A.P. HIGH COURT – M/s. Swetha Exports and M/s. Swetha Exports India Pvt. Ltd have sought a mandamus to declare the action of the respondents, in taking recourse to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act) to execute the recovery certificate issued by the Debts Recovery Tribunal, Visakhapatnam (DRT for short) in O.A.Nos.46 and 50 of 2013 against the petitioners, as illegal and arbitrary; and to declare the action of the respondents, in issuing letter dated 08.08.2016 rejecting the petitioners representation dated 24.06.2016 and cancelling the One Time Settlement (OTS) granted vide proceedings dated 19.01.2016, as arbitrary and illegal. The petitioners seek a direction to the respondents to adhere to the OTS granted by them to the petitioners vide proceedings dated 19.01.2016, and to co-operate with them by partially releasing the secured assets proportionate to the payment made by them. – their lordships dismissed and held that As noted hereinabove, both the DRT and the respondent bank have been extremely indulgent in extending to the petitioner the benefit of a one time settlement, waiving even a part of the principal apart from the interest thereon in its entirety. It is the petitioners who failed to make payment under the OTS scheme resulting in its cancellation, vide proceedings dated 08.08.2016, by the respondent-bank. = REPEATED EFFORTS OF THE RESPONDENT TO PUT THE SUBJECT PROPERTIES TO SALE AND RECOVER ITS DUES HAVE BEEN THWARTED BY THE PETITIONERS ON ONE PRETEXT OR THE OTHER:

THE HONBLE THE ACTING CHIEF JUSTICE RAMESH RANGANATHAN AND  THE HONBLE MS. JUSTICE J.UMA DEVI

Writ Petition Nos.28071 of 2016

22-09-2017

M/s.Swetha Exports rep. by its Prop:Dr.B.Srinivasa Rao .Petitioner

1. Bank of India & Anr. . Respondents

Counsel for Petitioner: Sri P.S.Rajasekhar

Counsel for respondents:  Smt.T.Vidya Rani, Learned Standing  Counsel for Bank of India.

<GIST:

>HEAD NOTE:

? Citations:

1.(2008) 1 SCC 125

2.(2002) 1 SCC 367

3.(2009) 8 SCC 257

THE HONBLE THE ACTING CHIEF JUSTICE RAMESH RANGANATHAN

AND

THE HONBLE MS. JUSTICE J.UMA DEVI

Writ Petition Nos.28071 and 28106 of 2016

COMMON ORDER: (Per the Honble the Acting Chief Justice Ramesh Ranganathan)

In these two Writ Petitions, M/s. Swetha Exports and     M/s.

Swetha Exports India Pvt. Ltd have sought a mandamus to declare 

the action of the respondents,  in taking recourse to the provisions

of the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (for short the

SARFAESI Act) to execute the recovery certificate issued by the

Debts Recovery Tribunal, Visakhapatnam (DRT for short) in

O.A.Nos.46 and 50 of 2013 against the petitioners, as illegal and

arbitrary; and to declare the action of the respondents, in issuing

letter dated 08.08.2016 rejecting the petitioners representation

dated 24.06.2016 and cancelling the One Time Settlement (OTS) 

granted vide proceedings dated 19.01.2016, as arbitrary and

illegal.  The petitioners seek a direction to the respondents to

adhere to the OTS granted by them to the petitioners vide

proceedings dated 19.01.2016, and to co-operate with them by

partially releasing the secured assets proportionate to the payment

made by them.  

The petitioners are carrying on business in the manufacture

and export of buffalo and ox horn button blanks ever since 2001.

The petitioner in W.P.No.28071 of 2016 obtained an Export

Packing Credit and Rupee Advance against bills sent for collection,

from the 1st respondent-bank, through the 2nd respondent for

various limits which stood at Rs.7.10 Crores as on 09.04.2008.

The debt, secured by creating equitable mortgage of 12 items of

immovable property owned by the proprietor of the petitioner and

his family members, was declared a Non-Performing Asset on

31.03.2012.  The 2nd respondent issued a notice, under

Section13(2) of the SARFAESI Act on 07.07.2012, demanding

payment of Rs.7,27,93,768.64 ps.  Thereafter, the 2nd respondent

issued a demand notice dated 08.01.2013 calling upon the

petitioners to pay the amount due of Rs.7,13,00,000/- as on

31.03.2012.  The 1st respondent initiated recovery proceedings

under Section 19 of the Recovery of Debts Due to Banks and

Financial Institutions Act, 1993 (hereinafter called the RDDB Act)

filing O.A.No.46 of 2013 on the file of the DRT for recovery of

Rs.8,33,10,044.37 ps.  Certificate dated 02.05.2014 was issued for

recovery of Rs.9,17,41,263.37 ps, and was forwarded to the

Recovery Officer, for realisation of the amount due, under Sections

25 to 29 of the RDDB Act.  The Recovery Officer issued notice dated

15.05.2014, in R.P.No.60 of 2014 in O.A.No.46 of 2013,

demanding the amount due, and the petitioner was informed that,

if they failed to make payment, the amount would be recovered

under Sections 25 to 29 of the RDDB Act, the 2nd and 3rd

Schedules to the Income Tax Act, 1961 and the Rules made

thereunder.

Thereafter the 2nd respondent issued notice dated

15.07.2015, under Section 13(4) of the SARFAESI Act r/w Rules 8

and 9 of the Security Interest (Enforcement) Rules, 2002

(hereinafter referred to as the Rules) with respect to 12 items of

immovable property furnished as security by the petitioners.  The

said notice referred to the amount due as Rs.9,17,41,263.37 ps

which the petitioners claim is exactly the same amount as is

referred to in the recovery certificate issued by the DRT. The 2nd

respondent issued sale notice dated 09.10.2015, under Rule 8(6) of

the Rules, stating that Rs.9,17,41,263.37 ps. was due.  The date of

sale was fixed as 23.11.2015, and the reserve price at Rs.529.39

Lakhs for the 12 items of immovable property.  The petitioner

claims to have informed the 2nd respondent to defer the sale as the

reserve price was very low.  Thereafter, the 2nd respondent issued

another sale notice, under Rule 8(6) of the Rules, dated 26.10.2015

proposing to conduct a sale on 03.12.2015 and 04.12.2015.  In the

sale notice, the 2nd respondent stated that the amount due was as

decreed by the DRT in O.A.No.46 of 2013 which was the subject

matter of recovery in R.P.No.60 of 2014.  The 2nd respondent fixed

the reserve price at Rs.520.09 Lakhs for the 12 items of immovable

property.

The sale notice dated 26.10.2015 was subjected to challenge

by the petitioner in S.A.No.252 of 2015 filed before the DRT under

Section 17 of the SARFAESI Act.  The petitioner claims to have

made a representation to the 2nd respondent on 04.11.2015

seeking to settle the amounts due, both by it and by its sister

concern, on a one time payment of Rs.1205 Lakhs, and to have

informed that 10% thereof i.e Rs.120 Lakhs would be paid upfront

after receiving consent for the OTS.  The petitioners request was

rejected by the 2nd respondent by their letter dated 06.11.2015 on

the ground that the upfront amount of 10% was not paid along

with the offer letter dated 04.11.2015.

By its order in S.A.No.252 of 2015 dated 18.11.2015, the

DRT directed the petitioner to deposit Rs.60 Lakhs on or before

03.12.2015 and a further sum of Rs.60 Lakhs on or before

14.12.2015 (totalling to Rs.120 lakhs representing 10% of the OTS

offer).  Upon such deposit, the respondent-bank was directed to

defer the proposed sale, consider the OTS proposal, and convey

their decision on or before 17.12.2015.  As the petitioner had

expressed its willingness to make payment of the entire OTS offer

of Rs.1205 lakhs on or before 31.03.2016, the respondent-bank

was directed to grant them time and consider the OTS proposal.

The DRT made it clear that, in the event of failure of the petitioner

to deposit the upfront amount of Rs.120 Lakhs, the respondents

were at liberty to proceed and take action in accordance with law.

The petitioner complied with the order of the DRT, and deposited

Rs.60 Lakhs on 02.12.2015, and the remaining Rs.60 Lakhs on

13.12.2015, totalling to Rs.120 Lakhs with the 2nd respondent.

The 2nd respondent, vide letter dated 19.01.2016, accepted the

petitioners request for OTS on a one time payment of Rs.12.71

Crores on condition that the properties would be released only after

full and final payment of the OTS amount.

The petitioner informed the 2nd respondent, by their letter

dated 20.01.2016, that their commitment under the OTS could be

complied with only if their properties were released proportionate

to the payments made; as they had already paid a sum of Rs.120

Lakhs as the upfront amount for OTS and, if the 2nd respondent

released property worth 40% thereof i.e Rs.48 Lakhs, the petitioner

would sell the same for a higher amount than the upset price fixed,

and make payment to the respondents; and, in this manner, they

would be able to liquidate the entire amount of OTS within the

time fixed by the DRT i.e. 31.03.2016.  The petitioner offered two

cheques bearing Nos.092460/005151 dated 25.02.2016 for Rs.700

Lakhs and 092461/005152 dated 25.03.2016 for Rs.451 Lakhs

along with their letter dated 28.01.2016 towards full payment of

the OTS amount.  They requested the respondents to release partial

security, at least to the extent of 40% of the amount paid, to enable

them to honour their commitment.  The 2nd respondent, vide letter

dated 25.02.2016, rejected the petitioners request for partial

release of the properties, and again issued a sale notice dated

05.04.2016, and an e-auction sale notice dated 16.04.2016, under

Rule 8(6) of the Rules proposing to conduct sale of the 12 items of

immovable property on 17.05.2016 fixing the reserve price at

Rs.529.39 Lakhs.

