Madras High Court
Pnl Depositors' Welfare Association, ... vs Union Of India (Uoi) By Secretary To ... on 12 July, 2005
Equivalent citations: 2005(4)CTC469, [2005]64SCL115(MAD)
Author: F.M. Ibrahim Kalifulla
Bench: F.M. Ibrahim Kalifulla
ORDER F.M. Ibrahim Kalifulla, J.
1. In all these Writ Petitions and Writ Petition Miscellaneous Petitions, the controversy centres around the proceedings initiated by the Indian Bank (Petitioner in W.P. No. 10077 of 2005) (hereinafter referred to as "Indian Bank") under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, "SARFAESI Act").
2. W.P. No. 9834 of 2005 has been filed by PNL Depositors' Welfare Association. The prayer is for the issuance of a Writ of Mandamus, to direct the respondents 1 to 4 therein to initiate necessary action to safeguard the interest of the depositors of the sixth respondent, namely, PNL Nithi Limited, Pondicherry by taking appropriate action under the provisions of law. In this Writ Petition, W.P.M.P. No. 14620 of 2005 has been filed by the Indian Renewable Energy Development Agency Limited (in short, "IREDAL") for getting itself impleaded as one of the party-respondents. A similar petition has been filed in W.P.M.P. No. 23476 of 2005 by Pondicherry Non-Banking Investors' Protection Association.
3. W.P. No. 13593 of 2005 has been filed by Pondicherry Branch of Bank of Baroda, praying for the issuance of a writ of Mandamus, to direct the fourth respondent therein, i.e., the Indian Bank, to safeguard the interests of the petitioner-bank for appropriating its claim in a sum of Rs. 75,73,873 vide its letter dated 8.3.2005 from the sale money deposited or to be deposited by the fifth respondent therein, namely, EID Parry (India) Ltd.
4. W.P. No. 10060 of 2005 has been filed by Puduvai Pradesa Sarkarai Aalai Thozhilar Sangam, praying for the issuance of a Writ of Certiorarified Mandamus, to call for the records relating to Tender Notification issued by the Indian Bank, dated 15.2.2005 published in The Hindu, dated 16.2.2005, to quash the same and consequently direct the Indian Bank and the other respondents, namely, New Horizons Sugar Mills Limited, to exercise their discretion under Section 13(4)(c) and 13(4)(b) of the SARFAESI Act, instead of straight away initiating action under Section 13(4)(a) of the said Act in order to run the third respondent Mills, namely, New Horizons Sugar Mills Limited. In this writ Petition also, W.P.M.P. No. 14619 of 2005 has been filed by 'IREDAL' for getting themselves impleaded as one of the party-respondents, W.P.M.P. No. 12743 of 2005 has been filed in the said Writ Petition by 'Ariyur Sarkarai Alai Thozhilalar Nala Sangam' for getting themselves impleaded in the said Writ Petition as one of the party-respondents.
5. W.P. No. 15303 of 2005 has been filed by Greata Enterprises & Developers (P) Ltd. as against the Indian Bank and M/s. Eid Parry Ltd., wherein, the petitioner seeks for the issuance of a writ of certiorarified Mandamus, to call for the records of the Authorised Officer of the Indian Bank, i.e., second respondent therein, in his letter dated 24.3.2005, to quash the same and consequently direct the second respondent to receive the balance sale consideration and to execute necessary documents of sale in favour of that petitioner.
6. W.P. No. 11715 of 2005 has been filed by the Pondicherry State Cooperative Bank as against New Horizon Sugar Mills Pvt. Ltd. and the Indian Bank, to set apart a sum of Rs. 1,88,56,704 as due and payable to the said petitioner out of the auction proceeds realised by the Indian Bank.
7. W.P. No. 10077 of 2005 has been filed by the Indian Bank as against the Government of pondicherry as well as New Horizon Sugar Mills Pvt. Ltd. and another for the issuance of a writ of certiorari, to call for the records of the second respondent therein relating to the order bearing No. 10912/DCRS/88/05 dated 21.3.2005 published in Daily Thanthi of Pondicherry Edition, which seeks to restrain the Indian Bank from conducting the sale of Molasses and other immovable properties in the premises of the sixth respondent therein, i.e., New Horizon Sugar Mills Pvt. Ltd. In the above said writ Petition, W.P.M.P. No. 23511 of 2005 has been filed by the Commissioner of Central Excise, Pondicherry Commissionerate, for getting himself impleaded as a party-respondent, similar such applications have been filed by M/s. Vijaya Bank, Pondicherry, Ariyur Sarkarai Alai Thozhilalar Nala Sangam, Pondicherry and Bank of Baroda, Pondicherry in W.P.M.P. Nos. 11926, 14137 and 14553 of 2005.
W.P. No. 9834 of 2005 & W.P.M.P. No. 10659 of 2005:
8. The case of the petitioner in this Writ Petition is that they have made huge deposits in the sixth respondent, namely, PNL Nithi Limited, that the seventh respondent, namely, New Horizon Sugar Mills Ltd., is a company which controls the sixth respondent, that substantial deposits which were lying with the sixth respondent were diverted to the seventh respondent and that subsequent to April, 2004, the sixth respondent started committing default in the payment of interest and refund of deposits and in the circumstances, the sale resorted to by the fifth respondent, namely, the Indian Bank of the assets of the seventh respondent under the provisions of SARFAESI Act would seriously prejudice the rights of the depositors and therefore, their interests should be protected by issuing appropriate directions to respondents 1 to 4, namely, the Union of India, Reserve Bank of India, Inspector of Police and Superintendent of Police, Pondicherry.
