2016 (12) TMI 461 - HC - Indian Laws

Court rules demand notice valid under SARFAESI Act but criticizes publication of director's photograph. Creditor ordered to apologize.

The court held that the demand notice under section 13(2) of the SARFAESI Act was valid but criticized the publication of the notice with the director's ... Demand notice issued under section 13(2) of the SRFAESI Act - publication of the demand notice in the newspapers - whether the petitioner is at all entitled to be compensated or not having regard to the conduct of the second respondent? - Held that:- No record maintained by the respondents in relation to having “reasons to believe” that publication of the demand notice in the newspapers has become absolutely essential for making the borrower/guarantor aware of what is required of him/them. The ‘sine qua non’ is thus conspicuous by its absence. That apart, no answer could be given by Mr. Saha as to why the photograph of the second petitioner was published despite the admitted fact of he having received the demand notice. Evasion of notice by the said Sushil Kumar Paul, if at all, could not have given rise to any situation warranting publication of the photograph of the second petitioner. There cannot thus be any doubt that the second respondent has conducted himself in a manner not authorized by law by publishing the demand notice in the newspapers with the photograph of the second petitioner. Interestingly, the second respondent had the photograph of the second petitioner published in the newspapers not at the stage of taking measures under section 13(4) of the Act but at a point of time when at the end of the PNB itself, the right to invoke measures under section 13(4) had not even crystalized. Over and above all these, it appears that the second respondent did not also care to abide by the circular letter dated March 22, 2013 issued by another senior officer of the PNB. It would, therefore, appear that the second respondent has acted in breach of the circular letter dated March 22, 2013. Considering the overall facts and circumstances, it appears to be crystal clear that the second respondent has grossly abused his authority. This is not a fit and proper case for any compensation to be awarded by the court of writ to the petitioners. While declining compensation, liberty to approach the appropriate forum for recovery thereof in accordance with law is reserved. As having regard to the findings recorded above that the second respondent grossly exceeded his authority in publishing the demand notice in the newspapers with, inter alia, the photograph of the second petitioner, this writ petition stands disposed of with the direction that the respondents shall publish an apology in the said newspapers (Ananda Bazar Patrika and The Times of India) expressing regret for having published the photograph of the second petitioner, within 30 days from date. The petitioners shall also be entitled to costs of proceedings assessed at ₹ 50,000/-, to be paid within the same period as aforesaid. Liberty of the PNB to recover the publication charges as well as costs of proceedings from the second respondent, in accordance with law, is also reserved. Issues Involved:1. Legality of the demand notice under section 13(2) of the SARFAESI Act, 2002.2. Legality of the publication of the demand notice with the photograph of the director/guarantor.3. Entitlement to compensation for the publication of the photograph.Issue-wise Detailed Analysis:1. Legality of the Demand Notice under Section 13(2) of the SARFAESI Act, 2002:The writ petition challenged the demand notice dated March 17, 2015, issued under section 13(2) of the SARFAESI Act by the Authorized Officer of Punjab National Bank (PNB) and the rejection of the petitioners' objection to such demand notice. The court noted that the demand notice was served on the petitioners and also published in two daily newspapers with the photograph of the second petitioner, a director of the first petitioner. The publication was justified by the second respondent on the grounds that the borrowers/directors were avoiding service of the demand notice. However, the court observed that the rejection letter dated May 30, 2015, referred to the receipt of the demand notice by the petitioners on March 18, 2015, which contradicted the claim of avoidance of service. The court emphasized that the demand notice under section 13(2) is merely a demand to apprise the borrower of what he owes and must repay, and natural justice is not involved at this stage.2. Legality of the Publication of the Demand Notice with the Photograph of the Director/Guarantor:The court examined whether the second respondent transgressed his powers by publishing the demand notice with the photograph of the second petitioner. The court referred to its earlier decision in Ujjal Kumar Das v. State Bank of India, which held that neither the Act nor the Rules empower a secured creditor to publish the photograph of a defaulting borrower as a mode for recovery of its dues. The court noted that the appeal against this decision had been decided by a Division Bench, which opined that publication of photographs should not be a routine procedure and should only be done in special circumstances where the borrower is categorized as a willful defaulter. The court concluded that the statute does not confer power on a secured creditor to publish a demand notice with the photograph of a director/guarantor and that such publication was not justified in the present case.3. Entitlement to Compensation for the Publication of the Photograph:The court considered whether the petitioners were entitled to compensation for the publication of the photograph of the second petitioner. The court noted that the second respondent had grossly abused his authority by publishing the photograph without proper justification. However, the court also observed that the writ petition did not contain specific pleadings indicating the extent of loss of reputation and damage or injury to goodwill suffered by the second petitioner due to the publication. Therefore, the court held that this was not a fit case for awarding compensation but reserved the petitioners' liberty to approach the appropriate forum for recovery of compensation in accordance with law.Conclusion:The court disposed of the writ petition with the direction that the respondents shall publish an apology in the said newspapers (Ananda Bazar Patrika and The Times of India) expressing regret for having published the photograph of the second petitioner within 30 days. The petitioners were also awarded costs of proceedings assessed at Rs. 50,000, to be paid within the same period. The PNB was granted liberty to recover the publication charges and costs of proceedings from the second respondent in accordance with law.