Authorized Officer, Stressed Assets Recovery Branch, State Bank of India & Manager, State Bank of India v. Jayesh Vijayan & Asha Shijo

-:1:- W.A. 1336/2022 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY WEDNESDAY, THE 19[TH] DAY OF OCTOBER 2022 / 27TH ASWINA, 1944 WA NO. 1336 OF 2022 [AGAINST THE JUDGMENT IN WP(C) NO.15897/2022 DATED 13-06-2022 OF HIGH COURT OF KERALA] ## APPELLANTS/RESPONDENTS: - 1 THE AUTHORIZED OFFICER, STRESSED ASSETS RECOVERY BRANCH, STATE BANK OF INDIA, 7TH FLOOR, VANKARATH TOWERS, PALARIVATTOM, BYE PASS JUNCTION, ERNAKULAM., PIN - 682024. - 2 THE MANAGER, STATE BANK OF INDIA, TEMPLE BRANCH, THODUPUZHA, IDUKKI DISTRICT., PIN - 685584. BY ADV. SRI. JAWAHAR JOSE ## RESPONDENTS/WRIT PETITIONERS: - 1 JAYESH VIJAYAN, AGED 37 YEARS, S/O. VIJAYAN, AMBATT HOUSE, VANNAPPURAM (P.O), IDUKKI DISTRICT., PIN - 685607. - 2 ASHA SHIJO, AGED 37 YEARS, W/O. SHIJO, MUNDANIKKAL HOUSE, KADAVOOR (P.O), NJARAKKAD, IDUKKI DISTRICT., PIN - 686671. ## BY ADV. SRI.PEEYUS A.KOTTAM (B/O) THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 19.10.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -:2:- W.A. 1336/2022 ## **JUDGMENT** Dated this the 19[th] day of October, 2022 ## **S. Manikumar, CJ** Instant writ appeal is filed by the Authorised Officer, Stressed Assets Recovery Branch; and the Manager, State Bank of India, against the judgment dated 13.06.2022 in W.P.(C) No.15897 of 2022, by which, a learned single Judge disposed of the writ petition directing the appellants bank to accept repayment of the entire overdue amount of Rs.5,40,242/along with bank charges from the 1[st] respondent herein and regularise the loan account on the following conditions: - (i) The overdue amount of Rs.5,40,242/- together with any accrued interest and charges shall be repaid in six (6) equated monthly instalments. - (ii) The first instalment shall be paid on or before 30.6.2022 and the subsequent instalments shall be paid on the last working day of every succeeding month. - (iii) The 1[st] petitioner shall continue to pay the regular EMI’s along with the instalments as directed above. - (iv) In the event of default of any one instalment, the respondent bank shall be entitled to proceed in accordance with law. - (v) In order to enable the 1st petitioner to repay the entire amounts, all coercive proceedings shall be kept in abeyance. ## 2. Writ court further ordered that the 1[st] petitioner shall not alienate or encumber the property mortgaged with the respondent bank without -:3:- W.A. 1336/2022 ## clearing the entire liability in respect of the loan. 3. Material facts for disposal of the writ appeal are that; in the year 2019, the 1[st] respondent together with his wife availed a housing loan from the State Bank of India – 1[st] appellant herein, for an amount of Rs.36 lakhs. The loan has to be cleared within a period of 15 years in 180 monthly installments, at the rate of Rs.32,400/-. The loan was sanctioned by creating mortgage, by depositing the original title deed of Exhibit-P1 document. At the time of availing the loan, the terms and conditions were cataloged into an agreement dated 15.07.2019 [Exhibit-R1(a)] produced along with the counter affidavit by the appellants before the writ court. 4. Appellants have further stated that during the pendency of the loan, 1[st] respondent and his wife entered into an agreement for sale with the 2[nd] respondent, for selling the property and residential building therein. It was covenanted that the amount outstanding as on the date of agreement i.e. 09.10.2020 is Rs.36 lakhs and that amount will be cleared by the 2[nd] respondent, by remitting the monthly installments of Rs.32,400/-. Due to failure on the part of respondent No.2, to clear off the dues, 1[st] appellant has issued possession notice dated 9.3.2022 (Exhibit-P3) as per Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. -:4:- W.A. 1336/2022 5. Though the respondents vide Exhibit-P4 requested the 2[nd] appellant to provide some installment facility to clear off the arrears, the 2[nd] appellant is taking an adamant stand that unless and until the entire loan amount is cleared off, they will not drop the further proceedings as per the provisions of SARFAESI Act, 2002. 6. Writ petition was filed by the respondents/writ petitioners when the appellant Bank initiated proceedings under the provisions of SARFAESI Act, 2002 and that the Bank had taken symbolic possession of the mortgaged property on 9.3.2022, by virtue of the authority conferred under Section 13(4) of the Act, 2002. 7. The reliefs sought for by the respondents herein in W.P.