SARFAESI Application No. 2 of 2008. Case: Kross Manufactures India (Pvt.) Ltd. and Ors. Vs M/s. Allahabad Bank and Ors.. Chennai Debt Recovery Tribunals

Case NumberSARFAESI Application No. 2 of 2008
CounselFor Appellant: S. Ramasubramaniam & Associates and For Respondents: Sri N. Rajendra, Advocate
JudgesE. Jacob R. Daniel, M.A., M.L., D.C.F.Sc., Presiding Officer
IssueSecuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 13(4), 19, 2(zc), 2(zd), 2(zf)
Judgement DateJuly 30, 2009
CourtChennai Debt Recovery Tribunals


E. Jacob R. Daniel, M.A., M.L., D.C.F.Sc., Presiding Officer

  1. The above application (SA) was filed by applicants on 21.01.2008 praying this Tribunal to direct the 3rd respondent M/s. Allahabad Bank, T. Nagar Branch represented by the Authorised Officer to release the goods valued at Rs. 20,24,000/- forthwith. The case of the applicants, in brief, is as follows:--

  2. The first applicant-M/s. Kross Manufacturers India Pvt. Ltd. is represented by Mr. T. Ashok Kumar, the 2nd applicant herein. The 1st applicant is engaged in the business of manufacture of auto components and engaged the 2nd respondent as job worker. The applicants used to supply spindle beam forgings for the purpose of machining, formulation and boring to the 2nd respondent (R2), who used to carryout the procedures and clear the same from their factory to the applicants. The transactions of the applicants with the R2 were on principal to principal basis and based on pure commercial consideration.

  3. The applicants have further stated that during July 2007, they had supplied spindle beams valued at Rs. 30,75,600/- to R2 for job work processing. After the job work processing, the applicants had to supply the same to M/s. Axles India Ltd. who had placed orders with them. On 24.11.2007, applicants were surprised to learn that the R1 bank had taken possession of the factory of R2 along with the goods of the applicants which were sent to R2 for job work processing. The applicants also learnt that action was resorted to by R1 against the R2 who had availed certain credit facilities and defaulted in repayment.

  4. The applicants have also contended that immediately thereafter, they wrote letter dated 27.11.2007 to the R1 bank clarifying that the goods they had taken possession of did not belong to R2. It was also pointed out in the said letter that the goods were not part of the secured asset of the R1 bank. (Letter dated 27.11.2007 is on pages 1 to 3 of the type-set of applicants). Thereafter, the applicants executed an Indemnity Bond dated 22.12.2007 in favour of R1 bank indemnifying them of any claim or demands that the R1 apprehends may arise if the goods are released. The respondent bank also received Rs. 50,000/- from the applicants as security and other expenses for the release of goods. R1 bank released a portion of goods (750 materials) and are still in possession of 1982 Nos. to be released to the applicants. Though the R1 bank released 750 numbers out of 2825, on 11.01.2008, R1 informed the applicants that 1982 Nos. are available with them, but refused to deliver the same.

  5. Applicants have also contended that the 1st applicant company is not aware of the dues of R2 against whom R1 and R3 bank have proceeded against under the SARFAESI Act. Hence, the above SA was filed on the following grounds:--

  6. Action of R1 bank in taking possession of the properties of applicants which is unconnected to the borrower and seeking to sell the same is arbitrary and illegal;

  7. R1 bank has not considered the fact that the applicant had given the materials to R2 for job work and that the R2 had no right over the goods handed over to R2 by applicants;

  8. The R1 bank did not consider the letter dated 04.12.2007 sent by R2 to release the materials to the applicants;

  9. R1 ought not to have taken possession of the goods belonging to applicants which did not form part of the secured interest;

  10. Even after the receipt of letter dated 27.11.2007 and execution of the indemnity bond on 22.12.2007, R1 bank did not release the goods;

  11. R1 should have given notice to applicants before they took possession of the belongings of the applicants. Even after receiving Rs. 50,000/- from the applicants, R1 bank did not return the goods.

