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B.K Sharma, J.

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Structured Summary of the Opinion

Factual and Procedural Background

The petition challenges notices issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("the Act"). Two specific notices are impugned: an earlier notice demanding Rs. 16,92,271.61 and a later notice demanding Rs. 202,49,726.87, the latter stated as payable as on 30 September 2005. The notices alleged that the petitioners (borrowers) had failed to repay a loan guaranteed by persons named in the notices, and that interest had accrued due to non‑refund. The petitioners relied on Section 31(i) of the Act, contending the loan related to agricultural land and therefore fell outside the Act's scope; they also contended that the bank had already initiated proceedings before the Debts Recovery Tribunal (DRT), making the Section 13(2) notices improper. The bank maintained the petition was premature, pointed to the statutory appeal remedy under Section 17 of the Act, and relied upon Section 37 to assert that proceedings under the Act could proceed despite concurrent DRT proceedings. The writ petition was dismissed by the court.

Legal Issues Presented

Whether the notices issued under Section 13(2) of the Act were valid and complied with the statutory requirements.
Whether Section 31(i) of the Act (which excludes security interests created in agricultural land) applies, i.e., whether the loan relates to agricultural land so as to bar the operation of the Act.
Whether the writ petition is premature or impermissible given the availability of statutory remedies (in particular, appeal under Section 17) and the bank's concurrent proceedings before the Debts Recovery Tribunal.
Whether the bank complied with the obligation to consider and deal with the objections raised by the petitioners (as required by precedent cited by the petitioners, namely Mardia Chemicals Ltd. v. Union of India).
Whether the petitioners' complaint regarding alleged incorrect or excessive calculation of interest is sufficiently substantiated to warrant interference at the writ stage.

Arguments of the Parties

Petitioners' Arguments (as submitted by Mr. S. P. Roy)

The properties/loan relate to agricultural land; Section 31(i) of the Act therefore excludes the transaction from the Act's operation.
The bank had already initiated proceedings before the Debts Recovery Tribunal; issuing notices under Section 13(2) was therefore uncalled for or impermissible.
The bank had miscalculated interest or charged a higher rate; reliance was placed on apex court decisions (including Mardia Chemicals Ltd. v. Union of India and others) for the obligation to consider objections and for principles on proper interest computation.
As a practical matter, petitioners indicated inability to pay 50% of the liability but offered to consider payment of 25% of the liability at this stage (left to the bank's discretion).

Respondent/Bank's Arguments (as submitted by Mr. B. R. Dey)

The writ petition is premature because statutory remedies exist; in particular, an aggrieved party can prefer an appeal under Section 17 of the Act.
Section 37 of the Act expressly provides that the Act's provisions are in addition to and not in derogation of other enactments (including the Recovery of Debts Due to Banks and Financial Institutions Act, 1993), so the bank could proceed under the Act despite DRT proceedings.
The loan does not involve "agricultural land" as commonly understood; thus Section 31(i) does not apply.
Reliance was placed on a Madras High Court decision (Ravichandran v. Manager, Indian Overseas Bank) where a similar writ petition was dismissed as premature and because an alternative statutory remedy existed.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Corporation Bank v. D.S. Gowda	Distinction between commercial loan and agricultural loan and aspects of interest payable on such loans.	The Court noted the case concerned the commercial vs agricultural loan distinction and interest; it found the petitioners had not shown on what grounds they claimed interest was excessively charged, and therefore the precedent had no direct application to justify interference.
Central Bank of India v. Ravindra [2001] 107 Comp Cas 416 : AIR 2001 SCW 4468	Matters relating to payment of interest.	The Court observed this precedent also related to interest disputes and held that the petitioners' emphasis on alleged wrong calculation of interest was misplaced in the present petition.
Mardia Chemicals Ltd. v. Union of India [2004] 120 Comp Cas 373 : AIR 2004 SCW 2541	Requirement that objections raised by borrowers be considered by the bank before proceeding under the Act; more generally, judicial scrutiny of bank action under the Act.	The Court found that the bank had considered the petitioners' objections (documents annexed showing objections and bank replies), and therefore the requirement identified in Mardia had been complied with.
Indian Banks' Association v. Devkala Consultancy Service [2004] 120 Comp Cas 612 : AIR 2004 SCW 2491	Concerns where a higher amount of interest is charged for no fault of the party concerned.	The Court held this precedent dealt with a higher interest charge scenario not present in the instant case and therefore found it inapplicable.
Ravichandran (D.) v. Manager, Indian Overseas Bank (Madras High Court, 2 Feb 2006) [2006] 132 Comp Cas 803	Example where a writ petition was dismissed as premature and where alternative statutory remedy existed.	The Court noted this decision supported the bank's position that the petition was premature and that alternative statutory remedies were available; it formed part of the support for dismissing the petition.
Punjab National Bank v. O.C. Krishnan [2001] 107 Comp Cas 20 : AIR 2001 SCW 2993	Principle that where a special statute provides an alternative remedy (fast‑track recovery procedure), courts should normally refrain from exercising writ jurisdiction; appellate hierarchy under the statute should be followed.	The Court relied on the quoted observations from this decision to underscore that judicial prudence disfavors bypassing the statutory appeal mechanism and that the High Court should generally refrain from exercising writ jurisdiction when an alternative statutory remedy exists.

