M/S. Perfect Binds vs Union Of India
2023 Latest Caselaw 4898 AP

                          HIGH COURT OF ANDHRA PRADESH


MAIN CASE No: W.P.No.26055 of 2023

                       PROCEEDING SHEET

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        DATE                                 ORDER                                    E
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                                                                                    NOTE.

03.   11.10.2023   RC,J
                                W.P.No.26055 of 2023


                          Post on 18.10.2023.
                                                                        ________
                                                                           RC, J
                                  I.A.N0.01/2023
                          Heard at length.
                          Learned counsel for the petitioner submitted that,
                   the respondent bank has issued auction notification for

hypothecated machineries, without following the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and further submitted that, unless the liability is adjudicated before the appropriate forum, the authorities cannot invoke the hypothecation agreement and cannot auction the movable's properties. He further submitted that, the respondent bank has issued notice under SARFAESI Act and without proceeding under the said Act, now the respondent authorities are contemplating to auction the movable properties under the guise of hypothecation agreement. In support of his contentions, learned counsel for the petitioner relied on judgment of High Court of Patna in Sujay Kumar Vs UCO Bank & others and contended that, the facts and circumstances of the said decision are almost identical to the facts of the present case. Though, the said decision is not a binding precedent and however has has persuasive value and has drawn the attention of this Court to the facts and findings of the said case. In the said decision, the Patna High Court has duly taken into consideration the pronouncement of Apex court as well as Gauhati High Court. He further submitted that, RBI guidelines are very clear in this regard and the said guidelines are placed on record and has drawn the attention of this Court. In the said guidelines RBI has categorically stated that, the Apex Court has observed that, taking possession of property, mortgaged or hypothecated to banks, are governed by rule of law in the country and the recovery of loans or seizure of vehicles could be done only through legal means and SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002 framed thereunder have laid down well defined procedures not only for enforcing security interest bu t also for auctioning the movable and immovable property after enforcing the security interest.

In the present case, contrary to their own guidelines and law laid down by the Hon'ble Patna High Court, the authorities are proceeding with the auction. He further submitted that, the auction is scheduled to be held tomorrow(12.10.2023) at 11:00 am and if the authorities are allowed to proceed with the auction, the rights of the petitioner would be affected and third party interest would be created and the same would complicate the issue. As such prayed to pass appropriate orders in that regard.

On the other hand, learned Standing counsel submitted that, a detailed counter has been filed denying the allegations inter alia contending that, the banks are the trustees of the public money, and having entered into hypothecated agreement, the petitioner cannot object recovery of the said amount. He further submitted that, the bank has invoked the SARFAESI Act, 2002 only with regard immovable properties but not with regard to movable properties. In these circumstances, if the said amount was not recovered, by conducting auction, it would cause loss not only to the bank but also affects the public money and sought time to argue the matter in detail.

Perused the record.

Prima facie, a point made is out for consideration in this writ petition. No reasons are forthcoming as to why, the bank did not proceed further, pursuant to the notice issued under SARFAESI ACT, 2002. It is very surprising to note as to why the bank has invoked SARFAESI Act only with regard to immovable properties but not with regard to movable properties. Further, without adjudicating the liability of the petitioner, auctioning the movable properties is unsustainable. However a detailed hearing is required in this matter. There is some force in the contentions of the contentions of the learned counsel for the petitioner that, if the respondent bank proceeds with the auction and conclude the auction, the rights of the petitioner as well as purpose of filing the writ petition would be defeated, as such, this Court is inclined to pass the following order:

The respondent authorities are permitted to proceed with the auction dated 12.10.2023, but however directed not to finalize the same, pending further orders.

________ RC, J Note:C.C today BRS