WP/40655/2014 of Sri Suryamanga Rice Mill Vs Karur Vysya Bank Limited, on 30 December 2014

THE HON'BLE SRI JUSTICE K.C.BHANUAND

THE HON’BLE MRS JUSTICE ANIS

WRIT PETITION No.40655 OF 2014

ORDER:- (per Hon’ble Sri Justice K.C.Bhanu)

This writ petition is filed seeking to issue a writ of Mandamusdeclaring the action of the respondents in issuing possession notice,dated 10.12.2014, as illegal, arbitrary and against the provisions of theSecuritization and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002 (for short, “the SARFAESIAct”) and consequently, to set aside the same.

2. Petitioner No.1 – Rice Mill was established in the year 2008. Petitioner No.1 obtained loan from respondent No.2 for an amount ofRs.1.50 crore as over draft cash credit facility on 9.4.2012. PetitionerNo.2, being the Proprietor of the said rice mill, and respondent No.3,being the guarantor, mortgaged their properties by depositing their titledeeds. While so, the authorities of the Civil Supplies Departmentseized the stocks available in the rice mill worth Rs.1,34,39,900/-,handed over the stocks to Sri Radha Hari Millers, Kotananduru,initiated proceedings under Section 6-A of the Essential CommoditiesAct, 1955 (for short, “the E.C. Act”) and locked the rice mill. PetitionerNo.1 filed W.P.No.11755 of 2013 for release of the stocks and thesame was disposed of on 18.04.2013 directing the respondents tofinalize the proceedings initiated under Section 6-A of the Act within aperiod of two months from the date of receipt of a copy of the order. Inspite of the same, the Civil Supplies Department has not finalized thesaid proceedings. As such, petitioner No.1 was unable to run the ricemill, which is beyond his control, and hence, it could not discharge theloan amount to the respondent Bank. Petitioner No.1 paid some instalments and later, committed default in repayment of the entire loanamount. Hence, the loan was declared as Non-performing Asset(N.P.A.) and a notice was issued on 01.10.2014 demanding to repaythe amount of Rs.1,33,74,416.54 ps. Petitioners made representationson 10.10.2014 and 12.10.2014 intimating the bank authorities that theywould discharge the loan amount immediately after the finalization ofthe proceedings initiated under Section 6-A of the Act pending with theCivil Supplies Department. The respondent Bank issued possessionnotice under Rule 8(1) of the Security Interest (Enforcement) Rules,2002 on 10.12.2014. Hence, the present writ petition.

3. Learned counsel for the petitioners contended that the petitionersare pursuing the proceedings initiated by the Civil SuppliesDepartment before the competent authority; that if a reasonable time isgranted to the petitioners, they would repay the entire outstandingamount payable to the respondent Bank and hence, she prays to admitthe writ petition.

4. As petitioner No.1 failed to repay the loan amount, the loanaccount was declared as N.P.A. and proceedings under theSARFAESI Act were initiated. In the first instance, the Bank hasissued a notice under Section 13(2) of the SARFAESI Act calling uponit to pay the entire outstanding amount due to the bank within a periodof 60 days. As petitioner No.1 failed to pay that amount, the notice,dated 10.12.2014, was issued intending to take possession of thesecured asset. Petitioner No.1 appears to be a bona fide borrower. Beyond its control and the circumstances, it could not repay the loanamount to the Bank. The reason for not paying the loan amount is theseizure of the stock by the Civil Supplies Department in pursuance of acase registered under the E.C.Act. Any how, petitioner No.1 ispursuing its remedies with the Civil Supplies Department and as amatter of fact, petitioner No.1 also approached this Court by filing W.P.No.11755 of 2013 under Article 226 of the Constitution of Indiawherein this Court directed the Civil Supplies Department to finalise 6-A proceedings within a period of two months from the date of receipt ofa copy of this order.

5. In view of the peculiar facts and circumstances of the case,reasonable time can be granted to enable the petitioners to pay theentire amount due to the Bank. Therefore, we direct the petitioners topay 50% of the outstanding loan amount to the Bank within a period ofeight (8) weeks from the date of receipt of a copy of this order and theremaining 50% of the loan amount within a period of eight (8) weeksthereafter. If anyone of the above conditions is not fulfilled by thepetitioners, the respondent Bank is at liberty to proceed further forrealisation of the amount due to the Bank in accordance with theprovisions of the SARFAESI Act. Registry is directed not to entertainany application seeking “Extension of Time” or “For being mentioned”in this regard. Since this order will not adversely affect the interests ofthe Bank and the Bank is only interested to recover the outstandingamount payable to it, notice to the respondent Bank in this writ petitionis not necessary.

6. With the above direction, the Writ Petition is disposed of. Thereshall be no order as to costs. Miscellaneous Petitions, if any, pendingin this Writ Petition shall stand closed.

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JUSTICE K.C.BHANU

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JUSTICE ANIS

THE HON'BLE SRI JUSTICE K.C.BHANUAND

THE HON’BLE MRS JUSTICE ANIS

WRIT PETITION No.40655 OF 2014

DATE: 30.12.2014

AMD