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2016 (12) TMI 461 - CALCUTTA HIGH COURT

2016 (12) TMI 461 - CALCUTTA HIGH COURT - TMI - Demand notice issued under section 13(2) of the SRFAESI Act - publication of the demand notice in the newspapers - whether the petitioner is at all entitled to be compensated or not having regard to the conduct of the second respondent? - Held that:- No record maintained by the respondents in relation to having “reasons to believe” that publication of the demand notice in the newspapers has become absolutely essential for making the borrower/guaran .....

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ndent has conducted himself in a manner not authorized by law by publishing the demand notice in the newspapers with the photograph of the second petitioner. - Interestingly, the second respondent had the photograph of the second petitioner published in the newspapers not at the stage of taking measures under section 13(4) of the Act but at a point of time when at the end of the PNB itself, the right to invoke measures under section 13(4) had not even crystalized. - Over and above all th .....

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by the court of writ to the petitioners. While declining compensation, liberty to approach the appropriate forum for recovery thereof in accordance with law is reserved. - As having regard to the findings recorded above that the second respondent grossly exceeded his authority in publishing the demand notice in the newspapers with, inter alia, the photograph of the second petitioner, this writ petition stands disposed of with the direction that the respondents shall publish an apology in th .....

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10-11-2016 - Justice Dipankar Datta For the petitioner : Mr. Sabyasachi Chowdhury, Advocate, Mr. S.E. Huda, Advocate, Mr. Awadhesh Kumar Rai, Advocate. For the respondent : Mr. Joy Saha, Sr. Advocate, Mr. V. Raja Rao, Advocate, Ms. Aparajita Rao, Advocate. JUDGEMENT 1. This writ petition dated July 8, 2015, mounts a challenge to a demand notice dated March 17, 2015 issued under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20 .....

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papers (the respective editions of ANANDA BAZAR PATRIKA and THE TIMES OF INDIA, dated April 5, 2015) with the photograph of, inter alia, the second petitioner, a director of the first petitioner. Such publication also contained photographs of two other directors of the first petitioner. 3. The demand notice published in the newspapers at the instance of the second respondent revealed that he had reasons to believe that the borrowers/directors of the borrowing company are avoiding service of dema .....

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ition for publication of a demand notice issued under section 13(2) of the Act in two newspapers having wide circulation, by an order dated July 22, 2015 the Bench had called upon Ms. Rao, learned advocate for the respondents to show how the second respondent had formed the opinion that publication of the demand notice in its entirety in two daily newspapers with the photographs of the directors of the first petitioner was necessary to take the proceedings initiated under the Act to its logical .....

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Joy Saha, learned senior advocate for the respondents regretted the respondents inability to apologize. Hearing progressed and the writ petition was heard-in-part. The Bench having been prima facie satisfied that publication of the demand notice under section 13(2) of the Act together with the photograph of the second petitioner in the newspapers was not in accordance with law, the Chairman and Managing Director of the first respondent (hereafter the CMD) was requested to consider the desirabili .....

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rowers and expects the borrowers/guarantors to honour their commitment as per the contractual terms. (b) That the Banking Industry underwent substantial changes with the nationalization of banks but thousands of crores of public money got locked up in litigations while seeking to recover debts from the borrowers/guarantors. (c) That this Hon ble Court is fully aware of the fact that a claim for damages is a claim in tort for violation of the rights of an individual. In the present case, in view .....

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ich make it not maintainable. As such, at this stage, it is the humble submission of the Deponent that payment of any compensation and its desirability cannot be considered unless other issues are decided against the respondents so as to make out a case for payment of any compensation and the ingredients connected therewith are fulfilled and satisfied. 3. That, without prejudice to the legal submissions made herein above, the following facts may also be taken into consideration by this Hon ble C .....

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date of realization. (b) That State Bank of India had issued notice under Section 13(2) of the SARFAESI Act, 2002 to the petitioner Company on 2.1.2015 for recovery of their dues of ₹ 34,23,09,312.11 as on 02.01.2015, while Punjab National Bank issued notice to the petitioner Company on 17.03.2015 under Section 13(2) of the SARFAESI Act, 2002. Although State Bank of India did not publish photographs, the obligants have filed writ petition against State Bank of India as well, making it ver .....

