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State Bank of India, Stressed Assets Management Branch, Represented Authorized Signatory v/s The District Collector, (District Magistrate), Tirupur

    W.P. No. 16567 of 2018

    Decided On, 04 July 2018

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE S. MANIKUMAR & THE HONOURABLE MR. JUSTICE SUBRAMONIUM PRASAD

    For the Petitioner: P. Elaya Rajkumar for M/s. Ramalingam & Asso., Advocates. For the Respondent: M. Sricharan Rangarajan, Additional Government Pleader.



Judgment Text

(Prayer: WRIT Petition filed under Article 226 of the Constitution of India, praying for the issuance of a writ of Mandamus, directing the respondent to pass appropriate orders in the petitioner's application dated 06.04.2017 filed under Sec.14 of SARFAESI Act, taken on file in Ref.No.6204/2017/C3 dated 08.05.2017, seeking necessary assistance to the petitioner in terms of Section 14 of the SARFAESI Act, to take vacant physical possession of the secured assets as set out therein and in accordance with law.)

S. Manikumar, J.

1. Seeking assistance, for taking physical possession, State Bank of India, Stressed Assets Management Branch, Coimbatore, has filed petition dated 06.04.2017, under Section 14 of the SARFAESI Act, 2002, before the District Collector cum District Magistrate, Tirupur, Tirupur District.

2. According to the petitioner, one M/s.Thirupur Suriya Textiles Private Ltd., has availed various credit facilities, in the nature of financial assistance from the petitioner bank, at the Specialized Commercial Branch, Tirupur, aggregating Rs.99.66 Crores. The said financial assistance is secured by the personal guarantee of one Mr.K.Kuppusamy, Mrs.Radhambikai, Mrs.K.Palanathal, Mr.K.Karthik, Smt.K.Suriya and Mr.S.Harihara Sivasubramanian. For default, the said credit facil

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ities were classified as non performing assets on 26.02.2013 and the borrower account was transferred to State Bank of India, Stressed Assets Management Branch, Coimbatore.

3. Demand notice dated 20.09.2016 was issued under Section 13(2) of the SARFAESI Act, 2002, calling upon the borrower/guarantors to repay the outstanding sum of Rs.117,80,29,715/- as on 12.08.2016. Reply/objection dated 21.11.2016 was received from the borrower, to which the petitioner bank has sent a rejoinder on 28.11.2016, rejecting the objections. Thereafter, possession notice dated 07.01.2017, was issued under Section 13(4) of the Act. Newspaper publication was made on 09.01.2017. Since the borrower did not come forward to discharge the liability, petitioner bank has filed an application, under Section 14 of the SARFAESI Act, 2002 dated 06.04.2017 before the District Collector cum District Magistrate, Tirupur. The said application was taken on file by the respondent in Ref.No.6204/2017/C3 and the same is pending till date.

4. Petitioner bank has further contended that the District Collector cum District Magistrate, Tirupur District, by letter dated 08.05.2017, has called upon the petitioner to produce certain documents. Petitioner has produced all documents and provided clarification by reply letter dated 22.05.2017. Petitioner Bank had also informed about the stay obtained by the alleged tenant before DRT vide its letter dated 22.05.2017 and sought for order under Section 14 of the SARFAESI Act.

5. Petitioner bank has further submitted that secured assets were brought for auction sale on two occasions and the last Sale Notice was issued on 01.06.2017, fixing the auction on 23.06.2017. Borrower company has challenged the measures under SARFAESI Act, before the Debts Recovery Tribunal, Coimbatore and the tribunal was pleased to grant an interim order on condition to deposit Rs.40 Crores. The company has failed to comply with the deposit as ordered by DRT, Coimbatore and by invoking the provisions of Insolvency and Bankruptcy Code, 2016, filed a petition under Section 10 of the Code before the National Company Law Tribunal, or initiation of Corporate Insolvency Resolution, thereby to defeat the SARFAESI Action. The said petition was admitted on 14.06.2018 and in view of the moratorium of 180 days, petitioner could not proceed against the borrower/guarantors under the SARFAESI Act and physical possession of the factory premises was also surrendered to the Insolvency Professional appointed under the Code. After the expiry of 180 days and on failure to come up with a Resolution Plan, National Company Law Tribunal, Chennai ordered liquidation of the borrower Company on 11.01.2018 and vacated the moratorium so as to enable the petitioner Bank to proceed under the SARFAESI Act. Immediately, petitioner sent a letter to the respondent on 01.02.2018, intimating about the said development and sought for necessary orders under Section 14 of the SARFAESI Act, to enable to proceed further. The said letter reads thus:

SAMB/CBE/CLO-II/2761 01.02.2018

Dear Sir,

THIRUPUR SURIYA TEXTILES PVT LTD.

SECTION 14 OF SARFAESI ACT, 2002

PHYSICAL POSSESSION - REQUESTED.

We write with reference to our earlier letter No.SAMB/CBE/CLO-II/321, dated 22.05.2017, on the captioned subject. In this connection, we inform that the Directors of the company filed Insolvency Petition before the National Company Law Tribunal, Chennai, praying for resolution/liquidation. The Hon'ble Court admitted the petition on 14.06.2017 and declared moratorium of 180 days. Due to moratorium, we could not proceed against the borrower / guarantors under SARFAESI Act.

2. Since the company / directors/ guarantors failed to submit any resolution plan before the Hon'ble Court even after expiry of moratorium, the court has ordered liquidation of the company on 11.01.2018 and vacated the moratorium. In view of the forgoing, we request you to issue an order for taking physical possession of the properties as mentioned in our application / letters, at the earliest and help us to recover the dues.

Yours faithfully,

sd/-

Authorised Officer &

Assistant General Manager,

Encl.:

Photocopies of

1. Our letter dated 22.05.17

2. Your letter dated 08.05.2017

3. NCLT's order dated 14.06.2017; 11.01.2018

6. Thereafter, on 19.04.2018, District Collector cum District Magistrate, Tirupur, has sent a hearing notice, directing the petitioner to appear before him on 25.04.2018 at 3.30pm, with all relevant documents and the said letter is extracted hereunder.

'TAMIL'/6204-2017-'TAMIL'3 'TAMIL'; 19/04/2018

'TAMIL'

7. Petitioner bank has further submitted that the borrower company has approached the National Company Law Tribunal against the liquidation order by way of an appeal and the same is pending. There is a status quo order passed in respect of the said liquidation. However, according to the bank, the enforcement against the security interest of the personal guarantors can proceed and major properties mortgaged are owned by the individual guarantor and clear identification is provided in the schedule describing the secured asset. In the above circumstances, left with no other alternative, instant writ petition has been filed for a mandamus, directing the respondent, to pass orders on the petition application dated 06.04.2017 filed under Sec.14 of SARFAESI Act, taken on file in Ref.No.6204/2017/C3 dated 08.05.2017, within such time frame to be fixed by this Court.

8. On this day, when the writ petition came up for admission, on instructions, Mr.M.Sricharan Rangarajan, learned Additional Government Pleader submitted that orders are yet to be passed in the application filed under Section 14 of the SARFAESI Act, 2002. He further submitted that proceedings are pending, before the authorities under National Company Law Tribunal (NCLT) constituted under Section 408 of the Companies Act, 2013 (18 of 2013). He prayed for four weeks time.

9. Heard the learned counsel appearing for the parties and perused the materials available on record.

10. Section 14 of the SARFAESI Act, 2002 mandates that on receipt of an affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit, pass suitable orders for the purpose of taking possession of the secured assets, within a period of 30 days from the date of application. Proviso to the said Section states that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate, within the said period of thirty days, for the reasons beyond his control, he may after recording reasons, in writing, for the same, pass the order within such also period but not exceeding in aggregate 60 days.

11. The Principal Secretary to Government, vide, Letter No.19498/Res.II/2014-1, dated 09.07.2014, has issued directions, stating that there should be speedy disposal of the application filed under Section 14 of the SARFAESI Act. The said letter is extracted hereunder:-

'I am to invite your kind attention to the reference cited (copy enclosed) wherein the GM, SLBC, Chennai, has requested to advise the District Collectors (District Magistrates) for speedy disposal of applications filed by banks to assist in taking possession of securities of the defaulters charged to the banks under Section 14 of SARFAESI Act, 2002.