9. The sum and substance of the claim of the petitioner in the writ Petition as well as the petitioner in W.P.M.P. No. 10695 of 2005 is that when the sixth respondent collected deposits from the public at large and diverted the same to the seventh respondent-Sugar Mills, unless the fifth respondent is restrained from selling away the assets and walk away with the money from the sale proceeds, the depositors would be seriously prejudiced and therefore, the intervention of this Court is called for in this writ petition.
10. I am afraid that the claim so made or any grievances expressed by the writ petitioner as well as the Association of depositors can be validly gone into in this writ Petition, AS rightly pointed by Mr. V.T. Gopalan, Additonal Solicitor General, there is absolutely no privity of contract as between the Association of depositors vis-a-vis the sixth respondent-PNL Nithi Limited on the one hand and the seventh respondent-Sugar Mills on the other, that in any event the proceedings initiated under Section 13 of the SARFAESI Act cannot be interfered with at the instance of those parties. According to the learned Addl.Solicitor General, the depositors will have to work out their remedy under the provisions of the Reserve Bank of India Act, 1934 or under the provisions of the Pondicherry Protection of interests of Depositors in Financial Establishments Act, 2004 (Act No. 1 of 2005).
11. At the outset, it will have to be held that under Act 1 of 2005, a separate procedure has been prescribed under Section 4(1) of the said Act investing with the Administrator of Union Territory of Pondicherry or the District Magistrate necessary power, either suo moto or on receipt of a complaint to cause necessary investigation of the complaint or fraudulent transaction as referred to in Section 3 of the said Act in order to protect the interests of the depositors of such financial establishments including for the return of their deposits, etc. Under Sections 5 and 6, the Union Territory of Pondicherry has been empowered to appoint a Competent Authority for the purpose of working out the remedies provided under the Act. In the other Sections of the said Act, necessary provisions have been made for realizing the money and for returning the same to the concerned depositors. That apart, as pointed out by the learned Additional Solicitor General, Chapter III-B of the Reserve Bank of India Act, 1934 deals with the manner in which the various non-banking financial institutions can carry on their business operations, the maintenance of reserve fund, etc. and also the power of Reserve Bank of India to take steps for the winding up of such non-banking financial companies in the event of such companies acting detrimental to the public interest or to the interest of the depositors as well as the Power of Company Law Board to order repayment of deposit to the depositors. Section 45(MC) empowers the Reserve Bank of India, to take necessary steps for filing application for winding up of non-banking financial companies under the provisions of the Companies Act which operates against the interests of the depositors on being satisfied that continuance of such non-banking financial companies would be detrimental to the public interest or to the interest of depositors of such companies, under Section 45(QA)(2), the Company Law Board has been empowered either on its own motion or on an application of the depositors to order for repayment of deposit of any deposit in accordance with the terms and conditions as against such non-banking financial companies.
12. Therefore, going by the above referred to provisions of the Pondicherry Protection of interests of Depositors in Financial Establishments Act, 2004 (Act No. 1 of 2005) as well as Chapter III-B of the Reserve Bank of India Act, 1934, the writ petitioner as well as the Association of Depositors and its members have got efficacious alternative remedy for the redressal of their grievances at against the 6th respondent and in the circumstances, exercising jurisdiction under Article 226 of the Constitution, there is no scope to consider the prayer of the petitioner in this Writ Petition. The Division Bench of this Court has held in the Judgment Indian Additives Ltd., Express Highway, Manali, Chennai v. Indian Additives Employees Union, rep. by General Secretary, Chennai and Anr., , as under in para 5:
"5. Learned counsel for the respondent then referred to the decision in Whirlpool Corporation v. Registrar of Trade Marks, , and very heavily relied on the observations made in paragraph 10 thereof, which we quote below:
"Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged."
In our opinion, the above observations of the Supreme Court cannot be held to mean that a writ petition cannot be dismissed on the ground of alternative remedy when there is an allegation of violation of any of the Fundamental Rights or the principles of natural justice or the proceedings are without jurisdiction. No doubt, it is well-settled that alternative remedy is not an absolute bar a writ petition but it is equally well settled that ordinarily if there is an alternative remedy, the discretion under Article 226 should not be exercised and the party should be relegated to avail the alternative remedy. Hence, even if there is violation of any of the Fundamental Rights or of natural justice or the proceedings are without jurisdiction, the High Court under Article 226, on the facts of the particular case, can still dismiss the writ petition on the ground of availability of alternative remedy and ordinarily it should do so if there is an alternative remedy."
13. The above said Judgment has also been subsequently followed in S. Thamil Arasan v. R. Narayanan and Anr., .
14. Further in the Judgment of the Hon'ble Supreme Court Mardia Chemicals Ltd. and Ors. v. Union of India and Ors., etc., , the Hon'ble Supreme Court, while upholding the validity of SARFAESI Act, in particular Section 13, highlighted the need for the speedy recovery of large amounts of debts due to the banks by the borrowers and also pointed out that such recovery measures in exercise of power of sale of assets without intervention of Court was highly needed in the present state of economy prevailing in this country. The Hon'ble Supreme Court after referring to the Second Report of Narasimham Committee, has observed as under in para 36.
