Madhya Pradesh High Court
Shri Carnet Elias Fernandes Vemalayam vs District Magistrate on 11 April, 2018
HIGH COURT OF MADHYA PRADESH : JABALPUR
SINGLE BENCH : JUSTICE MS.VANDANA KASREKAR
WRIT PETITION NO.8077/2017
Shri Carnet Elias Fernandes
Vemalayam and another
Vs.
District Magistrate and others
Shri Vishal Bhatnagar and Shri Yogesh Bhatnagar,
learned counsel for the petitioners.
Shri Sudeep Chaterjee, learned Govt. Advocate for
respondent No.1, 2 and 4.
Shri Sanjeev Singh and Shri L.K. Dubey, learned counsel
for respondent No.3.
ORDER
(11/04/2018) The petitioners have filed the present writ petition challenging the order dated 28/04/2017 and 06/05/2017 under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act'.
2. Petitioner No.1 is the Chairman of the company namely GEI Industrial System Limited. He approached Aditya Birla Finance Limited (hereinafter referred to as 'ABFL'), a non- banking finance company incorporated under the Companies Act, 1956 with an intention to expand the business. The ABFL 2 readily agreed to sanction the loan to petitioner No.1 for infusion of the equity in the petitioner No.1's company, running in Bhopal and to take over the existing loan from HDFC. Thereafter the parties entered into the agreement on 28/09/2012 wherein the ABFL sanctioned the loan of Rs.18 crore to petitioner No.1. As per clause-22 of the said agreement, for resolving the dispute, the Courts in the city of Bhopal were to have the exclusive jurisdiction over all aspects governing the interpretation and enforcement of the agreement. Further under clause-22.6, the venue of conducting arbitration proceeding was agreed to be Bhopal. Pursuant to execution of the said loan agreement, a charge was created on the land and building belonging to the petitioners. After the loan facility being subscribed by petitioner No.1, coal scam broke out and the Apex Court cancelled all coal blocks covered under the scam and, thus, the RBI came out heavily and advised all the banks to curtain their exposure on power sector based industries. The said incident caused a major damage to the financials of petitioner No.1 and major part of the payments of petitioner No.1 were struck mid way.
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3. ABFL then started harassing petitioner No.1 thereby forcing petitioner No.1 to clear the loan amount. Petitioner No.1 was pressurized by AFFL to raise a housing loan against his only residential house where he is living with his old aged wife. The house is in joint name of both petitioner No.1 and his wife. Under pressure, petitioner No.1 has agreed and accepted the said housing loan. The petitioners thereafter held several meeting with the officials of ABFL and assured the same to pay the said amount. The ABFL, being confident about the financial standing of petitioner No.1 agreed to grant time but to the utter surprise and shock to petitioner No.1, the ABFL served a letter to the petitioners on 08/01/2015 and demanded the petitioners to repay the entire loan amount and has also charged the interest.
4. Respondent No.3 thereafter vide letter dated 23/01/2015 invoked the arbitration proceedings against the petitioner. Although in the agreement it is provded that the dispute will be resolved at Bhopal but respondent No.3 with mala fide intention, initiated arbitration proceedings against the petitioner in Mumbai. Upon perusal of the letter dated 23/01/2015, the petitioners realised the fraud being played 4 upon by the ABFL i.e. respondent No.3 who forged and manipulated the agreement and unilaterally altered the venue of the arbitration clause. Respondent No.3 has appointed the sole arbitrator in the matter. The petitioners thereafter vide letter 06/02/2015 and 08/02/2015 vehemently disputed the initiation of the arbitration proceedings and the appointment of the sole arbitrator to arbitrate. The arbitrator so appointed by the ABFL was on the regular panel of the said respondent and has personal interest in the matter. The petitioners have raised an objection before the arbitrator, however, the sole arbitrator ignored the contention of the petitioners. The sole arbitrator did not even record objection of the petitioners in its meeting and chose to proceed with the said purported arbitration.