The petitioner challenged the validity of the e-auction sale

notice dated 16.04.2016 in W.P.No.16243 of 2016. They filed

I.A.No.206 of 2016 in S.A.No.252 of 2015 before the DRT for

restoration of the OTS proposal.  The DRT, by its order dated

12.05.2016, directed the respondent-bank to allow inspection of

the original title deeds to the probable buyers brought by the

applicants, and to allow sale of property to the buyers arranged by

the applicants.  The DRT opined that, in this manner, the

respondent-bank would be able to recover its dues directly from the

petitioner which, in turn, would get more value for their properties.

The petitioner was directed to pay Rs.10 Lakhs  within one week

from the date of the order, the respondent-bank was directed to

allow inspection of the original title deeds to the probable buyers

brought by the petitioner, accept the amount paid by the petitioner

or by the probable buyers, and to co-operate with the petitioner in

the sale of the secured assets to the buyers arranged by them.  The

OTS amount of Rs.12.71 Crores was directed to be accepted on

payment of interest thereon upto 30.06.2016.  The petitioners were

directed to arrange buyers, and pay the OTS amount along with

interest upto 30.06.2016. The DRT directed that, on payment of

Rs.10 Lakhs within one week, the respondent-bank should defer

the sale to be held on 18.05.2016, and allow time to the applicants

to clear the dues upto 30.06.2016 by sale of the properties

themselves; and, if the petitioner failed to pay Rs.10 Lakhs within

one week and in case the OTS amount along with interest, even

after showing the original title deeds to the petitioners and their

probable buyers, was not paid, the respondent-bank was at liberty

to proceed with the sale of the properties after 30.06.2016. With

these observations, S.A.No.262 of 2015 was finally disposed of.

The petitioner paid Rs.10 Lakhs on 15.05.2016 and, on the

ground that the respondents were directed by the DRT to defer the

sale, they withdrew W.P.No.16243 of 2016 on 19.05.2016.  The 2nd

respondent, vide letter dated 31.05.2016, informed the petitioner

that it was not possible to show the original title deeds as the same

had been deposited with the recovery officer in the recovery

proceedings; and the petitioner may arrange for its inspection, by

the prospective purchasers, at the DRT.  By their representation

dated 24.06.2016, the petitioner informed the 2nd respondent that,

as the time fixed by the DRT was due to expire by 30.06.2016, they

may be permitted to sell the properties one by one.  They

undertook to pay at least 50% more than the reserve price fixed for

each property. The 2nd respondent, by its letter dated 08.08.2016,

rejected the petitioners request. The proceedings issued earlier,

accepting their OTS offer, was also cancelled.  The action of the

respondents, in taking recourse to the provisions of the SARFAESI

Act, and in issuing letter dated 08.08.2016, are under challenge in

these Writ Petitions.

The debt of the petitioner, in W.P. No.28106 of 2016, was

declared a non-performing asset on 29.07.2011.  The second

respondent-bank issued notice dated 02.12.2011 under Section

13(2) of the SARFAESI Act demanding payment of

Rs.12.86,85,448/-.  A possession notice, under Section 13(4) of the

SARFAESI Act, was issued on 20.10.2012.  Thereafter the second

respondent-bank issued a notice on 08.01.2013 demanding

payment of Rs.12.88 crores due as on 27.07.2011. The first

respondent initiated recovery proceedings under Section 19 of the

RDDB Act filing O.A. No.50 of 2013 for recovery of

Rs.15,98,44,277/-.  The said O.A. was allowed by the DRT on

16.06.2014, and a certificate was issued on 23.07.2013 for

recovery of a sum of Rs.18,59,29,683/-.  The certificate was

forwarded to the Recovery Officer, for realisation of the amount

due, under Sections 25 to 29 of the RDDB Act.  The Recovery

Officer issued notice on 25.08.2014, in R.P. No.107 of 2014 in O.A.

No.50 of 2013, demanding payment of the amount due, failing

which recovery would be made under the provisions of Sections 25

to 29 of the RDDB Act, the II and III Schedules to the Income Tax

Act, 1961, and the Rules made thereunder.

Thereafter the second respondent-bank issued a notice on

05.11.2015, under Section 13(4) of the SARFAESI Act, read with

Section 8(6) of the Rules in respect of six items of immoveable

property, proposing to conduct a sale on 14.12.2015.  In the sale

notice, the second respondent-bank stated that the amount due

was as decreed by the DRT in O.A. No.50 of 2013 which was the

subject matter of recovery in R.P. No.107 of 2014.  The second

respondent-bank fixed the reserve price as Rs.161.64 lakhs for the

six items of immoveable property.  The second respondent-bank

again issued E-auction sale notice, under Section 8(6) of the Rules,

on 09.11.2015.  The petitioner claims that a representation was

submitted by their sister concern to the second respondent-bank

on 04.11.2015 to settle the amounts due by them, and for a one

time payment of Rs.12.5 crores, and that 10% upfront amount of

Rs.120 lakhs would be paid after receiving consent for OTS.  The

petitioners OTS request was rejected by the second respondent-

bank, by its letter dated 06.11.2015, on the ground that the

upfront amount of 10% had not been paid along with the offer

letter dated 04.11.2015.  The DRT, by order in S.A. No.252 of 2015

dated 18.11.2015, directed the petitioner to deposit Rs.120 lakhs

(Rs.60 lakhs on or before 03.12.2015 and the balance Rs.60 lakhs

on or before 14.12.2015).  On such deposit, the respondents were

directed to defer the proposed sale, consider the one time

settlement proposal, and convey their decision on or before

17.12.2015.  Taking note of the petitioners offer to settle the debt

on or before 31.03.2016, the DRT directed the respondent-bank to

grant them time, and to consider their one time settlement

proposal.  The DRT observed that, in the event of the petitioners

failure to deposit the upfront amount, the respondents were at

liberty to proceed in accordance with law.  The petitioner deposited

the said sum of Rs.120 lakhs within time.  By its proceedings

dated 19.01.2016, the second respondent-bank accepted the

proposal, for a one time settlement, of Rs.1270 lakhs, on condition

that the mortgaged properties would be released after full and final

payment of the OTS amount.  The petitioner submitted its

representation on 20.01.2016 informing the respondent-bank that

the commitment, under OTS, could be complied with only if the

second respondent released the properties proportionate to the

payments made.  They offered two cheques i.e cheque dated

25.02.2016 for Rs.700 lakhs and cheque dated 25.03.2016 for

Rs.451 lakhs, under covering letter dated 28.01.2016, towards full

payment of the OTS.  They requested the respondents to release

partial security to the extent of 40% of the amount paid.  The

second respondent-bank, by its letter dated 25.02.2016, rejected

the petitioners request for partial release of the properties.

The second respondent-bank again issued E-auction notice

dated 13.04.2016, under Rule 8(6) of the Rules, proposing to

conduct a sale of six items of immoveable property on 18.05.2016,

fixing the reserve price at Rs.161.64 lakhs.  While the petitioner

filed W.P. No.16234 of 2016, its sister concern filed I.A. No.206 of

2016 in S.A. No.252 of 2015 before the DRT for restoration of the

OTS proposal.  By its order dated 12.05.2016, the DRT directed the

respondent bank to allow inspection of the original title deeds to

the probable buyers brought by the petitones, and to allow sale of

the property to the buyers arranged by them.  The DRT observed

that, in this way, the respondent bank would be able to recover its

dues directly from the petitioners, and the applicants would also be

able to get more value for their property.  The DRT directed the

petitioner to pay Rs.10 lakhs within one week from the date of the

order, and directed the respondent bank to allow inspection of the

original title deeds to the probable buyers brought by the

petitioners, and to accept the amount paid by the petitioners or

paid by the probable buyers.  The respondent bank was also

directed to cooperate with the petitioner in the sale of the secured

assets to the buyers arranged by them.  The OTS amount of 1270

lakhs was directed to be accepted on payment of interest thereon

upto 30.06.2016.  The petitioners were directed to arrange buyers,

and to pay the OTS amount along with interest upto 30.06.2016.

