Gujarat High Court
Rakshit Ashwinbhai Patel vs Authorized Officer, State Bank Of ... on 27 April, 2023
Author: Sangeeta K. Vishen
Bench: Sangeeta K. Vishen
NEUTRAL CITATION
C/SCA/6501/2023 ORDER DATED: 27/04/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6501 of 2023
==========================================================
RAKSHIT ASHWINBHAI PATEL
Versus
AUTHORIZED OFFICER, STATE BANK OF INDIA, SME LAGHU UDYOG
BRANCH
==========================================================
Appearance:
MR KAMLESH P VAIDANKAR(10135) for the Petitioner(s) No. 1
DS AFF.NOT FILED (N) for the Respondent(s) No. 2,3,4
MR PRANAV G DESAI(290) for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 27/04/2023
ORAL ORDER
Mr Pranav G. Desai, learned advocate for the respondent bank has requested for hearing of the captioned writ petition, on the ground that the order dated 13.04.2023, passed by this Court, directing the bank not to take any coercive steps needs to be vacated as the petitioner has not stated correct facts before this Court.
2. Mr Pranav G. Desai, learned advocate, submitted that acceding to the request of the petitioner and adopting a humanitarian approach, the bank deferred taking over of the physical possession on 30.01.2023. In the proceeding pending before the Debt Recovery Tribunal (hereinafter referred to as the 'Tribunal'), the Tribunal, passed an order that in view of the out of Court settlement, handing over of the physical possession of the disputed property on 30.01.2023, be deferred to 15.04.2023.
3. It is submitted that as per the order and the assurance given before the Tribunal, the petitioner, was supposed to handover the possession on 15.04.2023; however, the petitioner, instead of handing over the possession, chose to file a writ petition before this Court on 03.04.2023 which, was thereafter, requested for circulation Page 1 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined on 13.04.2023; 14.04.2023 being holiday. It is submitted that the submission was made before this Court that the petitioner, is ready and willing to give the possession; however, some breathing time be accorded to the petitioner. In support of such contention, two letters dated 02.04.2023 and 31.03.2023, have been produced on record, purportedly of the tenants. Those two letters of the tenants, are misconceived inasmuch as, the tenants, were never occupying the properties, which is clear from the memorandum of mortgage deed filed in the year 2020. It is submitted that the declaration together with the mortgage deed, also does not contain any information that the properties, were possessed or in possession of the tenants.
4. It is submitted that in the communication dated 31.03.2023 of one of the tenants, it has been mentioned that the tenants, are there in the property for over 18 months. If 18 months, are to be counted, it would be, the month of October, 2021; whereas, notice under sub-section (2) of Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'SARFAESI Act') was issued on 05.07.2021 and therefore, by operation of the provisions of sub-section (13) of Section 13 of the SARFAESI Act, it would be impermissible for the borrower, to transfer by way of a sale, lease or otherwise any secured assets referred to in the notice without prior written consent. In the present case, the excuse of the tenant is, nothing, but to take the defence for extension of time. The tenants, are not parties before this Court and were not even before the Tribunal.
5. It is submitted that the account of the petitioner, was declared NPA on 29.06.2021 and as on 30.06.2021, the outstanding loan Page 2 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined amount was Rs.59.52 crore. It is submitted that when the petitioner, has assured the Tribunal, so also given an impression to the bank that it will handover the peaceful vacant possession on 15.04.2023, filing of the writ petition without any advance copy to the bank, would be nothing, but abuse of process of law and Court as well and at least, the petitioner should not be extended any equitable relief under Article 226 of the Constitution of India. It is therefore, urged that the direction issued to the bank, not to take any coercive steps till the next date of hearing, may be vacated.
6. Mr Kamlesh P. Vaidankar, learned advocate for the petitioner, has tried to justify the action. It is submitted that the tenants, are the family friends of the petitioner and were allowed to occupy the premises on a sympathetic consideration. It is urged that since the petitioner, was facing some difficulty, that the petition has been filed requesting for some breathing period. Except this, no further submissions are made.