Court's Reasoning and Analysis

The court's analysis proceeded in stages, grounded in the statutory framework and the documentary record:

Statutory compliance with Section 13(2): The court examined the impugned notices and concluded the bank had complied with the procedural requirements of Section 13(2) of the Act (notice to discharge liabilities within 60 days), and the notices correctly stated the petitioners' liabilities as well as the security to the loan (guarantees and mortgage/hypothecation of properties).
Consideration of objections (Mardia principle): Petitioners relied on Mardia to argue the bank had not considered objections. The court reviewed the documents (annexures 5–8) and found that the petitioners had submitted objections after the notices and the bank had furnished replies; therefore, the bank had considered objections as required by the Mardia decision.
Interest computation complaints: Several precedents cited by the parties concerned disputes over interest. The court examined the petitioners' contention about higher interest but found no specific grounds or documentary proof showing incorrect calculation; accordingly, the court treated the complaint about interest as misplaced for the purposes of the writ petition.
Section 31(i) (agricultural land) challenge: The court inspected the sanction ticket and the descriptions of the properties in the notices and found nothing indicating the security constituted agricultural land. Thus, the exclusion in Section 31(i) did not apply on the record before the court.
Concurrent proceedings and Section 37: The petitioners argued that because the bank had approached the DRT, it could not proceed under the Act. The court analyzed Section 37 and concluded the Act's provisions are in addition to and not in derogation of other Acts (including the Recovery of Debts Due to Banks and Financial Institutions Act, 1993), permitting concurrent remedies. The court therefore rejected the contention that DRT proceedings barred the bank from issuing notices under the Act.
Prematurity and alternative remedy: Citing judicial precedent (including Punjab National Bank v. O.C. Krishnan) and a Madras High Court decision relied upon by the bank, the court held that where statutory remedies (e.g., appeal under Section 17) are available and the matter is at the notice stage, writ jurisdiction should not ordinarily be exercised. The court emphasized that the petitioners could invoke statutory remedies if the bank proceeded to action under Section 13(4).
Conclusion on relief sought: Given that the bank had complied with Section 13(2), had dealt with objections, and that no factual basis established that the security was agricultural land, the court found no grounds to intervene by exercising writ jurisdiction at this stage.

Holding and Implications

Holding:

DISMISSED — the writ petition was dismissed for lack of merit.

Immediate consequences and implications (as stated in the opinion):

The bank has complied with Section 13(2) and, upon the petitioners' failure to discharge their liabilities within the notice period, may proceed to exercise one or more of the measures available under Section 13(4) of the Act to recover the secured debt.
If the petitioners are dissatisfied with any action taken under Section 13(4), they may avail themselves of the statutory appeal remedy under Section 17 of the Act. The court emphasized that the statutory remedy cannot be bypassed by invoking writ jurisdiction at this stage.
The court found no indication that the security was agricultural land; therefore Section 31(i) was not attracted on the material before the court.
The court left open the practical matter of settlement/payment negotiation: the petitioners indicated inability to pay 50% but might consider payment of 25% of the liability; the court left this aspect to the bank to decide in accordance with the Act.
No broader novel legal principle or new precedent was laid down by the court; the decision applied existing statutory provisions and precedents to the facts and dismissed the petition.

Show full summary ...

