Mohammed Ali M.K. v. Branch Manager (Authorized Officer), Federal Bank Ltd., Karinkallathani Branch, and Others

W.A. 1403/2020 1 # **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 28TH DAY OF OCTOBER 2020 / 6TH KARTHIKA, 1942** **WA.No.1403 OF 2020** **AGAINST THE JUDGMENT IN WP(C) 31645/2019(E) OF HIGH COURT OF KERALA** **APPELLANT/S:** **MOHAMMED ALI M.K., AGED 56 YEARS, S/O KUNHEEN, MUDIKUNNIL, THAZHEKODE, PERINTHALMANNA, MALAPPURAM DISTRICT. BY ADVS. SRI.S.VINOD BHAT KUM.ANAGHA LAKSHMY RAMAN** ## **RESPONDENT/S:** **1. THE BRANCH MANAGER (AUTHORISED OFFICER), FEDERAL BANK LTD., KARINKALLATHANI BRANCH, THAZHEKODE POST, PERINTHALMANNA, PIN – 679 357. 2. THE REGIONAL MANAGER, FEDERAL BANK LTD., 2ND FLOOR, FEDERAL TOWERS, 27/97-G, MAVOOR ROAD, KOZHIKODE – 673 016. 3. AYSHAKUTTY, W/O MOHAMMED ALI, MUDIKUNNIL, THAZHEKODE, PERINTHALMANNA, MALAPPURAM DISTRICT, PIN – 679 322.** ## **OTHER PRESENT:** **SRI. MOHAN JACOB GEORGE FOR R1 AND R2** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 28.10.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.A. 1403/2020 2 **“C.R”** ## **J U D G M E N T** Dated this the 28[th] day of October, 2020 ## S. Manikumar, CJ Instant writ appeal is filed against the judgment dated 15.09.2020 in W.P.(C) No.31645 of 2019, by which, a learned single Judge of this Court dismissed the writ petition by observing thus: “3. Learned counsel for the petitioner further argued that because of grant of loan facility subsequent to the notice of demand, the subsequent actions in respect of declaring the account as NPA does not survive. I am not impressed by the said submission. The SARFAESI Act is a special statute and the action taken in pursuant to the provisions of the said Act needs to be taken to the logical end adhering to the provisions of the said Act. The petitioner being the borrower had made a default in repayment of loan and therefore after issuing demand notice in writing (Ext.P4) by giving details of amount payable, the respondent Bank directed the petitioner to discharge liability. However, the petitioner failed to repay the loan. Hence Ext.P5 notice for taking possession of secured assets came to be issued. The petitioner wants these notices to be declared non est in view of grant of further loan. The petitioner is in fact challenging the notice issued under Section 13(4) of the SARFAESI Act. He has alternate, most efficacious and statutory remedy provided by Section 17 of the SARFAESI Act. The petition as such is not maintainable. The same is accordingly dismissed.” ## 2. Short facts leading to the filing of instant appeal are that, writ petitioner/appellant and his wife, third respondent, had availed a cash W.A. 1403/2020 3 credit facility of Rs.1,15,00,000/- from Federal Bank Ltd., in the year 2015, for the purpose of business on domestic trading and export of certain fruits, and the same was renewed yearly basis. On 01.08.2019, the appellant was informed that the loan account was irregular since 31.07.2019 and he was called upon by Exhibit-P3 letter dated 01.08.2019, to remit the entire amount due to the bank, within thirty days. Thereafter, proceedings were initiated by the respondent bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the 'SARFAESI Act) and notices under Sections 13(2) and 13(4) dated 7.2.2018 and 12.02.2019 (Exhibits-P4 and P5) were issued to the appellant for realising an amount of Rs.1,19,65,488/-, together with future interest and costs to be paid within 60 days from the date of receipt thereof. However, he overcame the hurdles and consequently, the bank issued sanction letter dated 20.02.2019 in terms of Exhiit-P2 agreement dated 18.12.2015. 3. The grievance of the appellant was that due to the issuance of Exhibits-P4 and P5, prospective buyers were dissuaded. Even though, he approched the respondents, requesting to withdraw the abovesaid notices, they insisted that issuance of Exhibit-P1 sanction letter, after Exhibits-P4 and P5 notices itself evidenced that earlier proceedings W.A. 1403/2020 4 under the Act have come to an end. Consequently, withdrawal of Exhibit-P5 notice is an unnecessary surplusage. Hence, W.P.(C) No.31645 of 2019 was filed for the following reliefs: - (i) To declare Exhibits-P4 and P5 notices dated 07.02.2018 and 12.02.2019 issued by the respondent bank are no longer valid in law; - (ii) To issue a writ of certiorari or such other writ quashing Exhibits-P4 and P5 notices. 