The South Indian Bank Ltd. v. Nikhil B.S and Babu K

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** # **`THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR`** ``` & ``` ``` THE HONOURABLE MR. JUSTICE SHAJI P.CHALY ``` ``` TUESDAY, THE 6[TH] DAY OF DECEMBER 2022 / 15TH AGRAHAYANA, 1944 WA NO. 1771 OF 2022 ``` ``` AGAINST THE ORDERS IN WP(C) 31793/2022 OF HIGH COURT OF ``` ``` KERALA DATED 9.11.2022, 31.10.2022 & 25.10.2022 ``` ## **`APPELLANTS/RESPONDENTS:`** ``` 1THE SOUTH INDIAN BANK LTD., KARTHIKAPPALLY BRANCH, ALAPPUZHA DISTRICT, REPRESENTED BY ITS MANAGER, PIN – 690516 2THE BRANCH MANAGER THE SOUTH INDIAN BANK LTD., KARTHIKAPPALLY BRANCH, ALAPPUZHA DISTRICT, PIN – 690516 3THE CHIEF MANAGER THE SOUTH INDIAN BANK LTD., REGIONAL OFFICE, THIRUVALLA, PATHANAMTHITTA DISTRICT, PIN – 689101 ``` ``` BY ADV SUNIL SHANKER ``` ## **`RESPONDENTS / PETITIONERS:`** ``` 1MR. NIKHIL B.S AGED 29 YEARS, S/O.BABU K, REVATHI HOUSE, HARIPAD P.O., ALAPPUZHA DISTRICT, PROPRIETOR, M/S.KULACHIRAYIL PLYWOOD CENTRE, WEST GATE, HARIPPAD, ALAPPUZHA, PIN – 690514 2MR. BABU K AGED 55 YEARS, S/O.KRISHNAN, REVATHI HOUSE, HARIPAD P.O., ALAPPUZHA DISTRICT, PIN – 690514 ``` ``` BY ADV P.M.ZIRAJ ``` ``` THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 06.12.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` _**W.A.1771/2022**_ 2 ## J U D G M E N T Dated this the 6[th] day of December, 2022 ## S. Manikumar, CJ. In W.P.(C). No.31793 of 2022, Exhibits P2, P5 and P6 are under challenge. Exhibit P2 is a notice dated 22.6.2022 issued by the Branch Manager, South Indian Bank Ltd., Karthikappally Branch/second respondent, under Section 13(2) of SARFAESI Act. Exhibit P5 is the possession notice dated 1.9.2022 issued by the second respondent under Section 13(8) of the Act. Exhibit P6 is the notice dated 2.9.2022 issued by the second respondent. ## 2. On 1.12.20 22, we passed the following order: - “Before the writ court, respondents/writ petitioners sought for the following reliefs: 1. Issue a writ of certiorari or any other appropriate writ, direction or order by calling for the records leading to the issuance of Exhibit P2, P5 and P6 notices and set aside the same since the same are illegal and against the provisions of law. 2. Issue a writ of mandamus or any other appropriate writ, order or direction to the respondents not to proceed against the petitioners under the provisions of SARFAESI Act, since the petitioners already expressed their willingness to settle their entire loan amount and offered to clear off the dues. _**W.A.1771/2022**_ 3 3. Declare that the petitioners are not liable to pay any interest towards the loan amount after 18.06.2018, the date on which the petitioners expressed their willingness to clear off the loan amount and offered payment. ## 2. Short facts leading to the filing of the appeal are as follows: The 1[st] respondent had availed a cash credit limit of Rs.40 Lakhs from the Karthikapally Branch of the first appellant Bank for working capital requirements of his proprietorship business, M/s. Kulachirayil Plywood Centre. Respondent No.2, father of the first respondent, is a guarantor to the said facility. The said facility is also secured by the equitable mortgage of property admeasuring 7.90 Ares situated in old Sy No. H1633/1, H1634, H1635, H1620A and Re.Sy.No.238/12, Block No.8 with building therein, Haripad Village, Karthikapally Taluk belonging to the 2[nd] respondent herein. Due to default in repaying the same, the appellant Bank had initiated recovery steps and instituted O.A No.233 of 2020 before the Debt Recovery Tribunal-2, Ernakulam for recovery of amounts. 3. Respondent No.2 had also availed a cash credit limit of Rs.125 Lakhs for working capital requirements of his proprietorship business, M/s. Kulachirayil Glass House. The said facility was also secured by the personal guarantee of Mrs. Suseela D and equitable mortgage of property belonging to the aforesaid Mrs. Suseela D. Due to default in repaying the loan amount, the appellant Bank had initiated recovery steps and instituted O.A No.245 of 2020 before the Debt Recovery Tribunal-2, Ernakulam for recovery of amounts. 