IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE TWENTY EIGHTH DAY OF OCTOBER TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE A.GOPAL REDDY and THE HON'BLE MR JUSTICE K.C.BHANU WRIT PETITION NO : 14389 of 2009 Between: M/s.Sri Sai Teja marine Exports Pvt. Ltd. Rep. by its Managing Director Burramsetti Venkataramana, Sunkara Peddayya Street, Bhimavaram, West Godavari District. ..... PETITIONER AND The State Bank of India, Main Branch, Bhimavaram & Another. .....RESPONDENTS The Court made the following : HON’BLE SRI JUSTICE A. GOPAL REDDY AND HON'BLE SRI JUSTICE K.C.BHANU WRIT PETITION No. 14389 OF 2009 ORDER: (Per Hon’ble Sri Justice A. Gopal Reddy) By means of filing this writ petition under Article 226 of Constitution of India, petitioner seeks issuance of writ of mandamus declaring that the respondent-Bank is not entitled to claim any amounts from the writ petitioner or its guarantors for the amounts given by the Bank while receiving the foreign bills, the bills of lading and other enclosures by the respondent-Bank for the goods shipped unless the Bank obtain a judicial finding that the petitioner is responsible for any subsequent tampering by committing any fraud, by a competent civil or criminal Court and consequently to declare that the sale notification issued by the respondent-Bank in Eenadu Daily, dated 14.6.2009 as void. Petitioner-M/s.Sri Sai Teja Marine Exports is a private limited company involved in large scale business in export of frozen Shrimp to foreign countries having its head office at Bhimavaram in West Godavari District. The petitioner availed CC Pre-Shipment EPC limits on 22.8.2005 from the respondent-Bank on the security of personal guarantees, mortgage of immovable securities etc. and however, the account was classified as non-performance Asset. According to the respondent-Bank, a sum of Rs.3,59,16,342/- was due and payable as on 15.2.2007 with further interest as per the contractual rate from 16.2.2007 till the date of full and final realization. Therefore, the respondent-Bank issued a demand notice contemplated under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘Act’) on 21.2.2007 to the principal borrower-petitioner and its guarantors. In spite of repeated demands, as the amounts were not paid, the respondent-Bank filed O.A.No.76 of 2007 before the Debts Recovery Tribunal, Visakhapatnam and obtained a recovery certificate on 25.9.2008 for a sum of Rs.4,55,42,029.23 ps. with further interest. After obtaining the recovery certificate, a demand notice was issued by the Recovery Officer of the Debt Recovery Tribunal, Visakhapatnam in RP.No.186 of 2008 in O.A.No.76 of 2007 on 28.11.2008 followed by sale notification published on 14.6.2009, which is sought to be set aside in this writ petition. The contention of the petitioner is that as per the norms of the letters of credit, all the bills of lading, invoices, shipping documents along with the necessary certificates about the quality and health condition of the shipped goods were handed over to the Bank and on being satisfied that such documents which are full and clear documents of title for the shipped goods are strictly in accordance with the LCs, the Bank made necessary payment to the consignors i.e. the petitioner. The two foreign consignments under bill Nos.0081806 L 0000030 and 32 on which an amount of 1,64,160 USD and 1,77,170 USD is payable by the consignees on handing over the bills of lading, the shipping documents and all necessary documents satisfying the letters of credit to the 1st respondent-Bank, the Bank made payments to the petitioner. Later the documents sent to the foreign banks by the 1st respondent- Bank through their own couriers were not honoured by Shikoku Bank Ltd., Kochi, Japan and were returned by two swift messengers, dated 21.12.2006 and 26.12.2006 in respect of the two bills for the value of 1,64,160 USD and 1,77,170 USD respectively, due to discrepancies in the documents. Therefore, the respondent-Bank lodged a complaint with the courier i.e. DHL Courier Services on 9.1.2007 calling for explanation and also lodged a criminal complaint against the said courier service. Further for recovery of the amounts covered by the returned bills, the Bank initiated the proceedings against the petitioner under the Act. According to the petitioner, since it is not a secured debt, the initiation of the proceedings under the act and the consequential auction notice, dated 14.6.2009 are liable to be set aside. The respondent-Bank filed a detailed counter opposing the claim of the petitioner. It is inter alia contended that on allowing O.A.No.76 of 2007 by the Debt Recovery Tribunal, Visakhapatnam filed by the Bank and on issuing the recovery certificate for a sum of Rs.4,55,42,029.23 ps. with further interest, the Bank can proceed under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 which is an additional remedy provided for recovery of the dues and therefore, the impugned proceedings cannot be faulted with. Sri D. Ramalinga Swamy, the learned counsel appearing for the petitioner strenuously contended that