On payment of Rs.10 lakhs within one week from the date of the

order, the DRT directed the respondent-bank to defer the sale to be

held on 18.05.2016, and to allow time to the petitioners to clear off

the dues upto 30.06.2016, by sale of property themselves.  The

DRT made it clear that, in case the petitioners failed to pay Rs.10

lakhs within one week and in case the OTS amount along with

interest, was not paid even after showing the original title deeds to

the petitioner and the probable buyers, the respondent bank was

at liberty to proceed with the sale of the said properties after

30.06.2016.  S.A. No.252 of 2014 was, accordingly, disposed of.

The petitioner paid Rs.10 lakhs on 15.05.2016 in compliance

with the order of the DRT, and thereafter withdrew W.P. No.16234

of 2016 on 19.05.2016.  The second respondent-bank, vide letter

dated 31.05.2016, informed the petitioner that it was not possible

to show the original deeds as they had been deposited with the

Recovery Officer in the recovery proceedings, and the petitioner

may arrange for inspection of the same, by the prospective

purchasers, at the Tribunal.  The petitioner informed the second

respondent, by its letter 24.06.2016, that, as the time fixed by the

DRT was due to expire by 30.06.2016, they may be permitted to

sell the properties one by one.  They undertook to pay 50% more

than the reserve price amount for each property.  The respondent-

bank, by its letter dated 08.08.2016, rejected the petitioners

request, and cancelled the OTS accepted by it earlier vide letter

dated 19.01.2016.  Aggrieved thereby, the petitioner filed W.P.

No.28106 of 2016.

In the affidavit filed in support of the Writ Petition, the

petitioners stated that the respondent-bank had lost sight of the

fact that no person would be willing to go to the DRT for inspection

of the original documents for fear of buying properties under

litigation; as against the order of the DRT dated 18.11.2015,

directing the second respondent-bank to consider the OTS

proposal made by them within thirty days i.e., on or before

17.12.2015, the second respondent-bank had accepted the OTS

proposal only on 19.01.2016; and the petitioner had lost valuable

time of more than one month to meet the dead line of 31.03.2016

fixed by the Tribunal.

In his counter-affidavit, the Chief Manager of the respondent-

bank submits that the petitioner was not entitled to seek plural

remedies in a single Writ Petition; they did not challenge the

specific order passed by the authorised officer of the respondent-

bank; they had only challenged the letter dated 08.08.2016

rejecting their representation dated 24.06.2016, and in cancelling

the OTS acceptance vide letter dated 19.01.2016; the OTS approval

or rejection did not fall within the ambit of the SARFAESI Act; and

since it did not contain a specific prayer and was vague, the Writ

Petition as filed was not maintainable.  The respondents contend

that granting or rejecting OTS fell within the credit decision and

discretionary power of the respondent-bank, for which a writ of

mandamus cannot be issued; the bank cannot be compelled to

accept the OTS proposal of the petitioner; granting of OTS may fall

within the purview of contractual obligations, and rejection of OTS

may mean breach of the contract; contractual obligations are not,

ordinarily, enforced in proceedings under Article 226 of the

Constitution of India; the petitioners loan account was classified

as an NPA on 29.07.2011 because of non-payment of the dues;

notices under Sections 13(2) and 13(4) were issued; the

respondent-bank had filed O.A.Nos.46 and 50 of 2013, and had

obtained recovery certificates dated 02.05.2014 and 23.07.2014 for

Rs.9,17,41,263.37ps. and Rs.18,59,29,683/- respectively under

Section 19 of the RDDB Act; the process of execution was pending

before the Recovery Officer, DRT, Visakhapatnam; the respondent-

bank was entitled to proceed under the SARFAESI Act without

giving up the O.A or the recovery proceedings under the RDDB Act;

and the Writ Petition, challenging the recovery proceedings

pending before the DRT, was not maintainable.

It is further stated that, in response to the petitioners

request for grant of OTS for Rs.12.5 Crores, the petitioner was

informed, by the respondent-bank, to deposit the upfront amount

of 10% on the OTS offer for the purpose of processing the OTS

proposal as per the norms prevailing in the Bank.  On the ground

that the upfront fee was not paid by the petitioner, along with their

offer letter dated 04.11.2015, the respondent-bank had rejected the

offer.  Later, the respondent-bank had, by their letter dated

19.01.2016, conveyed its acceptance of OTS for Rs.11.51 Crores,

and had informed the petitioner that the properties would be

released only after full and final payment of the OTS amount, and

filing of full satisfaction memo before the DRT upon receipt of full

OTS amount; as per the OTS terms, the petitioner was liable to pay

the OTS amount, minus upfront amount of Rs.120 Lakhs

deposited as per the order of the DRT dated 18.11.2015, in three

monthly instalments in January, February and March, 2016; the

OTS letter dated 19.01.2016 was acknowledged by the petitioner

on 20.01.2016. They raised an objection, regarding the condition

stipulated by the respondent-bank, that the OTS amount should

be paid, and only thereafter would the properties be released; the

petitioners suggestion for release of the bank documents was not

acceptable to the bank as its rules and procedure did not permit

release the documents/properties in the custody of the DRT unless

and until the recovery certificate was terminated by the Presiding

Officer on a joint memo of compromise being filed under Section 26

of the RDDB Act; the respondents had conveyed their rejection for

partial release of the properties by their letter dated 25.02.2016;

the said letter dated 25.02.2016 reveals that the petitioner was not

agreeable to the terms and conditions of the OTS; thereby the

contractual obligations had ended; and the respondent-bank was

entitled to proceed to recover the amount due in accordance with

law.

It is also stated in the counter-affidavit that the petitioner

had issued two cheques bearing Nos.581709 dated 25.02.2016 for

Rs.5.00 Crores and 581707 dated 25.03.2016 for Rs.2.79 Crores

drawn on ICICI Bank; when the cheques were presented for

clearance, they bounced for want of funds; the respondent-bank

was constrained to file criminal complaint Nos.816 of 2016 and

2340 of 2016 on 06.04.2016 and 27.05.2016 respectively; the

petitioner had suppressed the fact that the cheques were

dishonoured, only in order to secure an order from this Court; after

issuing letter dated 25.02.2016, the respondent-bank had initiated

proceedings under Rule 8(6) of the Rules to conduct e-auction; the

petitioners had filed W.P. No.16234 of 2016 and W.P.No.16243 of

2016, both of which were dismissed as withdrawn; the petitioner

filed I.A.No.206 of 2016 in S.A.No.252 of 2015 requesting the DRT

to restore the OTS proposal; the DRT passed an order dated

12.05.2016 directing the petitioner to pay Rs.10 Lakhs within one

week, and allow inspection of the title deeds to the probable buyers

brought by the petitioner, without noticing that the original

documents were marked as exhibits during the course of evidence

of the respondent-bank, and were in the custody of the DRT; such

orders were not enforceable against the bank; while deferring the

sale, the DRT directed the petitioner to pay the OTS amount along

with interest upto 30.06.2016; the petitioner never brought any

probable buyers with a request for verification of the title deeds

held in the custody of the DRT; until the recovery certificate is

terminated by the DRT, by way of full and final settlement, the

original documents cannot be parted with by the bank;

consequently, letter dated 31.05.2016 was issued informing the

petitioner that the original documents were in the custody of the

DRT, and could not be withdrawn as the Suits were decreed and

recovery proceedings were pending with the DRT; the petitioner

was informed that they may inspect by paying the inspection fee to

the DRT; for the purpose of inspection of records of the DRT,

necessary application had to be made by any of the parties to the

OA proceedings under Rule 26 of the Debts Recovery Tribunal

Regulations of Practice, 1996; Rule 23 of the Debts Recovery

Tribunal (Procedure) Rules, 1993 empowered the Registrar of the

DRT to grant leave to inspect the DRT records for which an

application, by the parties to the Suit proceedings could be

entertained; as the respondent-bank had no objection, for the DRT

to allow inspection of the records and the same was conveyed to

the petitioner vide letter dated 31.05.2016, nothing prevented them

from requesting the DRT to permit them to inspect the records;

there was no material on record to show that the petitioner had

brought any probable buyers for inspection of the title deeds; the

letter dated 08.08.2016, issued by the respondent-bank, is not a

judicial or a quasi-judicial order; it is only a letter informing the

petitioner of certain facts; the recovery certificate, issued by the

DRT, has not been subjected to challenge; the petitioner did not

bring any purchasers to the DRT for inspection of the documents,

contending that no person would be willing to go to the DRT for

fear of buying a property in litigation; and this clearly showed the

petitioners intention to suppress relevant facts.

Sri P.S. Rajasekhar, Learned Counsel for the petitioners,

would submit that the respondent-bank had hitherto invoked the

provisions of the SARFAESI Act, issuing a notice under Section

13(2) thereof on 07.07.2012; they had thereafter filed O.A. Nos.46

and 50 of 2013 before the DRT; as the respondent-bank had

invoked the jurisdiction of the DRT under the RDDB Act, after

having invoked the provisions of the SARFAESI Act, the first

proviso to Section 19(1) of the RDDB Act disabled them either from

withdrawing the applications filed in O.A. Nos.46 and 50 of 2013,

or from seeking to recover the very same amount under the

SARFAESI Act; the remedy available to the respondent-bank is only

to pursue their applications under the RDDB Act, and not to

continue with the action initiated by them earlier under the

SARFAESI Act; the directions issued by the RBI, in its circular

dated 21.07.2016, are referable to Section 21 of the Banking

Regulation Act; these guidelines are binding on the respondent-

bank which should have given wide publicity for the One Time

Settlement scheme offered by them; the respondent-bank has not

furnished details, of the OTS scheme prevalent in its bank, even in

the counter-affidavit filed by them before this Court; despite the

directions of the DRT, the respondent-bank has also failed to co-

operate with the petitioners in extending them the benefit of the

OTS scheme; the respondent-bank ought to have permitted the

petitioners to sell the properties by private treaty, and repay the

entire amount due to the bank from the proceeds received on the

sale of these immovable properties; the respondent bank had put

these properties to sale at an abysmally low price as is reflected in

the sale notice; this Court should direct the respondent-bank to

grant the petitioners two months time to pay Rs.10.5 Crores for

being extended the benefit of the OTS scheme, which they had

offered to deposit vide their letter dated 03.05.2017; and, while

agreeing to the petitioners request, the respondent bank had

imposed onerous conditions, vide their letter dated 03.05.2017,

which were incapable of compliance.  Learned Counsel would rely

on Transcore v. Union of India , Central Bank of India v.

