They developed Emu farms for the purpose of raring those birds. They have established these farms, but however, it is alleged, due to lack of supporting infrastructural facilities, the farms could not be run as the farm produce could not be effectively marketed. Therefore, managing and running the farms became a very difficult task. In fact, it is alleged that the birds have been carried to the nearest forest area and released into the forest at least to enable them survive on their own. In these set of circumstances, all the farm owners have taken up the matter with the respective bankers, State Bank of India and NABARD, which takes care of the agricultural financing benefits.= Though the action of the respective bankers as it is cannot be described as unjust act, inasmuch as their actions are in conformity with the provisions contained under the SARFAESI Act, but yet, we feel that the ends of justice would be better served if we defer the compulsion imposed upon the respective borrowers by the respective bankers for a period of four weeks. Accordingly, we direct the respective bankers not to put to sale any of the secured assets belonging to Emu farm owners, who have obtained such financial assistance and in case, the asset has already been put to sale, the said sale may not be confirmed and 75% of the offered amount/bid amount may not be collected from the best bidders till the end of July 2016. In the meantime, the respective petitioners shall endeavour to liquidate the liability either completely or substantially, so that they can take up the matter of liquidating the balance amount in installments not exceeding six. If, in the meantime, either the Central Government or the State Government or NABARD takes any policy decision offering any help or assistance, the respective bankers will regulate their measures of securitization strictly in conformity with such a policy decision.
THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO AND THE HONBLE DR. JUSTICE B.SIVA SANKARA RAO
WRIT PETITIONS No. 2661 OF 2016
01-03-2016
Jai Golden Emu Farms Rep. by its Proprietor Sri Kishore Kumar Mane. Petitioner
The Chief Manager cum- Authorized Officer, Bank of India, Rajahmundry Branch &
another.Respondents
Counsel for the petitioner :Sri N. Ravi Prasad
Counsel for the Respondents : Smt. T. Vidya Rani
<GIST:
>HEAD NOTE:
?Cases referred
THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO
AND
THE HONBLE DR. JUSTICE B. SIVA SANKARA RAO
WRIT PETITIONS No. 2661, 2753 AND 2888 OF 2016
COMMON ORDER : (per Honble Sri Justice Nooty Ramamohana Rao)
These three Writ Petitions can be disposed of by this
common order as the question involved is common and the factual
matrix is also identical.
The writ petitioners have secured financial assistance from
the respective banks, which are arrayed as the respondents. They
developed Emu farms for the purpose of raring those birds. They
have established these farms, but however, it is alleged, due to
lack of supporting infrastructural facilities, the farms could not be
run as the farm produce could not be effectively marketed.
Therefore, managing and running the farms became a very difficult
task. In fact, it is alleged that the birds have been carried to the
nearest forest area and released into the forest at least to enable
them survive on their own. In these set of circumstances, all the
farm owners have taken up the matter with the respective bankers,
State Bank of India and NABARD, which takes care of the
agricultural financing benefits. It is also represented before us
that the matter has been taken up with the Central Government
for providing some kind of assistance to enable the farm owners to
tide over the difficulties encountered by them. It is represented
that the matter is likely to be decided one way or the other as a
policy measure.
But at the same time, we are also conscious that the
financial institutions, which have lent money, cannot go without
recovering the said monies. Otherwise, the very vitals of the
financial institutions will get eaten up. Therefore, the respective
bankers have fallen back upon the provisions of the Securitization
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (for short, the SARFAESI Act).
The Parliament, with a view to regulate securitization and
reconstruction of financial assets and enforcement of security
interest and for matters connected therewith and incidental
thereto, enacted the SARFAESI Act.
There is no dispute on the factual count that the respective
writ petitioners are borrowers and they answer the said
expression as defined in Section 2(1)(f) of the Act. The respondent
bank answers the description of bank, as defined in clause (c) of
sub-section (1) of Section 2, as it is a banking company within the
meaning of Section 5(c) of the Banking Regulation Act, 1949.