5. The petitioners have filed Writ Petition No.11671/2015 before this Court seeking direction for registering the FIR against respondent No.3 which is pending adjudication. The arbitrator thereafter proceed with the matter and passed an award dated 05/10/2016. During pendency of the arbitration proceeding, respondent No.3 had filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before 5 Bombay High Court. The said application was disposed of vide order dated 04/09/2015 thereby appointing receiver on the property of the petitioners and notional possession of the property has been given to the petitioners. The petitioners thereafter challenged the said award passed by the Arbitrator by filing petition under Section 34 of the Arbitration and Conciliation Act, 1996 and the said application is pending for adjudication before the High Court of Bombay. Although the application is pending before the Court, the respondent No.3 has issued notice under Section 13(2) of the SARFAESI Act to the petitioners on 12/09/2016. Upon receiving the said notice, the petitioners immediately filed their reply of the said notice under section 13(3A) of the SARFAESI Act and raised objection with respect to maintainability of the notice under Section 13(2) of the SARFAESI Act. The objections so raised by the petitioners were duly replied by respondent No.3 vide its reply dated 23/11/2016. Respondent No.3 thereafter issued a notice under Section 13(4) of the SARFAESI Act and threatened to take over the physical possession of the properties claimed to be mortgaged by 6 adopting the recourse provided under Section 13(4) of the SARFAESI Act.
6. The petitioners thereafter assailed the notice dated 14/12/2016 issued by respondent No.3 under Section 13(4) of the SARFAESI Act through application under sub-section (1) of Section 17 of the SARFAESI Act being S.A. No.28/2017 before the Debt Recovery Tribunal, Jabalpur and the same is pending adjudication. Respondent No.3 thereafter proceed to initiate proceeding against the petitioner under Section 14 of the SARFAESI Act and filed application before respondent No.1 behind back of the petitioners seeking possession of the premises and properties belonging to the petitioners. Respondent No.1 without issuing any notice or given any opportunity of hearing, has passed the order dated 28/04/2017. Being aggrieved by that order, the petitioners have filed the present writ petition.
7. Respondent No.3 has filed affidavit reply in the present case. Respondent No.3 has raised preliminary objection that the writ petition is not maintainable and the petitioners have an alternate remedy of filing appeal under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal. The 7 respondent No.3, in their affidavit reply, has stated that the petitioners are a habitual defaulter and has duped several financial institutions. It has further been said that the petitioners owe a sum of Rs.30 crores to the respondent No.3- financial company and for last seven years, the petitioners have failed to make the repayment of the designated installments and has been enjoying the mortgaged property without making payment of the installments. The assets of the petitioner-company has already been declared as non- performing assets. The arbitrator has passed an award on 05/10/2016 and by the said award the arbitrator has directed the petitioners to pay an amount of Rs.23,65,07,643/-. The application which is preferred by the petitioners under Section 34 of the Arbitration and Conciliation Act, 1996 has not been moved. No application for stay has been filed by the petitioners in the said case.
8. Respondent No.3 has further submitted that as per Section 35 of the SARFAESI Act, the provisions of of the SARFAESI Act have an overriding effect overall other provisions of law, hence, any action taken under the SARFAESI Act is an independent action irrespective of any 8 other pending proceedings. In view of aforesaid provisions, the allegations and contentions raised by the petitioner, in the present writ petition as also in the additional affidavit filed by them that respondent No.3 could not have gone ahead with the SARFAESI proceedings in view of the orders passed the Bombay High Court to the effect that respondent No.3 has allegedly committed breach and contempt of the said order of the Bombay High Court by initiating action under the SARFAESI Act are totally mala fide, no contempt has been made by respondent No.3 of the order passed by the Bombay High Court. So far as order dated 18/11/2015 is concerned, the respondents have stated that it was an interim order till the closure of the arbitration proceeding which have already been closed, hence, the impugned order dated 18/11/2015 has become non-est. The arbitration proceeding has already been attained finality though the same has been challenged by way of filing a petition under Section 34 of the Arbitration and Conciliation Act.