  12. Hence, the applicants have prayed for directing R1 and 3 bank to release the goods valued at Rs. 20,34,000/- to the applicants.

  13. The point for determination is whether the applicants are entitled to the relief sought for in the above SA?


  14. I have heard the arguments of the Ld. counsel for applicants, R1 and R3 bank and R2. I have perused the relevant documents produced by both the sides. I have also carefully gone through the proceedings in the above SA which throws light on various orders passed by this Tribunal with regard to the spindle beam forgings seized from the premises of R2 by R1 bank.

  15. On 28.01.2008, Mr. N. Rajendra, Advocate undertook to file vakalat for R1 and R3 and this Tribunal directed the R1 and R3 bank to maintain status quo in respect of the goods seized until further orders. On 25.03.2008, a memo was filed by R1 bank in which the bank stated that R1 took possession of the factory of R2 including the plant, machinery, stocks etc. on 24.11.2007, 03.12.2007 and 05.12.2007. For a proper appreciation and understanding of the case, the memo dated 24.03.2008 filed by R1 bank on 25.03.2008 which plays a crucial role in this case is reproduced below:--

  16. The First Respondent had taken possession of the Factory of the Second Respondent including the Plant & Machinery, Stocks etc., on 24.11.2007, 03.12.2007 and 05.12.2007.

  17. The Appellant subsequently approached the First Respondent by stating that they have supplied to the Second Respondent goods being the spindles for the purpose of job work. Further, they have stated that the said goods does not belong to the Second Respondent.

  18. The Second Respondent also submitted a letter dated 04.12.2007 to the First Respondent Bank stated that the goods actually belongs to the appellant and does not form part of the secured assets. The Second Respondent therefore requested the Bank to return the goods to the appellant as they are the owners of the goods and expressed no objection for releasing and returning the materials back to the appellant. Based on the said letter, the First Respondent Bank obtained Indemnity Bond from the appellant to consider the request for release of the goods. But, unfortunately, the Second Respondent gave another letter dated 24.01.2008 to the General Manager of the First Respondent requesting the Bank not to hand over the spindles directly to the appellant but to handover the same to them on the ground that the goods not only belongs to the appellant but also to M/s. Axles India Ltd., and other suppliers and customers. It is also stated therein that it would take care of delivering the spindles from their end to the customers. In view of the above letter, the First Respondent could not deliver the goods to the appellant.

  19. The First Respondent is not aware of the dealings and the understanding between the appellant and the Second Respondent and therefore is not dealing with the submissions/statements/averments etc. made by the appellant on the same. The First Respondent also denies the various allegations of the appellant including about the release of 750 spindles.

  20. The First Respondent is holding only 1982 spindles which have been taken possession of and they are still on the custody of the Bank.

  21. It is therefore prayed that this Hon'ble Tribunal may be pleased to take note of the above submissions and pass such or other orders as this Hon'ble Tribunal may deem fit and proper in the circumstances of the case.

    Dated at Chennai, this the 24th day of March, 2008.

  22. In the above memo, R1 bank has stated that 1982 spindles were taken possession of by R1 bank. R1 bank has also stated that R2 vide letter dated 04.12.2007 informed the R1 bank that the goods belong to the applicants and do not form part of the secured assets. Thereafter, R2 gave another letter dated 24.01.2008 to the General Manager of R1 bank requesting him not to hand over the goods to the applicants as the goods not only belong to the applicants but also to other suppliers and customers. Hence, in the light of the said memo dated 25.03.2008, this Tribunal directed the applicants to take notice to R2 herein.

  23. On 27.05.2008, when this matter came up for hearing, after hearing the counsel for applicants and R1 bank, the following order was passed by this Tribunal:--

    This appeal has been filed by a third party applicant seeking order of this tribunal for release of spindle beam forgings given for job work with R2 who is the principal borrower. The R1 bank entered appearance and submitted that they had no objection...

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