4. On behalf of the 1[st] respondent, the Authorised Officer, Federal Bank Ltd., Perinthalmana, a statement has been filed contending that petitioner has approached the bank during February, 2019, praying for upgrading his account, by way of clearing the exceeding amount from the sanctioned limit of Rs.115 lakhs, in the cash credit facility, and by bringing down the account, within the limit. The bank has agreed to review the status of the account, on condition that if the petitioner remits the amounts outstanding and bringing the account as standard by making substantial payments into the same. Accordingly, Exhibit-P1 sanction letter dated 20.02.2019 was issued. 5. According to the 1[st] respondent, Exhibit-P1 letter is only a review sanction for the aforesaid purpose and for enabling the branch to take fresh documents after renewing the account, in the event of the petitioner making the account standard. However, he did not make the payments as agreed so as to bring the account as regular and, W.A. 1403/2020 5 therefore, no renewal documents have been executed and that the account was not renewed. 6. Respondent No.1, in his statement, has further contended that the contention that cash credit facility was renewed pursuant to Exhibit-P1 letter, is unsustainable. The notices issued under Sections 13(2) and 13(4) of the SARFAESI Act, 2002 are not liable to be quashed and that they are valid and binding on the petitioner. For the foregoing reasons, he prayed for dismissal of the writ petition. 7. After considering the submissions advanced, writ court, by the impugned judgment, dismissed the writ petition, finding that it is not maintainable. Aggrieved by the said judgment, this Writ Appeal is filed on the following grounds. A. Issuance of Exhibit-P1 letter of sanction for credit facility dated 20.02.2019 by the respondent bank gives an end to the proceedings initiated vide Exhibits-P4 and P5. B. The refusal to withdrawn Exhibits-P5 representation by the respondent bank is arbitrary and it reflects high handedness. C. The jurisdiction of the Debt Recovery Tribunal is limited. The petitioner has no alternate remedy, except to approach the writ court. D. The respondent bank cannot fall back on Exhibits-P4 and P5 notices to substantiate their claim in Exhibit-P3. F. The respondent bank has not adhered to the banking norms and practices set out by the Reserve Bank of India while W.A. 1403/2020 6 dealing with a loan account classified as non-performance asset. The respondent bank is unfairly cornering the appellant by not withdrawing Exhibits-P4 and P5 notices. 8. Heard learned counsel for the parties and perused the materials on record. 9. Exhibit-P4 notice dated 07.02.2018 issued by the 2[nd] respondent to the appellant is extracted hereunder: “Ref: KKDE/SAR/1660/55-2827/2018/1820/18 07-02-2018 ## **Registered with A/D** ## **Demand Notice** 1. Shri. Muhammed Ali. M.K., S/o. Kunheen, Mudikunnil, Thazhekode, Perinthalmanna,, Malappuram District, Pin: 679341. 2. Smt. Ayshakutty, A/o. Muhammed Ali, Mudikunnil, Thazhekode, Perinthalmanna,, Malappuram District, Pin: 679341. Notice issued under section 13(2). of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the Act) No. 1 of you as principal borrower and No. 2 as co-obligant availed a ODCC Limit of Rs.1,15,00,000/ (Rupees One crore fifteen lakhs only) on 18-12-2015 for carrying on business in the name and style of M/s. M.K. Bananas, at Thazhekode, Karinmallathani from The Federal Bank Limited, a company registered under the Companies Act having registered office at Alwaye (hereinafter referred to as the bank) through its branch at Karinkallathani after executing necessary security agreements / loan documents in favour of the Bank. Towards the security of the aforesaid credit facilities availed from the Bank, No.1 of you have created security interest in favour of the Bank by way of mortgage in respect of the following immovable properties. W.A. 1403/2020 7 ## **Description of Mortgaged Immovable Property** All the piece and parcel of the landed property measuring (1) 38.25 Cents in Sy. No.456 of Arukkuparamba Village, Perinthalmanna Taluk, Malappuram District, Kerala State within the registration Sub district of Melattur together with building existing and/or to be constructed and all other improvements thereon, bounded on East : Mohammed Ali, West: Kadeeja : North : 7 feet way, South “ Sachindananda Shenoy, (2) 42.25 Cents in Sy No. 457/3 of Arakkuparamba Village, Perintaimanna Taluk, Malappuram District, Kerala State within the registration Sub District of Melattur together with building existing and/or to be constructed and all other improvements thereon, bounded on East : Mohammed Ali, West: Ayisha, North : Panchayath Road, South : Thodu, (3) 3 Cents in Sy No. 457/3 of Arakkuparamba Village, PerintaImanna Taluk, Malappuram District, Kerala State within the registration Sub District of