9. The respondents have further stated that respondent No.3 in any manner has not violated the order passed by the Bombay High Court by initiating proceeding under the 9 SARFAESI Act as sought to be falsely posed by the petitioners. The respondents have further stated that the petitioners have challenged the SARFAESI proceeding before the DRT, Jabalpur by filing a Securitisation application and there is no interim order passed in favour of the petitioner. As the similar petition is pending before the DRT, Jabalpur, therefore, the present writ petition is not maintainable and the same has been filed with an ulterior motive to have further enjoyed the mortgaged property without making due repayment of the loan.
10. The District Magistrate while passing the impugned order has complied with all the provisions of the SARFAESI Act. The respondents have further stated that appeal No.725/2015 filed by the petitioners before the Bombay High Court has now become infructuous. Appeal No.725/2015 was filed by the petitioner to challenge the order dated 04/09/2015 passed by the Bombay High Court under Section 9 of the Arbitration and Conciliation Act, 1996. As the final order was passed by the arbitrator on 05/10/2016, therefore, appeal No.725/2015 filed by the petitioners before the Bombay High Court has become infractuous. It is further 10 submitted that till date neither the Court receiver of Bombay High Court or respondent No.3 has taken actual physical possession of the mortgaged property. The possession given to the Court receiver is a notional possession of the properties of the petitioner and not any actual physical possession, hence, the contempt petition filed by the petitioners before the Bombay High Court is false and frivolous and lack of merit.
11. The petitioners have filed the rejoinder to the reply submitted by respondent No.3. The petitioners have stated that respondent No.1 has passed the impugned order on the basis of an application submitted by respondent No.3 concealed the material facts. The petitioners have further stated that respondent No.3 had filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 bearing Arbitration Petition No.1118/2015 for appointment of the receiver of the same property for which an application under Section 14 of the SARFAESI Act was filed before respondent No.1 to hand over physical and vacant possession thereof to respondent No.3 and the Bombay High Court has passed an order dated 04/09/2015 thereby appointing the 11 receiver of the said property and stated that the receiver shall have the power to take physical possession of the said property and if necessary with assistance of Police. The petitioners have stated that prayer of respondent No.3 for taking physical vacant possession of the property and with liberty to dispose of the said property has been disallowed by the Bombay High Court and furthermore, the Bombay High Court has appointed its receiver in respect of the property of the petitioner and the receiver has already taken the symbolic possession of the said property. In the premises, the order of respondent No.1 ceased to have any effect and cannot override and outlaw the order dated 04/09/2015 passed by the Bombay High Court. The order of Bombay High Court is certainly having a binding effect and cannot be override and ceased by taking shelter of any other law, be it SARFAESI Act. The petitioners have challenged the order dated 04/09/2015 by filing an appeal and the said appeal is pending before the Bombay High Court in which notices have already been issued to the respondents. As respondent No.1 has passed an order under Section 14 of the SARFAESI Act, the petitioners have, therefore, filed the contempt petition before 12 the Bombay High Court in which notices were issued to the respondents.
12. Learned counsel for the petitioners argues that the order dated 14/05/2017 passed by respondent No.1 is illegal and arbitrary. He submits that the respondents have already invoked the arbitration proceeding by appointing arbitrator. The arbitrator has already passed an award which is under challenged before the Bombay High Court. During pendency of the arbitration award, the respondents have moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 in which the Bombay High Court has passed an interim order thereby appointing receiver over the properties and has also directed to take physical possession of the said property of the petitioner. Against the said order, the petitioners have filed an application before Bombay High Court, which is still pending for adjudication. In such circumstances, he submits that as the physical possession of the property has already been taken over by the receiver appointed by the Bombay High Court, therefore, the proceeding under Section 14 of the SARFAESI Act is not maintainable. Learned counsel for the petitioners further 13 submits that Section 35 of the SARFAESI Act cannot be said to have an overriding effect with other proceeding. He further submits that by filing an application under Section 14 of the SARFAESI Act, the respondents have violated the order passed by the Bombay High Court. He further submits that the order passed by the District Magistrate i.e. respondent No.1 is illegal and arbitrary and has been passed without giving any notice or any opportunity of hearing to the petitioners. The respondents have filed an application under Section 14 of the SARFAESI Act by concealing the material facts and obtained the impugned order under challenge. Learned counsel for the petitioners relies upon the judgment passed by the Apex Court in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Co. Ltd. & others (Criminal Appeal No.736/2014) as well as the judgment passed by this Court in the case of M/s Sri Ambika Solvex Ltd. Vs. State Bank of India and others passed in W.P. No.8229/2015 on 16/12/2015.
