a»k i ^, 'ut HIGH COU^T OF CHHATTISGARH AT BILASPUR W.P. (C) No. 1372 OF 2008 Petitioner Vijay Verma Versus Respondents : Dena Bank aad others O R D ER POST ON )3 MARCH. 2008 Sd/- Dhirendra Mishra Judge HIGH COURT OF CHHATTISGARH AT BILASP^TR W.P. 10 No. 1372 OJ'^OQS PETITIONER RESPONDENTS Vs 1. Vijay Verma, son of Shri Parmeshwar Lal Verma, aged about 45 years, resident of Ramnivas, P.P. Complex, Ranchi (Jharkhand) Dena Bank, a banking company duly incorporated under the relevant provisions of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 having inter-alia amongst other branches a branch office at Jawahar Nagar, Raipur through the General Manager, Dena Bank, Jawahar Nagar, Raipur. The Regional Office (Raipur) Borrower's Grievances Disposal (under SARFEST Act) Committee, Dena Bank, Raipur. 3. The Collector, Raipur. Present: Mr. B.P. Sharma, Advocate Mr. Rajeev Shrivastava, Advocate For the petitioner. For respondent No.l 8s 2. O R D ER (Passed on li^March, 2008) Dhirendra Mishra, J The petitioner has filed this petition under Article 226 of the Constitution of India for the following relief(s): A. A writ and/or an order in the nature of writ of mandamus do issue commanding and directing the respondent Bank authorities to produce before this Hon'ble Court all the relevant records for perusal of this Honble Court. B. A writ and/or an order in the nature of writ of mandamus do issue commanding and directing the respondent Bank authorities to l- y act in consonance with the law laid down in Para 45 of the Mardia Chemicals Ltd's case and strictly in accordance with Section 13(2) & (4) of the Act and the Rules 3-A & 4 of the Rules, 2002, as amended upto date, and prohibiting the respondent Bank authorities from taking possession of the said shops and movables since pre-conditions for exercise of those powers have not been follouied by the authorities. C. A writ and/or an order in the nature of writ of certiorari do issue quashing the decision of respondent No. 2 Committee dated 5.10.2007 and also the order of the respondent No.3-Collector dated 11.2.2008 as Ulegal, arbitrary and not in accordance with law in the facts and circumstances of the case. D. Cost ofproceedings. 2. BrieHy stated, facts necessary for decision of this petition are that the respondent/Bank issued a notice dated 4th January 2007 (Annexure P/2) under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the "NPA Act") calling upon the petitioner (guarantor to M/s Alankar, a unit of Verma Jewellers Group Pvt. Ltd.) to repay the loan advanced to him to the tune of rupees two crore ten lac twenty three thousand with further interest thereon, failing which the Bank as a secured creditor shall be entitled to enforce its security interest without intervention of the Court or Tribunal by taking recourse to one or more of the measures under Chapter-3 of the Act including taking over of the possession or management of the assets charged to the Bank for realizing the Bank's dues. 3. The petitioner in his reply had taken a preliminary objection that the Bank authorities have not constituted a committee as per law laid down by the Honble Apex ^^"^•^ ,y,fi% ^ ^: ?s s s / Court in the matter of Mardia Chemicals Ltd. However, the Bank authorities filed an application before the District Magistrate for exercising powers under Section 14 of the NPA Act. The petitioner challenged the above action of the Bank authorities by way of filing a writ petition being W.P.(C) No.2215/07, which was dismissed by this Court vide order dated 17.4.2007 (Annexure P/4). 4. Against the above order of the High Court, a writ appeal No. 102/07 was preferred and in the said writ appeal the respondent/Bank gave an undertaking that they shall not take possession of the unit and shall be constituting a committee as per decision of the Hon ble Apex Court in the case of Mardia Chemicals Ltd. and in these circumstances, the writ appeal was also dismissed vide order dated IIth October 2007 (Annexure P/6) with liberty to the petitioner to challenge the order passed by the Committee, if he so desires/advised. 5. Thereafter, the Committee constituted by the Bank authorities in their meeting dated 5th October 2007 vide Annexure P/5 considered the objections raised by the petitioner vide letter dated 8th March 2007 against the notice dated 4th January 2007 (Annexure P/2) and resolved as under:- "5. After going through all the issues involved/objections raised by the borrower, the committee unanimously reached to the conclusion that: a. The objection raised are baseless as such cannot be accepted for the reasons mentioned above. b. The committee reached to the conclusion that borrower is a willful defaulter and has been indulging in delaying tactics to avoid bank's recovery m.echanism. c. The committee hold that under no circumstances such a huge amount of public 'f^'-' money can be allowed to be wasted by a