Madhu Sudan Ghosh & Anr. v. Bank Of Baroda & Ors.

The Judgment of the Court was delivered by

Syamal Kanti Chakrabarti, J.:— In the instant writ petition the petitioner No. 1 Madhu Sudan Ghosh has claimed that he is owner of a plot of land measuring 2 Cottahs 1 Chittacks appertaining to R.S Plot No. 669 and R.S Khatian No. 1610 under Mohanpur Mouza within Titagarh Police Station of North 24 Parganas District by virtue of a deed of gift being No. 3791 of 1991. On 20.6.2003 he applied for a house building loan to the Branch Manager, Bank of Baroda at Baisakhi Barrackpore, District North 24 Parganas, being the respondent No. 3 herein, for a sum of Rs. 3,00,000/- which was granted on 14.7.2003 subject to repayment by 117 equal monthly instalments of Rs. 3,902/- each. Since then he is repaying the loan. But on 30.10.2007 he received a letter dated 29th October, 2007 to the effect that the respondents have started proceeding under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SRFAESI Act, 2002) treating his debt as Non Performing Asset. But no notice, as required under Section 13(2) of the Act, was served upon him and such proceeding was drawn behind his back. On 20.2.2009 he deposited a sum of Rs. 12,000/- through a pay-order drawn on State Bank of India, Prafulla Branch, Kolkata to show his bona fide intention to repay the loan. On that date he submitted a proposal for full and final settlement of the entire dues by repaying the balance amount of Rs. 2,50,000/- within March, 2009. But no reply thereof was given by the Bank despite several queries made. On 1.4.2009 by a letter the petitioner was informed that his proposal for settlement of the dues was cancelled as he failed to pay the entire amount of Rs. 2,50,000/- within March, 2009 as committed. Ultimately the said property was to put in auction sale by publishing a notice in the daily newspaper Ajkal on 21.1.2009 which is contrary to law. The petitioner is still willing to pay the entire claim amount of Rs. 1,24,000/- by way of full and final settlement of his outstanding dues. Under the circumstances he has prayed for appropriate direction upon the respondent authorities not to put the mortgaged property of the petitioner under loan account No. 24540600021191 in auction sale without adopting the procedure laid down under Section 13 of the SRFAESI Act, 2002 and to restrain the respondent authorities from acting upon the said published notice in the Ajkal dated 21.1.2009 since the entire process adopted was contrary to provisions of law with further prayer for direction upon the respondent authorities to accept the proposal for settlement of the petitioner dated 20.2.2009 and to prohibit the respondents from alienating and disposing of the secured immovable assets in their possession against the aforesaid house building loan account.

2. The respondents in their affidavit-in-opposition have opposed the move and contended that admittedly the petitioner has taken the loan by mortgaging the said property and failed to repay the amount as per agreement. Therefore, due notice was served upon him under Section 13(2) of the SRFAESI Act, 2002. There is a specific alternative remedy available to the writ petitioner under Section 17 of the said Act before the learned Debts Recovery Tribunal having jurisdiction in the matter. But the writ petitioner has not sought for such remedy before the appropriate authority and deliberately chosen this Writ Court since the period of limitation prescribed for foiling an application under Section 17 of the Act expired long ago. Since the petitioner failed to repay the loan even after due notice the respondent authorities had no other alternative but to declare the said loan as Non Performing Assets and due statutory notice was served upon him under Section 13(2) of the SRFAESI Act, 2002 on 3rd March, 2006 intimating therein that the loan account of the writ petitioners had been classified as Non Performing Asset on and from 13.9.2004 and he was called upon to make payment of a sum of Rs. 3,16,833/- within a period of sixty days. The said notice was served upon the writ petitioner No. 1 on 7th March, 2006 which will be evident from relevant acknowledgement due card. Nevertheless the writ petitioners turned a deaf ear to the demand notice made by the respondents for repayment of the loan and as a result the respondents were compelled to invoke the provisions laid down under Section 13(4) of the SRFAESI Act, 2002. Under the circumstances the respondents have taken recourse to the relevant provisions of the Act by publishing necessary advertisement in the leading newspaper for sale of the mortgaged property and rightly invited offers from intending purchasers. In fact on receipt of the notice under Section 13(2) of the Act on 7th March, 2006 the petitioner was bound to repay the loan amount within a period of 60 days and thereafter the respondent Bank has taken recourse to the provisions laid down in Section 13(4) of the Act which is not illegal. The notice published by the Bank for sale of the mortgaged property is in exercise of its statutory powers for recovery of the outstanding dues and as such there is no merit in this writ application which is liable to be dismissed in limine with exemplary costs.