"36. ...One of the measures recommended in the circumstances was to vest the financial institutions through special statutes, the power of sale of the assets without intervention of the Court and for reconstruction of assets. It is thus to be seen that the question of non-recoverable or delayed recovery of debts advanced by, the banks or financial institutions has been attracting attention and the matter was considered in depth by the committees specially constituted consisting of the experts in the field, in the prevalent situation where the amounts of dues are huge and hope of early recovery is less, it cannot be said that a more effective legislation for the purpose was uncalled for or that it could not be resorted to. It is again to be noted that after the Report of the Narasimham Committee, yet another Committee was constituted headed by Mr. Adhyarujina for bringing about the needed steps within the legal framework, we are therefore, unable to find much substance in the submission made on behalf of the petitioners that while the Recovery of Debts Due to Banks and Financial institutions Act was in operation it was uncalled for to have yet another legislation for the recovery of the mounting dues. Considering the totality of circumstances and the financial climate world over, if it was thought as a matter of policy to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor is it a matter to be gone into by the Courts to test the legitimacy of such a measure relating to financial policy."
15. Therefore, in the light of the provisions contained in the Prondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 (Act No. 1 of 2005) and Chapter III-B of the Reserve Bank of India, 1934, this Writ Petition is not maintainable. For the very same reason, I feel that there is no need or necessity to order for impleading of the other Association of Depositors as claimed in W.P.M.P. No. 23476 of 2005.
W.P. No. 10077 of 2005:
16. This Writ Petition has been preferred by the Indian Bank, who is a secured creditor, challenging the proceedings of the second respondent, namely, the office of the Deputy Collector (Revenue)-South, Government of Pondicherry bearing No. 10912/DCRS/88/05 dated 21.3.2005. Under the said proceedings, the second respondent has restrained the secured creditor from calling for tenders for the sale of Molasses and other immovable properties in the premises of 6th respondent therein, i.e., New Horizon Sugar Mills Pvt. Ltd., Ariyur, Pondicherry.
17. According to the petitioner, the said order would impinge upon its attempt for the sale of secured assets in respect of the sixth respondent Sugar Mills, called for by it in its sale notice dated 16.2.2005.
18. However, in the course of submissions made before me, the learned Additional Solicitor General appearing for the petitioner as well as the learned Government Pleader, submitted that inasmuch as the ultimate sale notice dated 16.2.2005 has been completed and the sale proceeds of Rs. 50.20 crores have been realized and the further fact that the liability of Sugar Mills to the petitioner is only in the order of around 30.50 crores, the apprehension of the second respondent expressed in the impugned notice dated 21.3.2005 as regards the recovery of loans granted by the Department of Agriculture, Pondicherry can be duly made good from the balance of the sale proceeds. It was also pointed out that while in the impugned proceedings dated 21.3.2005, the second respondent only restrained the petitioner from selling Molasses and the immovable properties pursuant to the sale notice dated 16.2.2005, the petitioner has sold only the land and building along with plant and machinery of the sixth respondent Sugar Mills leaving aside the sugar stock and molasses except the sale of some motor vehicles. In such circumstances, I do not find any serious prejudice having been caused to the first or second respondents by virtue of the sale resorted to by the petitioner in respect of the land and building along with plant and machinery of the sixth respondent sugar Mills. In any event, what was sought to be restrained under the impugned proceedings was only sale of Molasses and immovable properties and since admittedly, only some motor vehicles alone were brought to sale and no other immoveables have been sold by the petitioner, no direction is called for in this Writ Petition. Even as regards the motor vehicles sold, inasmuch as, nearly 20 crores remain in deposit after the adjustment of whatever dues payable to the petitioner bank as a secured creditor, no harm would be caused to the first and second respondents by virtue of the sale resorted to by the petitioner pursuant to the sale notice dated 16.2.2005. Therefore, the said Writ Petition stands disposed of noting the above facts.
19. AS far as W.P.M.P. Nos. 23511, 11926, 14137 and 14553 of 2005 filed by the Commissioner of Central Excise, Pondicherry commissionerate, M/s. Vijaya Bank, Pondicherry, Ariyur Sarkarai Alai Thozhilalar Nala Sangam, Pondicherry and Bank of Baroda, Pondicherry respectively for getting themselves impleaded as party respondents, inasmuch as the main Writ Petition itself stands disposed of on the above terms, I do not find any need or necessity for impleading those parties as their interests are not germane to the main prayer. Accordingly, these W.P.M.Ps. are also dismissed.
W.P. No. 15303 of2005:
20. The petitioner is one of the bidders who staked its claim in the purchase of secured assets pursuant to the sale tender called for by the first and second respondents. Admittedly, the said petitioner was the highest bidder by quoting a sum of Rs. 52 crores for the purchase of the land and building as well as plant and machinery of the New Horizon Sugar Mills. By the order impugned in the Writ Petition dated 24.3.3005, the Authorised Officer, namely, the second respondent has passed the following order:
"Dear Sir, Sub.-- Account M/s. New Horizon Sugar Mills Ltd -- Sale tender of properties taken possession -- Sale of land and building & plant and machinery, etc. (Item No. 1) Ref.-- Our notice of intended sale dated 15.2.2005 and paper publication dated 16.2.2005/17.2.2005. Your tender document dated. Your letter dated 24.3.2005.