There is also no further difficulty for us to hold that default has
been committed as was defined in Section 2(1)(j). The expression
financial asset has been defined in Section 2(1)(l) in the following
terms:
financial asset means debt or receivables and includes
i) a claim to any debt or receivables or part thereof, whether
secured or unsecured; or
ii) any debt or receivables secured by, mortgage of, or charge on,
immovable property; or
iii) a mortgage, charge, hypothecation or pledge of movable
property; or
iv) any right or interest in the security, whether full or part
underlying such debt or receivables; or
v) any beneficial interest in property, whether movable or
immovable, or in such debt, receivables, whether such interest is
existing, future, accruing, conditional or contingent; or
vi) any financial assistance.
Consequently, the mortgage created by the respective writ
petitioners renders the same as a financial asset. There is also no
difficulty that the respective accounts of the borrowers have been
declared as non-performing assets as per the definition assigned
to the said expression in clause (o) of sub-section (1) of Section 2.
The expression secured asset has been defined in clause (zc) of
sub-section (1) of Section 2 of the Act as meaning the property on
which the security interest is created.
Section 13 is included in Chapter - III of the SARFAESI Act,
which dealt with Enforcement of Security Interest. Section 13
would set out that any security interest created in favour of any
secured creditor may be enforced, without the intervention of court
or tribunal, by such creditor in accordance with the provisions of
this Act. Thus, the SARFAESI Act is a special piece of legislation
made by the Parliament for achieving a special objective of
securing the enforcement of the security interest of the secured
creditor. That is the reason why a special provision is created in
sub-section (1) of Section 13 of the SARFAESI Act by making it
clear that the security interest created in favour of any secured
creditor can be got enforced without the intervention of the Court.
The intention of the Parliament is so very clear that it wanted to
address the malady of the defaults committed by the borrowers in
repayment of the debt due by them, resulting in getting into the
very vitals of the secured creditors and more particularly financial
institutions including those in the banking sector. Under
sub-section (2), the secured creditor, by delivering a notice, in
writing, to any borrower whose liability remained unpaid, can call
upon him to discharge in full such liabilities within 60 days. Even
after receipt of such a notice delivered under sub-section (2) of
Section 13, if the borrower does not honour the commitment by
discharging in full the liability and thus fails to do so, sub-section
(4) empowered the secured creditor to take recourse to one or the
other of the measures provided there under to recover his secured
debt. Clause (a) thereof specified that the secured creditor may
take possession of the secured asset of the borrower including
right to transfer by way of lease, assignment or sale for realizing
the secured asset. Thus, a secured creditor has been vested with a
special power to take possession of the secured asset of the
borrower and also liquidate it by way of sale for realizing the debt.
Therefore, the provisions contemplated by Section 13 of the
aforesaid Act are liable to be invoked in these cases. The notice
drawn and delivered under sub-section (2) of Section 13 could not
be complied with by the petitioners as they are not in a position to
run the farm or generate enough resources there from to liquidate
the liability. In these circumstances, steps have already been
taken by the respective bankers to possess the asset and then,
seek to liquidate it by offering it for sale.
We are alive to the fact that when the operators of the
agricultural sector are pushed to the wall and are made to face too
much of a hardship to bear, all because of their inability to
liquidate the liabilities, they are prone to get distressed easily and
take recourse to extreme measures which would not only leave the
problem unresolved but would also leave another problem of a
huge dimension for the society. The fall-out from any such
extreme measures will have disastrous consequences as others,
who may find some little interest in pursuing Agriculture as an
avocation, may hesitate to take to agricultural sector as it is no
longer profitable or worthy of pursuing as an avocation. In such a
situation, not only the rural economy but the food-grain sector
would also get impacted greatly which would not in any manner be
useful to the society at large, as this country is yet to be
industrialized greatly and the rural India continues to be the best
place for living by majority of the population. The agricultural
lands cannot be left unproductive. Hence, we consider it
appropriate to adopt a balanced approach by trying to reconcile the
interests of both sides.
Though the action of the respective bankers as it is cannot
be described as unjust act, inasmuch as their actions are in
conformity with the provisions contained under the SARFAESI Act,
but yet, we feel that the ends of justice would be better served if we
defer the compulsion imposed upon the respective borrowers by
the respective bankers for a period of four weeks. Accordingly, we
direct the respective bankers not to put to sale any of the secured
assets belonging to Emu farm owners, who have obtained such
financial assistance and in case, the asset has already been put to
sale, the said sale may not be confirmed and 75% of the offered
amount/bid amount may not be collected from the best bidders till
the end of July 2016. In the meantime, the respective petitioners
shall endeavour to liquidate the liability either completely or
substantially, so that they can take up the matter of liquidating
the balance amount in installments not exceeding six. If, in the
meantime, either the Central Government or the State Government
or NABARD takes any policy decision offering any help or
assistance, the respective bankers will regulate their measures of
securitization strictly in conformity with such a policy decision.
