Kerala High Court
Jasmin K vs State Bank Of India on 11 April, 2024
"C.R."
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
THURSDAY, THE 11TH DAY OF APRIL 2024 / 22ND CHAITHRA, 1946
WP(C) NO. 11797 OF 2018
PETITIONER/S:
JASMIN K.
AGED 56 YEARS
ARACKAKUNNEL, KODIMATHA, KOTTAYAM-686013.
BY ADV SRI.T.M.ABDUL LATHEEF
RESPONDENT/S:
1 STATE BANK OF INDIA
RACPC, 3RD FLOOR, OPP.BCM COLLEGE, K.K ROAD,
KOTTAYAM-686001, REPRESENTED BY THE ASSISTANT
GENERAL MANAGER.
2 THE ASSISTANT GENERAL MANAGER
STATE BANK OF INDIA, RACPC, 3RD FLOOR,OPP. BCM
COLLEGE, K.K ROAD, KOTTAYAM-686001.
3 THE AUTHORIZED OFFICER
STATE BANK OF INDIA, RACPC, 3RD FLOOR, OPP. BCM
COLLEGE, K.K ROAD, KOTTAYAM-686001.
BY ADVS.
SRI.T.SETHUMADHAVAN (SR.)
DEEPA NARAYANAN
SRI. JAYESH MOHAN KUMAR, SC, STATE BANK OF
TRAVANCORE
OTHER PRESENT:
SRI.T,SETHUMADHAVAN, SENIOR ADVOCATE FOR R1
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 05.04.2024, THE COURT ON 11.04.2024 DELIVERED THE
FOLLOWING:
WPC 11797/2018
2
"C.R."
J U D G M E N T
A riveting question has emerged in this writ
petition. Whether the Secured Creditor is
entitled to continue with the measures under the
Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002 once a civil suit filed by it for recovery is
dismissed by the court?
2. The facts in the writ petition disclose
that petitioner availed a car loan for an amount
of Rs.9,00,000/-. The petitioner executed
necessary documents towards security. As per
Ext.P6, the terms and conditions of sanction of
the loan was accepted by the petitioner.
Thereafter, by Ext.P7 an agreement of
hypothecation was also executed on 14.7.2010. The
petitioner claims that she has paid the entire
amount due under the loan account. But, Ext.P9
notice under Section 13(2) of the Securitisation
and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
("Securitisation Act", for short) was issued for
an amount of Rs.1,73,138/-. The petitioner raised
her objection and while so, the respondent-Bank
again issued a fresh notice on 11.1.2008 under
Section 13(2) of the Securitisation Act. The
petitioner's objection that she is not liable to
pay any amount under the loan agreement was not
accepted by the respondent-Bank.
3. On behalf of the respondent-Bank, a
statement has been filed in the writ petition
wherein it is stated that Ext.P14 reply was
considered and Ext.P15 was issued by the Bank
rejecting the contentions. It is also contended
that as against the measures under the
Securitisation Act, the petitioner has got a
remedy before the Debt Recovery Tribunal in terms
of Section 17 of the Securitisation Act.
4. When the writ petition was taken up for
hearing, the learned counsel for the petitioner
submitted that the Bank during the pendency of the
writ petition had filed commercial suit
No.418/2021 before the Commercial Court, Kottayam.
However, by judgment and decree dated 29.11.2023,
the suit was dismissed finding that there is no
amount due to be recovered from the defendant
therein, who is the petitioner herein.
5. In the light of the dismissal of the suit
filed by the respondent Bank, the learned counsel
for the petitioner submitted that the respondent
Bank cannot proceed further with the recovery
measures under the Securitisation Act and
accordingly prayed that this Court may pass
appropriate orders on the writ petition taking
note of the subsequent events.
6. On the contrary, the learned Senior
Counsel Sri.T.Sethumadavan appearing for the
respondent Bank submitted that the measures under
the Securitisation Act and filing of the civil
suit being entirely different and whereas the
secured creditor is entitled to take parallel
proceedings for recovery of its dues, there cannot
be any interdiction on the measures under the
Securitisation Act. It is the specific case of
the Bank that the writ petition under Article 226
of the Constitution of India is not maintainable
against the measures taken by the Bank under the
Securitisation Act. Therefore, the learned Senior
Counsel submitted that despite the dismissal of
the suit, the bank is entitled to proceed with the
measures now initiated.