Section 13 of the Act has no application to the facts of the case on hand since the amount sought to be recovered is not a secured debt by the borrower, and that for the misdeeds committed by the bailor i.e. DHL Courier services, the Bank has already lodged a complaint and got registered a crime and therefore, the impugned proceedings are not at all warranted and the same are liable to be set aside. It is not disputed that the Debts Recovery Tribunal, Visakhapatnam by its order, dated 25.09.2008 allowed O.A.No.76 of 2007 filed by the respondent-Bank for recovery of an amount of Rs.3,88,42,491/- along with interest at 14.75% per annum with monthly rest from the date of O.A. till the date of final realization jointly and severally by the petitioner and its guarantors, and that the Recovery Officer of the Tribunal also issued a notice of demand to the petitioner and its guarantors on 28.11.2008 directing the petitioner to pay the said amount within 15 days of receipt of the notice. Even after receipt of notice, as the petitioner failed to pay the amount, a notice under Section 13(2) of the Act has been issued which is an additional remedy provided for the Bank for speedy recovery of the amounts due. Section 2(ha) of the Act defines the ‘debt’, which reads: “(ha) “debt” shall have the meaning assigned to it in clause (g) of Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).” Clause (g) of Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) defines the ‘debt’ as under: “2[(g) “debt” means any liability (inclusive of interest) which is claimed as due from any person by a bank of a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application.” Section 13(2) of the Act also contemplates enforcement of the security interest and makes it clear that when the borrower makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section(4). There is no dispute with regard to the following the said procedure. After issuance of possessory notice contemplated under Section 13(4) of the Act, the respondent-Bank is proceeding to auction the property of the petitioner which was secured as per the agreement entered by the petitioner with the respondent-Bank. Clause 18 (4) of the terms and conditions of the agreement deals with the indemnity of the petitioner which reads thus: “18(4) The Borrower shall indemnify the Bank (ii) against all loses, costs, damages, expenses of consequences whatsoever that the Bank may incur or sustain as a result of the Bank’s complying with the Borrower’s instructions to deliver to the Borrower or to the Borrower’s clearing agents the document covering the goods, movables and other assets (a) whether or not the said documents are in order (b) notwithstanding any discrepancies that may be present in documents and (c) notwithstanding any discrepancy between the price, quantity and quality of the goods, movables and other assets covered by the documents and the price, quantity and quality specified in the contract; and (iii) against all consequences, loses and damages that may arise from the Bank’s complying with the Borrower’s instructions to effect advances, payments from time to time to the suppliers (a) whether or not the suppliers consign the goods, movables and other assets (b) whether or not the documents respect thereof are received by the Bank and (c) notwithstanding any discrepancy between the quantity or quality of the goods/movables received from the suppliers and the contract quantity and quality.” In view of the same, we do not see any merit in the contention of the learned counsel for the petitioner that inasmuch as no security interest is created in favour of the Bank against the properties of the petitioner, the Bank cannot proceed under Section 13 of the Act. Further whether or not the judgment and decree passed by the Debts Recovery Tribunal, Visakhapatnam for the amounts claimed by the Bank is justified on the evidence available on record, is a matter that can be gone into in the appeal, if any, preferred by the petitioner against the orders passed in O.A.No.76 of 2007. Further whether the Bank can fasten liability on the petitioner under the agreement for the alleged tampering with the documents by the DHL Express Courier Services or whether only the DHL Express Courier Services is liable for any accountable claim for the loss suffered by the Bank are all disputed questions of fact, which cannot be decided in the writ petition particularly in the absence of DHL Express Courier Services which is not a party to this writ petition. All these facts can be gone into comprehensively in an appropriate forum. Suffice it to say, the present writ petition cannot be entertained when prima facie the Bank can proceed against the properties of the petitioner by virtue of recovery certificate issued by the Recovery Officer pursuant to the judgment and decree passed in O.A.No.76 of 2007 on the file of Debts Recovery Tribunal, Visakhapatnam. The writ petition fails and is accordingly dismissed. No order as to costs. _________________ (A. GOPAL REDDY, J.) ______________ (K.C.BHANU, J.) OCTOBER 28, 2009 TSR