Ravindra , and Sardar Associates v. Punjab & Sind Bank ).

I. IS A SECURED CREDITOR DISABLED FROM CONTINUING

TO TAKE ACTION UNDER THE SARFAESI ACT MERELY

BECAUSE IT HAD LATER FILED AN APPLICATION UNDER

SECTION 19(1) OF THE RDDB ACT FOR RECOVERY OF ITS

DUES?

Before examining the question whether the 2nd respondent-

bank can, after having initiated proceedings under the SARFAESI

Act and thereafter under the RDDB Act, again resort to taking

action under the SARFAESI Act, it is useful to refer to the relevant

provisions of the SARFAESI Act and the RDDB Act.   Section 2 (zc)

of the SARFAESI Act defines secured asset to mean the property on

which a security interest is created.  Section 2(zf) defines security

interest to mean the right, title or interest of any kind, other than

those specified in Section 31, upon property created in favour of

any secured creditor, and includes (i) any mortgage, charge,

hypothecation, assignment or any right, title or interest of any

kind, on tangible asset, retained by the secured creditor as the

owner of the property, given on hire or financial lease or

conditional sale or under any other contract which secures the

obligation to pay any unpaid portion of the purchase price of the

asset or an obligation incurred or credit provided to enable the

borrower to acquire the tangible asset; or (ii) such right, title or

interest in any intangible asset or assignment or licence of such

intangible asset which secures the obligation to pay any unpaid

portion of the purchase price of the intangible asset or the

obligation incurred or any credit provided to enable the borrower to

acquire the intangible asset or licence of intangible asset.

Chapter III of the SARFAESI Act deals with enforcement of

the security asset by the sale of the secured asset.  Section 13(10)

of the SARFAESI Act stipulates that, where the dues of the secured

creditor are not fully satisfied with the sale proceeds of the secured

assets, the secured creditor may file an application, in the form and

manner as may be prescribed, to the Debts Recovery Tribunal

(DRT for short) having jurisdiction or a competent court, as the

case may be, for recovery of the balance amount from the borrower.

Section 13(11) provides that, without prejudice to the rights

conferred under or by Section 13, the secured creditor shall be

entitled to proceed against the guarantors or sell the pledged assets

without first taking any of the measured specifies in Section 13(4)

in relation to the secured assets under the SARFAESI Act.  Section

37 of the SARFAESI Act stipulates that the provisions of the

SARFAESI Act, and the Rules made thereunder, shall be in

addition and not in derogation of, among others, the RDDB Act.

The RDDB Act is an Act to provide for the establishment of

Tribunals for expeditious adjudication and recovery of debts due to

banks and financial institutions.  Section 19 of the RDDB Act

relates to the application to be filed before the DRT and, under sub-

section (1) thereof, where a bank or a financial institution has to

recover any debt from any person, it may make an application to

the DRT within the local limits of whose jurisdiction (a) the

defendant voluntarily resides or carries on business or (b) any of

the defendants, where there are more than one, voluntarily reside

or carry on business or (c) the cause of action, wholly or in part,

arises.  Under the first proviso thereto the bank or financial

institution may, with the permission of the DRT, on an application

made by it, withdraw the application, whether made before or after

the enforcement of a security interest, and Recovery of Debts Laws

(Amendment) Act, 2004 for the purpose of taking action under the

SARFAESI Act, if no such action had been taken earlier under that

Act.  Section 24 of the RDDB Act stipulates that the provisions of

the Limitation Act 1963 shall, as far as may be, apply to an

application made to a Tribunal which, under Section 2(o) and

Section 3(1) thereof, refers to the Debt Recovery Tribunal.

More than one obligation may arise on the same transaction,

namely, to repay the debt or to discharge some other obligation.

While the primary obligation is to repay the debt, the borrower also

undertakes to keep the margin and the value of the securities

hypothecated so that there is no mismatch between the asset-

liability in the books of the bank/financial institution.  It is the

former obligation of the borrower which attracts the provisions of

the SARFAESI Act which seeks to enforce it by the measures

mentioned in Section 13(4) of the said Act, which measures are not

contemplated by the RDDB Act. (Transcore1; Snells Principles of

Equity (31st Edn.) at p. 777).

While the RDDB Act came into force on 24.06.1993, the

SARFAESI Act came into force nearly nine years thereafter on

21.06.2002.  However the first proviso to Section 19(1) of the

RDDB Act was inserted, by Section 20 of Act 30 of 2004, with

retrospective effect from 11.11.2004 i.e., from a date more than two

years after the SARFAESI Act came into force on 21.06.2002.  The

first proviso to Section 19(1) of the RDDB Act is an enabling

provision, and gives an option to the banks or financial institutions

to seek withdrawal of the application made by them earlier under

Section 19(1) of the said Act.  Permission of the DRT, to withdraw

the application filed by it earlier under the RDDB Act, can be

sought by the bank or financial institution for the purpose of

taking action under the SARFAESI Act, if it had not taken any

such action earlier under the SARFAESI Act.

In case it desires to take action under the SARFAESI Act, a

bank/financial institution may, instead of prosecuting the

application made by it earlier under Section 19(1) of the RDDB Act,

withdraw the said application.  The words that Act, as used in the

first proviso to Section 19(1) of the RDDB Act, refer to the

SARFAESI Act.  The words such action, used in the first proviso,

mean the action taken earlier under the SARFAESI Act.  In cases

where action was not taken by a bank/financial institution under

the SARFAESI Act, before the first proviso was inserted to Section

19(1) of the RDDB Act with effect from 11.11.2004, and they had

only filed an application under Section 19(1) of the RDDB Act for

recovery of their dues, the first proviso enables them to seek

permission of the DRT to withdraw the application made earlier

under Section 19(1) of the RDDB Act, and take action, for recovery

of its dues, by the sale of the secured assets under the SARFAESI

Act.

Permission being granted by the DRT to withdraw the

application made under Section 19(1) of the RDDB Act, and to take

action under the SARFAESI Act, would enable the bank/financial

institution, if need be, to invoke the jurisdiction of the DRT, under

Section 19(1) of the RDDB Act, later.  This can be easier explained

by way of an illustration.  If a bank/financial institution has made

an application to the DRT for recovery of its dues of Rs.100 crores

it may, with the permission of the DRT, withdraw the said

application, and take action under the SARFAESI Act for sale of the

secured assets.  If, on such sale, it is able to recover Rs.60 crores, it

is open to the bank/financial institution to again make an

application to the DRT (provided it is within limitation as

stipulated under Section 24 of the RDDB Act) for recovery of the

balance Rs.40 crores from the unsecured assets of the borrower

and others.

The words if any such action had been taken earlier under that Act,

used in the first proviso to Section 19(1), cannot be so read as to

preclude the bank from taking recourse to Section 19(1) of the

RDDB Act merely because it has initiated action earlier under the

SARFAESI Act.  It is only when the Bank/financial institution has

made an application under Section 19(1) of the RDDB Act, without

having taken recourse to the SARFAESI Act, would the question of

the Bank/Financial Institution exercising its option to withdraw its

application under Section 19(1) of the RDDB Act, and to proceed to

take action under the SARFAESI Act, arise.

In Transcore1, the Supreme Court held that the object

behind introducing the first and the third provisos to Section 19(1)

of the RDDB Act was to align the provisions of the RDDB Act, the

SARFAESI Act and Order 23 CPC; for instance, after an OA is filed

in the DRT for recovery of an amount on a term loan, on credit

facility and on hypothecation account and the OA is not disposed

of by the tribunal, in case the bank finds that one of the three

accounts has become substandard/loss, it can invoke the

SARFAESI Act with or without the permission of DRT; withdrawal

of the OA, pending before the DRT under the RDDB Act, is not a

pre-condition for taking recourse to the SARFAESI Act; it is for the

bank/financial institution to exercise its discretion as to cases in

which it may apply for leave, and cases where they may not apply

for leave to withdraw; and the first proviso to Section 19(1) is an

enabling provision, which may deal with myriad circumstances.

It is not as if the bank/financial institution is precluded from

instituting proceedings either under the SARFAESI Act or the

RDDB Act merely because they had invoked the provisions of the

other enactment earlier.  There are three elements to the doctrine of

election, namely, existence of two or more remedies; inconsistencies

between such remedies; and a choice of one of them. If any one of

the three elements does not exist, the doctrine will not apply.  The

doctrine of election of remedies is applicable only when there are

two or more co-existent remedies, available to the litigants at the

time of election, which are repugnant and inconsistent. As there is

neither repugnancy nor inconsistency between the two remedies

under the SARFAESI Act and the RDDB Act, the doctrine of

election has no application. (Transcore1; Snells Principles of

Equity (31st Edn., p. 119).

