JAMMU & KASHMIR BANK LTD Vs. SHAKEEL ENTERPRISES

JUDGEMENT

(1.) IMPUGNED order is dated 02.01.2006; the application filed by the defendant under Order 7 Rule 11 of the Code of Civil Procedure (hereinafter referred to as the 'Code') had been dismissed. This order suffers from an illegality.

(2.) RECORD shows that the present suit has been filed by the plaintiff M/s Shakeel Enterprises for mandatory and permanent injunction. Contention of the petitioner is that he is the exporter of accessories; he was maintaining his cash credit account with Jammu and Kashmir Bank (the defendant); he has availed of certain cash credit facilities; during his business dealings, he received an export order; thereafter a demand draft of US $ 56400 was received by the plaintiff on 21.02.2004 which had been deposited with the defendant bank; based on the aforenoted payment, the plaintiff had placed certain orders for purchasing goods which were duly received by the foreign buyer. The foreign buyer, however, confirmed to the defendant that payment of US $ 56400 was by a fraudulent instrument and these correspondences continued to be exchanged between the foreign buyer and the defendant; the plaintiff was informed of this and the immoveable property which had been mortgaged by the plaintiff against availment of his cash credit facilities was attached. The suit had accordingly been filed. The prayer made in the suit is that the defendant bank be restrained from interfering in the ownership right of the plaintiff which has been mortgaged as collateral security against his account; his secured assets should not be taken over by the bank.

(3.) THE Apex Court in the case of Mardia Chemicals Limited Vs. Union of India (2004) 4 SCC 311 while rejecting the prayer that the provisions of Sections 13 & 17 of the SARFAESI Act are unconstitutional had noted as under:- "In the background we have indicated above, we may consider as to what forums or remedies are available to the borrower to ventilate his grievance. THE purpose of serving a notice upon the borrower under sub-section (2) of Section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under sub-section (4) of Section 13 in case of non-compliance of notice within 60 days. THE creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. THEre may be some meaningful consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under sub-section (4) of Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it would only be conducive to the principles of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon them before proceeding to take measures under sub-section (4) of Section 13. Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. It will only be in fulfillment of a requirement of reasonableness and fairness in the dealings of institutional financing which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavoury steps contained under sub-section (4) of Section 13. At the same time, more importantly we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why his objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management/business of viz. secured assets without intervention of the court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of non- acceptance and of his objections. It is true, as per the provisions under the Act, he may not be entitled to challenge the reasons communicated or the likely action of the secured creditor at that point of time unless his right to approach the Debt Recovery Tribunal as provided under Section 17 of the Act matures on any measure having been taken under sub-section (4) of Section 13 of the Act.