With this, the Writ Petitions stand disposed of. No costs.
Consequently, the miscellaneous applications, if any shall
stand disposed of.
-----------------------------------------
NOOTY RAMAMOHANA RAO, J
----------------------------------------
DR. B. SIVA SANKARA RAO, J
01st March 2016
WRIT PETITIONS No. 2661 OF 2016
01-03-2016
Jai Golden Emu Farms Rep. by its Proprietor Sri Kishore Kumar Mane. Petitioner
The Chief Manager cum- Authorized Officer, Bank of India, Rajahmundry Branch &
another.Respondents
Counsel for the petitioner :Sri N. Ravi Prasad
Counsel for the Respondents : Smt. T. Vidya Rani
<GIST:
>HEAD NOTE:
?Cases referred
THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO
AND
THE HONBLE DR. JUSTICE B. SIVA SANKARA RAO
WRIT PETITIONS No. 2661, 2753 AND 2888 OF 2016
COMMON ORDER : (per Honble Sri Justice Nooty Ramamohana Rao)
These three Writ Petitions can be disposed of by this
common order as the question involved is common and the factual
matrix is also identical.
The writ petitioners have secured financial assistance from
the respective banks, which are arrayed as the respondents. They
developed Emu farms for the purpose of raring those birds. They
have established these farms, but however, it is alleged, due to
lack of supporting infrastructural facilities, the farms could not be
run as the farm produce could not be effectively marketed.
Therefore, managing and running the farms became a very difficult
task. In fact, it is alleged that the birds have been carried to the
nearest forest area and released into the forest at least to enable
them survive on their own. In these set of circumstances, all the
farm owners have taken up the matter with the respective bankers,
State Bank of India and NABARD, which takes care of the
agricultural financing benefits. It is also represented before us
that the matter has been taken up with the Central Government
for providing some kind of assistance to enable the farm owners to
tide over the difficulties encountered by them. It is represented
that the matter is likely to be decided one way or the other as a
policy measure.
But at the same time, we are also conscious that the
financial institutions, which have lent money, cannot go without
recovering the said monies. Otherwise, the very vitals of the
financial institutions will get eaten up. Therefore, the respective
bankers have fallen back upon the provisions of the Securitization
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (for short, the SARFAESI Act).
The Parliament, with a view to regulate securitization and
reconstruction of financial assets and enforcement of security
interest and for matters connected therewith and incidental
thereto, enacted the SARFAESI Act.
There is no dispute on the factual count that the respective
writ petitioners are borrowers and they answer the said
expression as defined in Section 2(1)(f) of the Act. The respondent
bank answers the description of bank, as defined in clause (c) of
sub-section (1) of Section 2, as it is a banking company within the
meaning of Section 5(c) of the Banking Regulation Act, 1949.
There is also no further difficulty for us to hold that default has
been committed as was defined in Section 2(1)(j). The expression
financial asset has been defined in Section 2(1)(l) in the following
terms:
financial asset means debt or receivables and includes
i) a claim to any debt or receivables or part thereof, whether
secured or unsecured; or
ii) any debt or receivables secured by, mortgage of, or charge on,
immovable property; or
iii) a mortgage, charge, hypothecation or pledge of movable
property; or
iv) any right or interest in the security, whether full or part
underlying such debt or receivables; or
v) any beneficial interest in property, whether movable or
immovable, or in such debt, receivables, whether such interest is
existing, future, accruing, conditional or contingent; or
vi) any financial assistance.
Consequently, the mortgage created by the respective writ
petitioners renders the same as a financial asset. There is also no
difficulty that the respective accounts of the borrowers have been
declared as non-performing assets as per the definition assigned
to the said expression in clause (o) of sub-section (1) of Section 2.