Melattur together with building existing and/or to be constructed and all other improvements thereon, bounded on East : Pathumma, West: Yoosuf, North Pathumma and Younus, South : Panchayath Road and (4) 2 Cents in Sy No. 200/12 of Thazhekode Village, Perintalmanna Taluk, Malappuram District, Kerala State within the registration Sub District of Perinthalmanna together with building existing and/or to be constructed and all other improvements thereon, bounded on East : Karayil Ali, West: P.T. Muhammed a/s. Bappu Haji, North : P.T. Muhammed a/s. Bappu Haji, South : Road The aforesaid mortgaged security properties are hereinafter referred to as 'secured assets'. You have defaulted repayment of the above-secured debt in violation of the agreed terms and the account became a Non Performing Asset as on 28-122017 as per the guideline of RBI. The undersigned being Authorised Officer of the Federal Bank Ltd. hereby informs you that a sum of Rs.1,19,65,488/- (Rupees One crore Nineteen lakhs sixty five thousand four hundred and eighty eight only) is due from you jointly and severally as on 31/01/2018 under your loan account No.16605500002827 with Karinkallathani branch of the Bank. As such, the bank as a secured creditor as envisaged under section 2(zd) of the Act hereby call upon you, as contemplated under Sec.13 (2) of the said Act, to pay the said amount with further interest @ 15.58% per annum with W.A. 1403/2020 8 monthly rests from 01-02-2018 till the date of payment and costs within 60 days from the date of this notice, failing which the Bank as a secured creditor shill be constrained, without prejudice to any of its other rights and remedies, to take, without any further notice, the following recourse measures prescribed under section 13(4) of the Act against you. 1. To take possession of the secured assets described above and transfer the said assets by way of lease, assignment or sale for realising the dues. 2. To take over the management of the secured assets and transfer them by way of lease, assignment or sale for realising the dues. 3. To appoint any person to manage the secured assets and the possession of which has been taken over by the bank. 4. To require at any time by notice in writing, to any person who has acquired any of the secured assets from you and from whom any money is due or may become due to you, to pay to the bank.” You are also put on notice that as per section 13(13) of the Act, you shall not after receipt of this notice transfer by way of sale, lease or otherwise any of the secured assets referred to in this notice in any manner whatsoever to the prejudice of the interest of the bank without its prior written consent. You are also put on notice that Section 13(6) of the Act empowers the bank to give a valid title to the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. Please be informed that in the event of your failure to discharge your liability in full within 60 days from the date of this notice and the bank initiates remedial actions under the provisions of the Act, you shall further be liable to pay to the bank all cost, charges and expenses incurred in that connection. Your attention is also invited to the provisions of section 13(8) of the Act, in respect of time available, to redeem the secured assets (security properties) In case the dues are not fully satisfied with the sale proceeds of the secured assets, the bank shall proceed against you for the recovery of the balance amount personally. This notice is issued without prejudice to the other rights and remedies available to the bank for recovering its dues. W.A. 1403/2020 9 Dated this the 07[th] February, 2018. For The Federal Bank Ltd., Authorised Officer under SARFAESI ACT” 10. Exhibit-P5 possession notice dated 12.02.2019 issued by the Authorised Officer of the Federal Bank to the appellant reads thus: “Ref: Date: 12/02/2019 **POSSESSION NOTICE** (For immovable property) Where as The undersigned being the Authorised Officer of the Federal Bank Ltd. under the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as Act) and in exercise of powers conferred under section 13(12) of the said Act read with rule 3 of the Security Interest (Enforcement) Rules, 2002(hereinafter referred to as Rules) issued a demand notice dated 07-02-2018 calling upon the borrowers **(1) Shri. Muhammed Ali S/o. Kunheen, Mudikunnil, Thazhekode, Perintalmanna, Malappuram District, Pin: 679341 and (2) Smt. Ayshakutty, W/o. Muhammed Ali, Mudikunnil, Thazhekode, Perintalmanna, Malappuram District, Pin: 679341** to repay the amount mentioned in the notice being **Rs. 1,19,65,488/- (Rupees One crore Nineteen lakhs sixty five thousand lour hundred