The cheque No. 068590 dated 24.3.2005 for Rs. 13.00 crores on ICICI, Santhome Branch is drawn by a third party and not from the bidder and hence not acceptable. There is no provision for making alternative arrangements for payment of the amount. The alternate arrangement proposed by you is also from a third party and hence not acceptable. As the payment has not been made by you (the offerer) at the venue of the tender opening and at the time of closing of the tender process, your tender is not acceptable and hence rejected."
21. Mr. S.A. Rajan, learned counsel appearing for the petitioner would contend that under Clause 31 of the Tender Notification falling under the head of 'Acceptance of Tender', it is stipulated that after the finalisation of tender process, the successful tenderer would be informed before 5.00 p.m. on the same date and that a letter of acceptance of the tender would also be given to enable him to deposit 25% of the sale price immediately. According to the learned counsel, the petitioner was informed that he was the highest bidder and therefore, he was the successful tenderer. Further it is stated that such confirmation was informed by 5.30 p.m. and that the petitioner was also asked to deposit 25% of the sale value offered by it immediately. It is claimed that the petitioner wanted a day's time to deposit 25% of the sale value and that a cheque offered by the petitioner representing 25% of the sale value was not accepted on the ground that the said cheque was issued by a third party. According to the learned counsel for the petitioner, as per Clause 31 of the tender schedule, the successful tenderer was to deposit 25% of the sale price immediately after the confirmation of finalisation of tender in his favour and that the expression 'immediately' cannot be construed to mean the date of opening of the tender, and that the petitioner ought to have been granted a grace time of atleast one day for making the deposit. The learned counsel, therefore, contended that the rejection of the petitioner's tender for the reasons mentioned in the impugned order dated 24.3.2005 was not valid and therefore, the same is liable to be set aside, it was also pointed out that while the petitioner offered 52 crores, the offer of the second highest bidder was only 50.20 crores and thereby loss of about 1.80 crorer had occurred which should not have been allowed to take place.
22. As against the above submission, the learned Additional Solicitor General would contend that as per Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002, the time schedule to be followed in the sale of secured assets, including the 'time of sale', 'issue of certificate' and 'delivery of possession' have been set out and therefore, when the above referred to Rules are applied and read along the tender schedule stipulations, when once the successful tender was informed of his success and he failed to make the deposit of 25% of the bid amount, as per Clause 37 of the tender schedule, the bank was entitled to confer the tender on the second successful tenderer. The learned Additional Solicitor General pointed out that under Rule 9(3) of the Security Interest (Enforcement) Rules, in the event of non-deposit of 25% by the highest bidder, the bank is entitled to sell the property forthwith to some other party. The learned Additional Solicitor General also pointed out that the Writ Petition is liable to be rejected on the ground of latches since while the impugned order was passed as early as on 24.3.2005, the petitioner has moved the present Writ Petition only in the month of May, 2005 and therefore, the grievances now expressed by the petitioner is purely an 'after-thought' and have been made after taking note of the pendency of the other writ Petitions filed by certain other parties.
23. Having heard the respective counsel, I find force in the submission of the learned Additional Solicitor General. In the 'Definitions' of the Tender Schedule, Clause 6 defines the term 'Tenderer', it also mentions that the word 'Tenderer' would also mean and include "Offerer", "Bidder" or similar terms which convey the same meaning. It also stipulates that it may be an 'individual', 'HUE', 'Partnership firm', 'private or public limited company' or 'a statutory corporation'. Clause 31 under the caption 'Acceptance of Tender' stipulates that 'a letter of acceptance of the tender' would be given to the successful tenderer to enable him to deposit 25% of the sale price immediately. The said Clause also mentions that such acceptance of tender of the highest bidder would be informed before 5.00 p.m. on the date of opening of the tenders. Clause 32 mentions that the sale would be subject to confirmation by the bank and that the bank would confirm the sale only after ensuring the initial payment of 25% of the sale price. Admittedly, the petitioner did not deposit the sale price of 25% quoted by it immediately after it was informed about its success in the tender process as a highest bidder. It is also admitted that the petitioner offered a cheque issued by a third party and not that of the tenderer itself, when Clause 31 mentioned in an unequivocal terms that it will be for the successful tenderer to make the deposit of 25%, no fault can be found with the respondent-bank in not accepting the cheque issued by a third party submitted by the petitioner. Further, it was also brought to my notice that on verification from the bank, namely, ICICI Bank, whose cheque was tendered by the petitioner, it came to light that as on that date, namely, 24.3.2005, there was no funds available to the extent of Rs. 13 Crores for which value, the said cheque was presented by the petitioner in pursuance of Clause 31 of the Tender Schedule. The said fact has been specifically mentioned by the respondent in paragraph 14 of its counter affidavit. However, no reply affidavit has been filed on behalf of the petitioner refuting the said averment. Therefore, when Clause 37 of the Tender Schedule itself provides for accepting the tender of the second successful tenderer for the failure of the petitioner in not depositing 25% of the purchase price immediately on conveyance of acceptance letter, I do not find any illegality in the action of the respondent bank in confirming the sale in favour of the third respondent, namely, the second successful bidder. Moreover, as pointed out by the learned Additional Solicitor General, having regard to the purport of SARFAESI Act and the Rules governing the said Act, the first and second respondents were fully justified in confirming the sale in favour of the second highest tenderer who offered a sale price of Rs. 50.20 crores as against the sale price of 52 Crores offered by the petitioner. Therefore, there is no merit in this writ Petition. Accordingly, the Writ Petition fails and the same is liable to be dismissed.