7. Heard the learned advocates appearing for the respective parties.
8. The petitioner, has filed the writ petition with a prayer seeking direction to the respondent no.1 to give three months time to the petitioner to handover the vacant and peaceful possession of his three residential properties mentioned in the Schedule of Properties to the respondent no.1. It is not in dispute that the respondent bank, has sanctioned various credit facilities to the petitioner from time to time aggregating, Rs.60.54 Crore. The petitioner, failed to repay the respective loan facility as per the terms and conditions which, led to the account of the petitioner being classified as 'NPA' on 29.06.2021. Upon classification of the loan account as NPA, demand Page 3 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined notice was issued on 05.07.2021, requiring the petitioner, to discharge the full amount of Rs.59,92,84,202/- Since the petitioner failed to discharge the dues, further proceedings were initiated under sub-section (4) of Section 13 of the SARFAESI Act.
9. As a result of the proceedings, the respondent bank took symbolic possession of the immovable properties on 25.09.2021. The proceedings were initiated before the Tribunal; however, the petitioner, subsequently, has filed the withdrawal purshis, inter alia, indicating that during pendency of the Securitization Application, the Mamlatdar & Executive, Vejalpur has issued notice for taking the physical possession of the secured assets and therefore, he voluntarily agrees to handover the physical, actual and vacant possession to Authorised Officer and that he does not want to challenge any of the SARFAESI measures against the respondent bank in the pending Securitization Application. The bank, has also filed the purshis that as the applicant has agreed for handing over the peaceful and vacant physical possession on 15.04.2023 and has accepted the SARFAESI notices, the Authorised Officer, will defer the physical possession to be taken on 30.01.2023 and will not take before 15.04.2023.
10. Considering the withdrawal purshis of the petitioner and purshis of the bank, that the Tribunal, has passed an order dated 30.01.2023, noting that both the parties have entered into an act and out of Court settlement. According to which the petitioner, shall hand over the possession of the disputed property on 15.04.2023 to the respondent bank, and the respondent bank, shall defer taking of the physical possession on 30.01.2023. The order dated 30.01.2023 of the Tribunal reads thus:-
"30.01.2023 NDN/243/2022(SA) Sr.no.16 Page 4 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined Present: Mr.K.M.Parikh, Ld. Counsel forApplicants.
Mr.P.G.Desai, Ld. Counsel for Respondent bank.
Service pursis Ex.A/10, amendment application Ex.A/13 and withdrawal affidavit Ex.A/14 filed by applicants, Vakalatnama Ex.R/11, Reply for application for condonation of delay Ex.R/12, Pursis Ex.R/15 filed by respondent bank, be taken on record.
Heard Ld. Counsels for both the parties and perused file.
Ld. Counsels for both the p a rties submitted that both the parties have entered into an out of court settlement according to which the applicants shall hand over physical possession of disputed property on 15.04.2023 to respondent bank and in view of the above, the respondent bank shall defer taking of physical p o s s ession on today i.e.30.01.2023.
They further submitted that the r e s p o ndent bank has filed a pursis Ex.R/ 15 and applicants have filed withdrawal affidavit Ex.A/14 to this effect.
Ld. Counsels for b o t h the parties submitted that the above application for condonation of delay be disposed of accordingly in the light of withdrawal affidavit Ex.A/14 and pursis Ex.R/15.
Since both the parties have entered into an out of court settlement in accordance with pursis Ex.R/15 and withdrawal affidavit Ex.A/14, the above matter is disposed of accordingly.
Order accordingly.
File be consigned to records.
(ANIL KUMAR GUPTA) PRESIDING OFFICER DRT-I,AHMEDABAD"
11. The petitioner, with an open eyes, accepted the order passed by the Tribunal and agreed, to hand over the possession on 15.04.2023. Instead of giving the vacant and peaceful possession, the petitioner, had filed the writ petition which was prepared on 05.04.2023, registered on 11.04.2023, and was thereafter, listed for hearing on 13.04.2023. The submissions were that the petitioner, is ready and willing to give the possession of all the three properties; however, some breathing time be granted considering the conditions of the petitioner, so also the tenants. A request was made that the petitioner shall file an undertaking, declaring that the Page 5 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined petitioner shall not come forward with a request for further extension. This Court, accepting the contention of the petitioner, passed an order dated 13.04.2023, recording the assurance, that if an extension is granted, the petitioner, shall not come forward with a request for further extension. This Court, also directed the bank not to take any coercive steps. Perceptibly, and as pointed out by the respondent bank, it was never the case of the petitioner before the Tribunal or at the time of executing the mortgage deed that two of the properties are being occupied by the tenants. As pointed out by the bank, it is for the first time, the petitioner, has taken the stand that the two properties are being occupied by the tenants, citing the difficulties faced by the petitioner, so also the family condition of the tenants, that a request was made for an extension.
