N. Sheela v. UCO Bank

**THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU THURSDAY, THE 19TH DAY OF JULY 2018 / 28TH ASHADHA, 1940** **PETITIONER:-----------** **N.SHEELA, AGED 48 YEARS, W/O. SREEKUMAR, PROPRIETOR, M/S. SWATHY EXPORTS, RESIDING AT "PULARI", MUNDAKKAL WEST, KOLLAM - 691 001. BY ADV.SRI.HARISH GOPINATH** **RESPONDENT:-----------** **UCO BANK, KOLLAM BRANCH, KHAISE BUILDING, BEACH ROAD, KOLLAM - 691 001. REPRESENTED BY ITS SENIOR MANAGER.** **BY ADV.SRI.DEEPAK JOY K., SC, UCO BANK** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19-07-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No. 18646 of 2018 (E)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS** ## **---------------------** **EXHIBIT P1 TRUE COPY OF THE NOTICE DATED 05.03.2018 ISSUED BY THE RESPONDENT. EXHIBIT P2 TRUE COPY OF THE PASS BOOK MAINTAINED IN THE CAR LOAN ACCOUNT NO. 00710610031063. EXHIBIT P3 TRUE COPY OF THE LETTER DATED 27.03.2018 ISSUED BY THE PETITIONER TO THE RESPONDENT. EXHIBIT P4 TRUE COPY OF THE ORDER IN O.A.119 OF 2018 BEFORE THE DEBT RECOVERY TRIBUNAL, ERNAKULAM DATED 18.04.2018.** |**RESPONDENT'S**|**EXHIBITS**| |---|---| |**---------------------**|| |**EXHIBIT R(A)**|**TRUE COPY OF LOAN AGREEMENT DATED 8.12.2015 EXECUTED BY**| ||**THE PETITIONER AND RESPONDENT**| |**EXHIBIT R(B)**|**TRUE COPY OF INTERIM REPORT FILED BY THE ADVOCATE**| ||**COMMISSIONER IN I.A.NO.740/2018 IN O.A.NO.119/2018 DATED**| ||**17.4.2018**| |**EXHIBIT R(C)**|**TRUE COPY OF THE VEHICLE SALE AGREEMENT DATED 9.3.2018**| ||**EXECUTED BY THE PETITIONER AND OTHERS**| |**EXHIBIT R(D)**|**TRUE COPY OF INJUNCTION APPLICATION FILED BY THE**| ||**RESPONDENT BANK IN O.A.NO.119/2018 BEFORE THE DEBTS**| ||**RECOVERY TRIBUNAL, ERNAKULAM**| |**EXHIBIT R(E)**|**TRUE COPY OF PETITION FOR SURRENDERING OF THE VEHICLE IN**| ||**I.A.NO.919/2018 BEFORE THE DEBT RECOVERY TRIBUNAL,**| ||**ERNAKULAM.**| **//True Copy//** **P.A. To Judge** **Bb** ## **DAMA SESHADRI NAIDU, J.** -------------------------------------------------------- **W.P.(C). No.18646 of 2018** -------------------------------------------------------Dated this the 19[th] day July 2018 ## **JUDGMENT** ## **Introduction:** A borrower has more than one loan. She clears one and claims back the hypothecated property. The Bank refuses. It wants to retain it for other loans. The borrower pleads sufficiency of security for the other loans, but fortuitously she gets an order—in the Bank’s application—for the return of the property. Aggrieved, the Bank appeals against the Tribunal’s order. Yet, before the appellate forum could consider the issue, the borrower files a writ petition and insists on the compliance of the Tribunal’s order. Should this Court compel compliance—through judicial review? ## **The Debt & The Dispute:** 2. The petitioner is a proprietor of an export concern dealing in cashew nuts. The proprietary concern processes the imported cashew kernels and exports them. It has been in business since 1998. The petitioner obtained loans from the respondent Bank: (i) a cash credit loan, (ii) a term WPC No.18646 of 2018 2 loan, and (iii) a vehicle loan. As on 30.1.2018, the total outstanding amount stood at Rs.9,43,08567/-. Because the petitioner defaulted, the Bank began recovery proceedings. It filed an O.A. 3. To be specific, since the petitioner borrowed around Rs.82 lakh for purchasing a car, on her default, the Bank filed O.A.No.119 of 2018. The Bank sought the Tribunal's leave to sell the hypothecated car and the immovable properties the petitioner offered as security for the loan. 4. In the OA, and also here, the petitioner took a specific plea: even before its filing the O.A., the Bank orally permitted her, though after issuing notice under Section 13(2) of the SARFAESI Act, to sell away the car and clear the car loan with that money. The petitioner did it. Besides remitting the sale proceeds of the car, the petitioner paid the balance amount and cleared the loan. Then, through Ext.P3, she requested the Bank to issue a No-Objection Certificate (NOC), so she could transfer the car to the purchaser. The Bank refused; then, it filed the O.A. ## **The Promise:** 5. Coming back to the O.A., the Bank filed I.A.No.740 of 2018 to have the car attached and possessed. The Tribunal allowed the IA., and appointed an Advocate Commissioner to take possession. This is evident from the docket now produced by the petitioner's counsel. On 7.4.2018, the Commissioner went to take possession, but returned empty-handed. For the petitioner told him that