W.P. No. 13593 of 2005:
24. This Writ Petition has been filed by Pondicherry Branch of Bank of Baroda. The prayer of the petitioner is for a direction to the Indian Bank, to safeguard the interest of the petitioner-bank for appropriating its claim in a sum of Rs. 75,73,873 vide its letter dated 8.3.2005 from the sale money deposited or to be deposited by the fifth respondent therein, namely, EID Parry (India) Ltd. According to the petitioner, it had advanced funds to the third respondent sugar Mills up to the year 2003-2004 to an extent of Rs. 55,79,873 that the accrued interest was of the order of Rs. 19,94,000, and that a total sum of Rs. 75,73,873 is liable to be paid by the third respondent, it is contended that the fourth respondent-Indian Bank, as a secured creditor and as a lead bank having initiated action under the provisions of SARFAESI Act for realization of their dues to an extent of only about 27 Crores and since 50.20 crores have been realized in the said auction, appropriate direction should be issued for the payment of Rs. 75,73,873 to the petitioner.
25. At the outset, it will have to be held that the said prayer of the petitioner in this writ Petition cannot be granted inasmuch as pursuant to the proceedings initiated by a secured creditor under Section 13(4) of the SARFAESI Act, any person including the borrower if aggrieved by the said proceedings will have to work out its remedy under Section 17 of the Act before the Debts Recovery Tribunal. Section 17(1) along with its proviso, reads as under:
"17. Right to appeal.-- (1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorized officer under this chapter, (may make an application along with such fee, as may be prescribed,) to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
(2)...
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made there under, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13, taken by the creditors assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under subsection (4) of Section 13.
(4) ...
(5) ...
(6) ...
(7) ...
26. A reading of Section 17(1) read along with the proviso to subsection (1) as well as Sub-section (3), it is manifestly clear that any person aggrieved, not only the borrower, can approach the Debts Recovery Tribunal as against the proceedings made under Section 13(4) of the SARFAESI Act On such application being made, it is for the Debs Recovery Tribunal to consider the points raised in such application in exercise of its power under Section 17(3), and pass such orders as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13. Therefore, the petitioner having got an efficacious alternate remedy under SARFAESI Act will have to move the Debts Recovery Tribunal under Section 17 of that Act The present Writ Petition is therefore, not maintainable. Therefore, applying the dictum of the Division Bench of this Court Indian Additives Ltd., Express Highway, Manali, Chennai v. Indian Additives Employees' Union, rep, by General Secretary, Chennai and Anr., , (cited supra) as well as the unreported Division Bench Judgment dated 7.7.2005 in W.P. No. 37061 of 2002, etc. (since reported) Digivision Electronics Ltd., registered Office at No. A5 & 6, Industrial Estate, Guindy, Chennai - 32 v. Indian Bank, rep. by its Deputy General Manager, Head Office, 31, Rajaji Salai, Chennai - 1 an another, this Writ Petition is liable to be rejected.
W.P. No. 11715 of 2005:
27. This Writ Petition has been filed by the Pondicherry State Cooperative Bank as against New Horizon Sugar Mills Pvt. Ltd. and the Indian Bank. The prayer is for the issuance of a Writ of Mandamus, to direct the second respondent-Indian Bank to set apart a sum of Rs. 1,88,56,704 as due and payable to the petitioner out of the auction proceeds realised by it. In this context, apart from whatever said based on Section 17 of the SARFAESI Act in relation to Writ Petition No. 13593 of 2005, Mr. K.K. Sashidharan, learned Government Pleader (Pondicherry), fairly points out that under the Pondicherry Protection of Interests of Depositors in Financial Establishments Act 2004, there are enough powers for securing a decree as against the first respondent and recover the same by invoking the provisions of the Pondicherry Revenue Recovery Act, 1970. Therefore, in the light of such statutory remedies available to the petitioner in this writ Petition, I do not find any scope for granting the relief as prayed for in this Writ Petition. Therefore, this Writ Petition is also liable to be dismissed.
W.P. No. 10060 of 2005:
28. This writ Petition has been filed by Puduvai Pradesa Sarkarai Aalai Thozhilar Sangam, praying for the issuance of a writ of Certiorarified Mandamus, to call for the records relating to Tender Notification issued by the Indian Bank, dated 15.2.2005 published in The Hindu, dated 16.2.2005, to quash the same as arbitrary and unconstitutional and consequently direct the Indian Bank and the other respondents, namely, New Horizons sugar Mills Limited, to first exercise their discretion under Sections 13(4)(c) and 13(4)(b) of the SARFAESI Act, instead of straight away initiating action under Section 13(4)(a) of the said Act in order to run the third respondent Mills, namely, New Horizons Sugar Mills Limited.