13. Learned counsel for respondent No.3 has argued that doctrine of election is not applicable in the case of remedies 14 available under the SARFAESI Act since in terms of Section 37 of the SARFAESI Act, the remedies available are additional remedies. Learned counsel for the respondent No.3 further submits that the petitioners were given full opportunity to participate in the proceeding under Section 14 of the SARFAESI Act by the District Magistrate but the petitioners failed to participate or raise any objection. The District Magistrate thereafter published a notice to the petitioner and co-borrower in two news papers namely Dainik Bhashkar and Navduniya dated 22/03/2017 but even then the petitioners and the co-borrower had chosen not to participate in the said proceeding or to object passing of order under Section 14 of the SARFAESI Act, 2002. In the objection which is filed by the petitioners under Section 13(3A) of the SARFAESI Act, the petitioners had raised a legal objection referring to Section 5 of the Arbitration and Conciliation Act, 1996 stating that arbitration proceeding has precedence over all other laws including SARFAESI Act, 2002. The said objection was duly replied with reasons that remedy under SARFAESI Act is an additional remedies and as such action of respondent No.3 under SARFAESI Act, 2002 is 15 maintainable. Learned counsel for the respondent No.3 relied upon the judgments delivered by the Apex Court in the case of M.D. Frozen Foods Exports Private Limited & others Vs. Hero Fincorp Limited, reported in 2017 SCC Online SC 1211, Transcore Vs. Union of India and another, reported in (2008) 1 SCC 125, Kanaiyalal Lalchand Sachdev and others Vs. State of Maharashtra and others, reported in (2011) 2 SCC 782 and Mathew Varghese v. M. Amritha Kumar, reported in (2014) 5 SCC
610.
14. I have heard learned counsel for the parties and perused the record.
15. In the present case, major grounds raised by the petitioners are as under :
"i) Since respondent No.3 Financial Institution has already elected the remedy under Arbitration and Conciliation Act, 1996 by filing a petition for grant of interim measures under Section 9 of the said Act before High Court of Bombay as such the respondent No.3 cannot resort to the remedies available under Securitisation and 16 Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
ii) Since the secured asset/mortgage property is under symbolic possession of the receiver appointed by Hon'ble Bombay High Court in application under Section 9 of Arbitration and Conciliation Act, 1996 filed by respondent No.3 as such respondent No.3 cannot resort to the remedies available under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
iii) The petitioner herein is trying to portray that actual possession of the secured asset is with the Court receiver which is not the case.
iv) In terms of order dated 18/11/2015 passed by the Division Bench of High Court of Judicature at Bombay in Appeal (L) No.725 of 2015, the Court receiver was given only symbolic possession of the secured asset and actual physical possession of the secured asset/mortgage property is with the petitioners and the co-borrower."17
16. So far as ground No.1 and 2 are concerned, respondent No.3 which is a financial institution has filed an application under Section 9 of the Arbitration and Conciliation Act before the Bombay High Court in which Bombay High Court has passed an order which reads as under :
"(a) Court Receiver, High Court, Bombay is appointed as a Receiver in respect of the property of the respondents described in Ex.'U' to the petition with a direction to appoint the respondents or any person found in possession of the said properties as an agent of the Court Receiver on usual terms and conditions including payment of royalty and on furnishing security. It is made clear that if the respondents or such third party do not accept the agency of the Court Receiver on the usual terms and conditions within two weeks from the date of such offer, the Court Receiver shall have power to take physical possession of the said property and if necessary, with assistance of police. The petitioner would be in that event at liberty to apply for further 18 interim measures under Section 9 of the Arbitration and Conciliation Act.