willful defaulter. d. A copy of the proceedings to be given to the Authorized Officer of the bank for taking note of the same and replying to the borrower a reasoned letter within a week's time." 6. Subsequently, the District Magistrate vide order dated 11th February 2008 (Annexure P/8) exercising powers under Section 14(a)(b) and 14(2) of the NPA Act, ordered the concerned Tehsildar to get the physical possession of the mortgaged jewelerry, shops and Plot No. 2/25, Khasra No. 2/258, Jayram Complex, Moudhapara, Sharda Chowk, Raipur handed over to the applicant/Bank from the non-applicants/petitioner, in accordance with law. 7. Learned counsel for the petitioner argued that the Committee constituted by the Bank has taken a decision in a ritual manner without affording an opportunity of hearing to the petitioner whereas it was obligatory on the part of the respondents-Bank authorities to recall their earlier decision taken under Section 13(4) of the NPA Act and then only they could consider the objections of the petitioner against the issuance of notice under Section 13(2). The authorities of the Bank have not followed the procedure prescribed under Section 13 of the NPA Act. It was further argued that explanation to sub-section (1) of Section 17 of the NPA Act provides that communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub- section (1) of section 17. The secured creditor has not taken any measure referred to in sub-section (4) of Section 13 of the NPA Act and therefore, the petitioner has no reniedy against the action of the respondents/Bank authorities except filing this writ petition under Article 226 of the Constitution of India. 8. I have heard learned counsel for the petitioner. 9. It is not in dispute that a notice under Section 13(2) of the NPA Act was issued to the petitioner on 4th January 2007 and thereafter, an application under Section 14 was filed before the District Magistrate for taking physical possession of the mortgaged property of the petitioner. At that stage, a writ petition No. 2215/07 was filed by the petitioner for commanding and directing the respondent Bank authorities to constitute an internal mechanism for consideration of the replies of the borrowers in an objective manner as per judgment of the Hon'ble Apex Court in the matter of Mardia Chemicals Ltd. and till consideration by the said Committee, the Bank authorities be restrained from taking drastic measures for dispossession and sale of the property in possession of the borrower as tenant of the petitioner. 10. The above writ petition was dismissed by this Court with an observation that Section 17 of the NPA Act provides for an appeal to the Debts Recovery Tribunal having jurisdiction in the matter, however, the petitioner without availing the said statutory alternative remedy has approached this Court directly with the plea that the petitioner has to deposit 75% of the total amount and the Tribunal is not regularly working, however, these are not exceptional circumstances so as to exercise its jurisdiction under Article 226 of the Constitution of India. The writ appeal preferred against the above order was also dismissed with an observation that the Bank has informed that a Committee has been constituted, the matter of the petitioner has also been decided and ^--. •A"^ '<» "• ^^si^s» <i-a.:aa ^i....vlfs ^' decision of the Committee has been communicated to the petitioner by the Bank authorities on 8.10.2007 and therefore, the appeal has become infructuous. However, a liberty was granted to the petitioner to challenge the order passed by the Committee, if he so desires/advised. 11. After passing of the above order, the District Magistrate vide order dated 11th February 2008 (Annexure P/8) allowed the application under Section 14 of the NPA Act of the respondents/Bank and directed the concerned Tehsildar to get the physical possession of the movable and immovable mortgaged property in possession of the petitioner handed over to the Bank in accordance with law. 12. In order to appreciate the arguments advanced by learned counsel for the petitioner, it would be appropriate to consider the aims, objects and reasons for enacting the NPA Act. 13. In the matter of Transcore Vs. Union oflndia and another1 the Hon'ble Supreme Court while dealing with the above aspect, has held that "there is a difference between accrual of liability, determination of liability and liquidation of liability. Section 13(2) deals with liquidation of liability in a case where there is no scope of any dispute regarding the liability. It is important to note that the dispute contemplated under Section 11 of the NPA Act is not with the borrower. Section 11 of the NPA Act deals with the rights of the secured creditors inter se. The reason is that the NPA Act proceeds on the basis that the liability of the borrower has crystallized and that his account is classified as non-performing asset in the hands of the bank/FI. Section 13 deals with enforcement of security interest." ' •^. : / ' (2008) 1 SCC 125 v- •^. 