THE HON’BLE SRI JUSTICE P.S.NARAYANA WRIT PETITION NO. 21974 OF 2007 BETWEEN: M/s Raghavendra Industries, represented by its Proprietor Mr. Vengala Narayana ,Nadiokuda Village, Parkal Mandal, Warangal District and one another. ------ PETITIONERS AND Union of India, represented by its Secretary, Ministry of Law, Shastri Bhavan, New Delhi and one another ----- RESPONDENTS THE HON’BLE SRI JUSTICE P.S.NARAYANA WRIT PETITION NO. 21974 OF 2007 ORAL ORDER: 1. Heard Sri G. Dhananjai, learned counsel representing the petitioners and Sri Ch. Siva Reddy, counsel representing the second respondent. 2. This Court ordered notice before admission on 12.10.2007 and granted conditional interim order. It was stated that Rs. 50,000/- had been deposited and a request was made for extension of time to deposit the balance amount of Rs. 50,000/-. Subsequent thereto, it was reported that the rest of the amount also had been deposited and thus the conditional order had been complied with, and the interim order granted for a limited period is being extended from time to time. 3. Both the counsel on record had taken this Court through the respective pleadings of the parties and explained their respective stands. 4. The learned counsel for the Writ Petitioners emphasizes the conduct of the parties to be taken into consideration and requests sufficient time be given so that the smooth running of the first petitioner not to be disturbed. 5. Counsel representing the second respondent had taken this Court through the contents of the counter affidavit and would maintain that the facts and circumstances of the case petitioners are having an affective alternative remedy and hence, the Writ Petition itself is not maintainable. Further, the counsel also explained the stand taken by the second respondent- State Bank of Hyderabad, Parkal Branch, Warangal, represented by its Branch Manager. 6. Heard the counsel and perused the material available on record. 7. The Writ Petition is filed for issuance of a Writ, Order, or direction more particularly one in the nature of Writ of Mandamus declaring the action of the second respondent in auctioning the properties of the petitioner known as M/s Raghavendra Industries on 16.10.2007 consisting of machinery and equipments bearing H.No. 1-58/8, in S.No. 21/C, admeasuring Ac. 1.04 gts situated at Nadikuda Vilalge, Parkal Mandal, Warangal District bounded by North:Land of Kudla Rajaiah, South: BC Colony houses, East: Nadikuda to Poligilla Road and West: Land of Lakati Rajaiay, by directing the respondent No. 2 Bank to consider and dispose of the representation of the petitioner dated 5.9.2007 by converting the cash credit facility into term loan by permitting the petitioner herein, to pay the loan amount in instalments after giving an opportunity to the petitioner to settle the interest payable on the principal and also to settle the quantum of instalments payable and by further directing the second respondent-Bank to permit the petitioners to pay the loan amount after its settlement in instalments and after giving due credit to the amounts already paid by the petitioners, otherwise the petitioner herein would suffer grave and irreparable loss which cannot be compensated by any means and pass such other order or orders. 8. It is stated that the petitioners had availed the cash credit facility for a sum of Rs. 4,50,000/- and the amount is payable in the course of conducting the business. In the course of business conducted by the petitioners, they had paid a sum of Rs. 90,000/- till December, 2006 and they paid a further sum of Rs. 50,000/- in the months of February, 2007, March,2006 and April,2007 making a total sum of Rs. 1,40,000/-. That apart, they paid a sum of Rs. 85,000/- on 28.8.2007, thus making a total amount of Rs. 2,25,000/-. 9. Further, it is stated that during the year 2006, the business of the petitioner went into trouble and they could not pay the amount for some time and thereby, the Industry of the petitioners herein fell in arrears in paying the amounts. While the maters stood thus, the petitioner herein filed an application before the second respondent- Bank on 5.9.2007 for converting the said cash credit account into Machinery Term Loan account in order to bring the said loan amount within the limits of Rs. 4,50,000/- by paying instalments to discharge the whole debt. 10. It is also averred that the petitioner had also stated in the said representation before the Bank authorities that huge amount of more than Rs. 5,00,000/- was invested for modernizing the said rice mill to improve the capacity of the working of the mill and in order to run the mill in a profitable manner. It was also further requested by the petitioners herein before the Bank authorities to convert the loan under cash credit into term loan by permitting the petitioners herein to pay the loan amount in instalments. The petitioners also undertook to bear all the expenses required for converting the cash credit loan into term loan. The said representation was received by the second respondent-Bank on 5.9.2007, but so far, the said representation was not considered and no reply