(C) No.15897/2022 are as under: - (i) Call for the entire records leading to Exhibit-P3 possession notice issued by the Authorised Officer, Stressed Assets Recovery Manager, State Bank of India, respondent No.1 therein by issuing a writ of certiorari, or any other appropriate order or direction; - (ii) Issue a writ of mandamus or any other appropriate writ, order or direction, and thereby command the respondent to reschedule the loan bearing No.386045396 availed by the first petitioner and his wife from the 2[nd] respondent Bank by allowing the petitioners to remit the outstanding amount of Rs.2,26,800/- as on today along with future monthly installments of Rs.32,400/- for facilitating petitioners to clear off the loan amount. -:5:- W.A. 1336/2022 8. Refuting the averments in the writ petition, appellants have filed a counter affidavit dated 9[th] June, 2022, wherein they have contended that the Bank has classified the loan as Non-Performing Asset and initiated recovery proceedings under the SARFAESI Act, 2002 and also under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 9. Appellants have also contended that as per the said agreement, the borrowers shall not sell, assign, mortgage or charge the mortgaged property to any other person. Contrary to the said stipulation in ExhibitR1(a), the 1[st] respondent entrusted the property to the 2[nd] respondent, by sale agreement dated 09.10.2020. It is stated by the respondents that the loan repayment shall be done by the 2[nd] respondent, and it is the 2[nd] respondent, who is repaying the loan since 09.10.2020. Further, as evident from Exhibit-R1(a), Bank has given leverage to recall the loan, in case the borrower fails to adhere to the terms and conditions agreed between them. 10. It was further stated that with respect to the proceedings under the SARFAESI Act, 2002, demand notice was issued under Section 13(2) on 27.07.2021 demanding Rs.35,24,351/- and thereafter, Exhibit-P3 possession notice was issued on 9.3.2022. As regards the proceedings under the RDDB Act, 1993, a suit is stated to have been filed before the Debt -:6:- W.A. 1336/2022 Recovery Tribunal, as O.A. No.322/2022 and the same is pending consideration before the Tribunal. 11. After hearing the learned counsel on both sides, writ court, by the impugned judgment, disposed of the writ petition, with the directions, extracted above. Being aggrieved, instant appeal is filed. Grounds, inter alia, raised by the appellants are hereunder: A. Writ court ought not to have directed the Bank to regularise the loan account, which is totally an act, within the wisdom and prerogative of the Bank, particularly when the 1[st] respondent borrower borrower has entrusted the property with the 2[nd] respondent and that the Bank has already recalled the loan. B. Writ court ought to have taken note of the fact that the recovery of loan amount by the bank is a contractual matter The rescheduling of loan by the court, is actually a modification of the contract which can only be done by mutual consent of the parties, by virtue of sSection 62 of the Contract Act. This being the fact, the judgment of the learned Single Judge directing to regularize the loan account is legally unsustainable. C. The Court can exercise the jurisdiction under Article 226 of the Constitution of India, only when the borrower establishes the fact that the bank has failed to discharge any statutory obligation or legal duty, in exercising the proceedings under the SARFAESI Act, 2002. In the case in hand, the borrower has no complaints before the Learned Single Judge, in respect of any of the procedures adopted by the bank under the SARFAES! Act. Moreover, the borrower has no case before the learned Single Judge. that there is a statute or rule having the force of law, which casts a duty upon the bank to reschedule the loan account of the borrower. This being the fact, the learned Single Judge ought not to have issued a direction to the bank, for regularizing the loan account. -:7:- W.A. 1336/2022 D. Writ court ought to have taken note of the objects of the SARFAESI Act, 2002,, which was legislated by the Parliament. One of the principal objects of the Act is for a speedy recovery of the debts of financial institutions and also for better availability of capital liquidity, for helping the growth of country's economy. The Act is also legislated to discourage the borrowers from postponing the payment of their dues. So, if the securitization proceeding initiated by the bank is prolonged and delayed, the very object of legislating the SARFAESI Act, 2002 would be defeated. This being the fact, the rescheduling of loan account by the learned Single Judge has the effect of defeating the very object of the SARFAESI Act. 12. Inviting the attention of this Court to the specific conditions in Exhibit-R1(a) agreement dated 15.07.2019, Mr. Jawahar Jose, learned counsel for the appellants, submitted that violating the same, sale agreement dated 09.10.2020 has been entered into by the borrower and the 2[nd] respondent and that, by virtue of the same, the 2[nd] respondent has been entrusted with the mortgaged property. 13. He further submitted for realisation of the loan amount, a suit in O.A. No.322/2022 has already been filed before the Debt Recovery Tribunal and the same is pending. By virtue of the judgment in W.P.