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their business to other line of products. The sale proceeds are not routed through the loan accounts and thereby did not adhere to financial discipline. (e) That as per the CIBIL report, the Directors of the Company have raised House Building Loans of ₹ 1.06 crore from INDIABULLS HFC at original tenure of 120 months, out of which they have repaid a sum of ₹ 1.00 crore between 2012 and 2015. Between the years 2012 and 2015, the loan account of the petitioner with the bank turned into .....

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h) That the writ petition contains no submission or claim or pleadings to the effect that, by reason of publication of the photographs, the guarantors have suffered any damages or injury or loss to their reputation and goodwill and have not prayed for any damages or compensation. The petitioners are fully aware that they have not paid the amounts due to Punjab National Bank as per the terms they had agreed to while availing the loan and they are not worthy of any compensation. (i) That petitione .....

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2013(2) Cal LT 639 is under challenge before the Division Bench of this Hon ble Court. (l) That the Supreme Court did not admit the SLP filed by the party against the judgement of Bombay High Court. (m) That in view of the foregoing, it is respectfully submitted that if compensation is imposed in the present case, such an order will send a wrong signal to the borrowers and guarantors and may even have the effect of encouraging such borrowers and/or guarantors to commit default in repayment of b .....

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etition was finally listed for hearing. 5. After hearing progressed to some length, it was made clear to Mr. Chowdhury, learned advocate for the petitioners that the merits of the order of rejection would not be examined by the writ court and that the petitioners may work out their remedy in accordance with the provisions of law, should the respondents decide to take measures under section 13(4) of the Act. It was also made clear that the scrutiny of the Bench would be confined to the aspect of .....

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for recovery of its dues. The circumstance that the said decision was pending in appeal has been referred to by the CMD in her affidavit. However, it requires to be noted that the appeal against the decision of this Bench in Ujjal Kumar Das (supra) has since been finally decided by an Hon ble Division Bench of this Court and its decision is reported in 2016 (3) CHN (CAL) 703 : State Bank of India & ors. v. Ujjal Kumar Das. The Hon ble Division Bench, after having noted that opinions of sever .....

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and Reserve Bank of India to the chairman State Bank of India Credit Policy and Procedures Department Mumbai in 2007 and the guidelines issued by RBI as updated on 07.01.2015 clearly indicate how and under what circumstances a borrower could be categorized as a willful defaulter and how the information has to be disseminated to the credit information companies. This clarifies the position that as a matter of routine procedure, one should not resort to publication of photographs of defaulters un .....

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economy because if a genuine borrower becomes defaulter for various reasons other than the reasons to treat him as willful defaulter in terms of guidelines of RBI, such genuine defaulter would be faced with situation where no one would come forward to assist him to come out of the financial crisis. There should not be publication of photograph before proceeding with further course of action under SARFAESI Act only with a view to pressurize the defaulter/guarantor to repay the loan. In other word .....

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pay the dues and it is only photographs of willful defaulters that could be published. 8. The Reserve Bank of India (hereafter the RBI) has framed guidelines which are required to be followed by lender banks before defaulting borrowers can be classified and declared as willful defaulters . It is, therefore, axiomatic that unless in an appropriate case a defaulting borrower is declared a willful defaulter in adherence to the guidelines framed by the RBI, photograph of a defaulting borrower cannot .....

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in the case of M/s. K.V. Wall Mount Pvt. Ltd. v. State Bank of India. 10. This Bench notes that although the decision of this Bench in Ujjal Kumar Das (supra) was placed before the relevant Benches of the Bombay and the Chattisgarh High Courts, Their Lordships did not quite agree with the same on the specious ground that rule 8 permits publication of photographs. The decision of a high court is at best a persuasive precedent, which another high court is free not to follow. That applies to this .....

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uaded by a persuasive precedent, some reason ought to be assigned. That is exactly the law laid down by the Supreme Court in the decision reported in (2008) 14 SCC 283 : Pradip J. Mehta v. Commissioner of Income Tax, Ahmedabad. In paragraph 23 of the decision, the Supreme Court stressed the need for the high courts to either record its agreement or dissent with the decision of any other high court that is placed before it. It was also stressed that the high court, which differs with the view tak .....