was given to the said representation. In fact, to show the bonafides of the petitioner-Industry herein, before submitting the said representation, they had also deposited a sum of Rs. 85,000/- to the credit of the second respondent-Bank on 28.8.2007 and the said amount was received and when the representation was made on 5.9.2007, the petitioners herein were also assured that it would be sympathetically considered and the petitioners would be allowed to pay the loan amount in instalments. It is averred that they were under the impression that the second respondent-Bank would consider the representation of the petitioner and awaiting communication from the said Bank. 11. While maters stood thus, the respondents herein more particularly, the second respondent-Bank appear to have invoked the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( hereinafter called as ‘the Act’) and have taken steps to auction the said rice mill belonging to the petitioners herein and the auction is scheduled to be held on 16.10.2007 without following the due process of law and without serving any notice either under Section 13 or under Section 34 of the said Act, violating the principles of natural justice and depriving the right of the petitioners to repay the loan amount in instalments, as assured by the second respondent-Bank. 12. The petitioner herein also had stated that the action of the second respondent-Bank to put the said rice mill M/s Raghavendra Industries belonging to the petitioners herein to auction on 16.10.2007 without serving any notice under the said Act and without giving any opportunity, having received a total sum of Rs. 2,25,000/-, as on 28.8.2007, is highly illegal, arbitrary and contrary to the principals of natural justice and seriously violative the rights of the petitioners herein under Article 300 of the Constitution of India. The petitioners herein submits that the value of the said mill and its properties, machinery is more than Rs. 30,00,000/- and the amount payable by the petitioner herein to the second respondent-Bank is less than Rs. 4,00,000/- and if the said rice mill is put to public auction, it will not even fetch 50% of its market value and the petitioner herein will be deprived of their livelihood and they will be on streets and will be subjected to serious hardships and they will not be entitled to survive and continue their business operations. On the contrary, if the petitioners herein are permitted to pay the said loan amount in instalments by converting the cash credit facility into term loan by fixing the monthly instalments, no prejudice would be caused to the second respondent Bank and the said loan is properly secured by mortgage of the said rice mill and which is worth more than Rs. 30,00,000/- and it will also facilitate the petitioner herein to survive and maintain his family and continue his business. In the event of the second respondent is allowed to put the said rice to auction, as scheduled on 16.10.2007, the petitioners herein and their family will be on the streets and they will be starved and they will be deprived of their livelihood and they will suffer grave and irreparable loss and the very object for which the loan is obtained from the second respondent Bank would be failed. It is permitted to submit that the said Act and its provisions could not be utilized for crushing the budding business when the loan is fully secured by the property and the second respondent Bank having received a sum of Rs, 85,000/- on 28.8.2007 by assuring that the petitioners will be permitted to repay the said loan amount in liberal instalments, the second respondent-Bank ought not to have put the said rice mill to public auction and that too without following the due process of law and without following the mandatory provisions of sections 13 and 34 of the said Act, 2002. 13. It is pertinent to state that no doubt Section 13 of the said Act gives power to the Bank and the financial institutions wide discretionary power to decide the issue and the borrower is required to pay the amount demanded by the secured creditor, but in this case, the borrower is not served with any demand or the calculation to show the exact amount that becomes payable by the petitioners and even the borrowers right to dispute the liability was also deprived, inasmuch as, they were not served with any notice and they were not given any opportunity for settling the amount payable to the said Bank. 14. Further it is stated that under the circumstances where the second respondent has initiated the proceedings under the said Act of 2002, an appeal is provided before the Debts Recovery Tribunal but the petitioners herein are not able to approach the said Debts Recovery Tribunal to prefer an appeal under Section 7 of the said Act, 2002, inasmuch as, no Officer is appointed for the Debts Recovery Tribunal, Hyderabad and only Debts Recovery Tribunal Officer is sitting only three days in a month. It is further submitted that the petitioners came to know that their property consisting of the said rice mill is put to auction on 16.10.2007 and when thery were advised to prefer the appeal, came to Hyderabad for preferring the appeal on 10.10.2007, but they were informed that for the next month, there will not be any sitting of the Debts Recovery Tribunal, Hyderabad, as such, under the said circumstances, they are not in a position to challenge the action of the second respondent- Bank in putting the said property to auction on 16.10.2007 by preferring the appeal before the Debts Recovery Tribunal under Section 17 of the said Act, as such, the petitioner herein has no other alternative except to invoke the provisions of the Article 226 of the Constitution of India. 