29. Mr. N.G.R. Prasad, learned counsel appearing for the petitioner, after pointing out the amendments to the Sick Industrial Companies (Special Provisions) Act, 1985) hereinafter referred to "SICA Act"), by invoking Section 41 of the SARFAESI Act, as mentioned in the Schedule to SARFAESI Act, contended that the rehabilitation measure available to any sick industry under the "SICA Act" has been done away with under the SARFAESI Act and therefore by reading Sections 13(4), 37 and 41 along with the schedule referred to above, it should be held that such safeguards contemplated under the SICA Act should be read into Section 13(4)(b) and (c). According to the learned counsel, merely because the secured creditor, namely, the Indian Bank has been vested with the power to invoke Section 13(4) and thereby bring the secured assets for sale for realization of its outstanding amounts as against the debtor, it should give a go bye to all other measures which could have been availed of before resorting to such sale. In other words, according to the learned counsel, even as per the Judgment of the Hon'ble Supreme Court Mardia Chemicals Ltd. and Ors. v. Union of India and Ors., etc., , every secured creditor, while invoking its power under Section 13(4) of the SARFAESI Act, should explore the possibility of rehabilitation of the sick industry either by way of lease, assignment or through its own management before resorting to the extreme measure of selling the industry for the purpose of recovering its dues. In this context, the learned counsel relied upon paragraphs 39, 45 and 79 of the Judgment cited supra and submitted that the Hon'ble Supreme Court has left it open for the Courts to decide appropriately as and when any such situation arises and therefore, in the present situation this Court should direct the secured creditor, namely, the Indian Bank to work out the alternate measures before resorting to sale of the mills to the fourth respondent. In support of this submission, reliance was also placed upon the Judgment of the Hon'ble Supreme Court Olga Tellis and Ors. v. Bombay Municipal Corporation and Ors., , paragraphs 32, 33 and 40 and contended that the Hon'ble Supreme Court, has held that 'right to live' guaranteed under Article 21 of the Constitution included 'right to livelihood' which is more precious and deprivation of such right can take place only according to just and fair procedure established by law. The learned counsel contended that the action of any authority should be within the frame work of law and that it must also be reasonable.
30. The learned counsel also relied upon the decision of the Hon'ble Supreme Court Teri Oat Estates (P) Ltd. v. U.T., Chandigarh and Ors., , with particular reference to paragraph 46, and contended that a proper balance should be maintained between the adverse effect which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve. According to the learned counsel, the secured creditor should, therefore, while exercising its powers under Section 13(4) ought to have examined whether alternate measures such as lease, assignment or managing the industry by engaging a Manager would serve the purpose of recovering its dues before resorting to outright sale of the secured assets.
31. To counter the above submissions made on behalf of the petitioner, the learned Additional Solicitor General relied upon the decision of the Hon'ble supreme Court Allahabad Bank v. Canara Bank and Anr., 2003 (2) SCC 205, with particular reference to paragraphs 34, 37 and 39, and contended that even a purposive interpretation in the context of SARFAESI Act should be the one which would achieve the object of the said Act, namely, speedy and summary remedy for recovery of several thousand crores of rupees due to the bank and financial institutions. The learned Additional Solicitor General contended that going by the decision of the Hon'ble Supreme Court reported in Mardia Chemicals Ltd., also, it will have to be held that as a secured creditor, the Indian Bank was entitled to resort to sale of the secured assets without intervention of the Court and that is the purport of the SARFAESI Act which provides for speedier legal method to recover the dues. The learned Additional Solicitor General also pointed out that while under Section 13(2), the bank, as a secured creditor owed a duty to act fairly and in good faith by fulfilling their part of the obligations under the contract, it should be its endeavour to exercise its drastic powers for speedier recovery of non-performing assets. The learned Addl.Solicitor General also submitted that in the light of the remedy available to the borrower or any other person aggrieved under Section 17 of SARFAESI Act, the action of the bank as a secured creditor in selling the secured assets cannot be faulted.
32. Mr. A.L. Somayaji, learned Senior Counsel appearing for the fourth respondent pointed out that after the amendment to Section 13(4) of the SARFAESI Act, a clear cut distinction has been made as between secured asset and the management of business of the borrower and when in the case on hand, admittedly the manufacturing operations of the third respondent Sugar Mills, came to a halt as early as in the year 2003, there would be no scope for exploring the possibility of resorting to other measures as contended on behalf of the petitioner as such a course was never in the contemplation of the Act as it stands today. The learned Senior Counsel, while referring to Section 13(6) of the Act, contended that once the transfer of secured assets takes place, by virtue of invocation of Section 13(4) with the transferee, having regard to the operation of Section 37, the consequences that would flow from Section 25FF of the Industrial Disputes Act would automatically come into play. The learned Senior Counsel would therefore, contend that by virtue of the application of the said provision relating to transfer of establishment as provided under Section 25FF of the Industrial Disputes Act, whatever apprehensions expressed on behalf of the petitioner would be ruled out and that that would also take care of the submissions made based on Article 21 of the constitution.