(b) Till the Court Receiver takes possession of the property described at Ex.'U', there shall be an injunction in respect of such properties in terms of prayer clause (g) excluding the word 'dealing'.
(c) The respondents are also directed to disclose on oath by filing an affidavit the details of their assets whether encumbered or unencumbered within four weeks from today and serve a copy of such affidavit upon the petitioner's advocate simultaneously.
(d) Arbitration petition is disposed of in the aforesaid terms. No order as to costs."
As per this order, the Bombay High Court has directed to appoint the receiver on the dispute properties and has also directed the receiver to take physical possession of the properties. In spite of this order passed by the Bombay High 19 Court, respondent No.3 has filed an application under Section 14 of the SARFAESI Act before respondent No.1.
17. Section 35 of the SARFAESI Act provides that the provisions of this Act shall have overriding effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Section 37 of the said Act provides that the provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 2000 and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or any other law for the time being in force.
18. The Apex Court in the case of M.D. Frozen Foods Exports Pvt. Ltd. & ors (supra) has framed legal issues which are as under :
"A. Whether the arbitration
proceedings initiated by the
respondent can be carried on along
with the SARFAESI proceedings
simultaneously ?
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B. Whether resort can be had to
Section 13 of the SARFAESI Act in
respect of debts which have arisen
out of a loan agreement/mortgage
created prior to the application of the SARFAESI Act to the respondent ?
C. A linked question to question
(ii), whether the lender can invoked the SARFAESI Act provision where its notification as financial institution under Section 2(1)(m) has been issued after the account became an NPA under Section 2(1)(o) of the said Act ?"
The Apex Court in the said case while answering the aforesaid legal issues in para-26 to 36 has held as under :
26. A claim by a bank or a financial institution, before the specified laws came into force, would ordinarily have been filed in the Civil Court having the pecuniary jurisdiction. The setting up of the Debt Recovery Tribunal under the RDDB Act resulted in this 21 specialised Tribunal entertaining such claims by the banks and financial institutions. In fact, suits from the civil jurisdiction were transferred to the Debt Recovery Tribunal. The Tribunal was, thus, an alternative to a Civil Court recovery proceedings.
27. On the SARFAESI Act being brought into force seeking to recover debts against security interest, a question was raised whether parallel proceedings could go on under the RDDB Act and the SARFAESI Act.
This issue was clearly answered in favour of such simultaneous proceedings in Transcore vs. Union of India & Anr. A later judgment in Mathew Varghese vs. M. Amritha Kumar also discussed this issue in the following terms:
"45. A close reading of Section 37 shows that the provisions of the SARFAESI Act or the Rules framed thereunder will be in addition to the provisions of the RDDB Act. Section 35 of the 22 SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of the RDDB Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely, the SARFAESI Act and the RDDB Act, would be complementary to each other. In this context, reliance can be placed upon the decision in Transcore v. Union of India [(2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116] . In para 64 it is stated as under after referring to Section 37 of the SARFAESI Act: (SCC p. 162) "64. ... According to American Jurisprudence, 2d, Vol. 25, p. 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as 23 stated above, the NPA Act is an additional remedy to the DRT Act.
Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Principles of Equity (31st Edn., p. 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application."
(emphasis added)
46. A reading of Section 37 discloses that the application of the SARFAESI Act will be in addition to and not in derogation of the provisions of the RDDB Act. In other words, it will not in any way nullify or annul or impair the effect of the provisions of the RDDB Act. We are also fortified 24 by our above statement of law as the heading of the said section also makes the position clear that application of other laws are not barred. The effect of Section 37 would, therefore, be that in addition to the provisions contained under the SARFAESI Act, in respect of proceedings initiated under the said Act, it will be in order for a party to fall back upon the provisions of the other Acts mentioned in Section 37, namely, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, or any other law for the time being in force."