The RDDB  and the SARFAESI Acts do not provide parallel

remedies.  The SARFAESI Act is treated as an additional remedy

(Section 37) which is not inconsistent with the RDDB Act.

Together they constitute one remedy and, therefore, the doctrine of

election does not apply.   (Transcore1).   As the remedy under the

SARFAESI Act, in view of Section 37 thereof, is an additional

remedy, it is open to the bank/financial institution to

simultaneously take recourse to both the provisions of the RDDB

and the SARFAESI Act, and it is not obligatory for them to elect

either one of the two remedies.  Further, Section 13(10) of the

SARFAESI Act enables the secured creditor, in cases where the

dues are not fully satisfied with the sale proceeds of the secured

asset, to file an application to the DRT in the form and manner

prescribed.  It is evident therefore that the secured creditor can

invoke either of the two enactments i.e the SARFAESI Act or the

RDDB Act or both.

The very purpose of seeking permission, to withdraw the

application made earlier under Section 19(1) of the RDDB Act, is to

enable the bank/financial institution, in case its debt is not wholly

satisfied on the sale of the secured asset under the SARFAESI Act,

to again approach the DRT for recovery of the balance amount, by

instituting proceedings again under Section 19(1) of the RDDB Act.

The mere fact the provisions of the SARFAESI Act was invoked

earlier, before an application was filed under Section 19(1) of the

RDDB Act, would not disable the bank/financial institution from

either continuing with the action initiated by it earlier under the

SARFAESI Act, or from simultaneously availing the remedies both

under the SARFAESI Act and the RDDB Act.

As permission of the DRT would be sought only for the

purpose of taking action under the SARFAESI Act, Parliament has,

by use of the words if no such action had been taken earlier under the

Securitisation Act, merely stated the obvious for, if the

bank/financial institution had already initiated action under the

SARFAESI Act before it filed an application under Section 19(1) of

the RDDB Act, it would make no sense for it to withdraw its

application under Section 19(1) of the RDDB Act to pursue its

remedy under the SARFAESI Act which it had initiated earlier, as it

can simultaneously pursue both its remedies under the RDDB Act

and the SARFAESI Act.  Nothing prevents a bank/financial

institution from continuing with the proceedings initiated by it

earlier under the SARFAESI Act, even if it has subsequently

invoked the jurisdiction of the DRT under Section 19(1) of the

RDDB Act.  This contention of bar of jurisdiction under the

SARFAESI Act, merely because a secured creditor has instituted

proceedings under the RDDB Act after having initiated proceedings

under the SARFAESI Act earlier, does not merit acceptance.

II. HAS THE RESPONDENT-BANK VIOLATED RBI GUIDELINES

REGARDING EXTENSION OF THE ONE-TIME SETTLEMENT

SCHEME TO ITS BORROWERS?

Section 21 of the Banking Regulation Act, 1949 confers

power on the Reserve Bank of India (RBI for short) to control

advances by banking companies. Under sub-section (1) thereof,

where the RBI is satisfied, that it is necessary or expedient in the

public interest or in the interests of depositors or banking policy so

to do, it may determine the policy in relation to advances to be

followed by banking companies generally, or by any banking

company in particular, and when the policy has been so

determined all banking companies or the banking company

concerned, as the case may be, shall be bound to follow the policy

so determined.

The RBI is a statutory authority, and exercises supervisory

power over the functioning of the scheduled banks. RBI is entitled

to issue guidelines, from time to time, in matters relating to

supervision of scheduled banks.  (Sardar Associates3).  The

respondent Bank, a State within the meaning of Article 12 of the

Constitution of India, is bound to follow the guidelines issued by

RBI.  The power of the Board of Directors of the bank, to deviate

from the broad policy decisions contained in the RBI guidelines, is

confined only to minor matters which do not touch upon the broad

aspects of the policy decision. (Sardar Associates3).

In Sardar Associates3, on which reliance is placed on behalf

of the petitioner, the guidelines, which fell for consideration, were

those issued by RBI by its letter dated 3-9-2005 addressed to the

Chairman/Managing Director of all public sector banks.  This

letter, in turn, referred to the Circular dated 19-8-2005 issued by

RBI formulating the One-Time Settlement Scheme for recovery of

NPA below Rs 10 crores. The guidelines were issued to provide a

simplified, non-discretionary and a non-discriminatory mechanism

in the small and medium enterprises sector, and all public sector

banks were directed to uniformly implement these guidelines.  In

Sardar Associates3, the Supreme Court held that the circular

dated 19.08.2005 was binding on the banks.

As public sector banks are bound by the guidelines issued by

RBI, such guidelines can be enforced, in terms of the provisions of

the SARFAESI Act, by the Debts Recovery Tribunal, and

consequently by the Appellate Tribunal.  (Sardar Associates3).  The

Debt Recovery Tribunal and the Appellate Tribunal have the

requisite jurisdiction to consider the prayer made by a debtor for a

one-time settlement, particularly when it is within the purview of

the One-Time Settlement Scheme of the RBI. (Sardar Associates3).

While the guidelines/directions issued by RBI would,

undoubtedly, bind the respondent-bank, the question which

necessitates examination is whether any policy guidelines/

directions issued by RBI has been violated by the respondent-bank.

Reliance is placed by Sri P.S. Rajasekhar, Learned Counsel for the

petitioner, on the directions of the RBI with respect to units

governed by the Micro, Small & Medium Enterprises Development

(MSMED) Act, as communicated to all scheduled commercial banks

by RBI letter dated 21.07.2016.  The petitioner claims to be a

medium enterprise, and contends that the aforesaid directions

issued by RBI are applicable both to them and the respondent-

bank.

Clause 4.7 of the 2016 RBI directions relates to the debt

restructuring mechanism for MSMEs,  and clause 4.7(ii) refers to

the earlier circular of the RBI dated 04.05.2009 which put in place

loan policies governing extension of credit facilities,

restructuring/rehabilitation policy for revival of potentially viable

sick unit/enterprises, and a non-discretionary One Time

Settlement Scheme for recovery of non-performing loans for the

MSE sector, with the approval of the Board of Directors.  Under

clause 4.7 (iii) banks were advised to give wide publicity to the One

Time Settlement Scheme implemented by them, placing it on the

banks website and through other possible modes of dissemination.

In order to extend the benefits of the scheme to eligible borrowers,

RBI directed the banks to allow reasonable time to the borrowers to

submit the application, and to make payment of the dues.

Sri P.S. Rajasekhar, Learned Counsel for the petitioner,

would submit that the respondent bank has not given adequate

publicity to its One Time Settlement Scheme.  While Smt.T.Vidya

Rani, Learned Standing Counsel for the respondent bank, would

submit that the petitioner does not fall within the ambit of the

2016 RBI Guidelines as it is not a Micro, Small or a Medium

Enterprise, it is wholly unnecessary for us to delve into this aspect

as the petitioner has not even stated, in its affidavit filed in support

of the Writ Petition, that the respondent bank had not given

publicity to its One Time Settlement Scheme in terms of clause

4.7(iii) of the 2016 directions of the RBI.  On the other hand the

petitioners have taken advantage of the OTS benefit extended to

them by the respondent bank, whereby they were called upon only

to pay Rs.12.71 Crores in full and final settlement of their debt,

with the respondent-bank agreeing to waive a part of the principal

besides interest in its entirety.  This submission, of lack of

information of the OTS scheme, raised for the first time during the

course of hearing of these Writ Petitions, is yet another attempt by

the petitioners to avoid payment of the amounts due to the

respondent-bank. While the DRT has the power to issue directions

to scheduled banks to extend an RBI approved OTS scheme to the

borrowers, the order passed by the DRT in S.A.No.252 of 2015

dated 18.11.2015, directing the 2nd respondent to consider the

petitioners OTS proposal, has not been shown to be based on any

policy directions of the RBI.

It is no doubt true that if, in terms of the guidelines issued

by RBI, a right is created in a borrower, a writ of mandamus can be

issued. While exercising its power under Article 226 of the

Constitution of India, the High Court may or may not issue such a

direction, but it would not be justified in interfering with an order

passed by the DRT/Appellate Tribunal considering the effect of a

one-time settlement. (Sardar Associates3).

As they have not been able to show transgression, of the RBI

guidelines relating to OTS scheme, by the respondent-bank, the

petitioners are not entitled to seek a mandamus from this Court

directing the respondent-bank to extend them the OTS benefits,

offered to them earlier, despite their having failed to adhere to the

conditions stipulated therein.  The petitioners have failed to avail

the OTS benefit extended to them by the 2nd respondent-bank in its

proceedings dated 19.01.2016, or to comply with the order of the

DRT in I.A.No.206 of 2016 in S.A.No.252 of 2015 dated 12.05.2016

to pay the OTS amount with interest by 30.06.2016.  It is

unnecessary for us to dwell on this aspect any further as the OTS

benefit, extended to the petitioners vide proceedings dated

19.01.2016, has been withdrawn by the 2nd respondent bank vide

its proceedings dated 08.08.2016.