7. I have heard Sri.Abdul Lathiff, learned
counsel for the petitioner, and
Sri.T.Sethumadhavan, learned Senior Counsel
appearing for the respondent Bank assisted by
Smt.Deepa Narayanan.
8. In the light of the specific argument
raised by the learned Senior Counsel for the Bank,
this Court is called upon to decide the following
issues:-
(1) Whether the writ petition is maintainable
against the measures under the Securitisation
Act?
(2) Whether the Securitisation measures now
initiated can be proceeded, despite the
dismissal of the suit by the Commercial Court,
Kottayam?
9. The question, as to whether the writ
petition under Article 226 of the Constitution of
India is maintainable against the measures taken
under the Securitisation Act, is no longer res
integra. It has already been decided by the
Hon'ble Supreme Court in Authorized Officer, State
Bank of Travancore v. Mathew K.C. [2018 (1) KHC
786] that the High Court under Article 226 of the
Constitution of India can entertain a writ
petition only under exceptional circumstances and
that it is a self-imposed restraint by the High
Court. The Apex Court while deciding the above
case referred to the decision of the Hon'ble
Supreme Court in CIT v. Chhabil Das Agarwal
[(2014) 6 SCC 603], wherein four exceptional
circumstances were carved out in paragraph No.15
of the said judgment, which is extracted for
reference:
"15. Thus, while it can be said that this
Court has recognized some exceptions to the
rule of alternative remedy i.e. where the
statutory authority has not acted in
accordance with the provisions of the
enactment in question, or in defiance of the
fundamental principles of judicial procedure,
or has resorted to invoke the provisions which
are repealed, or when an order has been passed
in total violation of the principles of
natural justice, the proposition laid down in
Thansingh Nathmal case, Titaghur Paper Mills
case and other similar judgments that the High
Court will not entertain a petition under
Article 226 of the Constitution if an
effective alternative remedy is available to
the aggrieved person or the statute under
which the action complained of has been taken
itself contains a mechanism for redressal of
grievance still holds the field. Therefore,
when a statutory forum is created by law for
redressal of grievances, a writ petition
should not be entertained ignoring the
statutory dispensation."
10. This position was reiterated by the
Supreme Court of India in South Indian Bank Ltd.
v. Naveen Mathew Philip [2023 (4) KLT 29].
11. In the light of the principles laid down
by the Hon'ble Supreme Court, this Court is of the
considered view that normally a writ petition will
not lie against the measures under the
Securitisation Act, unless exceptional
circumstances are made out in the writ petition.
12. Now the question before this Court is
whether exceptional circumstances are made out for
entertaining this writ petition. This Court is
called upon to decide this issue, especially since
the bank contends that it is entitled to continue
the measures under the Securitisation Act, 2002,
notwithstanding the dismissal of the suit.
13. Whether there exits exceptional
circumstances as laid down by the Supreme Court in
Chabbil Das (supra) would certainly depend on
analyzing the facts of each case and see whether
it fits into the four exceptions carved out by the
Apex Court in paragraph No.15 of the decision in
Chabbil Das (supra). While deciding whether the
facts of this case fall within the exceptions as
stated above, it would incidentally give answer to
the second question raised before this Court.
14. To answer the contention put forth by the
learned Senior Counsel that the Bank is entitled
to proceed with the measures notwithstanding the
dismissal of the civil suit, one needs to closely
look into the definition of the word "debt" as
defined under the statute. It is apposite to
extract the definition of "debt" under Section
2(ha) of the Securitisation Act, which reads thus:
"(ha) "debt" shall have the meaning assigned
to it in clause (g) of section 2 of the
Recovery of Debts and Bankruptcy Act (51 of
1993) and includes-- (i) unpaid portion of the
purchase price of any tangible asset given on
hire or financial lease or conditional sale or
under any other contract; (ii) any right,
title or interest on any intangible asset or
licence or assignment of such intangible
asset, which secures the obligation to pay any
unpaid portion of the purchase price of such
intangible asset or an obligation incurred or
credit otherwise extended to enable any
borrower to acquire the intangible asset or
obtain licence of such asset;"
Though the Securitisation Act does not define
debt, the Parliament has adopted the definition of
"debt" as defined under Section 2(g) of the
Recovery of Debs and Bankruptcy Act, 1993.