4. It is also submitted that the first appellant Bank had _**W.A.1771/2022**_ 4 also instituted OA No.665 of 2020 before the Debt Recovery Tribunal-2, Ernakulam for recovery of amounts misappropriated by the then Manager- Mr. Brijesh in collusion with third parties, including the respondents herein, who are the defendants in the said OA also. Respondents had filed O.S No.48 of 2021, before Sub Court, Mavelikkara as a counter blast to the above OA filed by the first appellant Bank. 5. It is further submitted that in respect of the cash credit facility availed by the first respondent herein (M/s. Kulachirayil Plywood Centre), the appellants initiated proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 as per Exhibit P2 demand notice dated 22.06.2022. Respondents had filed Exhibit P3 objection dated 2.07.2022. Thereafter, the Branch Manager, South Indian Bank Limited, Karthikappally Branch, Alappuzha District, second appellant, has issued Exhibit P5 possession notice dated 01.0.2022 and also Exhibit P6 notice dated 02.0.2022 intimating the mortgagor of his right to redeem the property mortgaged. Hence, the writ petition. 6. Materials on record discloses that considering the averments and the prayers sought for, writ court passed an interim order on 25.10.2022 and the same has been periodically extended. Interim order dated 25.10.2011 passed by the writ court reads thus: “The learned counsel for the petitioners state that the proceedings now initiated by the Bank relate to a loan availed by the 1st petitioner, which is secured by a mortgage created by the 2nd petitioner, the father of the 1st petitioner. It is submitted that the 1st petitioner has always been ready and willing to clear the liability in respect of the loan availed by him. _**W.A.1771/2022**_ 5 2. The learned counsel appearing for the respondent Bank states that the petitioners, as a condition for clearing the liability, had insisted that mortgage created by the 2nd petitioner must also be released and the title deeds pertaining to the property in question must be returned to them. It is submitted that this is not possible in law and that the 2[nd] petitioner has other liabilities with the Bank, for which the property, which is mortgaged for securing the loan availed by the 1[st] petitioner is also is also liable to be proceeded against. 3. The learned counsel appearing for the petitioners would state that the 1st petitioner is not insisting that the documents of title deposited by the 2[nd] petitioner should be returned to the 1[st] petitioner as when the loan account is closed. It is submitted that if the property of the 2[nd] petitioner is liable to be proceeded against by the Bank, the 1[st] petitioner has no objection in such proceedings being continued. 4. The learned counsel for the petitioners state that if the 1st petitioner makes some deposit to show bonafides, the Bank can consider the amount for which the loan account of the 1 st petitioner can be closed. 5. Taking note of the submissions as above, there will be a direction to the 2nd respondent or any other competent authority of the Bank to inform to this Court the amount for which the loan account of the 1st petitioner can be closed, provided the 1st petitioner remits a sum of Rs.10 lakhs towards the loan liability before 05.00PM tomorrow (26.10.2022). List on 31.10.2022. If the 1st petitioner makes a payment of the sum of Rs.10 lakhs by 05.00PM tomorrow (26.10.2022), further proceedings under the provisions of the SARFAESI Act in respect of the loan availed by the 1st petitioner shall be kept in abeyance till 31.10.2022.” 7. Placing reliance upon the decisions of the Hon’ble Supreme Court in _**Phoenix Arc Private Limited vs Vishwa Bharati Vidya Mandir**_ (Civil Appeal Nos. 257-259 of 2022 dated 12.01.2022], _**Y. Sleebachan v. State of Kerala and others**_ [2020 (4) KLT Online 1024], _**Federal Bank v Sagar Thomas**_ (2003) 10 SCC 733), _**United Bank of India v. Satyavati Tandon and Others**_ [AIR 2010 SC 3413], and _**Authorised Officer, State Bank of Tranvancore v. K.C.Mathew**_ [(2018) 3 SCC 85], learned counsel appearing _**W.A.1771/2022**_ 6 for the appellant Bank, Sri. Sunil Shanker, submitted that the writ court ought not to have entertained the writ petition and granted the interim orders. He further submitted that as on today, the outstanding amount due and payable by the respondents/writ petitioners is Rs.65,63,000/-. 