TMI Blog2009 (12) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate measures for remedying the situation, if necessary, in consultation with the Reserve Bank of India. Since the writ petitioner has liquidated the entire liability, we allow this writ petition and direct the respondent-bank to treat the writ petitioner to have been freed from all further obligations - WRIT PETITION NO. 23741 OF 2007 - - - Dated:- 31-12-2009 - GHULAM MOHAMMED NOOTY RAMAMOHANA RAO, JJ G Vidya Sagar for the Petitioner M Narender Reddy for the Respondent ORDER Rao, J 1. This writ petition has been instituted questioning the validity of the action taken by the respondent-State Bank of India, in putting a commercial complex owned by the writ petitioner to auction. The case of the writ petitioner is that he availed certain credit facilities from the respondent-bank, one is term loan and the other cash credit loan during the year 2004. He has created collateral security over his commercial complex building bearing Old Door No. 20-85, New Door No. 301/3, Block No. 7, T.S. Ward-3, Chirala town. Though he has paid certain instalments, it is admitted by the petitioner that there was default committed in the matter of repayment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit that the petitioner as the Proprietrix of Vishnupriya Bar Restaurant had availed cash credit facility of Rs. 5 lakh and a term loan facility of Rs. 19,64,000 and executed the security documents in that regard on 28th June, 2004. She has also created equitable mortgage over her immovable property, the one that is described by the writ petitioner and that the petitioner has committed default in repaying the debts and, hence, notice under section 13(2) of the Act was issued as on 5th October, 2005 calling upon the petitioner to pay sum of Rs. 26,23,999.10 ps. and though the writ petitioner has paid substantial amounts thereafter, his liability was outstanding as of 20th November, 2007 was Rs. 2,96,684 together with costs of Rs. 1,90,000 towards securitisation expenses, as claimed by Sisir Ravi Associates, Visakhapatnam, the Recovery agent. 4. Sri Narender Reddy, learned counsel for the respondent-bank was fair enough in stating that the impugned tender notice which was issued as of 21st October, 2007 ought not to have mentioned the liability as Rs. 26,23,999.10 and instead it should have reflected the correct amount of liability as of that date. However, what the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an asset or account of a borrower, which has been classified by a bank or financial institution as substandard, doubtful or loss asset, ( a )in case such bank or financial institution is administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body ; ( b )in any other case, in accordance with the directions or guidelines relating to assets classification issued by the Reserve Bank ; The guidelines relating to "assets classification" issued by the Reserve Bank of India were also required to be followed by the secured creditor. It is, therefore, inevitable for any secured creditor to faithfully adopt and follow the guidelines issued on classification of assets issued by the Reserve Bank of India from time to time before action contemplated by sub-section (2) of section 13 is initiated. Failure to do so would vitiate action initiated under sub-section (2) of section 13 of the Act. Equally important to notice is the follow up action. Sub-section (3) enabled any such borrower, to whom a notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing with passage of time, to the extent it is subsisting and outstanding. Consequently, it is quite possible that the liability of a borrower would have further increased by the time measures contemplated by sub-section (4) are taken up by the secured creditor. Clearly, the secured creditor without once again following the procedure contemplated by sub-section (2) cannot jump the queue and invoke the provisions contemplated by sub-section (4) of section 13. It is too well known a legal principle that those who take the sword shall perish by it. If a statute has provided for a particular procedure for performing an act, it shall be done in the same manner or it shall not be allowed to be done at all. See Taylor v. Taylor [1876] 1 Ch.D 426 - wherein it is held that "where a power is given to do a certain thing, the thing must be done in that way or not at all, and that other methods of performance are necessarily forbidden. The principle behind this rule is that if this were not so, the statutory provision might as well not have been enacted at all. Therefore, we have no hesitation to hold that the respondent-bank has exceeded its power in publishing the impugned notice. 9. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held : 'The expression "proper" means appropriate, in the required manner, fit, suitable, apt. The mere making of a request of leave, which has not been accepted, is not a proper intimation. It cannot be said that the word is a surplusage. The intention of the Legislature is primarily to be gathered from the language used, and as a consequence a construction, which results in rejection of the words as meaningless has to be avoided.' It is, therefore, clear that the expenses must be incurred by the secured creditor by applying the standard of a prudent and reasonable person. Learned counsel for the writ petitioner Sri Vidya Sagar, is right in drawing our attention to the statement of account of the writ petitioner filed at pp. 20-22 of the paper book. The respondent-bank has already debited the account of the writ petitioner-borrower in a sum of Rs. 10,000 towards inspection charges on 29th March, 2006, and on 19th April, 2006, an amount of Rs. 17,632 has been similarly debited towards auction notice. On 8th May, 2006, a sum of Rs. 15,727 has been debited towards the newspaper notification bill. On 16th August, 2006, a further sum of Rs. 5,900 has been booked towards the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up circular dated 26th December, 2006 has been issued by the