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TMI Blog2008 (1) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners averment is that, M/s. NAP Agencies, Guwahati having approached the Respondent Bank for availing cash credit facility, was sanctioned financial accommodation to the tune of ₹ 1,10,000.00. To secure the repayment of the loan amount, the borrower approached the petitioners and their deceased father/husband Late Jamini Prasad Singh to be sureties and furnish securities by creating equitable mortgage of immovable properties. Acceding to the request, the petitioners and their father/husband aforenamed offered equitable mortgage of their immovable properties by way of collateral securities guaranting repayment of the loan. It is not essential to detail the particulars of the properties mortgaged. Suffice it to mention that according to the petitioners, they along with their families are residing on the said property and are carrying on business therefrom. 5. The petitioners have alleged that they remained in a bonafide belief that the borrower had been duly repaying the dues inasmuch as, at no point of time, the respondent Bank had complained to them of any default in the liquidation schedule. To their shock and surprise therefore, they came to learn from the officials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.05.2007 ₹ 5,000/- 05.05.2007 Rs. 5,000/- In all, according to the petitioners, on the date of institution of the instant petition, they had deposited ₹ 11,70,000/- in the cash credit account of M/s. NAP Pvt. Ltd. While the matter rested at that, the impugned notice dated 26.04.2007 was served on them on 01.05.2007 demanding ₹ 96,29,667.04 with the intimation that the Bank would take over the possession the security assets on 7.05.2007 on the failure to make payment. 6. The petitioners besides disputing the amount of demand in the face of the deposits made by them in between, have questioned the validity of the notice dated 16.12.2006 for non compliance of the peremptory statutory prerequisites engrafted in Section 13 of the Act. They have pleaded that as they have been regularly making deposits in the borrower's account with an earnest desire to liquidate the outstanding amount and that the notice dated 26.04.2007 consequential to the one dated 16.12.2006 is also invalid besides being violative of the principles of natural justice. The petitioners have contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned action taken is in accordance with the provisions of the Act. The bank also denied that account of the borrower could not be assigned out of order status in view of the deposit of ₹ 15 lakhs by the borrower and ₹ 11,70,000/- 'by the petitioners. As the borrower as well as its guarantors faired to clear the amount due inspite of notice under Section 13(2) of the Act, the action as per provision of Section 13(4) thereof is permissible. 9. Referring to the petitioners representation dated 14.2.2007, the answering respondent has pleaded that thereby they assured to clear all dues with interest and besides depositing ₹ 7,50,000/- they undertook to pay further sum of ₹ 10,00,000/- on or before 10.3.2007. The Bank has claimed that on receipt of the representation, it informed the petitioners over phone as well as during their personal visits about its inability to consider the proposal made in the representation and in the circumstances, the impugned notice dated 24.4.2007 had to be issued. The bank referred to a letter dated 31.8.2006 of the borrower admitting its liability to the tune of ₹ 97.42 lakhs and asserted that the petitioners as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 24.4.2007 as in his contention, the same was impermissible under the Act in view of the non disposal of the petitioners representation dated 14.2.2007 as obligatorily required under Section 13(3) (A) of the Act. As the petitioners are making payments accepted by the bank, the impugned action in any view of the matter is not sustainable in law, he urged. 12. Mr. Sahewalla to buttress his arguments has placed reliance of the decisions of the Apex Court in Mardia Chemicals v. Union of India and of the Mysore High Court in P. Janakiram Chetty, Appellant v. Punjab National Bank Ltd. New Delhi and Anr. respondents AIR 1968 Mysore 56. 13. Mr. Bhatra in reply has at the threshold challenged the maintainability of the writ petition for non - exhaustion of the alternative remedy of appeal under Section 17of the Act. According to him, as statutory remedy is obtainable by the petitioners, this Court would refrain from exercising its extra ordinary jurisdiction under Article 226 of the Constitution of India. 