the vehicle, WPC No.18646 of 2018 3 Volvo XC90, went on a trip to Chennai. So he filed Ext.R1(b) report before the Tribunal. The Bank filed two more interlocutory applications: I.A.Nos.918 of 2018 and 919 of 2018. The first is to injunct the petitioner from transferring the vehicle, and the next to direct the petitioner to surrender the vehicle. Besides these two IAs by the Bank; the petitioner filed I.A.No.951/2018. She wanted an NOC from the Bank because she cleared the car loan. 6. The Bank, as I gather, insists that it does not let go of the vehicle; it exercises its lien over it. The petitioner feels let down because the Bank, according to her, went back on its promise: that it would release the vehicle from encumbrance, once the petitioner cleared the loan. There are no proceedings for the petitioner to show that the Bank promised and reneged. ## **The IAs:** 7. As to the I.A.s, the petitioner's I.A.No.951 of 2018 for NOC is still pending. The Bank’s I.A.s, however, have been dismissed through the Ext.P4 common order. The Ext.P4 order, passed at the Bank's instance, contains a specific direction against it. The order mandates that the Bank should “release the charge over the vehicle and issue No due certificate in the vehicle loan to the petitioner for having it entered in the RC book.” 8. The petitioner filed this writ petition contending that the Bank has not so far complied with the Tribunal’s direction in Ext.P4. She has also contended that, WPC No.18646 of 2018 4 to have the Ext.P4 enforced, she has no other efficacious remedy than this writ petition. In the meanwhile, the Bank filed two Miscellaneous Appeals before the learned Debt Recovery Appellate Tribunal, Chennai. ## **Submissions:** ## **Petitioner’s:** 9. Sri Harish Gopinath, the petitioner’s counsel, contends that the petitioner waited long enough before her filing the writ petition. The Bank, according to him, neither complied with the Ext.P4 nor obtained a stay from the DRAT. Drawing my attention to Section 20 of the DRT Act, he points out that an aggrieved person can file an appeal before DRAT in 30 days. He contends that the Bank, as a matter of ritual, filed the appeals but never cared to bring them up for hearing. Instead, it has been dragging the proceedings here, in the name of pending appeals. He wanted the Court to consider paras 9 and 10 in the Ext.P4. According to him, the Tribunal considered the Bank’s defence and finally ordered it to give an NOC. The Ext.P4 is a well-considered order. 10. The car loan cleared, the petitioner still owes about Rs.9 Crore to the Bank. The secured assets, even by the Bank’s estimate, are worth more than Rs.13 cores. And this estimate found favour with the Bank. So the Bank cannot indiscriminately invoke, Sri Gopinath asserts, its power of general lien. For this, he WPC No.18646 of 2018 5 relies on the decision in _Santhamma v. Authorised Officer, State Bank of India._ _**[(]**_[1] _**[)]**_ 11. So long as a binding judicial directive stands, the person who suffered the order, Sri Gopinath submits, cannot take shelter under pending appeal proceedings. For mere filing of an appeal does not arrest the operation of an order. The rule of law enjoins this Court, he continues, to direct the Bank to comply with the Ext.P4. He reminded that this Court had given the Bank a long rope—many adjournments—to enable it to press its claim before the DAT, but the Bank failed. 12. On the powers of the Debt Recovery Tribunal, Sri Gopinath contends that it does not face the procedural constraints under CPC; it has to follow only the principles of natural justice. The Tribunal can regulate its own procedure, subject to the other provisions of the Act. In the end, the learned counsel has urged this Court to allow the writ petition. ## **Respondent Bank’s:** 13. Sri Deepak Joy, the Bank’s Standing Counsel, has submitted that the Bank has never promised the petitioner it would release the vehicle from encumbrance, even if she cleared the car loan. According to him, the outstanding debt is huge, and the Bank deals with public money. So it must take all precautions, and every step, to ensure that it would not let go of any other security with easy salability. The Bank's exercising the general lean, he stresses, cannot be > 1 **[()]** 2011 (1) KLT SN 22 WPC No.18646 of 2018 6 faulted. 