3. From the averment so made by the parties it is now to be decided—

(a) Whether the instant process of disposal of the mortgaged property has been undertaken by the respondent without proper service of notice upon the writ petitioners;

(b) Whether alternative remedy is available to approach the Debts Recovery Tribunal for the remedies sought for; and

(c) Whether the action taken by the respondents under Sections 13(2) and 13(4) of the SRFAESI Act, 2002 is contrary to law.

4. It appears from the letter dated 29.4.2004 (Annexure-A to the affidavit-in-opposition) that both the petitioners were asked to deposit overdue loan instalments with interest amounting to Rs. 16,000/- against outstanding balance of Rs. 2,58,461/- and they were also called upon for discussion in the matter and to deposit overdue loan instalments with interest amounting to Rs. 21,016/-. There is an endorsement in this letter that the writ petitioners had a discussion with the respondent on 28.9.2004 in pursuance of which the said letter was given. Ultimately on 3.3.2006 notice was issued to both the respondents (Annexure-B to the affidavit-in-opposition) intimating that the said loan account was classified as Non Performing Asset and notice was given to them under Sub-section (2) of Section 13 of the SRFAESI Act, 2002 to discharge their liabilities amounting to Rs. 3,16,824/- within 60 days from the date of such notice failing which the respondents will be at liberty to exercise all or any of the rights under Sub-section (4) of Section 13 of the said Act. It appears from the copy of acknowledgement receipt (Annexure-C to the affidavit in opposition) that the said notice was received by writ petitioner No. 1 on 7.3.2006 over his signature and thereafter he has taken no steps within 60 days as required. Therefore, the respondents took possession of the secured assets, i.e, the property in plot No. 669 under Khatian No. 1610 within Titagarh Police Station, District North 24 Parganas as per possession certificate dated 6.11.2007 (Annexure-D to the affidavit-in-opposition) by preparing an inventory on that date.

5. Admitted position in this case is that the writ petitioners obtained house building loan from the respondents by mortgaging their property in question by executing certified documents annexed with their writ petition (Annexures P-1 to P-5 to the writ petition). There is also no denial (Annexure P-6 to the writ petition) that the respondent authorities by letter dated 1.4.2009 intimated the writ petitioners that since he has failed commitment dated 20.2.2009 to repay a sum of Rs. 2,50,000/- within 20.3.2009 their acceptance of such offer stands cancelled. It is further stated that the liability of the writ petitioners towards the above house building loan account is outstanding with up to date interest and all expenses incurred by the Bank for recovery of the loan and accordingly they were informed that the respondents would proceed for recovery of dues under SRFAESI Act, 2002.

6. Learned lawyer for the petitioner has drawn my attention to the intimation dated 1.4.2009 from where it will appear that the talk of compromise for final settlement of the dues was going on by and between the parties up to 31st March, 2009 and thereafter the respondents decided to recover their dues under the SRFAESI Act, 2002. This rejection dated 1.4.2009 in fact has given a go by to their earlier notice under Section 13(2) of the Act issued to the petitioners on 3.3.2006 (Annexure-B). It is further contended that once the loan account has been transferred as Non Performing Asset on 3.3.2006 and notice under Sub-section (2) of Section 13 of the SRFAESI Act, 2002 has been issued, the Bank authorities cannot claim any further interest as made in their intimation dated 1.4.2009 on account of failure of negotiation for such settlement during the intervening period from 3.3.2006 to 31.3.2009 The respondent took possession of the secured assets on 6.11.2006 and issued public notice on that date and thereafter published notice in the Ajkal dated 21.1.2009 which is not in conformity with the relevant provision of the SRFAESI Act, 2002.

7. For the purpose of deciding merit of this writ petition the relevant provisions of Section 13 of the SRFAESI Act, 2002 are quoted below:

“13(2) Where any borrower, who 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).

13 (3) The notice referred to in Sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

13 (3 A) If, on receipt of the notice under Sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:

Provided 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 Debts Recovery Tribunal under Section 17 or the Court of District Judgeunder Section 17A.”