15. Section 2(g) of the Recovery of Debts and
Bankruptcy Act, 1993 defines the word "debt",
which is extracted as below:
"2(g) "debt" means any liability
(inclusive of interest) which is claimed as
due from any person by a bank of a financial
institution or by a consortium of banks or
financial institutions during the course of
any business activity undertaken by the bank
or the financial institution or the consortium
under any law for the time being in force, in
cash or otherwise, whether secured or
unsecured, or assigned, or whether payable
under a decree or order of any civil court or
any arbitration award or otherwise or under a
mortgage and subsisting on, and legally
recoverable on the date of the application;"
16. A reading of Section 2(g) shows that the
"debt" means liability inclusive of interest
claimed as dues from any person by the Bank, which
is payable under a decree or order of any civil
court or an arbitration award or otherwise or
under a mortgage subsisted on and legally
recoverable as on the date of application.
(emphasis supplied by the Court).
17. In the present case, it was purely the
creditors wisdom to approach the civil court by
filing the suit. Unfortunately, it ended with a
dismissal, finding that there is no liability on
the part of the borrower. But, still the learned
Senior Counsel for the Bank submits that since the
initiation of measures under the Securitisation
Act and filing of civil suit is permissible, the
dismissal of the suit would not have a bearing on
the outcome of the measures under the
Securitisation Act. The learned Senior Counsel
further pressed home his point based on the
Division Bench judgment of this Court in Abdul
Azeez v. Punjab National Bank [2005 (1) KLT 243]
that merely because the Bank has invoked the civil
remedy for recovery of its dues, that will not
enable the borrower to contend that the measures
under Section 13(2) of the Securitisation Act must
be dropped. In other words, according to the
learned Single Judge, the civil suit and measures
under the Securitisation Act being independent can
be pursued notwithstanding the dismissal of the
suit.
18. No one can dispute the above proposition
raised by the learned Senior Counsel. In fact,
the court is in full agreement with the
proposition raised by the learned Senior Counsel
for the respondent Bank. It may be incidentally
noted that in Transcore Vs Union of India [2008(1)
SCC 125], the Apex Court has held that the
Securitisation Act is supplemental to the Recovery
of Debts Due to Banks and Financial Institution
Act, 1993. Applying the aforesaid principles, it
may be possible to conclude that filing of civil
suit is supplement to the right under Section
13(2) of the Securitisation Act. But, the
question before this Court is once a civil remedy
is invoked and the civil court has found that
there is no debt to be recovered by the creditor
against the borrower, can the creditor proceed
under the Securitisation Act independently de hors
the dismissal of the suit.
19. As explained above, the Parliament has
chosen consciously to define the word "debt" as
one legally recoverable. Can it be said that
despite the dismissal of the suit, C.S. No 418 of
2021, filed by the Bank, there exist a "debt"
which is legally recoverable one. The answer to be
given must be in negative against the respondent
Bank and in the affirmative in favour of the
petitioner.
20. The reasoning of this Court is based upon
the well-defined basic principles governing the
interpretation of statute. When the plain and
ordinary meaning is given to the definition of
"debt" under Section 2(g) of the Recovery of Debts
and Bankruptcy Act, 1993, it leaves no doubt on
one's mind that it includes the amount so ordered
by any civil court and should be legally
recoverable one.
21. Viewed in another perspective, the court
must necessarily hold that the stand taken by the
respondent Bank is not only irrational but
contrary to the statue. It clearly depicts the
mind of a creditor, where it does not want to
respect the judgment of the civil court on the
finding that no amount is liable to be recovered
from the petitioner must be respected by the
parties and proceed under the Securitisation Act
which cannot be acceded to.