14. Concurring with the submissions made by the petitioner's counsel, he too submits that the Tribunal has vast powers in designing its own procedure. Then, he draws my attention to Ext.P4 to contend that, first, it was in the Bank’s applications. Second, the order the Bank invited cannot contain a mandatory direction against it: a relief can be granted or refused, but nothing beyond. Put it differently, the Tribunal, he contends, either could have allowed the I.A.s or dismissed them. The order should not have traveled beyond that; that is, issuing a mandatory direction against the very applicant. 15. Sri Joy Counsel has also contended that the Bank’s O.A., seeking attachment and possession is still pending. The Tribunal at this stage dealt only with interlocutory applications. To elaborate, Sri Joy has submitted that once the Bank issues the NOC, there remains nothing for it to prosecute the O.A. Through an interim order, he asserts, no final relief can be granted, nor can the original application be stultified. For this, he relies on _Ayan Chatterjee v. Future Technology Foundation Inc._ _**[(]**_[2] _**[)]**_ 16. Sri Joy also submits that the Bank filed the statutory appeal on time and served the notice on the petitioner, the caveator. According to him, the Bank cannot take the blame if the Appellate Tribunal could not take up the matter for whatever > 2 **[()]** 2017 (2) KLJ 495 WPC No.18646 of 2018 7 reason, including the docket pressure. He has also reminded the Court that the petitioner's I.A.No.951 of 2018 for a direction to the Bank to give the NOC is still pending. If the petitioner feels any urgency and finds fault with the Bank's action, it could as well seek that IA’s disposal, expeditiously. Therefore, he concludes that the writ petition cannot be maintained. 17. Heard Sri Harish Gopinath, the learned counsel for the petitioner and Sri Sri Deepak Joy, the learned Standing Counsel for the respondent Bank, besides perusing the record. ## **The Issue:** 18. Should this Court issue _mandamus_ or a direction to enforce the Ext.P4 order (a portion of it) while the statutory appeals are pending before the DRAT? **Discussion:** 19. To begin with, the Tribunal is “not bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice.” Subject to the other provisions of the Act and of any rules, the Tribunal will have powers to regulate its own procedure. In the IAs the Bank filed, the Tribunal passed the Ext.P4 order. The IAs were for attachment and possession of the car. True, the car has no encumbrances. Still, the Bank desires to exercise its general lien, under Section 171 of the Contract Act. 20. Put differently, the IAs was limited: attachment and possession. First, on WPC No.18646 of 2018 8 03.04.2018, the Tribunal allowed the attachment petition (IA No.740 of 2018) and appointed an advocate-commissioner “to take custody of the vehicle.” The commissioner went to attach the car but could not, for he found no car. The petitioner, it seems, informed him that the car had “gone to Chennai for a trip.” On 13.04.2018, the Tribunal directed the commissioner to file an interim report. It also directed him “not to take possession till further orders” from the Tribunal. On 25.04.2018, the Bank filed two IAs: IA No.918 of 2018 and IA No.919 of 2018— one to injunct the petitioner from selling the car; the other to direct the petitioner to surrender it. The petitioner filed I.A. No.951 of 2018. She wanted the Tribunal to direct the Bank to give the NOC. 21. The Bank now pleads that it did not know of the petitioner’s selling the car. It points to the commissioner’s report before the Tribunal—that the car has “gone to Chennai for a trip”—presumably the petitioner’s information to the commissioner. On 18.05.2018, the Tribunal dismissed the Bank’s both IAs, through the Ext.P4. The petitioner’s remained pending. True, the Ext P4 contained this direction: “Applicant bank is hereby directed to release the charge over the vehicle and issue No due certificate in the vehicle loan to the defendant for entering the same in the RC book.” 22. Any observations now will render the pending MAs before the DRAT otiose and prejudice the cause of either party. So I do not rule on the correctness of WPC No.18646 of 2018 9 the Ext.P4. Yet, for adjudicating this writ petition, I may observe that, first, by the time the Ext.P4 was passed, the order of attachment passed on 03.04.2018 in I.A. No.740 of 2018 remained undisturbed; it was not recalled. Second, the Bank’s IAs does not go beyond injuncting the petitioner from selling the car and letting the Bank take possession of it. Three, the Bank’s having sufficient security and, so, letting go of the car fall beyond these two IAs. So the ration of _Santhamma_ does not apply—at this stage of the proceedings. 