On a specific query from this Court regarding the amount

repaid by the petitioners till date, in discharge of their debt to the

2nd respondent-bank, Sri P.S.Rajasekhar, Learned Counsel for the

petitioners, stated that, as against the principal loan amount of

Rs.19.10 Crores, the petitioners have paid Rs.3.8 Crores so far.

This means that Rs.15.3 Crores, representing the principal amount

due, remains unpaid till date.  As against the principal amount

then due of Rs.16.50 Crores, the petitioner made an an OTS offer

for Rs.12.70 crores i.e. they wanted waiver of Rs.3.80 Crores

towards the principal debt itself, besides the entire interest due on

the loan extended to them, by the 2nd respondent-bank in the years

2008-2009, more than 8 years ago.

The 2nd respondent-bank, by its e-mail dated 19.01.2016,

informed the petitioner that their OTS had been considered under

the terms and conditions specified in the said letter.  While the

manner in which a one-time settlement scheme should be

formulated are all matters for the RBI and the concerned banks to

decide, and this Court would, ordinarily, not interfere therewith as

it lacks expertise, it is disconcerting that the 2nd respondent-bank

was willing to receive only Rs.12.71 Crores towards OTS (Rs.432

lakhs from M/s.Swetha Exports and Rs.839 Lakhs from

M/s.Swetha Exports India Pvt Ltd) though the principal debt then

due, from both of them together, was Rs.16.50 Crores which

means that, even if the petitioners had adhered to the OTS offer,

the second respondent would have foregone around Rs.3.80 Crores

towards the principal amount due plus the interest due thereon,

for the past more than eight years i.e., 2008-09, in its entirety.

Section 34 of the Civil Procedure Code relates to interest and,

under sub-section (1) thereof, where and in so far as a decree is for

the payment of money, the Court may, in the decree, order interest

at such rate as the Court deems reasonable to be paid on the

principal sum adjudged, from the date of the suit to the date of the

decree, in addition to pay interest adjudged on such principal sum

for any period prior to the institution of the suit, with further

interest at such rate not exceeding six per cent per annum as the

Court deems reasonable on such principal sum, from the date of

the decree to the date of payment, or to such earlier date as the

Court thinks fit.

The scope of the words the principal sum adjudged and such

principal sum, used in Section 34 CPC and the meaning to be

assigned thereto, fell for consideration in Ravindra2; and it is in

this context that the Supreme Court observed:

..Banking is an organised institution and most of the banks press

into service long-running documents wherein the borrowers fill in the blanks, at

times without caring to read what has been provided therein, and bind

themselves by the stipulations articulated by the best of legal brains. Borrowers

other than those belonging to the corporate sector, find themselves having

unwittingly fallen into a trap and rendered themselves liable and obliged to

pay interest the quantum whereof may at the end prove to be ruinous. At

times the interest charged and capitalised is manifold than the amount

actually advanced. Rule of damdupat does not apply. Penal interest, service

charges and other overheads are debited in the account of the borrower and

capitalised of which debits the borrower may not even be aware. If the practice

of charging interest on quarterly rests is upheld and given a judicial

recognition, unscrupulous banks may resort to charging interest even on

monthly rests and capitalising the same. Statements of accounts supplied

by banks to borrowers many a times do not contain particulars or details of

debit entries and when written in hand are worse than medical prescriptions

putting to test the eyes and wits of the borrowers. Instances of

unscrupulous, unfair and unhealthy dealings can be multiplied though they

cannot be generalised. Suffice it to observe that such issues shall have to be

left open to be adjudicated upon in appropriate cases as and when actually

arising for decision and we cannot venture into laying down law on such

issues as do not arise for determination before us. However, we propose to

place on record a few incidental observations, without which, we feel, our

answer will not be complete and that we do as under:

(1)

(2)

(3)

(4) ..

(5) The power conferred by Sections 21 and 35-A of the Banking

Regulation Act, 1949 is coupled with duty to act. The Reserve Bank of

India is the prime banking institution of the country entrusted with a

supervisory role over banking and conferred with the authority of

issuing binding directions, having statutory force, in the interest of the

public in general and preventing banking affairs from deterioration and

prejudice as also to secure the proper management of any banking

company generally. The Reserve Bank of India is one of the watchdogs of

finance and economy of the nation. It is, and it ought to be, aware of all

relevant factors, including credit conditions as prevailing, which would invite

its policy decisions. RBI has been issuing directions/circulars from time

to time which, inter alia, deal with the rate of interest which can be

charged and the periods at the end of which rests can be struck down,

interest calculated thereon and charged and capitalised. It should

continue to issue such directives. Its circulars shall bind those who fall

within the net of such directives. For such transaction which are not

squarely governed by such circulars, the RBI directives may be treated

as standards for the purpose of deciding whether the interest charged is

excessive, usurious or opposed to public policy  (emphasis

supplied).

As noted hereinabove, while the petitioners herein had

borrowed a total sum of Rs.19.10 crores from the respondent bank

(Rs.7.10 crores in 2008 and Rs.12.00 crores in 2009) they have

repaid, in all till date, only Rs.3.8 crores leaving the balance

principal debt unpaid of Rs.15.3 crores .  The OTS, which the

petitioners sought, is for payment of only Rs.12.70 crores (Rs.4.30

crores towards the loan extended to them in 2008, and Rs.8.40

crores towards the loan extended to them in 2009).  The

respondent-bank had granted them OTS, waiving even a part of the

principal, apart from the interest due from them in its entirety.

Reliance placed by the petitioners, on the observations of the

Supreme Court, in Ravindra2 which were made in the context of

penal interest, service charges and other sums being debited in the

account of the borrower, is misplaced.

As banks deal with public funds, waiver of even a part of the

principal debt would endanger the financial viability of these

banks.  It would also put to risk the hard earned money of small

depositors who park their life savings in these institutions, to

ensure safety and security of their deposits, even if the interest

offered thereon is far lower than in other forms of investment.  We

wish to say no more, as the petitioners have failed even to adhere to

the OTS offered by the 2nd respondent-bank which is now seeking

to recover the entire amount due to it from the petitioners herein.

III. IS FAILURE OF THE 2ND RESPONDENT-BANK TO SHOW

THE TITLE DEEDS TO THE PETITIONER-BORROWER, ON

THE GROUND THAT THEY ARE IN THE CUSTODY OF THE

RECOVERY OFFICER OF THE DRT, FATAL?

It is not in dispute that the title deeds, deposited by the

petitioners with the 2nd respondent-Bank as security for the loan,

are in the custody of the DRT.  Rule 23 of the Debt Recovery

Tribunal (Procedure) Rules, 1993 relates to the additional powers

and duties of the Registrar of the DRT.  It stipulates that, in

addition to the powers conferred elsewhere in the Rules, the

Registrar shall have the powers and duties, subject to any general

or special order of the Presiding Officer,  as are specified in clauses

(i) to (vii)  thereunder which, under clause (vii) and (viii), include

the power to order grant of copies of documents to the parties to

the proceedings; and to grant leave to inspect other records of the

Tribunal.

Rule 26 of the Debts Recovery Tribunal Regulations of

Practice, 1996 relates to inspection of the records.  Under clause (a)

thereof, subject to the provisions of Rule 17(1) of the D.R.T.

(Procedure) Rules, inspection of the records in Form No.16, on any

working day in a pending or decided case before the Tribunal, shall

be allowed only under the order of the Presiding Officer or the

Registrar as the case may be.  Clause (b) stipulates that inspection

of the records of a pending case shall not, ordinarily, be permitted

on the date fixed for hearing of the case or on the preceding day.

Clause (c) stipulates that, on grant of application for inspection of

the records, the Section Officer or an Officer authorised in that

behalf shall arrange to procure the records of the case, and allow

inspection of such records on the date and time fixed by the

Registrar; and such inspection shall preferably be between 2.30

p.m. and 4.30 p.m, in the presence of an officer authorised in that

behalf by the Registrar.  Clause (d) provides that the person,

inspecting the records, shall not in any manner cause dislocation

to, or mutilate, tamper or damage the records in the course of

inspection; and shall not make any marking on any record or

paper so inspected; and notes, if any of the documents or records

inspected, may be done only in pencil.  Clause (e) provides that the

officer, supervising inspection, may, at any time, prohibit further

inspection if, in his opinion, any of the records are likely to be

damaged in the process of inspection; or the person inspecting the

records is acting against the interest of parties or has violated the

above provision; and shall, immediately, make a report of the

matter to the Registrar, and seek his further orders.

The DRT, while passing the order in I.A.No.206 of 2016 in

S.A.No.252 of 2015 dated 12.05.2016 (ie in the proceedings under

the SARFAESI Act) appears to have overlooked the fact that the title

deeds were in its custody in O.A.Nos.46 and 50 of 2013 filed by the

2nd respondent-bank under the RDDB Act; and, in R.P.No.60 of

2014, the Recovery Officer was proceeding to recover the amounts

due.  Nothing prevented the petitioners from making an

application, in terms of the aforesaid statutory rules and

regulations, either to the Presiding Officer of the DRT or the

Registrar for permission to inspect the title deeds.  Having chosen

not to do so, the petitioners cannot now be heard to contend that

the 2nd respondent bank has not showed them or the prospective

buyers the title documents.  The petitioners have neither disclosed

the identity of the prospective buyer nor have they furnished his

details in the Writ affidavit.