bank. However, the bank has made this much clear that the efforts of outsourcing are for supplementing the recovery efforts of the branch officials. In annexure (1) to the circular dated 26th December, 2006, the role of recovery agents and enforcement agents has been set out in detail. The following parameters thereof are significant for our inquiry and, hence, we prefer to quote them. Parameter Recovery agents Enforcement agents Eligible agencies : The following categories of outfits have been permitted for empanelment of Recovery Agents : l Local NBFCs with good reputation and track records of 3 years. l Self-Help Groups banking with us with good track record. l Individuals such as retired revenue/IT/Sales Tax Department officials, retired teachers, retired army/police officers, village sarpanch, etc., below 65 years of age and with impeccable reputation for integrity. l Retired officers of RBI, FIs, Banks and NBFCs below 65 years of age. Retired SBI officers also would be eligible, except those who retired under Voluntary Retirement Schemes of the Bank, i.e., SBI VRS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance and/or any other action required to ensure safety of the asset taken over. l Assist the authorised officer to send notices to debtors of the borrower- follow up collection. l Assist the authorised officer in arranging for valuation as per procedure laid down. l Assist the authorised officer in arranging for sale of the assets as per any of the modes prescribed. l Assist the authorised officer in receipt of sale proceeds, issue of sale certificate and all other necessary formalities prescribed. Commission The structure for payment of remuneration to Recovery Agents is as under : l The agent will be paid commission on a graded basis depending upon the scale of recovery with a floor of 10 per cent and a ceiling of 15 per cent depending upon the performance. Any commission above the floor of 10 per cent would be decided by the CGM, i.e., in special cases, where the recovery agent has made significant recoveries, the Module DGM may make recommendations for payment of additional commission of up to 5 per cent over and above the normal floor of 10 per cent. l Commission to be paid by debit to charges account (sundries). The structure for payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 per cent of the recovery amount has been indicated as payable towards commission to these professional recovery/enforcement agents. In this context, it will be important to notice what exactly a profession or a trade or a calling is all about, and the answer has been furnished by the Supreme Court in Indian Medical Association v. V P Shantha AIR 1996 SC 550 ; Shanta Devi v. Swami [2003] 2 SCC 26 and Sodan Singh v. New Delhi Municipal Committee [1989] 4 SCC 155/AIR 1989 SC 988 to the following effect: 'Profession. - 'Profession' means an occupation carried on by a person by virtue of his personal and specialised qualifications, training or skill. The word "occupation" has a wide meaning such as any regular work, profession, job, principal activity, employment, business or a calling in which an individual is engaged. "Trade" in its wider sense includes any bargain or sale, any occupation or business carried on for subsistence of profit, it is an act of buying and selling of goods and services. It may include any business carried on with a view to profit whether manual or mercantile. "Business" is a very wide term and would include anything, which occupies the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other professionals. 14. When once the role of a recovery agent or an enforcement agent attracts the expression "profession" then therefrom flows a corresponding obligation to observe ethics. Every profession, in contrast to a trade, calls for certain value system to be preserved and protected. Certain amount of dignity and disinterestedness in self-interests is* associated with it. No professional can show signs of charging exorbitantly for their services. The professional charges are always commensurate to the intellectual contribution of the individual. Where a contribution is not in a great, or significant measure charging exorbitantly or excessively is often characterised as an act of fleecing rather than pleasing. Even if the contribution is enormous, but still, if the situation does not warrant, a self-imposed restraint on one's own professional charges, is automatically deployed by the true professional. 15. The grant of exorbitant amount of commission to the recovery agents and enforcement agents at a minimum rate of 10 per cent, is, in our considered opinion, too excessive and disproportionate to the nature of work liable to be performed by them. Payment of commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the newspapers drawing inspiration from the fact that such an expenditure can be booked to the account of the borrower, it would be a case of taxing the borrower rather, than charging him appropriately. Such measures can hardly pass the test of properly incurred expenses. 16. We, therefore, hold that the claim of the respondent-bank that a sum of Rs. 1,90,000 as payable to Sisir Associates, chartered accountants and Enforcement agents, Visakhapatnam as exorbitant and unreasonable. This is the reason, why we directed a sum of Rs. 15,000 to be paid by the writ petitioner towards the proper expenses in this regard, apart from what has already been found booked to his account, as noticed supra. That is the reason why, apart from the balance outstanding of Rs. 1,96,000 the writ petitioner has paid a sum of Rs. 2,11,000 to the respondent-bank. We, therefore, hold that the respondent-bank is not justified in proposing to charge the writ petitioner a further sum of Rs. 1,90,000 in terms of subsection (7) of section 13. We hope and trust that the respondent-bank, would focus its attention to what has been pointed out by us and take appropriate measures for remedying the situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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