28. These observations, thus, leave no manner of doubt and the issue is no more res integra, especially keeping in mind the provisions of Sections 35 and 37 of the SARFAESI Act, which read as under:
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"35. The provisions of this Act to override other laws. The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." .... .... .... .... "37. Application of other laws not barred. - The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force."
29. The aforesaid two Acts are, thus, complimentary to each other and it is not a case of election of remedy.
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30. The only twist in the present case is that, instead of the recovery process under the RDDB Act, we are concerned with an arbitration proceeding. It is trite to say that arbitration is an alternative to the civil proceedings. In fact, when a question was raised as to whether the matters which came within the scope and jurisdiction of the Debt Recovery Tribunal under the RDDB Act, could still be referred to arbitration when both parties have incorporated such a clause, the answer was given in the affirmative. That being the position, the appellants can hardly be permitted to contend that the initiation of arbitration proceedings would, in any manner, prejudice their rights to seek relief under the SARFAESI Act.
31. The discussion in the impugned order refers to a judgment of the Full Bench of the Delhi High Court in HDFC Bank Limited vs. Satpal Singh Baksh1 opining that an arbitration is an alternative to the RDDB Act. In that context, the learned Single Judge 27 has rightly held that this Full Bench judgment does not, in any manner, help the appellants but, in fact, supports the case of the respondent.
The jurisdiction of the Civil Court is barred for matters covered by the RDDB Act, but the parties still have freedom to choose a forum, alternate to, and in place of the regular courts or judicial system for deciding their inter se disputes. All disputes relating to the "right in personam" are arbitrable and, therefore, the choice is given to the parties to choose this alternative forum. A claim of money by a bank or a financial institution cannot be treated as a "right in rem", which has an inherent public interest and would thus not be arbitrable.
32. The aforesaid is not a case of election of remedies as was sought to be canvassed by learned senior counsel for the appellants, since the alternatives are between a Civil Court, Arbitral Tribunal or a Debt Recovery Tribunal constituted under the RDDB Act. Insofar as that 28 election is concerned, the mode of settlement of disputes to an arbitral tribunal has been elected. The provisions of the SARFAESI Act are thus, a remedy in addition to the provisions of the Arbitration Act. In Transcore Vs. Union of India & Anr.
(supra) it was clearly observed that the SARFAESI Act was enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith.
Liquidation of secured interest through a more expeditious procedure is what has been envisaged under the SARFAESI Act and the two Acts are cumulative remedies to the secured creditors.
33. SARFAESI proceedings are in the nature of enforcement proceedings, while arbitration is an adjudicatory process. In the event that the secured assets are insufficient to satisfy the debts, the secured creditor can proceed against other assets in execution against the debtor, after 29 determination of the pending outstanding amount by a competent forum.
34. We are, thus, unequivocally of the view that the judgments of the Full Bench of the Orissa High Court in Sarthak Builders Pvt. Ltd. vs. Orissa Rural Development Corporation Limited, the Full Bench of the Delhi High Court in HDFC Bank Limited vs. Satpal Singh Bakshi (supra) and the Division Bench of the Allahabad High Court in Pradeep Kumar Gupta vs. State of U.P lay down the correct proposition of law and the view expressed by the Andhra Pradesh High Court in M/s. Deccan Chronicles Holdings Limited vs. Union of India following the overruled decision of the Orissa High Court in Subash Chandra Panda vs. State of Orissa does not set forth the correct position in law. SARFAESI proceedings and arbitration proceedings, thus, can go hand in hand.
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35. The issue of whether resort can be had to Section 13 of the SARFAESI Act in respect of debts which have arisen out of a loan agreement/ mortgage created prior to the application of the SARFAESI Act to the respondent, though urged before us, appears really not to have been canvassed before the learned Single Judge of the Delhi High Court. At least, it finds no substantive mention. We, however, are of the view that in the larger interest of settling the question of law, this issue is also required to be dealt with.