The order of the DRT, in I.A.Nos.206 and 207 of 2016 in S.A.

No.252 of 2015 dated 12.05.2016, merely required the respondent-

bank to allow inspection, of the original title deeds, by the probable

buyers brought by the petitioners; and accept the amount paid by

the petitioners or the probable buyers.  By their letter dated

31.05.2016, the respondent-bank informed the petitioner that the

original documents, in both the accounts, were lying with the DRT,

Visakhapatnam in RP Nos.60 and 107 of 2014; the petitioner had

xerox copies of the title deeds, and they could negotiate with the

prospective buyers; the petitioner could arrange for inspection of

the original documents, by the prospective buyers, with the DRT,

Visakhapatnam on payment of the examination fee; and the

original documents could not be withdrawn at this juncture, since

the Suits were decreed and the recovery proceedings were pending

before the DRT.

The respondent-bank has pointed out, in our opinion

rightly, that, since a decree was passed by the DRT and recovery

proceedings were pending before the Recovery Officer, they could

not withdraw the original documents from the DRT at that

juncture.  The petitioners have not even stated, in their writ

affidavits, why they chose not to submit an application seeking

permission of the DRT to have the title deeds inspected by the

prospective buyers. On the other hand, they have specifically

asserted in the writ affidavits that no person would be willing to go

to the DRT for inspection of the original documents for fear of

buying properties under litigation.   It is evident, therefore, that no

prospective buyer came forward to inspect the title deeds in the

custody of the DRT. The ruse of a prospective buyer coming

forward to purchase the property, and the 2nd respondent being

blamed for not showing the documents, is only to avoid sale, of

their mortgaged immovable properties, by the 2nd respondent-bank

for recovery of its dues.

IV. IS THE RESPONDENT-BANK OBLIGATED TO RELEASE

THE      MORTGAGED PROPERTIES PROPORTIONATE TO

REPAYMENT OF THE DEBT BY THE PETITIONERS?

In examining the petitioners claim that the 2nd respondent-

bank should be directed to release their mortgaged properties

proportionate to repayment of the debt, it is necessary to take note

of the periodic changes in the petitioners stand from time to time.

After depositing the upfront amount of Rs.1.20 Crores (ie Rs.60

Lakhs each, in two instalments, as per the DRT order in

S.A.No.252 of 2015 dated 18.11.2015), the petitioners had agreed

to pay the balance OTS amount of Rs.1151 Lakhs by 31st March,

2016. (Rs.372 Lakhs and Rs.779 lakhs respectively i.e Rs.372

lakhs in three equal monthly instalments of Rs.124 Lakhs each

commencing from January, 2016, and Rs.779 Lakhs in two

monthly instalments of Rs.260 lakhs in January and February,

2016 and the last instalment of Rs.259 lakhs in March, 2016).

The respondent-bank, while sanctioning OTS by its letter dated

19.01.2016, reserved its right to cancel the OTS at any time, if the

petitioner defaulted in the payment schedule, and to proceed

further under the SARFAESI Act to auction the secured assets.

The petitioner was also informed that the mortgaged properties

would be released only after full and final payment of the entire

OTS amount, and on a full satisfaction memo being filed before the

DRT; and, at the time of conveying the banks approval, they

should give post dated cheques for the amounts payable as per the

payment schedule.  The petitioners were asked to confirm having

accepted these terms and conditions.

By their letter dated 20.01.2016, the petitioners informed the

respondent-bank that they would endeavour to meet the

commitments as per the conditions stipulated therein.  Contending

that there was very little time for mobilisation of the amount

during January, 2016, the petitioners requested the respondent-

bank to permit them to pay Rs.700 lakhs on or before 25.02.2016,

the balance Rs.451 Lakhs on or before 25.03.2016, and assured

that the entire OTS amount would be cleared before 31.03.2016.

They requested the respondent-bank to release the securities, at

least to the extent of 45% of the partial amounts deposited, to

enable them to realise the necessary amounts to facilitate further

payments in the agreed manner.  They requested the respondent-

bank to consider the following: (1) approval for payment of OTS

dues in two instalments i.e. Rs.700 Lakhs by 25.02.2016 and

Rs.451 Lakhs by 25.03.2016; (2) release of securities of

approximately 45% (Rs.305.89 lakhs security) on payment of

Rs.700 Lakhs immediately; and (3) approval for submission of post

dated cheques for Rs.700 Lakhs and Rs.451 Lakhs dated

25.02.2016 and 25.03.2016 respectively.  They informed the

respondent-bank that, upon confirmation, they would submit post

dated cheques to the bank immediately.

By their letter dated 25.02.2016, the respondent-bank

informed the petitioners that extension of the payment period of

the OTS amount, and partial release of securities as requested by

them by their letters dated 20.01.2016 and 28.01.2016, was

declined by the competent authority; and the petitioners request

for payment of the entire OTS amount, on both the accounts

together, by 25.03.2016, as conveyed by them in their letter dated

25.02.2016, could also not be considered at this juncture.  The

petitioners were called upon to pay Rs.700 Lakhs by 25.02.2016,

and the remaining Rs.451 Lakhs by 25.03.2016, as conveyed by

them in their letters dated 20.01.2016 and 28.01.2016; the total

amount payable, for the two accounts, was Rs.1151 lakhs as per

the OTS; and if the amounts were not paid by 25.02.2016 and

25.03.2016, the respondent-bank would be constrained to present

the two post dated cheques, submitted by the petitioner along with

their letter dated 28.01.2016, for payment. Both the cheques

issued by the petitioner (i.e cheque dated 25.2.2016 for Rs.5.00

crores and cheque dated 25.3.2016 for Rs.2.79 crores) were

dishonoured, on presentation, for insufficient funds.

As not a single rupee was paid after the OTS was sanctioned

by the 2nd respondent-bank by its letter dated 19.01.2016, and as

both the cheques were dishonoured on presentation, an e-auction

notice dated 16.04.2016, proposing to conduct an auction on

17.05.2016, was issued questioning which one of the petitioners

filed W.P.No.16243 of 2016 before this Court, and the other filed

I.A.No.206 of 2016 in S.A.No.252 of 2015 before the DRT.  In its

order in I.A.No.206 of 2016 dated 12.05.2016, the DRT directed the

petitioner to pay Rs.10 Lakhs, and extended the time for payment

of the OTS amount, with interest, till 30.06.2016. While the

petitioner paid Rs.10 Lakhs on 15.05.2016, they did not pay any

amount thereafter.   It is in such circumstances that the 2nd

respondent-bank, by its letter dated 08.08.2016, cancelled the OTS

offer extended to the petitioners earlier on 19.01.2016.  The

petitioners filed the present Writ Petitions, and an interim order

directing the respondent-bank not to take coercive steps for

recovery of the balance amount due from the petitioners was

passed on 23.08.2016.  Consequently the petitioners have not paid

a single rupee to the 2nd respondent-bank for the past one year and

four months ever since 15.05.2016.

Even after these Writ Petitions were filed before this Court on

19.08.2016, the petitioners have been in correspondence with the

respondent-bank.  Sri P.S. Rajasekhar, Learned Counsel for the

petitioners, has placed before us copies of the letter addressed by

the petitioners on 03.05.2017, and the reply of the respondent-

bank thereto on the very same day.  In their letter dated

03.05.2017, the petitioners informed the respondent-bank that

they were improving their OTS offer to Rs.10.50 Crores, to close the

NPA accounts, from their present OTS offer of Rs.9.25 Crores.

They requested the respondent-bank to consider and accept

Rs.10.50 Crores as the OTS towards full and final settlement of all

their NPA accounts.  They referred to the terms and conditions of

the OTS as (1) Rs.10.50 Crores being deposited in a no lien third

party account till approval, and to appropriate the deposit on

conveying approval; (2) release of all securities mortgaged in the

bank upon payment of afore-said OTS amount of Rs.10.50 Crores;

(3) withdrawal of cases filed by both the bank and by them; and (4)

the entire amount of Rs.10.50 Crores to be adjusted in all the loan

accounts of their entire group.

In reply thereto the Chief Manager of the respondent-bank,

by his letter dated 03.05.2017, informed the  petitioners that, with

reference to their compromise offer, they should comply with the

following (1) deposit Rs.10.50 Crores in a third party no lien

account; (2) letter from the third party, in whose account the OTS

amount is to be parked, stating that the amount would be

appropriated towards closure of said accounts under OTS if the

proposal is approved by the competent authority; and, if the

proposal was not accepted by the competent authority, the amount

deposited in the third party account would be returned.  The

petitioners were requested to arrange for deposit of Rs.10.5 crores,

into the third party no lien account, to enable the respondent-bank

to start the process of considering their request for a one-time

settlement.  The petitioners did not take up the 2nd respondents

offer.  Let alone deposit of Rs.10.50 Crores in a third party no lien

account, they have not paid a single rupee to the bank for the past

sixteen months and, under the protection of the unconditional

interim order passed by this Court, have successfully prevented the

2nd respondent-bank from realising its debt on the sale of the

secured assets.