2. In this connection, I am to request you to take necessary action for speedy disposal of the applications filed by the banks in taking possession of securities of the defaulters charged to the banks under Section 14 of SARFAESI Act, 2002, without affecting the image of the administration.'

12. Following the said letter, in W.P.No.7813 of 2016, dated 22.04.2016, a Hon'ble Division Bench of this Court, has passed the following order:-

'In the light of the above, we direct the District Collector (District Magistrate), Thanjavur District, to pass orders on the Application dated 18/8/2015 in file Ref.No.34810/2015, filed under Section 14 of the SARFAESI Act, within the period of two months from the date of receipt of a copy of this order. While doing so, procedure set out under Section 14 of the Act should be followed. Mr.B.Kumar, learned Additional Government Pleader is directed to forward the copy of this order to the Principal Secretary to Government, Finance (Res.II), Department, Chennai for appropriate follow up action. 10. Along with the supporting affidavit, to the instant writ petition, the petitioner has also enclosed the copies of the petitions, dated 8/1/2014, 7/5/2014, 11/9/2014, 24/12/2014 and 31/1/2015, filed under Section 14 of the SARFAESI Act, 2002.'

13. Further, the Secretary to Government, Finance (Res.II) Department vide, Letter No.32082/Fin/Res.II/2017, dated 03.08.2017, has issued directions to all District Collectors, stating that they are supposed to act on the SARFAESI Application within a period of 30 days for the purpose of taking possession by lending banks. The said letter is extracted hereunder:-

To

All District Collector (w.e.)

Sir / Madam,

Sub: SARFAESI Act, 2002 - Action of District Collectors being Chief Metropolitan Magistrate / District Magistrate under Section 14, appropriate file action requested - Reg.

Ref:Letter received from the Zonal Manager of Indian Bank, Zonal Office - DDDC Building, 1st Floor, 91, Pennagaram Road, Dharmapuri - 636 701, dated 28.06.2017 addressed to the CS to Government of Tamil Nadu.

------

I am to invite your attention to the reference cited received from the Zonal Manager, Indian Bank in connection with taking appropriate action under Section 14 of the SARFAESI Act, 2002.

2. As per Section 14 of the SARFAESI Act, 2002 the Authorised Officer of lending banks can approach the District Collectors being CMM/DM, by filing an application to take actual possession / Control over the property of the NPA. According to the Act, the District Collectors are supposed to act on that application within a period of 30 days for the purpose of taking possession by lending banks. Therefore, I am to request you to take immediate action as per the SARFAESI Act without any delay.

3. I am also to request you to acknowledge the receipt of this letter.'

14. Placing on record the submission of the learned Additional Government Pleader and in the light of the directions issued by the Principal Secretary to Government, vide, Letter No.19498/Res.II/2014-1, dated 09.07.2014, following the earlier order of this Court in W.P.No.7813 of 2016, dated 22.04.2016, and also the subsequent directions of the Secretary to Government, Finance (Res.II) Department vide, vide Letter No.32082/Fin/Res.II/2017, dated 03.08.2017, it is ordered as hereunder:-

'The District Collector cum District Magistrate, Tirupur District, is directed to dispose of the application dated 06.04.2017 filed under Sec.14 of SARFAESI Act, taken on file in Ref.No.6204/2017/C3 dated 08.05.2017, if not done earlier, within a period of four weeks, from the date of receipt of a copy of this order. While doing so, District Collector cum District Magistrate, Tirupur District, should act in accordance with Section 14 of the SARFAESI Act, 2002.'

15. We make it clear that the District Collector cum District Magistrate, Tiruppur District, can take note of the proceedings pending on the file of the appellate forum and pass appropriate orders on the application filed under Section 14 of the SARFAESI Act, 2002.

16. With the above direction, this writ petition is disposed of accordingly. No costs.
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