15. It is also averred that the second respondent Bank had taken steps and they are intending to auction the property bearing No. 1-58/8 consisting of rice mill property along with machinery situated at Nadikuda Village, Parkal Mandal, Warangal District, standing in the name of Vengala Narayana @Babu Rao in survey No. 21/C admeasuring Ac. 1.04 gts., in the nomenclature of M/s Raghavendra Industries and the said action is being conducted by the second respondent herein on 16.10.2007 for a sum of Rs. 5,75,000/- and though the petitioners herein had already paid a sum of Rs. 15,000/- in February, 2007, Rs. 25,000/- in March, 2007 and Rs. 10,000/- in April 2007 and Rs. 85,000/- on 28.8.2007 for which the Bank challans are filed along with the Writ Petition, but the same amount was not deducted by the second respondent-Bank, as such, if the said property is put to auction on 16.10.2007, as scheduled by the second respondent-Bank, the petitioners herein will suffer grave and irreparable loss and the property which is worth more than Rs. 30,00,000/- will be put to only for meager amount and the purpose of the Bank to recover the said amount may not be fulfilled, if the auction is conducted. As such, in the interest of justice, pending disposal of the writ petition, all further proceedings including the auction of the said mill known as M/s Raghavendra Industries situated at Nadikuda Village, Parkal Mandal, Warangal District, deserves to be stayed, otherwise, the petitioners would suffer grave and irreparable loss. 16. Further, it is stated that the petitioners came to know about the auction of the said property being held only on 10.10.2007 when a close relative of him shown the publication of the auction notice in the paper, as such, they preferred the Writ Petition before this Court, seeking appropriate relief in the absence of the Presiding Officer of the Debts Recovery Tribunal for the next 30 days and since the auction is scheduled to be held on 16.10.2007. In such circumstances, the petitioners approached this court praying for appropriate relief as specified above. 17. In the counter affidavit filed by the second respondent certain of the facts had been admitted and certain of the facts had been denied. It is stated that the petitioners failed to repay the loan amount as agreed upon and hence, it is classified as Non Performing Asset, as per the guidelines of the RBI. For the purpose of recovery of the amount due, this respondent bank initiated the proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (hereinafter called as SARFAESI Act) and issued the notice dated 25.7.2006 under Section 13(2) of the SARFAESI Act demanding to pay the amount due of Rs. 5,24,910/- as on 25.7.2006 with future interest within sixty days, failing which, the bank will proceed for sale of the secured assets. The petitioners herein did not comply with the notice under Section 13(2) of the SARFAESI Act nor made any representations or objections on the notice under Section 13(2). Therefore, this respondent issued the possession notice dated 23.1.2007 and published the possession notice in two newspapers including the one in vernacular language. After taking the possession the respondent bank issued the sale notice dated 31.5.2007 giving another 30 days time. As there was no repayments, as agreed upon, the respondent bank published the auction notice dated 26.7.2007 in two news papers i.e., the Hindu and Eenadu giving the terms and conditions of auction and fixed the auction sale on 29.8.2007 and the reserve price was fixed at Rs. 7,38,000/-. As there was no proper response for auction the respondent bank again published the auction notice dt. 14.9.2007 in Deccan Chronicle and Andhra Bhoomi fixing the auction on 16.10.2007 and in the meanwhile, the petitioner had given the letter dated 5.9.2007 requesting the bank to convert the cash credit loan into term loan and for fixing the schedule of instalment payment. 