As neither the SARFAESI Act nor the Rules made thereunder

so obligate the Bank, it is not for this Court, in proceedings under

Article 226 of the Constitution of India, to take upon itself the task

of determining whether the Bank should or should not release the

mortgaged property in proportion to the debt repaid by the

petitioners, for these are all matters for the bank, in its wisdom, to

decide.  The 2nd respondent had earlier, by its letter dated

25.02.2016, declined the petitioners request in this regard, and

this Court, in judicial review proceedings under Article 226 of the

Constitution of India, would neither sit in judgment over such a

decision nor would it substitute its views for that of the bank.

Even otherwise, the petitioners have chosen not to pursue

this request for, in their letter dated 03.05.2017, they have sought

for release of the mortgaged securities only on payment of the OTS

amount of Rs.10.50 Crores, and have not requested proportionate

release of their properties on part payment of the OTS amount.

Despite the respondent-banks request that they should deposit

Rs.10.50 Crores in a third party no lien account to show their

bonafides, (for the said amount to be appropriated towards their

loan in case their proposal was accepted and, in case the proposal

was not accepted, for return of the said sum of Rs.10.50 Crores to

them), the petitioners have not taken up the offer of the

respondent-bank to pay the said amount; and, under the

protection of the interim order dated 23.08.2016, (which precluded

the respondent-bank from taking coercive steps for recovery of the

balance amount due from the petitioners account), have chosen not

to pay even a single rupee towards the amounts due from them to

the respondent bank.  It is evident, therefore, that there are no

bonafides in these Writ Petitions, and the petitioners are merely

seeking to drag on proceedings and thwart all attempts of the

respondent-bank to recover the amounts due to it.

V. OTHER CONTENTIONS:

The contention that the respondent bank had failed to co-

operate with the petitioners in extending them the benefit of the

OTS, despite the directions of the DRT, is only to be noted to be

rejected.  As noted hereinabove, both the DRT and the respondent

bank have been extremely indulgent in extending to the petitioner

the benefit of a one time settlement, waiving even a part of the

principal apart from the interest thereon in its entirety.  It is the

petitioners who failed to make payment under the OTS scheme  

resulting in its cancellation, vide proceedings dated 08.08.2016, by

the respondent-bank.

With regards the petitioners claim that they should be

permitted to sell the immoveable properties by private treaty, it is

necessary to note that Section 13(8) of the SARFAESI Act, after its

substitution by Act 44 of 2016 with effect from 01.09.2016,

provides that, where the amount of dues, together with all costs,

charges and expenses incurred by him, is tendered to the secured

creditor at any time before the date of publication of the notice for

public auction or inviting quotations or tender from public or

private treaty, for transfer by way of  sale of the secured assets, the

secured asset shall not be transferred for sale by the secured

creditor.    Prior to its substitution by Act 44 of 2016, Section 13(8)

stipulated that if the dues of the secured creditor, together with all

costs, charges and expenses incurred by him, are tendered to the

secured creditor at any time before the date fixed for sale or

transfer, the secured assets shall not be sold or transferred by the

secured creditor, and no further steps shall be taken by him for

transfer or sale of that secured asset.

After its substitution, Section 13(8) of the SARFAESI Act

recognises the respondent banks right to tender, from public or

private treaty, for the transfer by way of sale of the secured asset.

The decision whether or not to tender the secured asset by way of

private treaty, for its transfer by way of sale, is at the discretion of

the bank/financial institution.  The right conferred on the

borrower is to redeem the property at any time before such an

exercise is undertaken by the bank/financial institution.  Section

13(8) does not obligate the respondent-bank to sell the subject

property by private treaty, even for receipt of the OTS amount

which is far less than the total amount due from the petitioners.

Even otherwise, the petitioners have not been able to show that

any person was willing to purchase the subject immoveable

properties by private treaty, and to pay a price which would enable

the respondent bank to recover its dues, along with interest

thereon, in its entirety.  While Section 13(8) of the SARFAESI Act

acknowledges the power of the bank/financial institution to tender

the secured asset, for sale by private treaty, it does not obligate the

bank to release the property piecemeal as and when proportionate

payment is made by the borrower.  In any event, the petitioners

have not been able to show that they found a buyer, who was

willing to pay a price far higher than the reserve price, for purchase

of the subject properties, which would enable repayment of the

entire amount due to the respondent-bank.

The contention that the respondent-bank had put the

subject properties to auction for an abysmally low price does not

also merit acceptance.  If, as is contended by the petitioners, the

price at which the subject properties are sought to be sold are so

abysmally low, nothing prevented them for finding a buyer who

would offer a far higher price, than the reserve price fixed by the

respondent bank and thereby repay the entire debt due, or from

finding a person to participate in the auction and submit a bid for

an amount far higher than the reserve price.

We see no reason to accede to the petitioners request for

grant of two months time to pay the OTS amount of Rs.10.5 crores.

It is because of the petitioners failure to adhere to the repayment

schedule, stipulated by the respondent bank and the DRT, initially

by 31.03.2016 and later by 30.06.2016, was the bank constrained

to cancel the OTS offer, made by them earlier on 19.01.2016, vide

their letter dated 08.08.2016.  As noted hereinabove after the OTS

offer dated 19.01.2016, for payment of 11.51 crores (12.71 crores

minus 1.20 crores paid by them), the petitioners did not pay any

amount apart from Rs.10 lakhs on 15.05.2016 that too only

because the DRT had, by its order in I.A. No. 206 and 207 of 2016

in SA No.252 of 2015 dated 12.05.2016, directed them to do so.

For the past more than 16 months (i.e., from 15.05.2016 till date),

the petitioners have not paid a single rupee in discharge of the debt

due to the respondent-bank, and their request for grant of further

time of two months is only to avoid sale of the secured assets

without having to repay the debt.

VI. REPEATED EFFORTS OF THE RESPONDENT TO PUT THE              

      SUBJECT PROPERTIES TO SALE AND RECOVER ITS DUES            

      HAVE BEEN THWARTED BY THE PETITIONERS ON ONE            

      PRETEXT OR THE OTHER:    

The petitioners have resorted to every trick in the book to

prevent the 2nd respondent-bank from putting the subject

properties to sale, and at the same time avoid payment of the

amounts due to the bank.  In these Writ Petitions they seek a

direction to the respondent bank to permit them to sell the

mortgaged properties one after the other, and pay 50% more than

the reserve price fixed for each of the mortgaged properties.  A

similar offer made by the petitioner was rejected by the respondent-

bank by its letter dated 25.02.2016 itself.  As noted hereinabove,

the OTS offer made by the respondent-bank, vide its proceedings

dated 19.01.2016, was for payment of Rs.1271 Lakhs (Rs.432

lakhs towards the loan accounts of M/s.Swetha Exports and

Rs.839 lakhs towards the loan accounts of M/s.Swetha Exports

India Pvt. Ltd). As they had already paid Rs.120 Lakhs in

December, 2015, the petitioners were asked to pay the balance

Rs.1151 lakhs (Rs.11.51 Crores) in three monthly instalments in

the months of January, February and March, 2016.

After the OTS offer was made by the respondent-bank on

19.01.2016, the petitioners have paid only Rs.10 Lakhs on

15.05.2016, in compliance with the order of the DRT in

I.A.Nos.206 and 207 of 2016 in S.A.No.252 of 2015 dated

12.05.2016.  As they have not paid the OTS offer amount of

Rs.12.71 Crores, within the time stipulated i.e., by 31st March,

2016, or even by the extended time granted by the DRT till

30.06.2016, the respondent-bank was justified in cancelling the

OTS offer by its letter dated 08.08.2016.  As against the OTS offer

of Rs.12.71 Crores, the petitioners have paid only Rs.1.30 Crores

and, even in terms of the said OTS offer, they were still due

Rs.11.41 Crores to the respondent-bank.

The repeated indulgence shown to them by the DRT has,

evidently, emboldened the petitioners to reduce the OTS offer to

Rs.9.35 Crores, and to subsequently marginally increase it to

Rs.10.50 Crores as is evident from their letter dated 03.05.2017,

though the balance amount due, even in terms of the earlier OTS

offer dated 19.01.2016, is Rs.11.41 Crores.  The petitioners have

successfully thwarted all legitimate attempts of the respondent-

bank to recover its dues.  It is not even contended before us, by the

petitioners herein, that they have identifiable buyers ready and

willing to purchase the secured assets, nor have they furnished

any information of the price which the so called prospective buyers

are willing to pay for the mortgaged properties.  The present Writ

Petitions are a last ditch effort to prevent the respondent-bank from

putting the subject properties to sale for recovery of its dues.

VII. CONCLUSION:

Viewed from any angle the Writ Petitions, as filed, are devoid

of merits and are, accordingly, dismissed.  As the efforts of the

respondent-bank, to put the subject properties to sale, have been

scuttled by the petitioners, (repeatedly approaching either the DRT

or this Court), on wholly untenable grounds, exemplary costs of

Rs.25,000/- are imposed in each of these Writ Petitions, which the

petitioners shall pay the respondent-bank within four weeks from

today failing which it is open to the 2nd respondent-bank to recover

the same in accordance with law.  Miscellaneous Petitions, if any

pending, shall also stand dismissed.

________________________________

RAMESH RANGANATHAN, ACJ

_________________

J. UMA DEVI, J.

Date:22.09.2017.