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phs of the directors and the guarantors in the newspapers. It was at that stage that the writ petition was presented challenging the letter dated October 10, 2013. The threatened action of the secured creditor was sought to be sustained, inter alia, by referring to rule 8 of the Rules. With respect to the Hon ble Division Bench, rule 8 has no manner of application at the stage a demand notice under section 13(2) of the Act is issued. It comes into play when measures have been initiated against t .....

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borrower when action under section 13(4) of the Act has not yet been initiated, to the mind of this Bench, is an erroneous approach. That apart, whether rule 8 at all permits publication of names of willful defaulters is indeed debatable. That a secured creditor cannot declare any defaulting borrower as a willful defaulter except in accordance with the provisions of the Master Circular of the RBI, is settled law. It is thus difficult to comprehend the procedure that a secured creditor may be req .....

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g followed. 12. The decision in Shri Mohan Products (supra) [as well as the decision in D.J. Exim (supra)] seems to have overlooked the provisions of section 13(1) of the Act (the fundamental guiding principle for recovery of debts in terms of the provisions of the Act) as well as the applicability of the Latin maxim expressio unius est exclusio alterius . That apart, the difference in wording of rule 6(2) and rule 8(2) of the Rules also went unnoticed. Rule 6, providing for the manner of sale o .....

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ng authority on the secured creditor to publish the photograph of a defaulting borrower, it would amount to stretching the Rules to absurd limits to read into it the authority of a secured creditor to do so. It is well-known that a subordinate legislation supplements and cannot supplant the enactment to which it owes its origin. The Act being a self-contained code, it would be disastrous to read it and the Rules in a manner that would confer on authorized officers unfettered, unbridled and uncha .....

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ked unlike the present case and is, therefore, distinguishable on facts too. 13. The Delhi High Court in the case of K.V. Wall Mount Pvt. Ltd. (supra) simply followed the decision in D.J. Exim (supra) upon noting that the special leave petition filed thereagainst had been dismissed, without assigning any independent reason. This decision too does not aid the respondents. 14. For the aforesaid reasons, this Bench is of the clear and firm view that publication of the photograph of the second petit .....

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affidavit filed by her does not commend to be acceptable and her effort to create an impression of the law being unsettled to save her subordinate from being hauled up for exercising non-existent powers, is abortive. 17. However, this Bench proposes to give the benefit of doubt to the CMD as well as the respondents on the ground that the law may have been unsettled insofar as publication of photographs along with a notice issued either under rule 6 or 8 is concerned. At the same time, there cann .....

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the first petitioner by lodging an objection dated May 16, 2015. However, in the interregnum, April 5, 2015 to be precise, the newspapers carried the demand notice, inter alia, with the photograph of the second petitioner. Such paper publications were attacked by the first petitioner in such objection by terming it to be illegal, wrongful, and arbitrary, and in abuse of the process of law. That apart, several contentions were raised by the first petitioner and it was ultimately prayed that each .....

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published in the newspapers Times of India and Ananda Bazar Partika on 05.04.2015. 19. Referring to the above extract, Mr. Chowdhury contended that nonacceptance of the demand notice under section 13(2) of the Act by the said Sushil Kumar Pal could not have afforded any ground to the respondents to publish the demand notices in two newspapers having wide circulation without formation of necessary opinion in that regard, as mandated by the proviso to rule 3(1) of the Rules. He even brought to th .....

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was, accordingly, prayed that the petitioners may be adequately compensated not only to provide some relief to the petitioners but also to send a message to devious authorized officers that any transgression of their powers would be seriously viewed by the writ court and appropriate directions given to undo the gross wrongs committed by them while recovering the dues. 20. Per contra, Mr. Saha contended that the writ petition is not maintainable. According to him, all points that are available t .....

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nt of publication of photographs at this stage. He also contended that bare perusal of the writ petition would not reveal the attack of the petitioners being targeted at publication of photographs of the guarantors; on the contrary, the focal challenge is directed against initiation of proceedings under the Act by issuing demand notice and rejection of the objection in terms of section 13(3A) of the Act. According to him, only a negligible portion of the writ petition pertains to publication of .....