8. However, Mr. P.M. Ziraj, learned counsel for the respondents/writ petitioners submitted that bank officials have misappropriated money from the account of the respondents, for which a criminal case has been filed and final report filed. He further submitted that if a ‘One Time Settlement scheme’ is provided, the respondents would discharge the debt. 9. Responding to the same, learned counsel for the appellant Bank submitted that no such scheme is in force. He has also submitted that the subject matter of mortgage is not a matter raised before the criminal court and that there are three Original Applications pending before the Tribunal for recovery of the amounts. 10. Learned counsel for the respondents states that to pay off the entire amount due along with interest, 20 equal monthly instalments are required. On that aspect, learned counsel for the appellant Bank seeks time to get instructions on that aspect. Post the matter on 06.12.2022.” 2. On this day, when the matter came up for hearing, on _**W.A.1771/2022**_ 7 instructions from the appellant Bank, Mr.Sunil Shankar, learned counsel for the appellant submitted that loan account was declared as NPA in the year 2018 and that for recovery, SARFAESI proceedings have been initiated before the Debt Recovery Tribunal. He reiterated that three Original Applications are pending before the Tribunal, for recovery of amounts. He further submitted that on the aspect of misappropriation, said to have been committed in the bank, another borrower has also raised a dispute in O.P. (DRT) No.370/2022 before the Tribunal and that the said contention has not been accepted. 3. Being aggrieved, the matter was taken up to Hon’ble Supreme Court in SLP. No.20871/2022, however, the Hon’ble Apex Court sustained the same. 4. In the light of the above it is submitted that the Bank has no other alternative than to address the maintainability of the writ petition. The judgments relied on by learned counsel for the appellant categorically lay down the law that writ against proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), initiated by the Bank, is not maintainable. _**W.A.1771/2022**_ 8 ## 5. Apart from the decisions cited supra, in **Varimadugu Obi** **Reddy v. B. Sreenivasulu and Ors.** decided on 16.11.2022 reported in MANU/SC/1495/2022, the Hon’ble Supreme Court at paragraph Nos. 32 and 34 reiterated the legal position. “32. The order of the Tribunal dated 1[st] August, 2019 was an appealable order Under Section 18 of the SARFAESI Act, 2002 and in the ordinary course of business, the borrowers/person aggrieved was supposed to avail the statutory remedy of appeal which the law provides Under Section 18 of the SARFAESI Act, 2002 in the absence of efficacious alternative remedy being availed, there was no reasonable justification tendered by the Respondent borrowers in approaching the High Court and filing writ application assailing order of the Tribunal dated 1[st] August, 2019 under its jurisdiction Under Article 226 of the Constitution without exhausting the statutory right of appeal available at its command. ……….. ……….. ……… 34. In the instant case, although the Respondent borrowers initially approached the Debts Recovery Tribunal by filing an application Under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable Under Section 18 of the Act subject to the compliance of condition of pre-deposit and without exhausting the statutory remedy of appeal, the Respondent borrowers approached the High Court by filing the writ application Under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction Under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre-deposit contemplated under 2nd proviso to Section 18 of the Act 2002.” _**W.A.1771/2022**_ 9 6. Following the decisions of the Hon’ble Supreme Court, we have no hesitation to hold that writ court ought not have entertained the challenge to proceedings initiated by the Bank. For the reasons stated supra, the impugned order is set aside. Writ appeal is allowed. Sd/S. Manikumar, Chief Justice Sd/Shaji P. Chaly, Judge sou.