33. Having heard the learned counsel for the petitioner as well as for the respondents herein, in order to appreciate the submissions made, it would be worthwhile to refer to Sections 13(4) and (6) as amended by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004, which reads as under:
"13(4). In case the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely--
(a) ...
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt.
(c) ...
(d) ...
13(5) ...
13(6). Any transfer of secured asset after taking possession thereof or take over of management under Sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset."
34. While considering the contention made based on the Schedule read along with Section 41 of SARFAESI Act, as per the said Schedule, two other Provisos have been added on to Section 15(1) of the SICA Act. By virtue of the above referred to two Provisos added on to existing proviso of Section 15(1), the scope of approaching BIFR under the SICA Act is taken away. Further if any application for rehabilitation was pending before BIFR, that would also stand abated when once action is taken under Section 13(4) of the SARFAESI Act. Even in the light of the above said provision, when Section 13(4) is examined, the power of the secured creditor to take possession of the secured assets of the borrower inclusive of the right to transfer by way of lease, assignment or sale for the purpose of realizing the secured assets is absolute, when once the borrower failed to discharge his liability in full within the periods specified in Section 13(2). Significantly, while under Section 13(4)(a), secured creditor has been vested with such a power to take possession inclusive of the right of lease, assignment or sale under subsection (4)(b) of Section 13, when it conies to the question of taking over management of the business of the borrower, again, along with the right to transfer by way of lease, assignment or sale, the provisos to the said Sub- Clause (b), specifically mentions that the exercise of the right to transfer by way of lease, assignment or sale to be made where the substantial part of the business of the borrower is held for the secured debt. The second Proviso to Clause (b) deals with the same situation, but where the management of either whole or part of it is severable.
35. On a detailed analysis of Section 13(4)(a) and (b) along with its proviso, I find that while under Section 13(4)(a), the secured creditor takes over possession of the secured assets only with all ancillary rights such as lease, assignment as well as the right of absolute sale, when it comes to the question of taking over the management of business as provided under Section 13(4)(b), having regard to the provisos added on to that sub-clause, it will have to be necessarily held that such a situation would arise only where 'taking over' takes place in respect of a running business which would necessarily require the exercise of other ancillary powers such as grant of lease, assignment or sale. In other words, while in respect of taking over possession of a dormant secured asset though such assumption of possession would include the right of lease as well as assignment apart from the overall right to sell, it cannot be held that in respect of such a dormant asset, the secured creditor should be expected to explore the possibility of reviving its operations in order to recover its secured debt. It will have to be held that to hold it otherwise would defeat the very purpose of speedy and summary recovery of the secured debt which as held by the Hon'ble Supreme Court should be allowed to be made without intervention from any quarter in the point of view of economy of the country.
36. Therefore, the argument of Mr. N.G.R. Prasad, learned counsel for the petitioner to the effect that taking over of possession along with the rights to transfer by way of lease and assignment was to ensure that sale is not the only remedy for recovery of dues and in the interests of the workmen, the secured creditors should explore the possibility of leasing out the mills to the third parties or arrange to manage it by employing its own Manager and only in the event of its failure in that process as a last resort, the bank can opt for sale, does not appeal to me. I am of the opinion that if such a course as submitted by the learned counsel for the petitioner is to be accepted, that would run contrary to the very object of the SARFAESI Act and defeat all its purposes. That would virtually nullify the whole effort of the secured creditor in its attempt for the speedy recovery of its dues which would run contrary to the ratio laid down by the Hon'ble Supreme Court in Mardia Chemicals Ltd. case while upholding the validity of Section 13(4). In this context, it will be worthwhile to refer to the resent Division bench Judgment of our High Court to which I am also a party where the Division Bench has noted the liability due to the Banks have been stated to be in the order of about 1,50,000 crores. That Judgment has been made in a Batch of Writ Petitions, commencing with W.P. No. 37061/2002 by order dated 7.7.2005 Digivision Electronics Ltd., registered Office at No. A5 & 6, Industrial Estate, Guindy, Chennai - 32 v. Indian Bank, rep. by its Deputy General Manager, Head Office, 31, Rajaji Salai, Chennai - 1 an another, .
37. However, if the above submission of the learned counsel for the petitioner is considered, with reference to Section 13(4)(b), it may have some relevance and inasmuch as we are not concerned with taking over of possession of management of business, I do not propose to delve deep into the question as to how the said provision would operate upon when a secured creditor exercises its power under Section 13(4)(b). If any situation arises for dealing with the said question, it can be considered in the facts and circumstances that may be existing in those situations.
38. As far as the contention raised based on the Schedule read along with Section 41 of SARFAESI Act, here again, it can only be said that the very purport of introducing those provisos and thereby excluding the operation of Section 15(1) of the SICA Act in respect of a secured asset as against which action is taken under Section 13(4) of the Act, it will have to be held that the Parliament itself thought it fit to grant such an exclusion in order to ensure that the operation of Section 13(4), does not meet with any hurdles so as enable the secured creditor to resort to speedy measures for the recovery of a secured debt. Therefore, the submissions of the learned counsel for the petitioner on that score should also fail.