and eighty eight only)** as on **31/01/2018** under your loan account No.I6605500002827 with **Karinkallathani** branch, together With further interest & costs within 60 days from the date of receipt of the said notice. The borrower having failed to repay the amount, notice is hereby given to the borrower and the public in general that the undersigned has taken possession of the property described herein below in exercise of powers conferred on him/her under section 13(4) of the said Act read with rule 8 of the said Rules on this 12[th] day of February 2019. The borrower/s' attention is invited to the provisions of Section 13(8) of the Act, in respect of time available, to redeem the secured assets (security properties). The borrower W.A. 1403/2020 10 in particular and public in general is hereby cautioned not to deal with the property and any dealings with the property will be subject to the charge of the Federal Bank Ltd. for an amount Rs.1,30,47,900.28/- (Rupees One crore thirty lakhs forty seven thousand nine hundred and paise twenty eight only) as on 31/01/2019 due under loan account No. I6605500002827 and subsequent interest from thereon. ## **Description of the Immovable Property** 1) All the piece and parcel of the landed property measuring 42.25 Cents in Sy No. 457/3 of Arakkuparamba Village, Perintalmanna Taluk, Malappuram District, Kerala State within the registration Sub District of Melattur together with building existing and/or to be constructed and all other improvements thereon,bounded on East : Mohammed Ali, West: Ayisha, North : Panchayath Road, South: Thodu. 2) All the piece and parcel of the landed property measuring 3 Cents in Sy No. 457/3 of Arukkuparamba Village, Perintalmanna Taluk, Malappuram District, Kerala State within the registration Sub District of Melattur together with building existing and/or to be constructed and all other improvements thereon,bounded on East : Pathumma, West: Yoosuf North : Pathumma and Younus, South : Panchayath Road. 3) All the piece and parcel of the landed property measuring 2 Cents in Sy No. 200/12 of Thazhekode Village, Perintalmanna Think, Malappuram District, Kerala State within the registration Sub District of Perinthalmanna together with building existing and/or to he constructed and all other improvements thereon, bounded on East Karayil Ali, West: P.T.Muhammed a/s. Bappu Haji, North: P.T. Muhammed. Bappu Haji, South : Road. For The Federal Bank Ltd., Authorised Officer under SARFAESI ACT” 11. The Hon'ble Supreme Court, on several occasions, held that writ petitions filed against the proceedings initiated under the SARFAESI Act, 2002 is not maintainable. On that aspect, reference can be made to a few decisions of the Hon'ble Apex Court. W.A. 1403/2020 11 (i) In **Authorised Officer, State Bank of Travancore and Another v. Mathew K.C.** reported in **(2018) 3 SCC 85** , at paragraphs 15 to 18, the Hon'ble Supreme Court held as under: “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 ex-parte 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 W.A. 1403/2020 12 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 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 W.A. 1403/2020 13 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.” (emphasis supplied) (ii) In **ICICI Bank Ltd. v. Umakanta Mohapatra and Others** , [2018 (13) SCALE 724], the Hon'ble Apex Court reaffirmed the 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.” 12. Though attention of this Court was invited to the decision of the Hon'ble Apex Court in _**Mathew K.C**_ (cited supra), wherein it is held that writ petition against proceedings under the SARFAESI Act, 2002 is not maintainable, still Kum. Anagha Lakshmy Raman, learned counsel for the appellant, argued on the merits of this case, and further contended that writ court has failed to advert to the merits of the case. 13. Though several grounds have been raised challenging the correctness of Exhibits-P4 and P5 notices dated 07.02.2018 and 12.02.2019 issued by the Authorised Officer of the respondent bank and that, learned single Judge has not considered the merits of the case, in W.A. 1403/2020 14 the light of the decisions of the Hon'ble Apex Court, we are of the view that when the challenge to the proceedings under the SARFAESI Act, 2002, by way of a writ petition itself is not maintainable under Article 226 of the Constitution of India, there is no need to advert to the merits of the case. We find that there is absolutely no error in the impugned judgment. Accordingly, this writ appeal is dismissed. Sd/- **S. MANIKUMAR CHIEF JUSTICE** Sd/- **SHAJI P. CHALY JUDGE** Eb ///TRUE COPY/// P. A. TO JUDGE