S S SOHRAB Vs. SYNDICATE BANK

JUDGEMENT

(1.) IN this case the petitioners have sought for quashing the auction notices bearing No. Ref. ADV/1706/mng dated: 2. 1. 2007, Ref: adv/1707/mng dated: 3. 1. 2007, Ref: ADV/1704/mng dated 4. 1. 2007 and Ref: ADV/1705/mng dated 5. 1. 2007 issued by the first Respondent (Annexures J1 to J4) and for a writ of mandamus directing the 1st respondent to release the buses belonging to the petitioners, detailed in the schedule to the writ petition in the condition in which they were seized.

(2.) PETITIONERS contend that the Central Government enacted an Act called "road Transport Corporation Act, 1951" permitting each and every State within the Union of India to constitute a corporation mainly to cater to the needs of travelling public. In furtherance of the object of the aforesaid Act the State Government constituted the Transport Department and thereafter on re-organisation of the Stale in the year 1956 it came to be called as Mysore State road Transport Corporal ion (MSRTC) and thereafter Karnataka State road Transport Corporation (KSRTC ). The KSRTC in turn came to be bifurcated and known as KSRTC, BMTC (Bangalore metropolitan Transport Corporation), NWKRTC (North West kamataka Road Transport Corporation) and NEKRTC (North East kamataka Road Transport Corporation ). Consequent upon the change of policy, the concept of public-private participation came into vogue even in respect of NWKRTC and in furtherance of the same, it announced the scheme to take on hire private buses upon fulfillment of various terms and conditions imposed with regard the type of vehicle, chasis, seating arrangements, etc. , on first cum first serve basis. Petitioners contend that they gave representations pursuant to which the NWKRTC issued letter of intent. As per the scheme every participant is required to provide atleast five buses besides a security deposit of Rs. 10,000/- for each vehicle/bus. Since participating individual will be at liberty to avail credit facility from any of the nationalised/schedule bank, etc. , the NWKRTC issues comfort letter. Since the petitioners required financial assistance, they approached various banks and financial institutions, etc. , for the facility which ultimately came to be sanctioned and released and thereafter the vehicles were acquired. It is the case of the petitioners that NWKRTC has given a distorted version as a consequence whereof they suffered serious set back during the initial stage. The petitioners could not clear the EMI to the respective banks from where they have availed loan for acquisition of the buses. The petitioners have sustained loss of several lakhs of rupees. Therefore, petitioners filed a writ petition before this Court in W. P. No. 15732/2006 seeking directions to the corporation to give effect to the hiring rate chart and scrupulous implementation of the scheme by ensuring the protections to the petitioners. This Court by the order dated 14. 12. 2006 directed the respondents to consider the representations in the light of the observations made therein. Petitioners contend that the 1st respondent being a nationalised Bank was obliged to act fairly and permit the petitioners to ply the buses and repay the 1st respondent. In the meantime, the 1st respondent had seized the buses of the petitioners on 16. 11. 2006 and 20. 11. 2006. Petitioners made applications in the said writ petition to implead the 1st respondent and to issue consequential directions to it to return the seized buses. According to the petitioners, the 1st respondent filed a frivolous memo objecting to the same. After the disposal of the matter the respondents have issued notices on 02. 01. 2007, 03. 01. 2007, 04. 01. 2007 and 05. 01. 2007 threatening to auction the buses within 15 days as per Annexures 'j1' to 'j4'. Petitioners have called in question the said notices in this writ petition.

(3.) THE 1st respondent has filed a detailed statement of objections to the writ petition. It is contended that the Bank has extended financial assistance to the petitioners to acquire the buses. To secure the loan petitioners have created hypothecation of the buses in favour of the Bank. Petitioners have entered into an agreement with respondent No. 2 to which agreement the 1st respondent is not a party. Under the said agreement petitioners are obliged to carry out several things and the agreement provided for levy of penalty, cancellation of the agreements, etc. The agreement between the petitioners and respondent No. 2 specifically provided that the passenger tax in respect of the user of the buses in the routes provided by the respondent no. 2 only is to be borne by the respondent No. 2 and all other taxes are to be borne by the owners. Thus, the taxes payable under the karnataka Motor Vehicles Taxation Act, 1957, is on the petitioners. The dispute between the petitioners and the 2nd respondent pertains to escalation of the rates per running kilometer on the routes allotted to the petitioners. The respondent No. 2 had issued letters of comfort in favour of the 1st respondent at the request of the petitioners agreeing to pay certain amounts directly to the respondent No. 1 - Bank towards discharge of the loan of the petitioners in the escrow account. No third party rights are created by such letter of comfort, but the same has been at the request of the owners. Since the respondent No. 2 did not pay the amounts on the ground that the petitioners have defaulted the terms of the agreement, the loan account of the petitioners became overdue and rendered non-performing asset. Petitioners did not care to pay the installments. Petitioners were personally responsible to discharge the liability of the respondent Bank in respect of the loan amount. After accumulation of huge arrears and after affording reasonable time to the owners to discharge the debt due to the Bank, it took prudent steps to seize the security, namely, the buses hypothecated in favour of the respondent Bank. The hypothecated buses were seized between 16,11. 2006 and 22. 11. 2006 in the ordinary course by the respondent. Bank through seizing agents. During the first week of November 2006 the remaining buses were found abandoned at various places by the person-in-charge. It was also found that certain important pails of such buses had been removed and in some cases, stolen on account of such abandonment. Since the buses were found in such condition, the Bank having special property in such buses on account of the hypothecation, seized under due inventory and arranged to park these buses in a ground hired by the seizing agents for the said purpose for their safe custody. It is stated that if the buses are detained in the possession Bank, the Bank will be saddled with the liability to pay the tax and the arrears of tax due from the owner in respect of the vehicles. Further, the buses are likely to be deteriorated. Therefore, the respondent - Bank has decided to dispose off the buses on as is where is basis in public auction exercising its rights under Section 176 of the Contract Act and has issued the notices at Annexures 'j1' to 'j4'.