23. To quench the precedential curiosity, I will examine _Santhamma_ . The petitioner cleared the original liability “substantially” and “brought down” the debt to nearly 50%. And the “bank was very much satisfied with the worth the property originally offered as security.” Then, _Santhamma_ directs: In the said circumstances, the respondents _will consider the adequacy/inadequacy of the extent of property retained at the hands of Bank by way of security and if it is found that the property offered as security at the time of availing the first two loans in the year, 2005 is sufficient to safe guard the interests of the Bank regarding the remaining liability,_ the title deeds surrendered regarding the 3rd loan of Rs. 18.70 lakhs extended on 23/03/07, (which stands already closed), shall be returned to the petitioner, to enable the petitioner to discover the ways to pursue the business and to generate funds to meet the obligations. The proceedings shall be considered and finalized by the respondents expeditiously, at any rate, within 'one month' from receipt of a copy of this judgment. (italics supplied) 24. This Court has never disregarded the banker’s concern; instead, it observed caution. It only required the bank to consider the adequacy of the security offered. Then it asked the bank to decide within one month. There is, evidently, no peremptory judicial fiat that the bank should act in a particular manner. WPC No.18646 of 2018 10 ## _**Prima Facie**_ **Findings & Finality:** 25. The effect of interlocutory observations on the final proceedings finds well explained in many judgments. A case in point is _Ayan Chatterjee._ The Trial Court, while disposing of the injunction application, directed the parties to maintain status-quo over the suit property. It _prima facie_ fond that the petitioner possessed the suit property; it also observed that the second defendant could not prove his possession over the property. This observation assailed, the Supreme Court clarified that the findings recorded in interlocutory proceedings, say injunction proceedings, are only _prima facie_ observations. Their effect remains confined only to the interlocutory proceedings. Those findings neither affect nor prejudice the suit adjudication on merits. ## **The Tribunal’s Procedural Bounds:** 26. Section 22 of the Act declares that “the Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Tribunal and the Appellate Tribunal shall have the powers to regulate their own procedure including the places at which they shall have their sittings.” However, I may also add that Section 22 does not obliterate all and sundry procedural safeguards. 27. At any rate, any more observations, as I have observed, will come in the WPC No.18646 of 2018 11 way the DRAT’s adjudicatory path. So I refrain from further comment. It is for the DRAT to examine all the issues that the Ext.P4 throws open. ## **Judicial Review:** 28. It admits of no ambiguity that the judicial review under Article 226 is discretionary. And it is not for mere asking. Even if the petitioner establishes its claim, the Court may decline to exercise its discretion if such declining well serves the cause of justice. Merely delay before an appellate forum, by itself, cannot be a compelling reason for this Court to issue _mandamus_ or a direction rendering the situation irreversible. The public interest is the paramount law. In _City and Industrial Development Corporation v. Dosu Aardeshir Bhiwandiwala,_ _**[(]**_[3] _**[)]**_ the Supreme Court has observed, while dwelling upon jurisdiction under Article 226 of the Constitution, that the Court is duty bound to whether: (a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved; - (b) the petition reveals all material facts; (c) the petitioner has any alternative or effective remedy for resolving the dispute; (d) the person invoking the jurisdiction is guilty of unexplained delay and laches; - (e) ex facie barred by any laws of limitation; - (f) grant of relief is against public policy or barred by any valid law; and host of other factors 29. So I decline to grant the relief the petitioner has prayed for. If I may > 3 **[()]** (2009) 1 SCC 168 WPC No.18646 of 2018 12 observe, the parties can agitate their claims and advance their contentions before the learned DRAT, Chennai, where admittedly the Miscellaneous Appeals are pending. I close this writ petition. No order on costs. Sd/- **Dama Seshadri Naidu Judge** Bb/ _[True copy] P.A to Judge_