22. The reasoning of this Court is perhaps
strengthened by the indisputable fact that
issuance of demand notice under Section 13(2) is
based on the original contract between the parties
and further that the same contract was subjected
to adjudication by the civil court and once an
adjudication by the civil court has taken place
ending in dismissal of the suit finding that there
is no debt due from her, necessarily, it has to be
held that the secured creditor is disentitled from
proceeding further with measures under the
Securitisation Act, since there is no legally
recoverable debt.
23. In Kanhaiya Lal vs State Bank of India
[2008 KHC 8059] the Patna High Court had an
occasion to consider a similar issue, wherein the
Court considered the action of State Bank of India
in moving the certificate court under the Public
Demand Recovery Act against an insurance claim.
The borrower was required to pay the certificate
amount and the insurance claim. The bank did not
challenge the said order. Later the bank filed a
review petition which was dismissed and against
the dismissal of the review petition appeal was
filed. In the meantime, when measures under the
Securitisation Act was initiated, the borrower
approached the High court which interdicted the
action of the bank.
24. In M/s.Ace Media Advertisors Pvt. Ltd. &
Others v. Bank of Baroda & Others [2009 KHC 6346],
a Division Bench of the Allahabad High Court
considered the issue as to whether the secured
creditor is entitled to initiate measures under
the Securitisation Act for the amount recoverable
by the Original Contract despite the Debt Recovery
Tribunal determining the debt due. Answering the
question in negative, the Bench of the Allahabad
High Court held that the secured creditor can
initiate measures only for the amount determined
by the Debt Recovery Tribunal.
25. The Hon'ble Supreme Court of India in A.P
State Financial Corporation v. M/s.Gar Re-rolling
Mills and Another [1994 KHC 790] considered the
right of a financial institution under the State
Financial Institutions Act to move under Section
29, despite suffering an order under Section 31.
26. When the decision of the Apex Court in
A.P. Financial Corporation (supra) is carefully
scrutinized, one can find similarity to the
question raised in the writ petition. The
question before the Hon'ble Supreme Court was that
when the claim of the State Financial Corporation
was negatived under Section 31 of the State
Financial Corporations Act by a competent court,
can the Financial Corporation rely on Section 29
and take further proceedings in this regard.
Section 31 of the State Financial Corporations Act
enables the Financial Corporation to apply before
the District Judge seeking for an order of sale of
the property pledged, mortgaged or hypothecated to
them. After analyzing the various provisions
under the State Financial Corporations Act, the
Hon'ble Supreme Court found in paragraph No.13 as
follows:
"13.On a conjoint reading of Sections
29 and 31 of the Act, it appears to us
that in case of default in repayment of
loan or any instalment or any advance or
breach of an agreement, the Corporation
has two remedies available to it against
the defaulting industrial concern, one
under Section 29 and another under Section
31 of the Act. The choice for availing the
remedy under Section 29 or Section 31 of
the Act is that of the Financial
Corporation alone and the defaulting
concern has no say whatsoever in the
matter, as to which remedy should be taken
recourse to by the Corporation against it
for effecting the recovery. The expression
"without prejudice to the provisions of
Section 29 of this Act" as appearing in
Section 31 of the Act clearly demonstrates
that the Legislature did not intend to
confine the Corporation to take recourse
to only a particular remedy against the
defaulting industrial concern for recovery
of the amount due to it. It left the
choice to the Corporation to act in the
first instance under Section 31 of the Act
and save its rights and remedies under
Section 29 of the Act to be availed at a
later stage, with the sole object of
enabling the Corporation to recover its
dues. It is not, however, obligatory on
the part of the Financial Corporation to
invoke the special provisions of Section
31 of the Act, it can even without taking
recourse to the provisions of the said
section invoke the procedure prescribed
under Section 29 of the Act for
realisation of its dues. Where the
Corporation takes recourse to the
provisions of Section 31 of the Act and
obtains an order from the court, it shall
ordinarily and invariably seek its
enforcement in the manner provided by
Section 32 of the Act, which provisions
are aimed to act in aid of the orders
obtained under Section 31 of the Act and
it cannot simultaneously initiate and take
recourse to the remedy available to it
under Section 29 of the Act unless it
gives up, abandons or withdraws the
proceedings under Section 31 of the Act,
at whatever stage those proceedings may
be. The Corporation cannot simultaneously
pursue two remedies at the same time. The
reach and scope of the two remedies is
essentially different even if somewhat
similar result flows by taking recourse to
either of the two provisions in certain
respects."
