Andhra Pradesh High Court - Amravati
M/S. Sree Geethanjali Constructions vs Union Bank Of India on 12 September, 2024
Author: R. Raghunandan Rao
Bench: R. Raghunandan Rao
IN THE HIGH COURT OF Bench
APHC010394632024 Sr.No:-9
ANDHRA PRADESH [3446]
AT AMARAVATI
WRIT PETITION NO: 20029 of
2024
M/s. Sree Geethanjali ...Petitioners
Constructions and others
Vs.
Union Bank of India and another ...Respondents
**********
Sri Ch. Siva Reddy, Advocate for the petitioners.
Sri V. Raghu, Advocate for the respondents.
CORAM : THE CHIEF JUSTICE DHIRAJ SINGH THAKUR
SRI JUSTICE R. RAGHUNANDAN RAO
DATE : 12th September 2024
PC:
Petitioner Nos.1 and 3 are the principal borrowers whereas petitioner
Nos.2 and 4 are the guarantors in regard to the loans which were obtained by
petitioner Nos.1 and 3 from the respondent Union Bank of India. On account
of the failure on the part of the petitioners to repay the loans in accordance
with the terms and conditions settled, the accounts of the petitioners were
declared as Non-performing Assets (N.P.A.). Proceedings under the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (for short, "SARFAESI Act") were initiated for
taking possession of the properties, which were secured assets with the
respondent bank, and also sale and auction of the said properties. Based
upon the proposal for One Time Settlement (for short, "O.T.S."), it appears
that the Union Bank of India, vide communication dated 06.01.2024, laid down
the terms and conditions of the said O.T.S.
2. According to the said terms and conditions, the petitioners had to pay
upfront amount of Rs.1.92 crores, which was already available with the bank
and had only to be adjusted. According to condition (B) of the settlement, an
amount of Rs.3.00 crores was to be deposited within 20 days of the date of
the conveying of the approval to the borrower. This condition is also stated to
have been complied with. According to condition (C) of the settlement, the
balance amount had to be paid within three months from the date of
conveying the approval to the borrower. The balance amount was
approximately Rs.15.18 crores. It needs to be seen that according to the
other conditions of the O.T.S., the balance amount, which was required to be
paid within three months, had to be arranged by sale of properties which were
mortgaged with the bank.
3. It is the admitted case of the parties that two of the such mortgaged
properties were released in favour of the petitioners which were sold and the
amount was deposited with the bank. The petitioners claim that contrary to
the terms and conditions agreed between the parties and recorded in the
O.T.S. dated 06.01.2024, the respondent bank, without any prior notice to the
petitioners, cancelled the agreed terms by virtue of communication dated
03.07.2024 by which time, an amount of Rs.4.92 crores had already been
deposited with the bank.
4. Learned counsel for the petitioners would submit that there was no
reason for the respondent bank to go back on the O.T.S. inasmuch as there
was no violation of the terms and conditions recorded therein. It is stated that
the O.T.S., in fact, was an open ended agreement inasmuch as clause (3) of
the said agreement also envisage that for any delayed payment beyond three
months from the date of conveying of sanction to the borrower, the borrower
has to pay the remaining dues along with interest leviable at the rate of one
year MCLR (simple) on diminishing balances till the date of final payment. It
was urged that since the terms of the O.T.S. also envisage delayed payment,
no cancellation of the O.T.S. was justified and that too, without hearing the
petitioners. What was urged by learned counsel was that once the accounts
of the petitioners were declared as N.P.A and proceedings initiated under the
SARFAESI Act, yet, on account of the fact that the parties had entered into a
O.T.S., after the declaration of the accounts as N.P.A., the same would attract
the principles of novation of contract and therefore, the bank was obliged to
adopt the procedure, yet again and first, had to declare the accounts of the
petitioners as N.P.A. and then, proceed afresh by invoking the provisions of
the SARFAESI Act.
5. Learned counsel for the respondents, on the other hand, states and
relies upon the judgments of the Apex Court, which have clearly held that the
Constitutional Courts, exercising powers under Article 226 of the Constitution
of India, should not interfere in matters which are otherwise governed under
the provisions of the SARFAESI Act inasmuch as there is an equal efficacious
alternate remedy and Forum provided under the said Act.
6. Reference in this regard can be made to the case of United Bank of
India vs. Satyawati Tondon1 wherein the Apex Court held as under:-
"55. It is a matter of serious concern that despite repeated
pronouncement of this Court, the High Courts continue to ignore the
availability of statutory remedies under the DRT Act and the SARFAESI
Act and exercise jurisdiction under Article 226 for passing orders which
have serious adverse impact on the right of banks and other financial
institutions to recover their dues. We hope and trust that in future the
High Courts will exercise their discretion in such matters with greater
caution, care and circumspection."
7. Similar view is expressed by the Apex Court in the case of Celir LLP
vs. Bafna Motors (Mumbai) (P) Ltd., 2 wherein the Apex Court held as
under:-
"101. More than a decade back, this Court had expressed serious
concern despite its repeated pronouncements in regard to the High
Courts ignoring the availability of statutory remedies under the RDBFI
Act and the SARFAESI Act and exercise of jurisdiction under Article 226
of the Constitution. Even after, the decision of this Court in Satyawati
Tondon, it appears that the High Courts have continued to exercise its
writ jurisdiction under Article 226 ignoring the statutory remedies under
the RDBFI Act and the SARFAESI Act."
[(2010)8 SCC 110 : 2010 INSC 428]
(2024) 2 SCC 1
8. Considering the ratio of the judgments laid down in the aforementioned
cases, we relegate the petitioners to avail the appropriate remedies which are
available under law. However, considering the nature of the controversy
including the issue with regard to novation of contract, as has been urged by
the learned counsel for the petitioners, we deem it appropriate that the auction
proceedings be deferred for a period of four (4) weeks with a view to enable
the appropriate Forum to go into the issues which were agitated at some
length before us.
9. Accordingly, the Writ Petition is disposed of. No order as to costs.
Pending miscellaneous applications, if any, shall stand closed.
DHIRAJ SINGH THAKUR, CJ
R. RAGHUNANDAN RAO, J
AMD
Note:-
Furnish C.C. today.
B/O
AMD
HON'BLE MR. JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE
&
HON'BLE MR. JUSTICE R. RAGHUNANDAN RAO
WRIT PETITION NO: 20029 of 2024
Dt: 12.09.2024
AMD