18. Further, it is stated that the alleged notice dated 5.9.2007 was given by the petitioner only after the sale for want of bidders on 29.8.2007. As per law, under Section 13(8), after initiating the proceedings under the SARFAESI Act, the secured creditor shall not sell the secured assets provided the amount due and the expenses incurred are tendered before the date of sale or transfer. Since the petitioners had not tendered the amount due including the expenses incurred, they have no right to stop the sale of the secured assets by giving irrelevant representations like the representation dated 5.9.2007 and by making meager payments now and then. As the petitioners had availed the cash credit facility for their business activity they are liable to pay the said amount in the course of business transactions by routing through the bank account. As they failed to comply with the terms of cash credit facility, the petitioners cannot claim as of right to convert the cash credit account into term loan account for payment of the amount due in instalments. As the account was classified as non performing asset, the bank had issued the mandatory notices in accordance with law and proceeding for sale fixing the date of auction on 16.10.2007. The respondent bank got the property valued by qualified valuer and fixed the reserve price at Rs. 7,38,000/- as it was the realizable value given by the valuer. As there was no response for the purchase in the auction on 29.8.2007, this respondent bank again fixed the date of auction on 16.10.2007 by fixing the reserve price as Rs. 6,50,000/-. Therefore, the valuation of the property and the reserve price fixed for sale of the property are very reasonable and fair. 19. It is also stated that the allegation of the petitioners that the property is worth more than Rs. 30,00,000/- is not correct and it is a created one for obtaining the interim orders to stay the sale of the property fixed on 16.10.2007, in fact, the valuer valued the property at 9,84,000/-. Further the petitioners have made misleading allegations alleging that the Presiding Officer was not appointed for Debts Recovery Tribunal, Hyderabad and only Debts Recovery Tribunal Officer is sitting three days in a month for the purpose of obtaining the interim orders. In fact the Presiding Officer of the Debts Recovery Tribunal, Chennai-3 was given in charge of the Debts Recovery Tribunal, Hyderabad and the learned Presiding Officer was conducting the proceedings for two weeks in a month at Hyderabad. In case of any urgency the aggrieved party may go to Chennai and move the petitions in Debts Recovery Tribunal, Chennai-3 under Section 17 of the SARFAESI Act. The petitioners herein had misled this Court and filed the Writ Petition without filing the appeal under Section 17 of the SARFAESI Act, which attracts the court fee stamp in law. As there is an alternative and efficacious remedy under the SARFAESI Act, the writ petition is not maintainable. 20. It is also stated that the petitioners had availed the cash credit facility and failed to repay the amount as agreed upon. The account of the petitioners was classified as Non performing Asset under the guidelines of Reserve Bank of India and the bank is proceeding under the SARFAESI Act. The respondent Bank had followed the procedure under the Act and the rules and issued all the mandatory notices for sale of the secured assets. The petitioners herein approached this Court by making false and baseless allegations to delay the recovery proceedings under the SARFAESI Act. The SARFAESI Act was enacted giving powers to Banks and Financial Institutions to sell the secured assets to recover the mounting non performing assets without interventions of the courts and tribunals. If the sale of the properties is stayed, the recovery proceedings will be delayed and the purpose of the SARFAESI Act will be defeated. In such circumstances, dismissal of the Writ Petition had been prayed for. 21. The auction notice, the bank statement of the vendor were placed before this court. Likewise, on behalf of the second respondent, the auction notice dated 14.9.2007 published in Deccan Chronicle and Andhra Bhoomi and also the auction notice dated 26.7.2007 published in Eenadu and the Hindu and possession notice issued by the second respondent dated 23.1.2007, sale notice dated 30.1.2007, notice under Section 13(2) of the Act dated 25.7.2006, the settlement of account dated 29.8.2007 and the letter by the petitioners and the reply by the second respondent- Bank and the valuation report also has been placed before this Court. 22. In the light of the respective stands taken by the parties, this Court is of the considered opinion that no positive relief as such, prayed for, in the Writ Petition can be granted in favour of the Writ Petitioners. But however, in the light of the peculiar facts and circumstances, let the Writ Petitioners make a representation to the second respondent-Bank indicating all the facts and circumstances and let the second respondent-Bank consider the possibility of granting reasonable time, if the facts and circumstances warrant in doing so, and apart from that aspect of the matter, the petitioners also at liberty to invoke the alternative remedy available to them in the event of the petitioners being advised to do so. 23. Accordingly, let the Writ Petitioners file a representation, within a period of two weeks from today and let the second respondent-Bank take an appropriate decision, within a period of four weeks thereafter in relation to the request made by the petitioners. 24. With the above direction, the Writ Petition is disposed of. No order as to Costs. __________________ P.S. NARAYANA, J DATE: 23--01--2008. KA