Bobby Sebastian and Rajendran v ICICI Bank Ltd.

**“CR”** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI** **FRIDAY, THE 11TH DAY OF APRIL 2014/21ST CHAITHRA, 1936** ## **WP(C).No. 2372 of 2013 (V)** **--------------------------------------** ## **PETITIONERS:** **---------------------** ## **1. BOBBY SEBASTIAN,** **W/O.RAJENDRAN, KUMARANASAN NAGAR, KADAVANTHRA, KOCHI-682 020, ALSO HAVING ADDRESS AT FLAT NO.6, SPARTA, PRESTIGE ACROPOLIS, HOSUR ROAD, BANGALORE - 560 002.** ## **2. RAJENDRAN, AGED 42 YEARS,** **S/O.KUNJAPPAN NAIR, KUMARANASAN NAGAR, KADVANTRA, KOCHI-682 020, ALSO HAVING ADDRESS AT FLAT NO.6, SPARTA, PRESTIGE ACROPOLIS, HOSUR ROAD, BANGALORE - 560 002.** **BY ADV. SRI.PRAVEEN K. JOY** **RESPONDENTS:** **------------------------** **1. THE AUTHORISED OFFICER, ICICI BANK, HAVING BRANCH AT ICICI BANK LTD., 1ST FLOOR, OPP. LIC BUILDINGS, PULIMOODU JUNCTION, TRIVANDRUM-695 001.** ## **2. ICICI BANK LTD.,** **1ST FLOOR, OPP. LIC BUILDINGS, PULIMOODU JUNCTION, TRIVANDRUM-695 001, REP. BY ITS BRNACH MANAGER.** **BY ADVS. SRI.LAL K.JOSEPH SRI.A.A.ZIYAD RAHMAN SRI.V.S.SHIRAZ BAVA SRI.KKM.SHERIF** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 06-03-2014, THE COURT ON 11-04-2014 DELIVERED THE FOLLOWING:** Msd. **WP(C).No. 2372 of 2013 (V) --------------------------------------** ## **APPENDIX** **---------------** **PETITIONER(S)' EXHIBITS --------------------------------------** **EXT.P1: TRUE PHOTOSTAT COPY OF THE NOTICE ISSUED UNDER SECTION 13(2) OF THE ACT. EXT.P2: TRUE PHOTOSTAT COPY OF THE STATEMENT OF ACCOUNTS ISSUED BY THE BANK DATED 26.10.2012.** **RESPONDENT(S)' EXHIBITS:** **-----------------------------------------** ## **NIL** **//TRUE COPY//** **P.A.TO JUDGE.** Msd. **“CR”** **A.V. RAMAKRISHNA PILLAI, J. -------------------------------------------------W.P.(C) No. 2372 of 2013 -------------------------------------------------Dated this the 11[th] day of April, 2014** ## **J U D G M E N T** The competency of Ext.P1 notice is under challenge in this writ petition. 2. The 1[st] and 2[nd] petitioners are the borrowers in a loan transaction. They got a housing loan of ₹1,00,00,000/- from the respondent bank mortgaging an apartment owned by them. The petitioners allege that they have remitted nearly 76,00,000/- in repayment and;₹ even after the aforesaid payment, the respondent bank was threatening that huge amounts are due from them. Though the petitioners disputed the amount, the respondent bank caused Ext.P1 lawyer's notice to be issued on the petitioners under the SARFAESI Act, hereinafter referred to as “the Act”. The petitioners allege that a lawyer is not competent to issue such a W.P.(C) No. 2372 of 2013 **==> picture [19 x 9] intentionally omitted <==** notice as he is not an authorized officer of the respondent bank. Thus, the petitioners have approached this Court. 3. Arguments have been heard. 4. While the learned counsel for the petitioners would argue that the lawyer, who issued the notice on the petitioners, is not an authorized officer within the meaning of Section 2(a) of the Security Interest Rules, 2002, the learned counsel for the respondent bank would contend that Ext.P1 notice is legally competent. 5. Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 deals with the enforcement of security interest. Subsection 2 of Section 13 reads as follows; “(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).” W.P.(C) No. 2372 of 2013 ..3.. ## 5. Rule 2(b) of the Security Interest (Enforcement) Rules, 2002 defines “demand notice” as follows; “(b) demand notice means the notice in writing issued by a secured creditor or authorised officer, as the case may be, to any borrower pursuant to sub-section (2) of section 13 of the Act.” Therefore, a notice to be valid and effective in law ought to be issued by a secured creditor or an authorised officer. 6. In the instant case, the notice was issued by the counsel representing the respondent bank. Now, the question is, if such a notice is issued by the counsel representing the bank (secured creditor), can it be repudiated, branding it as one issued in contravention of the letter and spirit of the provisions of the Act and Rules? 7. The learned counsel for the respondent bank would submit that the notice issued by the counsel representing the bank is a notice of demand, which constitutes an action, thereby providing for an opportunity to the borrower to make a representation to the secured creditor and; therefore, it is legally W.P.(C) No. 2372 of 2013 ..4.. competent. 8. The learned counsel for the petitioner, per contra, would submit that as the statute and rules made thereunder specify a particular mode, the same has to be complied with, especially, because, it involves the taking away of the property belonging to the borrower. Section 13(2) of the Act makes it clear how the right of a secured creditor has to be enforced, which has to be by a notice. Rule 2(b) makes it clear that it has to be by the secured creditor or its authorised officer. 9. Section 2(zd) of the Act defines “secured creditor” as follows; “(zd) “secured creditor” means any bank or financial institution or any consortium or group of banks or financial institutions and includes- (i) debenture trustee appointed by any bank or financial institution; or (ii) securitisation company or reconstruction company, whether acting as such or managing a trust set up by such securitisation company or reconstruction company for the securitisation or reconstruction, as the case may be; or (iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance;” 10. Rule 2(a) defines “authorised officer” as follows; W.P.(C) No. 2372 of 2013 ..5.. “(a) “authorised officer” means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the Act;” 11. The Calcutta High Court in **Asset** **Reconstruction Company India Ltd.** v. **M/s. Amit ventures Private Ltd. & Others** [AIR 2007 Calcutta 49], which considered a similar situation, observed that a notice of demand under Section 13(2) of the Act, issued by a solicitor on the instruction of the secured creditor, is valid. A similar view was expressed by the Rajasthan High Court in **Kailash Chandra Sharma** v. **ICICI Bank Ltd. & Others** [AIR 2013 Rajasthan 163] following the decision of the Calcutta High Court. However, the apex court in **Transcore** v. **Union of India and Another** [(2008) 1 Supreme Court Cases 125] has observed that a notice under Section 13(2) is not a mere show cause notice, but, it is similar to a demand notice under Section 156 of the Income Tax Act. 12. I would regretfully, but, most respectfully, note W.P.(C) No. 2372 of 2013 ..6.. that neither the decision of the Calcutta High Court nor the decision of the Rajasthan High Court deals with the proposition of Rule 2(a), which defines “authorised officer”. On a plane reading of Rule 2(a) and 2(b), it can be seen that only an officer of the bank, as specified by the Board of Directors, can issue a notice of demand under Section 13(2) of the Act as contemplated under Rule 2(b) of the Security Interest Rules, 2002. I, therefore, respectfully disagree with the views rendered by the High Courts of Calcutta and Rajasthan. In the result, the writ petition is allowed. Ext.P1 notice is set aside. This judgment, however, will not preclude the respondent bank from taking action in accordance with the provisions of the Securitisation Act. Sd/- ## **A.V. RAMAKRISHNA PILLAI, JUDGE** bka/-