TMI Blog2018 (9) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... who has no legal wherewithal - Another aspect that requires to be noted is that, though Section 17(5) of the SARFAESI Act prescribes the outer time limits for disposal of securitization applications filed under Section 17(1), Tribunals have not lived up to this statutory mandate. It is rare, if at all, to find a securitization application filed under Section 17(1) being disposed of in terms of the temporal mandate of Section 17(5) thereof. The writ petitions are disposed of permitting the petitioners to invoke the jurisdiction of the competent civil Court within four weeks from the date of receipt of a copy of this order. - WRIT PETITION NOS. 22510, 22547 And 22884 OF 2016 - - - Dated:- 23-3-2018 - SRI SANJAY KUMAR AND SRI P. KESHAVA RAO, JJ. For The Petitioner : Sri P. Mehar Srinivasa Rao For The Respondent : G. P. for Industries Commerce (TS) And Sri Y. N. Vivekananda COMMON ORDER ( Per Sri Justice Sanjay Kumar) Rajanala Kusuma Kumari, Enugala Manjula and Bhukya Shakuntala, the petitioners in these three cases, claim to be the owners of individual house properties bearing H. No. 2-4-964/1/A, H. No. 2-4-964/1/A/2 and H. No. 2-4-964/1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed that default was committed in repayment of the loan availed by one Sudhamalla Venkat Swamy of Ladella Village, Atmakur Mandal, Warangal District, for acquiring a Tipper vehicle, and a notice was issued to him under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( hereinafter, the SARFAESI Act ). This was also stated to have been intimated to Kusam Eshwaraiah and Kusam Ramesh, the collateral security providers. It was further stated that as Sudhamalla Venkat Swamy and the collateral security providers had not cleared the arrears, the loan account had become overdue and stood at ₹ 3, 99, 514/- as on 31. 05. 2013. The APSFC stated that it proposed to sell the collateral/ primary security properties but as it had been informed that the three petitioners were residing in the collateral security properties which were mortgaged with it, they were advised to vacate the premises occupied by them on or before 15. 07. 2013, failing which the APSFC threatened to take further action to take possession of the properties. All three petitioners got issued individual legal notices dated 06. 07. 2013 to the AP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by delivering and affixing the possession notice. Possession notice dated 13. 06. 2016 issued in the form contained in Appendix IV of the Security Interest (Enforcement) Rules, 2002 ( for brevity , the Rules of 2002 ) was appended thereto. The schedule of property in this notice as well as in the possession notice dated 13. 06. 2016 reads as under: SCHEDULE OF PROPERTY Residential plot admeasuring 506 Sq . yards covered by Sy . No . 194/C, 194/D (New) Situated at Waddepally (V), Hanamkonda (M), Warangal District, belonging to Sri Kusam Eshwaraiah and Sri Kusam Ramesh . The property is currently occupied by constructing residential building in namely 1) Smt B . Shakuntala, 2) Smt R . Kusuma Kumari and 3) Sri E . Devender Reddy . Yet again, the petitioners got issued individual legal notices dated 21. 06. 2016 to the APSFC reiterating their earlier stand. Unmoved thereby, the APSFC issued individual notices dated 28. 06. 2016, titled DEMAND NOTICE TO BORROWER/SURETY UNDER SEC. 13(4)(a) of SARFAESI ACT, 2002 DEMANDING PHYSICAL POSSESSION OF SECURED ASSETS . Therein, the borrower, sureties and the occupants were shown as earlier. The Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. No. 22510 of 2016, the Branch Manager of the APSFC at its Warangal Branch, Hanamkonda, stated as follows: The APSFC sanctioned a term loan of ₹ 5, 62, 700/- on 04. 10. 1999 to Sudhamalla Venkat Swamy for acquiring an Ashok Leyland Tipper vehicle for transportation of coal. He thereupon acquired the Tipper vehicle bearing No. AP 36U 8064. Collateral security was offered at the time of execution of the loan documents, in addition to hypothecation of the vehicle. The property offered as collateral security was the residential plot admeasuring 506 square yards in Sy. Nos. 194/C and 194/D (new) at Waddepally Village, Hanamkonda Mandal, Warangal District, standing in the names of Kusam Eshwaraiah and Kusam Ramesh. As default was committed in the repayment of this loan, the APSFC initiated recovery proceedings under the SARFAESI Act, by issuing a notice to the collateral security providers on 13. 05. 2011. The notice was however returned unserved. Officials of the APSFC thereupon inspected the collateral security property and noticed that it was in the possession of three different people who were illegally residing there. Having regard to the same, the APSFC got eviction notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r her vendor had purchased the property from his father. She alleged that Sudhamalla Venkat Swamy, Kusam Eshwaraiah and Kusam Ramesh had hatched a plan by playing fraud and created Document No. 1297 of 1995 dated 20. 03. 1995 so as to obtain a loan. She asserted that she was the absolute owner of her house property and that the APSFC had no right to proceed against it. In so far as Enugala Manjula is concerned, she stated in her reply affidavit that Donthi Devender Reddy, s/o Varada Reddy, her vendor, had purchased the property from Musuku Nagi Reddy under Document No. 8610 of 2003 dated 25. 11. 2003 and Musuku Nagi Reddy, in turn, had purchased the property from Lingampally Venkataiah under registered Document No. 7464 of 1980 dated 22. 