(C) No.15897/2022 dated 13.06,2022, impugned in this writ appeal, the whole proceedings initiated before the Tribunal, would become redundant. 14. He further submitted that when the Hon’ble Supreme Court in several decisions has repeatedly held that writ petitions challenging the -:8:- W.A. 1336/2022 recovery proceedings under SARFAESI Act, 2002 should not be entertained, instant writ petition has been entertained and Bank has been directed to regularise the same. 15. Per contra, defending the impugned judgment, Mr. Peeyus A. Kottam, learned counsel for the respondents submitted that payments have been made regularly. If the respondents were granted a weeks’ time, they would clear off the over dues. He also submitted that the respondents have not received any notice in O.A. No.322/2022 pending on the files of the Debt Recovery Tribunal. 16. He further submitted that in the event of accepting the contention of the appellants, liberty be given to move the Debt Recovery Tribunal, to challenge Exhibit-P3 possession notice dated 9.3.2022. 17. Heard learned counsel for the appellants, learned counsel for the respondents/writ petitioners, and perused the material on record. 18. Repeatedly, the Hon'ble Supreme Court held that writ petitions as against proceedings initiated under the SARFAESI Act, 2002 should not be entertained. Reference can be made to a few decisions of on that aspect. (i) In **Authorised Officer, State Bank of Travancore and Another v. Mathew K.C.** [(2018) 3 SCC 85], at paragraphs 15 to 18, the Hon'ble Supreme Court held as under: -:9:- W.A. 1336/2022 “15. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of exparte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in **United Bank of India v. Satyawati Tondon and others** [AIR 2010 SC 3413], has also not been kept in mind before passing the impugned interim order:- “46. It must be remembered that stay of an action initiated by the State and/or its agencies/ instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in **Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad** , [1969 AIR 556, 1969 SCR (1) 518], **Whirlpool Corpn. v. Registrar of Trade Marks** [(1998) 8 SCC 1], and **Harbanslal** -:10:- W.A. 1336/2022 **Sahnia v. Indian Oil Corpn. Ltd.** [AIR 2003 SC 2120] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.” (emphasis supplied) 16. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference. 17. We cannot help but disapprove the approach of the High Court for reasons already noticed in **Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and Another** , [(1997) 6 SCC 450], observing :- “32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.” 18. The impugned orders are therefore contrary to the law laid down by this Court under Art.141 of the Constitution and unsustainable. They are therefore set aside and the appeal is allowed.” ## (ii) In **ICICI Bank Ltd. v. Umakanta Mohapatra and Others** , [2018 (13) SCALE 724], the Hon'ble Supreme Court has reaffirmed the -:11:- W.A. 1336/2022 legal position that High Court has no jurisdiction to entertain writ petitions under Article 226 of the Constitution of India, relating to matters coming under the purview of SARFAESI Act, 2002, where a statutory remedy is available by filing an application under Section 17 of the said Act. (iii) In **Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir & Ors.** [(2022) 5 SCC 345] **,** the Hon'ble Supreme Court held that writ against recovery proceedings, initiated under the SARFAESI Act, 2002 is not maintainable. 19. As rightly contended by Mr. Jawahar Jose, learned counsel for the appellants, when Exhibit-P3 possession notice dated 9.3.2022 was challenged, writ court, ought to have relegated the respondents/writ petitioners to approach the Debt Recovery Tribunal. As rightly contended, contrary to the specific terms and conditions in Exhibit-R1(a) agreement dated 15.07.2019, the 1[st] respondent has entered into a sale agreement dated 09.10.2020 and entrusted the property to the 2[nd] respondent. 20. Appellants have raised substantial grounds. That apart, when a suit in O.A. No.322/2022 has already been initiated against the respondents, therefore, as rightly contended by the learned counsel, the impugned judgment, regularising the loan account, would certainly make the proceedings initiated by the appellant Bank, under the SARFAESI Act, 2002, redundant, which includes, the suit stated supra. -:12:- W.A. 1336/2022 21. In the light of the above discussion and decisions, impugned judgment has to be set aside and accordingly, we do so. 22. Exhibit-P3 possession notice is dated 9.3.2022. When this Court has set aside the impugned judgment, we are of the view that liberty can be given to the respondents/writ petitioners, to approach the Tribunal, and accordingly given. Writ appeal is allowed as above. krj **Sd/S.MANIKUMAR CHIEF JUSTICE Sd/SHAJI P.CHALY JUDGE** //TRUE COPY// P.A. TO C.J.