39. Moreover, in the case on hand, the operation of the third respondent Sugar Mills admittedly came to a grinding halt in the year 2003 itself. By virtue of the sale now resorted to by the first and second respondents by invoking Section 13(4), when once the transfer of the secured assets, namely, the land, building along with plant and machinery vest with the transferee, namely, the fourth respondent, as rightly contended by Mr. A.L. Somayaji, learned Senior Counsel for the fourth respondent, the workmen who are the members of the petitioner or any other union will also stand to . gain inasmuch as whatever rights that had accrued to the workmen which can be worked out under Section 25FF of the Industrial Disputes Act remains intact. Section 25FF of the Industrial Disputes Act is to the following effect:
"25-FF. Compensation to workmen in case of transfer of undertakings.-- Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of Section 25F, as if the workman had been retrenched:
Provided that nothing in this Section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if--
(a) the service of the workman has not been interrupted by such transfer;
(b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and
(c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer."
40. Therefore, either in the event of the proviso to the said Section not being operated upon whatever benefits conferred on the workmen under the substantive provision would be available to the workmen and thereby they can also reap the benefits which they earned by virtue of the service put in by them under the erstwhile management, namely, the third respondent herein. Reliance placed upon by the learned counsel for the petitioner on the Judgment reported in Olga Tellis and Ors. v. Bombay Municipal Corporation and Ors., MAN`C/0039/1985 (cited supra) only states that any deprivation of one's right to livelihood can only take place according to just and fair procedure established by law. Therefore, so long as the rights of the workmen by virtue of their service put in the erstwhile management continue to enure to their benefit by virtue of operation of Section 25FF of the industrial Disputes Act vis-a-vis Section 13(6) of the SARFAESI Act, I do not find any grievances to be redressed in so far as the workmen of the third respondent Sugar Mills are concerned. One other relevant factor to be mentioned is that pursuant to the sale made as per the sale notice dated 16.2.2005 a sum of Rs. 50.20 Crores have been secured which is lying in deposit in the first respondent bank. Admittedly, the secured debt of the first respondent is only of the order of around Rs. 30 Crores and therefore at best it can only be held that from the remaining sum whatever legal dues payable to the workmen of the third respondent should be set apart for distribution in the event of any necessity arising for such distribution by virtue of Section 25FF of the Industrial Disputes Act. Except observing to the above extent, I do not find any other scope or grant any other relief as prayed for by the petitioner in this writ Petition.
41. Having regard to my above said conclusion, I find that the prayer of the petitioner as couched in the Writ Petition cannot be granted. However, it will have to be held that the members of the petitioner as well as the other workmen represented by the fifth respondent union or any other union are entitled for the benefits available under Section 25FF of the Industrial Disputes Act as against the third and fourth respondents by virtue of the prescription made under Section 13(6) of the SARFAESI Act.
42. To sum up,
(a) Writ Petition No. 9834 of 2005 is dismissed as not maintainable on the ground of efficacious alternate remedy available under the provisions of Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 (Act No. 1 of 2005) as well as the various provisions contained in Chapter III-B of the Reserve Bank of India Act, 1934. In view of the dismissal of the main Writ Petition, no orders are necessary in the petitions, viz., in W.P.M.P. Nos. 14620 and 23476 of 2005, filed by IREDAL and the other Association of Depositors, namely, Pondicherry Non-Banking Investors Protection Association respectively, the said W.P.M.Ps. are also dismissed.
(b) Writ Petition No. 10077 of 2005 is disposed of in the light of what is stated in paragraphs 16 to 18 of this Judgment. W.P.M.P. Nos. 11926, 14137, 14533 and 23511 of 2005 filed by M/s. Vijaya Bank, Pondicherry, Ariyur Sarkarai Alai Thozhilalar Nala Sangam, Pondicherry, Bank of Baroda, Pondicherry and the Commissioner of Central Excise, Pondicherry Commissionerate respectively stand dismissed as their interests are not germane to the main prayer in the Writ Petition and inasmuch as the Writ Petition itself stands disposed of on the terms mentioned above.
(c) In the light of the discussions made in paragraphs 20 to 23 of this Judgment, Writ Petition No. 15303 of 2005 lacks merits and the same is dismissed.
(d) Writ Petition No. 13593 of 2005 stands dismissed on the ground of alternate remedy available to the petitioner under Section 17 of SARFAESI Act and following the Division Bench Judgment of this Court Indian Additives Ltd., Express Highway, Manali, Chennai v. Indian Additives Employees' Union, rep. by General Secretary, Chennai and Anr.,, as well as the unreported Judgment of the Division Bench in W.P. No. 37061 of 2002, etc. dated 7.7.2005 (since reported) Digivision Electronics Ltd., registered Office at No. A5 & 6, Industrial Estate, Guindy, Chennai - 32 v. Indian Bank, rep. by its Deputy General Manager, Head Office, 31, Rajaji Salai, Chennai-1 an another, .
(e) Writ Petition No. 11715 of 2005 is also dismissed in view of the reasoning mentioned in para 27 of this Judgment on the ground of efficacious remedy available to the petitioner both under the SARFAESI Act as well as Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 (Act No. 1 of 2005).
(f) Writ Petition No. 10060 of 2005 stands dismissed with the observations contained in para 41 of this judgment.
(g) All connected W.P.M.Ps. are also dismissed.
(h) There will be no order as to costs.