12. 1980. She repeated the same allegations as were made by Rajanala Kusuma Kumari. In her reply affidavit, Bhukya Shakuntala traced the title of Annamaneni Pushpa Leela, her vendor, to Lingampally Venkataiah as she had purchased the subject property from him under registered Document No. 7463 of 1980 dated 22. 12. 1980. She also adopted the attack launched by Rajanala Kusuma Kumari against Document No. 1297 of 1995 dated 28. 03. 1995, by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution. Section 2(1)(zb) defines security agreement to mean an agreement, instrument or any other document or arrangement under which security interest is created in favour of the secured creditor, including the creation of mortgage by deposit of title deeds with the secured creditor. Section 2(1)(zd), as it now stands, defines secured creditor to mean any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible or intangible asset, amongst others, in whose favour security interest is created by any borrower for due repayment of any financial assistance. The term security interest is defined under Section 2(1)(zf) to mean the right, title or interest of any kind upon property, other than those specified in Section 31 of the SARFAESI Act, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment etc. or such right, title or interest in any intangible asset or assignment or licence of such intangible asset. The term secured a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds place in Chapter VI thereof, titled Miscellaneous . It states that no civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or Appellate Tribunal is empowered by or under the SARFAESI Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken pursuant to the powers conferred by the SARFAESI Act or the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ( hereinafter, the RDDB Act ). Sri Y. N. Vivekananda, learned counsel, would stress upon the phrasing of Section 17(1) of the SARFAESI Act, as extracted supra , and contend that as any person, who is aggrieved by any of the measures referred to in Section 13(4) taken by a secured creditor, is entitled to make an application to the Tribunal, the petitioners cannot be permitted to get over the statutory bar to the jurisdiction of the civil Court under Section 34 of the SARFAESI Act and must necessarily be relegated to the remedy under Section 17(1) of the SARFAESI Act before the Tribunal. We are not persuaded to agree. The argument of the learned counsel, though s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Judges of the Supreme Court in MARDIA CHEMICALS LTD. V/s. UNION OF INDIA (2004) 4 SCC 311. The validity of the SARFAESI Act came up for consideration before the Supreme Court in this case. One of the contentions advanced was that as the remedy under Section 17(1) of the SARFAESI Act was provided only after measures were taken under Section 13(4) of the SARFAESI Act, there would be no bar to approach the civil Court prior to such measures being taken under Section 13(4). However, the Supreme Court disagreed, pointing out that a full reading of Section 34 of the SARFAESI Act showed that the jurisdiction of the civil Court was barred in respect of matters which a Debts Recovery Tribunal or the Appellate Tribunal was empowered to determine in respect of any action taken or to be taken pursuant to power conferred under the SARFAESI Act and therefore, the prohibition covered even matters which could be taken cognizance of by such Tribunal, though no measures in that direction had so far been taken under Section 13(4). The Supreme Court further noted that the bar of jurisdiction was in respect of a proceeding which may be taken to such Tribunal and therefore, any matter in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he will have no right to raise an objection, before measures have been taken against him under Section 13(4) of the Act nor could he approach the civil court . It is submitted by the respondent that in such cases a civil court may have jurisdiction to entertain the case as character as a guarantor itself is denied . It is clear from the aforestated extract that the Union of India, the respondent in that case, conceded that in case a guarantor, who is included within the definition of borrower in Section 2(1)(f) of the SARFAESI Act, claims that he stood discharged either under Section 133 or 135 of the Indian Contract Act, 1872, he would be entitled to avail the ordinary civil remedy before the competent civil Court. It was this aspect that weighed with this Court in D. RAM REDDY1 to hold that, when the very status of the person proceeded against as a borrower was in question, the bar to the civil Court s jurisdiction under Section 34 of the SARFAESI Act would not apply. It is no doubt true that in the concluding portion of the judgment, the Supreme Court observed in Para 80 that it would be open to an aggrieved party to maintain a suit in a civil Court, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the property in question had been purchased in the individual names of the borrowers under registered sale deeds and no claim had ever been made at any stage by any member of the Joint Hindu Family that the property was joint and not an individual property. It was in this context that the Supreme Court held that the expression any person used in Section 17(1) of the SARFAESI Act was of wide import and took within its fold not only the borrower or the guarantor but also any other person who may be affected by the action taken under Section 13(4) thereof . Reference was also made to the earlier decision in UNITED BANK OF INDIA V/s. SATYAWATI TONDON (2010) 8 SCC 110. The learned Judges further observed that irrespective of the question whether a civil suit was maintainable or not, under the SARFAESI Act itself, a remedy was provided to such persons and that they can invoke the provisions of Section 17 thereof, in case the secured creditor adopts any measures, including sale of the secured assets in which the plaintiffs claim interest. Though reference was also made to certain observations in MARDIA CHEMICALS LTD. 2, the learned Judges did not consider what was stated in P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1992) 3 SCC 159 and INDUSTRIAL INVESTMENT BANK OF INDIA LTD. V/s. BISWANATH JHUNJHUNWALA (2009) 9 SCC 478, the Bench observed that the liability of the guarantor and the principal debtor is not in the alternative, as it is co-extensive, and the creditor has the right to proceed against either for recovery of its dues. The Bench further observed that there was another reason as to why the High Court s order should be set aside. Referring to the expression any person used in Section 17(1) of the SARFAESI Act, it was observed that the same was of wide import and would take within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) of the SARFAESI Act. Again, the issue raised before us did not fall for consideration and there was no discussion on Para 53 of MARDIA CHEMICALS LTD (2004) 4 SCC 311. Another judgment, strongly relied upon by Sri Y. N. Vivekananda, learned counsel, is that of a Bench of two learned Judges of the Supreme Court in ROBUST HOTELS PRIVATE LIMITED V/s. EIH LIMITED (2017) 1 SCC 622. In the context of ouster of the civil Court s jurisdiction under Section 34 of the SARFAESI Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect in refusing an application under Order 7 Rule 11 CPC, filed on the ground that its jurisdiction was barred under Section 34 of the SARFAESI Act. The Supreme Court observed that in normal circumstances, there cannot be any action of an authority which cannot be challenged before a civil Court unless there is a statutory bar with regard to challenging such an action, but Section 34 specifically provides a bar of jurisdiction and therefore, an order passed under Section 13 of the SARFAESI Act could not have been challenged before the civil Court. This decision however turned on a distinction being drawn between the original jurisdiction of the Tribunal under Section 17 of the SARFAESI Act as opposed to its appellate jurisdiction thereunder. Be that as it may. In STATE OF A. P. V/s. MANJETI LAXMI KANTHA RAO (2000) 3 SCC 689, the Supreme Court observed that the normal rule of law is that the civil Courts have jurisdiction to try all suits of civil nature except those, of which cognizance by them is either expressly or impliedly excluded, as provided under Section 9 CPC. It was further observed that where a statute gives finality to the orders of special tribunals, jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted sum that they would be entitled to approach the Tribunal. Banks and financial institutions, keeping in view the provisions of Sections 17 and 18 of the RDDB Act, are therefore necessarily required to file such claim petitions before the Tribunal, but the converse is not true as debtors could file their claims of set-off or counter-claims only when a claim application is filed and not otherwise. As liabilities and rights of the parties have not been created under the RDDB Act and only a new forum has been created, the Supreme Court observed that the banks and financial institutions cannot approach the Tribunal unless the debt becomes due and in such a contingency, a civil suit would lie. Significantly, it was also observed that when fraud and misrepresentation are alleged, the civil Court s jurisdiction can be invoked, as issues of complicated nature may arise in such a suit. Though these observations were made in the context of the RDDB Act, they are of significance as they manifest that the Tribunal is not the panacea for all evils. As already pointed out supra , the petitioners presently dispute the right of the APSFC to proceed against their house properties on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous alternative remedy. Further, in the light of the claims put forth by the petitioners, duly supported by documentary evidence, the issue that arises goes to the very root of the claim put forth by the APSFC, whereby it is proceeding against the subject properties under the SARFAESI Act. Such an issue would necessarily entail adducing of evidence in a fullfledged trial and as the SARFAESI Act and the RDDB Act permit the Tribunal to adopt a rather informal procedure, unhindered by the provisions of the Indian Evidence Act, 1872, and the Code of Civil Procedure, 1908, the remedy under Section 17 of the SARFAESI Act, by no stretch of imagination, can be said to be an efficacious alternate remedy. Be it viewed from any angle, we find no merit in the argument of Sri Y. N. Vivekananda, learned counsel, to the effect that the view taken in D. RAM REDDY1 requires reconsideration. In a situation as is obtaining in the present cases, it cannot be said that Section 34 of the SARFAESI Act has application, whereby the petitioners would have to be relegated to the statutory remedy under Section 17(1) of the SARFAESI Act. The facts and circumstances in the cases on hand ordain otherwise. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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