8. From a plain reading of the aforesaid provisions it will appear from Sub-section (3) of Section 13 of the Act that the notice to be issued by the secured creditor under Section 13(2) of the Act shall give details of the amount payable by the borrower on the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. Unfortunately while serving notice under Section 13(2) dated 3.3.2006 no details of the amount payable by the borrower has been supplied to the borrowers. Only a total amount of Rs. 3,16,824/- was demanded inclusive of interest up to 30.11.2005 (Annexure-B to the affidavit-in-opposition) which does not indicate the amount paid by instalments by the borrower in details showing progressive total of debit and credit balance resulting therein the total demand of Rs. 3,16,824/-. This is a serious infirmity in issuing statutory notice under Section 13(2) of the SRFAESI Act, 2002 which vitiates the entire procedure adopted for realisation of Non Performing Assets by auction sale of the mortgaged property.

9. Another serious infirmity in the procedure adopted by the respondent will be reflected from non-compliance of the provision of Section 13(3A) of the Act. It will appear from the aforesaid provision that if any borrower makes any representation or raises any objection, the secured creditor shall have to consider such representation or objection and the decision taken thereon shall have to be communicated within one week of receipt of such representation or objection the reasons for non-compliance of such representation or objection to the borrower.

10. From Annexure P-6 to the application it will appear that the borrower submitted on 20.2.2009 a written proposal for repayment of the loan by instalments by way of compromise which was considered and rejected by the Bank on 1.4.2009, i.e, long after one week as prescribed under Section 13(3A) of the SRFAESI Act, 2002. This is also a non-compliance of the statutory provision on the part of the secured creditor Once notice under Section 13(2) is issued on 3.3.2006 the process for realisation of the dues under the SRFAESI Act, 2002 stalled, but no tangible action has been taken by the Bank from 3.3.2006 to 31.3.2009 and only by letter dated 1.4.2009 the Bank has ipso facto renewed their claim of recovery of the dues under the SRFAESI Act, 2002 giving a go by to their earlier notice dated 3.3.2006 Therefore, the action taken under Section 13(4) of the Act for taking possession of the secured assets on 6.11.2006 and the issue of possession notice on the same date also become inoperative on account of the subsequent action taken by the secured creditor by renewal of their claim. Therefore, I hold that such notice dated 6.11.2006 under Section 13(2) of the Act is void and inoperative and the disputed property cannot be same for recovery of the dues without taking cresh recourse to Section 15(i) of the SRFAESI Act, 2002 giving fresh notice to the borrower with details of the amount payable by the borrower in respect of Non Performing Asset to be worked out afresh in accordance with law.

11. In view of aforesaid discussion it is—

(a) held that the respondent Bank has started the process of recovery of NPA under SRFAESI Act, 2002 without serving valid notice under Section 13(2) of the Act since the earlier notice dated 7.3.2006 has lost its force on account of renewal of their demand on 1.4.2009;

(b) held further that on account of defective measures taken under the SRFAESI Act, 2002 no alternative remedy is available to the petitioners for which instant writ petition is maintainable in law; AND

(c) held further that the measures taken by the Banks without furnishing details of NPA along with their notice dated 7.3.2006 as required under Section 13(2) of the Act and failure to consider and dispose of the representation of the writ petitioner dated 20.2.2009 within one week of receipt as required under Section 13(3 A) of the Act are not in conformity with the mandatory provisions of the said Act for which the entire procedure adopted is not sustainable in law.

12. Under the circumstances I have no other option but to hold that there are sufficient merits in this writ petition which accordingly succeeds. It is directed that the respondent Bank authorities cannot put the mortgaged property in respect of the petitioners' loan account No. 24540600021191 in auction sale without issuing fresh notice under Section 13(2) of the SRFAESI Act, 2002 accompanied by details of the amount claimed and that the public notice published in the Ajkal dated 21.1.2009 cannot be acted upon on the basis of the previous notice dated 6.11.2006 under Section 13(2) of the Act which had lost its force on account of renewal of same demand after three years and that the respondents are entitled to recover dues (NPA) after due observance of all the statutory formalities required under the SRFAESI Act, 2002.

13. Urgent photostat certified copy of this order, if applied for, be supplied to all the parties upon compliance of all necessary formalities.

14. W.P allowed.