SREE SRINIVASA CONSTRUCTIONS Vs. HDB FINANCIAL SERVICES

JUDGEMENT

(1.) The petitioners assail the order dated 15.12.2018 passed by the learned Chief Metropolitan Magistrate, Nampally, Hyderabad, in Crl.M.P.No.8052 of 2018, in exercise of power under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, 'the Act of 2002'). The first petitioner is a registered partnership firm and the second and third petitioners are its partners. The second petitioner is the husband of the third petitioner. The first petitioner firm availed a loan of Rs.1.00 Crore from HDB Financial Services, Hyderabad, the first respondent, and offered the house property situated at H.No.8-2-686/B/D, Plot No.5, Survey No.129/31, Road No.12, Banjara Hills, Hyderabad, belonging to the third petitioner, as security therefor by creating an equitable mortgage through deposit of title deeds.

(2.) Default having been committed in repayment of the loan, the first respondent initiated arbitration proceedings which culminated in the Award dated 15.02.2012, holding that the first petitioner firm was liable to pay a sum of Rs.1,01,71,494.56 ps. to the first respondent. Arbitration Petition No.177 of 2013 was filed by the petitioners under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, 'the Act of 1996'), to set aside the said Award, but the same was dismissed by a learned Judge of the Bombay High Court on 20.01.2014. Aggrieved thereby, the petitioners preferred Appeal No.322 of 2014. The said appeal was however disposed of by order dated 13.07.2015, recording the compromise between the parties to the effect that the petitioners herein would pay to the first respondent a sum of Rs.1,30,00,000/- in 13 equal monthly installments of Rs.10,00,000/- each, commencing from August, 2015. The order further recorded that in the event of two defaults being committed in such repayment, the appeal would stand dismissed and the order dated 20.01.2014 passed by the learned Judge in Arbitration Petition No.177 of 2013 would stand revived. Admittedly, the petitioners failed to pay the installments as agreed upon.

(3.) While matters stood thus, the Government of India issued Notification F.No.C/1/2014-Recovery on 05.08.2016 under the Act of 2002 notifying certain companies as 'financial institutions' within the meaning of Section 2(1)(m)(iv) of the Act of 2002 and the first respondent was one amongst them. Thereupon, the first respondent issued demand notice dated 10.11.2016 under Section 13(2) of the Act of 2002 calling upon the petitioners to pay a sum of Rs.2,43,55,483/- towards the outstanding dues. Possession notice dated 01.03.2017 was thereafter issued by it under Section 13(4) of the Act of 2002. The first respondent again issued demand notice dated 11.12.2017 under Section 13(2) of the Act of 2002 quantifying the amount payable by the petitioners at Rs.2,08,40,697/-. The petitioners submitted their reply dated 08.02.2018, raising certain issues, but the first respondent issued possession notice dated 16.02.2018 under Section 13(4) of the Act of 2002 without complying with Section 13(3A) thereof. Aggrieved thereby, the third petitioner herein filed W.P.No.8502 of 2018 before the High Court for the State of Telangana and the State of Andhra Pradesh. The said writ petition was allowed on 10.08.2018, holding that the possession notice dated 16.02.2018 was invalid for non-compliance with the statutory mandate of Section 13(3A) of the Act of 2002.