Barak Valley Tea Co. And Another v. Union Of India And Others

1. The challenge made in this writ petition is in respect of annexure 3 notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, proceeded by annexure 4 notice dated August 25, 2004, under same provision. While in the first notice, the demand was made for Rs. 16,92,271.61 in the second notice the demand made was for Rs. 202,49,726.87 payable as on September 30, 2005. As per the impugned notice issued under Section 13(2) of the Act, the petitioners are liable for the outstanding dues amounting to Rs. 202,49,726.87 as on September 30, 2005. The amount along with interest has accrued due to non refund of the loan by the petitioner guaranteed by the persons indicated in the notice itself.

2. On perusal of annexure 4 notice dated August 25, 2004, it appears that the repayment of the loan was personally guaranteed by executing an agreement of guarantee dated January 2, 1999, and the indebtedness was also acknowledged from time to time. Despite repeated requests calling upon the petitioners and the guarantors, the outstanding dues have not been paid and thereby the petitioners and the guarantors have been made jointly and severally liable.

3. Annexure I is the sanction ticket in reference to the terms and conditions of which it is the case of the petitioner that the land involved being an agricultural land, is excluded from the purview of the Act. In this connection, Mr. S. P. Roy, learned Counsel has referred to Section 31(i) of the Act which provides that the provisions of the Act shall not apply to any security interest created in agricultural land. Another ground urged by Mr. Roy, learned Counsel for the petitioners is that the bank having already initiated proceedings before the Debts Recovery Tribunal, the impugned notices under the Act are uncalled for. Mr. Roy has also placed reliance on the following decisions of the apex court:

(1) Corporation Bank v. D.S. Gowda ;

(2) Central Bank of India v. Ravindra [2001] 107 Comp Cas 416 : AIR 2001 SCW 4468 ;

(3) Mardia Chemicals Ltd. v. Union of India [2004] 120 Comp Cas 373 : AIR 2004 SCW 2541 ;

(4) Indian Banks' Association v. Devkala Consultancy Service [2004] 120 Comp Cas 612 : AIR 2004 SCW 2491 ;

4. Mr. B. R. Dey, learned Counsel for the bank on the other hand submits that the writ petition is premature and even otherwise also there being provision for appeal under Section 17 of the Act in the event of the petitioners being aggrieved by any action of the bank under the provision of the Act, they would be entitled to invoke the statutory remedy of the appeal. He further submits that as per the provisions of Section 37 of the Act, there is no bar, in issuing the notice under Section 13(2) of the Act. As regards the plea of the bar of the provision of the Act in respect of any agricultural land, Mr. Dey submits that loan does not involve agricultural land as is understood in the common parlance.

5. Mr. Dey, learned Counsel for the bank has placed reliance on the decision of the High Court of Madras dated February 2, 2006, rendered in W. P. (C) No. 250 of 2006 Ravichandran (D.) v. Manager, Indian Overseas Bank [2006] 132 Comp Cas 803 in which under similar circumstances the writ petition filed by the petitioner was dismissed both on the merits as well as on the ground of being premature and also there being alternative statutory remedy.

6. I have considered the submissions made by learned Counsel for the parties. There is no dispute that the petitioners have obtained the loan and that the persons named in the impugned notice stood guarantors for repayment of the same. On perusal of the notices, it appears that the petitioners from time to time admitted indebtedness to the bank. However, the same dispute has been raised regarding the methodology adopted towards calculation of interest. Although Mr. Roy, learned Counsel for the petitioners placing reliance on the decision of the apex court in Mardia Chemicals Ltd. v. Union of India [2004] 120 Comp Cas 373 : AIR 2004 SCW 2541, submits that the respondent-bank ought to have considered the objections raised by the petitioner, on perusal of the documents annexed to the writ petition, I find that such consideration has been given by the bank. After issuance of annexure 3 notice dated October 31, 2005, proceeded by annexure 4 notice dated October 25, 2004, the petitioners submitted annexure 5 objection dated November 11, 2005, preceded by annexure 6 objection dated September 15, 2004, to which the bank duly furnished its reply by annexures 7 and 8 communications dated January 27, 2006 and February 11, 2005. Thus, the requirement to deal with the objection as envisaged in the aforesaid decision of Mardia Chemicals Ltd. v. Union of India [2004] 120 Comp Cas 373 : AIR 2004 SCW 2541 has been complied with by the bank. Be it stated here that in this decision of the apex court has upheld the provisions of the Act.

7. In Indian Banks' Association v. Devkala Consultancy Service [2004] 120 Comp Cas 612 (SC) : AIR 2004 SCW 2491, the apex court is concerned with higher amount of interest for no fault of the party concerned. The same is not the case in hand. Thus, this case has no application. In the case of Corporation Bank v. D.S. Gowda , the apex court was concerned with the distinction between commercial loan and agricultural loan and the interest payable on the said loan. Although it is the case of the petitioners that interest has been charged at a higher rate by the bank, nothing could be shown as to on what ground the petitioners feel the charge to be in the higher side.

