the borrower. In our opinion, at the most, it would amount to a mere irregularity and having regard to the facts and circumstances of the case, we are satisfied that the appellant-bank has substantially complied with the provisions of Section 13 (3-A) of the SARFAESI Act." https://hcservices.ecourts.gov.in/hcservices/ It was submitted that the aforesaid decision cannot be relied upon in the present case as no substantial compliance was made by the respondent bank, having not passed any order within one week from the date of receipt of objection. 6. Learned counsel for the bank submitted that the aforesaid issue is not required to be determined in the present case. According to him, after notice issued u/s 13 (2), the appellant did not choose to prefer any representation nor filed any objection as required u/s 13 (3-A). In absence of such representation, for non- payment of the amount, after 60 days it was open to the bank to take steps u/s 13 (4). Counsel for the bank placed reliance on a Division Bench decision of this Court in Tamil Nadu Industrial Investment Corporation Ltd. - Vs – Millenium Business solutions Pvt. Limited & Anr. reported in 2005 (1) LW 58. In the said case, the Court held as follows :- "7. In our considered opinion it is not proper for the Court to interfere in such matters relating to recovery of loans. Such matters are contractual in nature and writ jurisdiction is not the proper remedy for this. A writ lies when there is an error of law apparent on the face of the record, or there is violation of law. No writ lies merely for directing one time settlement or for directing re- scheduling of the loan or for fixing instalments in connection with the loan. It is only the bank or the financial institution which granted the loan which can re-schedule it or fix one time settlement or grant instalments. The Court has no right under Article 226 of the Constitution to direct grant of one time settlement or for re-scheduling of the loan, or to fix instalments." 7. We have heard the parties, perused the impugned order and the records produced by the appellant. 8. It appears that notices u/s 13 (2) were issued on 2nd Jan., 2007. After the said notice, the appellant, as borrower, made no representation nor raised any objection as stipulated u/s 13 (3-A) of the Act. A letter was merely issued on 27th Jan., 2007, whereby, giving reference to a meeting held on 10th Nov., 2006, the borrower- appellant informed that they are now accepting the offer to settle the dues of both the firms at Rs.30 lakhs as one time settlement as agreed by the AGM (Recovery) Mumbai. Pursuant to the said letter, the correspondence continued between the bank and the petitioner vide letters dated 29th Jan., 2007, 12th March, 2007, etc., but finally no such settlement was arrived at between the parties. https://hcservices.ecourts.gov.in/hcservices/ In the present case as we find that the appellant has not filed any objection/representation against the notice u/s 13 (2) as required u/s 13 (3-A) of the Act, and, therefore, the question of deciding such representation/objection by the bank within one week does not arise. On completion of 60 days period, as per Section 13 (2), it was open to the bank to proceed u/s 13 (4). 9. In view of the aforesaid finding, we are not inclined to interfere with the order dated 19th Dec., 2007, passed by learned single Judge. In absence of merit, the writ appeal is dismissed. Consequently, connected miscellaneous petition is also dismissed. But there shall be no order as to costs. GLN Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. To Union Bank of India Nungambakkam Branch No.37, College Road Chennai 600 006. 1 cc to M/s.Ahmed Associates, Advocate, SR.9899 jrg (co) dv/3.3. W.A. NO. 178 OF 2008 https://hcservices.ecourts.gov.in/hcservices/