The expression secured asset has been defined in clause (zc) of
sub-section (1) of Section 2 of the Act as meaning the property on
which the security interest is created.
Section 13 is included in Chapter - III of the SARFAESI Act,
which dealt with Enforcement of Security Interest. Section 13
would set out that any security interest created in favour of any
secured creditor may be enforced, without the intervention of court
or tribunal, by such creditor in accordance with the provisions of
this Act. Thus, the SARFAESI Act is a special piece of legislation
made by the Parliament for achieving a special objective of
securing the enforcement of the security interest of the secured
creditor. That is the reason why a special provision is created in
sub-section (1) of Section 13 of the SARFAESI Act by making it
clear that the security interest created in favour of any secured
creditor can be got enforced without the intervention of the Court.
The intention of the Parliament is so very clear that it wanted to
address the malady of the defaults committed by the borrowers in
repayment of the debt due by them, resulting in getting into the
very vitals of the secured creditors and more particularly financial
institutions including those in the banking sector. Under
sub-section (2), the secured creditor, by delivering a notice, in
writing, to any borrower whose liability remained unpaid, can call
upon him to discharge in full such liabilities within 60 days. Even
after receipt of such a notice delivered under sub-section (2) of
Section 13, if the borrower does not honour the commitment by
discharging in full the liability and thus fails to do so, sub-section
(4) empowered the secured creditor to take recourse to one or the
other of the measures provided there under to recover his secured
debt. Clause (a) thereof specified that the secured creditor may
take possession of the secured asset of the borrower including
right to transfer by way of lease, assignment or sale for realizing
the secured asset. Thus, a secured creditor has been vested with a
special power to take possession of the secured asset of the
borrower and also liquidate it by way of sale for realizing the debt.
Therefore, the provisions contemplated by Section 13 of the
aforesaid Act are liable to be invoked in these cases. The notice
drawn and delivered under sub-section (2) of Section 13 could not
be complied with by the petitioners as they are not in a position to
run the farm or generate enough resources there from to liquidate
the liability. In these circumstances, steps have already been
taken by the respective bankers to possess the asset and then,
seek to liquidate it by offering it for sale.
We are alive to the fact that when the operators of the
agricultural sector are pushed to the wall and are made to face too
much of a hardship to bear, all because of their inability to
liquidate the liabilities, they are prone to get distressed easily and
take recourse to extreme measures which would not only leave the
problem unresolved but would also leave another problem of a
huge dimension for the society. The fall-out from any such
extreme measures will have disastrous consequences as others,
who may find some little interest in pursuing Agriculture as an
avocation, may hesitate to take to agricultural sector as it is no
longer profitable or worthy of pursuing as an avocation. In such a
situation, not only the rural economy but the food-grain sector
would also get impacted greatly which would not in any manner be
useful to the society at large, as this country is yet to be
industrialized greatly and the rural India continues to be the best
place for living by majority of the population. The agricultural
lands cannot be left unproductive. Hence, we consider it
appropriate to adopt a balanced approach by trying to reconcile the
interests of both sides.
Though the action of the respective bankers as it is cannot
be described as unjust act, inasmuch as their actions are in
conformity with the provisions contained under the SARFAESI Act,
but yet, we feel that the ends of justice would be better served if we
defer the compulsion imposed upon the respective borrowers by
the respective bankers for a period of four weeks. Accordingly, we
direct the respective bankers not to put to sale any of the secured
assets belonging to Emu farm owners, who have obtained such
financial assistance and in case, the asset has already been put to
sale, the said sale may not be confirmed and 75% of the offered
amount/bid amount may not be collected from the best bidders till
the end of July 2016. In the meantime, the respective petitioners
shall endeavour to liquidate the liability either completely or
substantially, so that they can take up the matter of liquidating
the balance amount in installments not exceeding six. If, in the
meantime, either the Central Government or the State Government
or NABARD takes any policy decision offering any help or
assistance, the respective bankers will regulate their measures of
securitization strictly in conformity with such a policy decision.
With this, the Writ Petitions stand disposed of. No costs.
Consequently, the miscellaneous applications, if any shall
stand disposed of.
-----------------------------------------
NOOTY RAMAMOHANA RAO, J
----------------------------------------
DR. B. SIVA SANKARA RAO, J
01st March 2016
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