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had been issued not to publish photographs of defaulters in the print media. He also submitted that since the instructions were being duly followed since then, the petitioners are not entitled in law to cash on a slip on the part of an authorized officer and seek compensation by invocation of public law remedy. Several decisions were cited by him to support the contention that the petitioners ought to approach the civil court claiming compensation, if at all, and that the writ court is not the .....

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ioner? and (iii) what relief the petitioners are entitled to, on facts and in the circumstances? 23. All the points are taken up together for consideration, in the light of the arguments that have been advanced by the parties. 24. Once the law [read: section 13(1) of the Act] ordains that a security interest may be enforced in accordance with the provisions of the Act, it is only those acts which are expressly authorized that can be performed and no act can be performed on the premise that such .....

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rrower to discharge in full his liability to the secured creditor within sixty days failing which the secured creditor shall be free to exercise all or any of the rights under section 13(4). At such stage, the demand is merely a demand. It is issued to apprise a borrower what he owes to the secured creditor and must repay. Natural justice is not involved at such stage. Anyone having interest in the history of legislation may recollect that the Act in its original form permitted a secured credito .....

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incorporated in section 13 providing for a right of representation/objection. The law as it now stands makes it imperative for a secured creditor to consider and dispose of, upon application of mind, any representation/objection that it might receive from a borrower/guarantor and it is only thereafter that recourse could be taken to provisions contained in section 13(4). Invocation of power is, thus, not at the fancy and whims of a secured creditor. The guidelines flowing from judicial pronounce .....

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power on a secured creditor/its authorized officer to publish a demand notice in a newspaper without having reasons to believe that such publication is imperative having regard to the facts and circumstances before it and that at such stage, there is no question of reading a power of publication of photograph in the newspapers along with the demand notice. The manner of service of the demand notice is provided by rule 3 of the Rules. Rule 3 reads as follows: 3. Demand Notice.- (1) The service of .....

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mission of documents like fax message or electronic mail service: Provided that where authorised officer has reason to believe that the borrower or his agent is avoiding the service of the notice or that for any other reason, the service can not be made as aforesaid, the service shall be effected by affixing a copy of the demand notice on the outer door or some other conspicuous part of the house or building in which the borrower or his agent ordinarily resides or carries on business or personal .....

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ded in this rule. (4) Where there are more than one borrower, the demand notice shall be served on each borrower. 27. Publication of the demand notice in the newspapers was made by the second respondent upon invocation of such power. 28. It is settled law that if the statute requires a particular act/thing to be performed/done in a particular manner, it has to be performed/done in that manner alone or not at all. This Bench need not burden this judgment with authorities on the point. Suffice it .....

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w thereby making it imperative to proceed for the last option i.e. publication in newspapers, that recourse thereto could be taken. The requirement of formation of opinion, which must be available in the record, is the sine qua non and the law cannot be observed in the breach. 29. As has been recorded in the order dated July 29, 2015, referred to above, there appears to be no record maintained by the respondents in relation to having reasons to believe that publication of the demand notice in th .....

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e second petitioner. There cannot thus be any doubt that the second respondent has conducted himself in a manner not authorized by law by publishing the demand notice in the newspapers with the photograph of the second petitioner. 30. Interestingly, the second respondent had the photograph of the second petitioner published in the newspapers not at the stage of taking measures under section 13(4) of the Act but at a point of time when at the end of the PNB itself, the right to invoke measures un .....

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uld not be published. However in case of Partnership Firm, the photographs of the partners can be published. (bold and underlining in original) It would, therefore, appear that the second respondent has acted in breach of the circular letter dated March 22, 2013. 32. Considering the overall facts and circumstances, it appears to be crystal clear that the second respondent has grossly abused his authority. 33. The second point having been decided, it would now be appropriate to look at the pleadi .....

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h March, 2015 along with the photographs of the petitioner no. 2. A copy of the said paper publication dated 28th March, 2015 is annexed hereto and marked with the letter P-26 . While publishing the Notice in the newspaper as well as letters to the petitioners, the respondents has wrongly claimed the properties of the petitioners which are exclusively charged with SBI. Further PNB have failed to:- a) Describe how they arrived at the outstanding amount of ₹ 3,95,25,425/-. b) How while issui .....

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