The Apex Court further held in paragraph No.19 as
follows:
"19.The right vested in the
Corporation under Section 29 of the Act is
besides the right already possessed at
common law to institute a suit or the right
available to it under Section 31 of the
Act. Since, the Corporation can withdraw
from the court its proceedings under
Section 31 of the Act at any stage, it
would imply that it has the right to
withdraw from further proceedings under
Sections 31 and 32 of the Act even after
obtaining an order in its favour and take
recourse to the proceedings under Section
29 of the Act without pursuing the
proceedings under Section 31 of the Act any
further. The Corporation cannot, indeed,
execute the order under Section 31 of the
Act and yet simultaneously take recourse to
proceedings under Section 29 of the Act for
the same relief. The position may also be
different if the claim of the Corporation
is negatived, on facts, by the Court in the
proceedings under Section 31 of the Act. In
that event depending upon the facts of each
case, it may be permissible to hold that
fair play and justice demand that the
Corporation is not allowed to take recourse
to the provisions of Section 29 of the Act.
Thus from the above discussion it follows
that the answer to the question posed in
the opening part of the judgment is in the
affirmative."
27. The Apex Court further proceeded to hold
that Corporation cannot indeed execute an order
under Section 31 of the State Financial
Corporations Act and yet simultaneously take
recourse to proceedings under Section 29 of State
Financial Corporations Act for the same relief.
The position may be also different if the claim of
the Corporation is negatived, on facts, by the
Court in a proceedings under Section 31. In that
event, depending upon the facts of each case, it
may be permissible to hold that fair play and
justice demand that the Corporation is not allowed
to take recourse to the provisions under Section
29 of the Act.
28. This Court is guided by the principles
laid down by the Hon'ble Supreme Court in A.P
State Financial Corporation (supra). Applying the
principles, this Court indeed finds that the view
taken by it as above is supported by precedents
and guided by the well-defined principles
governing interpretation of statues.
29. Law being as declared above; this Court
must now answer another objection raised by the
learned Senior Counsel for the Bank that the writ
petition is not maintainable and the petitioner
must be relegated to the Debt Recovery Tribunal.
As observed earlier, once it is held that on
dismissal of the suit finding that the borrower is
not liable for any amount as claimed by the
secured creditor, should this Court relegate the
petitioner to Debt Recovery Tribunal?
30. It may be noticed that secured creditor
had no compulsion to institute the suit. However,
it chose to proceed with the same and invited an
adverse order. Alternatively, it was open to it to
have independently prosecute its claim under the
Securitisation Act, which it did not chose to do
so and in such event, this Court would have
necessarily relegated the petitioner to an
adjudicatory mechanism under Section 17 of the
Securitisation Act.
31. Despite having invited an adverse order
from the civil court, when the secured creditor
insists that it can continue the measure under the
Securitisation Act, this Court necessarily must
see whether the same is permissible under law. On
such an exercise, this Court since has found that
the secured creditor is not entitled to proceed
with the measures now initiated, necessarily such
act must be construed as without jurisdiction and
therefore the action complained will come within
the purview of the exceptions carved out by the
Apex Court in Chabbil Das (supra). Therefore, it
becomes imperative for this Court to hold that
since the measures now initiated and continued are
without jurisdiction, the petitioner need not be
relegated to the alternative remedy before the
Debt Recovery Tribunal under Section 17 of the
Securitisation Act. Hence, this Court is inclined
to exercise its discretionary jurisdiction vested
in it under Article 226 of the Constitution of
India.