36. The SARFAESI Act was brought into force to solve the problem of recovery of large debts in NPAs.
Thus, the very rationale for the said Act to be brought into force was to provide an expeditious procedure where there was a security interest. It certainly did not apply retrospectively from the date when it came into force.
The question is whether, the Act being applicable to the respondent at a subsequent date and thereby 31 allowing the respondent to utilize its provisions with regards to a past debt, would make any difference to this principle. We are of the view that the answer to the same is in the negative."
Thus, as per the said judgment, the SARFAESI proceedings are in the nature of enforcement proceedings, while arbitration is an adjudicatory process and, therefore,the proceeding which has been initiated by the respondents under Section 14 of the SARFAESI Act is maintainable.
19. So far as ground No.3 and 4 regarding physical possession of the properties is concerned, the Bombay High Court while passing the interim order has directed to hand over the physical possession of the properties to the receiver. Thus, as per the interim order passed by the Bombay High Court, symbolic possession of the properties has been given to the receiver and, thus, as the symbolic possession of the properties is with the receiver, the order passed by respondent No.3 ceased to have any effect and cannot override the order dated 04/09/2015 passed by the Bombay High Court. The 32 order passed by the Bombay High Court is certainly having a binding effect and cannot override and ceased by taking shelter of any other law, be it SARFAESI Act. Respondent No.3 has concealed the fact about the order passed by the Bombay High Court on 04/09/2015 and that the properties as of now are not with the petitioners and it is with the receiver of the Bombay High Court. As these facts were not brought to the notice of respondent No.1, therefore, the said order deserves to be quashed.
20. So far as availability of the alternate remedy is concerned, the Apex Court in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Ltd., reported in (2014) 6 SCC 1 in para-22 has held as under :
"22. Sub- section (3) of Section 14 of the SARFAESI Act provides that no act of the Chief Metropolitan Magistrate or the District Magistrate or any officer authorised by the Chief Metropolitan Magistrate or District Magistrate done in pursuance of Section 14 shall be called in question in any court or 33 before any authority. The SARFAESI Act, therefore, attaches finality to the decision of the Chief Metropolitan Magistrate or the District Magistrate and this decision cannot be challenged before any court or any authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an authority excluding the power of any other authority or Court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution. To quote, the observations of this Court in Columbia Sportswear Company v. Director of Income Tax, Bangalore (2012) 11 SCC 224]:
"17. Considering the settled position of law that the powers of this Court under Article 136 of the Constitution and the powers of the High Court under Articles 226 and 227 of the Constitution could not 34 be affected by the provisions made in a statute by the Legislature making the decision of the tribunal final or conclusive, we hold that subsection (1) of Section 245S of the Act, insofar as, it makes the advance ruling of the Authority binding on the applicant, in respect of the transaction and on the Commissioner and income- tax authorities subordinate to him, does not bar the jurisdiction of this Court under Article 136 of the Constitution or the jurisdiction of the High Court under Articles 226 and 227 of the Constitution to entertain a challenge to the advance ruling of the Authority."
In our view, therefore, the decision of the Chief Metropolitan Magistrate or the District Magistrate can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the Chief Metropolitan Magistrate 35 or the District Magistrate, as the case may be, in accordance with the settled principles of law.
21. The aforesaid judgment passed by the Apex Court has been followed by this Court in the case of M/s Sri Ambika Solvex Ltd. Vs. State Bank of India and others passed in W.P. No.8229/2015 on 16/12/2015 by which this Court has held that appeal would not lie against the order passed under Section 14 of the SARFAESI Act.
22. Thus, in view of aforesaid discussion, this writ petition is allowed. The impugned orders dated 28/04/2017 and 06/05/2017 are hereby quashed. There shall be no order as to cost.
(Ms. Vandana Kasrekar) JUDGE ts Digitally signed by TULSA SINGH Date: 2018.04.11 15:53:03 +05'30' 36