14. It has been further held in the above judgment that "On reading Section 13(2) it is clear that it proceeds on the basis that the borrower is already under a liability and the debt has become due and further that, his account in the books of the bank or FI is classified as substandard, doubtful or a loss i.e. as a non-performing asset. The NPA Act comes into force only when both these conditions are satisfied. Therefore, there is no scope of any dispute regarding the liability. In the event of non-payment of secured debts by the borrower, notice under Section 13(2) is given as a notice of demand. It is very similar to notice of demand under Section 156 of the Income Tax Act, 1961. After classification of an account as NPA, a last opportunity is given to the borrower of sixty days to repay the debt. The scheme of sub-sections (2), (3) and (3-A) of Section 13 of the NPA Act shows that the notice under Section 13(2) is not merely a show- cause notice, it is a notice of demand and amounts to an action taken under the NPA Act. Section 13(13) further fortifies our view that notice under Section 13(2) is not merely a show-cause notice. In fact, Section 13(13) indicates that the notice under Section 13(2) in effect operates as an attachment/injunction restraining the borrower from disposing of the secured assets. In fact, because it is a notice of demand which constitutes an action, Section 13(3-A) provides for an opportunity to the borrower to make representation to the secured creditor. Section 13(2) is a condition precedent to the invocation of Section 13(4) of the NPA Act by the bank/FI. Once the two conditions under Section 1392) are fulfilled, the next step which the bank or FI is entitled to take is one of the possible steps available under Section 13(4) of the NPA Act. 15. Therefore, apart from obligation to repay, the borrower undertakes to keep the margin and the value of ^r,^^^, if^y'k^ ^'1 '•^., "'Sfs-^'' /! •!t)!^-.^,^: t.. the securities hypothecated so that there is no mismatch between the asset-liability in the books of the bank/FI. This obligation is different and distinct from the obligation to repay. It is the former obligation of the borrower which attracts the provisions of the NPA Act which seeks to enforce it by measures mentioned in Section 13(4) of the NPA Act. It is for this reason, that Sections 13(1) and 13(2) of the NPA Act proceed on the basis that security interest in the bank/FI needs to be enforced expeditiously without the intervention of the court/tribunal. 16. In the instant case, there is no dispute that the petitioner stood guarantor to the borrower, who was sanctioned a loan to the tune of Rs.200 lacs by the respondent-Bank. The account of the petitioner became irregular. The loan could not be repaid even after service of notice under Section 13(2) of the NPA Act and the representation of the petitioner was also rejected. Thereafter, a notice under Section 13(4) was served. The application before the District Magistrate under Section 14 of the NPA Act was filed. It is the duty of the respondent-Bank to see that the margin between what the company borrows and the extent to which the loan is covered by the value of the financial asset hypothecated is retained under Section 13 of the NPA Act. 17. So far as objection of the petitioner that before issuing notice under Section 13(4) of the NPA Act the petitioner was not afforded an opportunity of hearing, is concerned, a bare reading of Section 13(4) read with Section 17(3) of the NPA Act goes to show that if the petitioner-borrower is dispossessed, not in accordance with the provisions of the NPA Act, then the DRT is entitled to put the clock back by resorting the status quo ante Therefore, it cannot be said that if possession is —I:^~^x. ^"l;:;iSA taken before confirmation of sale, the rights of the borrower to get the dispute adjudicated upon are defeated by the authorized officer taking possession. The NPA Act provides for recovery of possession by non- adjudicatory process; therefore; to say that the rights of the borrower would be defeated without adjudication would be erroneous. 18. On the basis of aforesaid analysis, this Court is of the considered opinion that the petitioner has an alternative remedy under Section 17 of the NPA Act to impugn the course taken by the respondent-Bank in taking possession of his movable and immovable property and if the procedure adopted by the respondent-Bank is not in accordance with the provisions of the NPA Act, then DRT is entitled to restore the possession of the property to the petitioner under Section 17(3) of the NPA Act. 19. In the result, the instant petition has no force, the same deserves to be dismissed and is accordingly, dismissed. Sd/- Dhirendra Mishra Judge