32. It is further to be noted that the writ
petition was filed on 3.4.2018 and by order dated
12.4.2018, the learned Standing Counsel for the
Bank has undertaken before this Court that the
vehicle will not be taken possession pending
disposal of the writ petition. It was open for the
Bank to have moved this court for either vacating
the interim order or have the writ petition
disposed of at an earlier stage. This was however
not done. The filing of the suit during the
pendency of the writ petition also cannot be
faulted with. But, once the civil suit is
dismissed and when the writ petition is taken up
for final hearing, the Bank cannot be heard to say
that the writ petition is not maintainable and the
writ petitioner has to be relegated to the
alternative remedy. This Court is not impressed by
the said stand of the Bank and can view it
certainly as unreasonable. Hence, on facts, this
Court hold that it will be highly discriminatory
to relegate the petitioner to agitate the cause
before the Debt Recovery Tribunal, especially when
the civil suit is dismissed by the Commercial
Court, Kottayam on 29.11.2023. It must be presumed
that secured creditor was aware of the
consequences of filing of the suit.
33. In the result, the writ petition is
allowed. It is declared that the Bank cannot
proceed with the measures under the Securitisation
Act in the light of the dismissal of
C.S.No.418/2021 dated 29.11.2023. At this point
of time, the learned Senior Counsel for the Bank
submits that the Bank had challenged the above
dismissal of the suit in the appellate court.
This Court takes note of the fact that since an
appeal has already been filed it is only
appropriate that it should reserve the liberty of
the Bank to proceed with the measures under
Section 13(2) of the Securitisation Act on
successful reversal of the judgment and decree in
C.S.No 418 of 2021 on the files of Commercial
Court, Kottayam by the appellate court.
The writ petition is ordered accordingly. No
orders as to the costs.
Sd/-
EASWARAN S.
JUDGE
jg
APPENDIX OF WP(C) 11797/2018
PETITIONER EXHIBITS
EXHIBIT P1 TRUE COPY OF THE LETTER NO.RASMECCC/396/10-11
DATED 31/07/2010 ISSUED BY THE 2ND RESPONDENT
TO THE PETITIONER.
EXHIBIT P2 TRUE COPY OF THE LETTER DATED 31.08.2017
ISSUED BY THE PETITIONER TO THE 2ND
RESPONDENT.
EXHIBIT P3 TRUE COPY OF THE POSTAL REGISTRATION SLIP.
EXHIBIT P4 TRUE COPY OF THE LETTER DATED 05.09.2017
ISSUED BY THE 2ND RESPONDENT TO THE
PETITIONER.
EXHIBIT P5 TRUE COPY OF THE LETTER DATED 17-11-2017
ISSUED BY THE 2ND RESPONDENT TO THE
PETITIONER.
EXHIBIT P6 TRUE COPY OF THE DOCUMENT DATED 12-06-2010.
EXHIBIT P7 TRUE COPY OF THE LOAN-CUM-HYPOTHECATION
AGREEMENT.
EXHIBIT P8 TRUE COPY OF THE STATEMENT ISSUED BY THE
BANK.
EXHIBIT P9 TRUE COPY OF THE NOTICE DATED 03-11-2017.
EXHIBIT P10 TRUE COPY OF THE REPLY DATED 07-12-2017
SUBMITTED BY THE PETITIONER TO THE 3RD
RESPONDENT.
EXHIBIT P11 TRUE COPY OF THE LETTER DATED 10-01-2018
SUBMITTED BY THE PETITIONER TO THE 3RD
RESPONDENT.
EXHIBIT P12 TRUE COPY OF THE LETTER DATED 11-01-2018
ISSUED BY THE 2ND RESPONDENT TO THE
PETITIONER.
EXHIBIT P13 TRUE COPY OF THE REPLY DATED 11-01-2018
ISSUED BY THE 3RD RESPONDENT TO THE
PETITIONER.
EXHIBIT P14 TRUE COPY OF THE LETTER DATED 06-02-2018
SUBMITTED BY THE PETITIONER TO THE 3RD
RESPONDENT.
EXHIBIT P15 TRUE COPY OF THE NOTICE DATED 17-02-2017
ISSUED BY THE 2ND RESPONDENT TO THE
PETITIONER.
RESPONDENT EXHIBITS
EXHIBIT R1(A) TRUE COPY OF THE LOAN APPLICATION DATED
07/07/2010.