14. Referring to the borrower's account as well as the norms, the learned Counsel has argued that it is apparent therefrom that the balance had remained in excess of sanctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been wrongly described as an appeal and the Debt Recovery Tribunal in fact is a forum where proceedings are originally initiated in case of any grievance against the creditor in response to any measure taken under Section 13(4) of the Act. The Apex Court upheld the condition of deposit of 75% of the amount claimed as a condition precedent for availing the remedy under Section 17(2) [as it was then)] of the Act as irrational, arbitrary and violative of Article 14 of the Constitution of India. It eventually recorded that where as required, the creditor has taken action under Section 17(4) of the Act, it would be open to the borrower to file an appeal under Section 17 of the Act within the period of limitation as prescribed therefore. The pronouncement in M/s. Mardia Chemicals Ltd. (supra) does not admit of a predication of absolute bar on the exercise of the writ jurisdiction under Article 226 of the Constitution pf India in face of the alternative remedy of appeal under Section 17 of the Act. 17. The Apex Court in Whirlpool Corporation, Appellant v. Registrar of Trade Marks, Mumbai and Ors. Respondents while elaborating on the plenary power of a High Court under the above const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extual facts. 20. It is not in dispute that the stock in trade of the borrower as security for thefinancial accommodation though hypotheticated with the respondent bank had remained in the possession and custody of the borrower. Though it was expected that the above notwithstanding, the creditor would maintain a close vigil thereon to guard against the same being frittered away by the borrower to its prejudice, the materials on record do not unequivocally suggest any deliberate and intentional lapse of the respondent bank in this regard. The present therefore is not a case where any security in the custody or control of the creditor had been lost due to any overt or covert omission or negligence on its part so as to entitle the surety to claim a discharge to the extent of the value thereof as contemplated under Section 441 of the Contract Act. This view is reinforced by the decision in Bank of India, Bombay (supra) where their Lordships of the Punjab and Haryana High Court had held in categorical terms that a surety in the case of hypothecation is not entitled to invoke Section 141 of the Contract Act for his benefits. It was held that if any hypothecated goods remain with the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners who admittedly are borrowers in terms of Section 2(f) of the Act. The petitioners as well, in their reply affidavit have insisted to the said effect. 24. The Apex Court in Mardia Chemicals Ltd. and Ors. (supra) while dwelling on the Act before its amendment by Act 30 of 2004 incorporating Section 13(3 A) had held that the purpose of serving a notice upon the borrower under Section 13(2) is to enable him to submit a reply explaining the reason as to why the measures may or may not be taken under Section 13(4) for non compliance of the notice within 60 days. Their Lordships were of the view that the creditor must apply its mind to the objections raised in the reply. It emphasized in favour of some meaningful consideration of the objections raised rather ritual rejection thereof before proceeding to take drastic measures under Sub-section (4) of Section 13. This, their Lordships underlined was conducive to the principles of fairness on the part of the banks and financial institutions in dealing with the borrowers to apprise them of the response for not accepting their objections or points raised in reply to the notice before proceeding under Sub-section 4 of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response of a borrower to the notice under Section 13(2) ought not to be necessarily limited to an objection, denial or reservation against the demand made, but can presumably be comprehended to be a request as well, for time or relaxation of the payment schedule for discharging the outstanding liability Be it an objection to the tenability of the demand or beseechment for further time or easy terms for payment of the demanded dues, the creditor if not inclined to accede to the request is statutorily obliged to record reasons therefore and communicate the same to the borrower within a week of the receipt of the representation or objection as the case may be. The provision being impelled by the wholesome objective of providing an opportunity to the borrower to record his stand against the demand or make a representation in connection therewith, on the threshold of an action under Section 13(4) and to be apprised of the decision of the creditor, the duty cast on the latter has to be strictly construed so much so that any digression therefrom by the borrower would be at the pain of invalidation of the steps subsequent thereto to enforce the demand by adopting one or more of the measur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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