8. The case of Central Bank of India v. Ravindra [2001] 107 Comp Cas 416 : AIR 2001 SCW 4468 is also a case relating to payment of interest. The whole emphasis of the petitioners being on the purported wrong calculation of interest, I find that this is totally misplaced.

9. The impugned notices have been issued under Section 13(2) of the Act in terms of which any borrower which is under a liability to a secured creditor under a security agreement, 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).

10. The bank has complied with the necessary requirements of Section 13(2) of the Act. It has also dealt with the objection raised by the petitioners. Now upon failure to discharge their liability in full within the period specified in the notice, it will be open for the bank to take recourse to one or more of the measures as indicated in Section 13(4) of the Act to recover the secured debt. In the event of being dissatisfied with the action taken under Section 13(4), it will be open for the petitioners to prefer an appeal under Section 17 of the Act. This statutory remedy cannot be bypassed invoking the writ jurisdiction. Moreover, the stage has not yet ripened for initiating any proceeding. It is only at the notice stage and it will be open for the bank to take action as per the provision of the Act upon failure of the petitioners to comply with the requirement under Section 13(2) of the Act.

11. As regards the plea of the petitioners that the bank has already approached the Debts Recovery Tribunal and thus is not entitle to proceed simultaneously under the provision of the Act, the same is not at all sustainable in view of the express provision under Section 37 of the Act. As per Section 37, the provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of the provisions of other Acts as indicated therein which includes the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, under which Debts Recovery Tribunal has been established.

12. This now leads us to the plea of the petitioners that the impugned notices are barred by Section 31(i) of the Act. Section 31(i) provides that the provisions of this Act shall not apply to any security interest created in agricultural land. According to the petitioners the loan has been obtained in respect of agricultural land.

13. I have perused the documents annexed to the writ petition including the sanctioned ticket at annexure I. There is nothing to indicate that the loan is on account of agricultural land. As per the impugned notice, the petitioners and the guarantors have mortgaged their assets as security to the loan availed of by the petitioners. In annexure 3 notice dated October 31, 2004, it has been indicated as to how the repayment of the loan has been personally guaranteed by the incumbents named in the notice. It has also been indicated that the repayment of the loan is collaterally secured by mortgage/hypothecation of the properties as mentioned in the notice. The description of the properties available in the impugned notice itself does not indicate creation of any security interest in agricultural land.

14. Apart from the above, the decision on which Mr. Dey, learned Counsel for the respondent-bank has placed reliance also supports the case of the respondent-bank. The said decision has been rendered in somewhat similar circumstances holding the writ petition to be not maintainable being premature. The decision has been rendered placing reliance on the earlier Division Bench judgment of the same court. However, independent of the said decision, the facts and circumstances involved in the present case do not support the case of the petitioners warranting interference by exercising writ jurisdiction of this Court. In this connection, the observations made by the apex court in the case of Punjab National Bank v. O.C. Krishnan [2001] 107 Comp Cas 20 : AIR 2001 SCW 2993 are quoted below (page 21):

5. In our opinion, the order which was passed by the Tribunal directing sale of the mortgaged property was appealable under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'the Act'). The High Court ought not to have exercised its jurisdiction under Article 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the Tribunal was correct or not has to be decided before an appropriate forum.

6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless when there is an alternative remedy available judicial prudence demands that the court refrain from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.

15. For all the aforesaid reasons and discussions, I do not find any merit in the writ petition and accordingly it is dismissed. Before parting with the case records, I feel it my duty to make a mention of the submission made by learned Counsel for the petitioner to the query made as to whether the petitioner is agreeable to pay at least 50 per cent. of the liability. Mr. Roy, learned Counsel for the petitioner submits that the petitioners are not in a position to make payment to the tune of 50 per cent. of the agreed liability, but they may consider the payment of 25 per cent. of the liability at this stage. This aspect of the matter is left open to the bank while deciding the matter in accordance with the provisions of the Act.

Barak Valley Tea Co. And Another v. Union Of India And Others

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments (as submitted by Mr. S. P. Roy)

Respondent/Bank's Arguments (as submitted by Mr. B. R. Dey)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Barak Valley Tea Co. And Another v. Union Of India And Others

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