12. The petitioner together with the petition, has placed on record the Securitization Application (Diary) no.243 of 2022; the notice was issued under sub-section (2) of Section 13 of the SARFAESI Act; order passed u/s.14 of the SARFAESI Act by office of the Collector & District Magistrate, Ahmedabad; and consequential notice by the office of Mamlatdar & Executive Magistrate, Vejalpur. In addition thereto, the petitioner has also placed on record withdrawal affidavit, the purshis by the bank and order. The petitioner, in addition to said documents has placed on record the communications dated 31.03.2023 and 02.04.2023 of the so-called tenants, without even joining them as a party. The tenants, were not a party before the Tribunal nor in the purshis and it is only for the first time, the so-called tenants have cropped up. The petitioner, was supposed to place it on record the mortgage deed; however, the petitioner, chose not to do so. The same was placed on record by the bank. Had it been the case of the petitioner that the properties are occupied by the tenants, the mortgage deeds, should have contained the details about the tenants; however, the Page 6 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined mortgage deeds, do not make any reference about the tenants, so is the position with the declarations with respect to all the three properties.
13. Mr Pranav G. Desai, learned advocate, has pointed out from the letter dated 31.03.2023, of one of the tenants, that he has been rented the house for 18 months. If one is to count the period of 18 months, it would be around October, 2021. Pertinently, the account of the petitioner, was declared as NPA on 29.06.2021 and the notice under sub-section (2) of Section 13, was issued on 05.07.2021, i.e. prior to the date on which the property must have been rented. It is to be noted that sub-section (13) of Section 13 of the SARFAESI Act, contemplates a bar inasmuch as, no borrower after the receipt of the notice referred to in sub-section (2) of Section 13 of the SARFAESI Act, can transfer by way of sale, lease or otherwise any of the secured assets referred to in the notice, without prior written consent of the secured creditor. It is not in dispute that the so-called induction of tenants, is after the issuance of notice under sub- section (2) of Section 13 of the SARFAESI Act and therefore, was impermissible.
14. Mr Kamlesh P. Vaidankar, learned advocate, has justified the aspect of tenants by saying that they are the family members; however, in the writ petition, it is simply stated that the properties, are being occupied by the tenants without further explaining or qualifying the said statement. The submission made of the tenants being family members, is nothing but an afterthought theory propounded by the petitioner. Besides, the petitioner, has not produced any lease deed executed in favour of the tenants, much less any agreement with them except two simple letters of the so- called tenants. The said two letters, are nothing, but a futile attempt on the part of the petitioner to buy some time only with a view to Page 7 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined seeing that the petitioner is not to handover the possession, as agreed before the Tribunal. Therefore, the present writ petition, is nothing, but as has been rightly pointed out by Mr Pranav G. Desai, learned advocate, is an abuse of process of Court. The petition, therefore, deserves to be dismissed.
15. Mr Pranav G. Desai, learned advocate, is also right in his submission that if at all the petitioner wanted some extension, the petitioner could have approached the Tribunal, seeking further orders of direction; however, instead of approaching the Tribunal, the petitioner, has straightaway approached this Court and that too, when the petitioner, was to handover the possession. Therefore, this Court, is of the opinion that the petition, is nothing but an unfair attempt on the part of the petitioner to buy some time which, would be impermissible.
16. The judgment of the Apex Court in the case of M/s. South Indian Bank Ltd. vs. Naveen Mathew Philip rendered in unnumbered Civil Appeal (Arising out of SLP (Civil) Nos.22021-22022 of 2022) is worth referring to. The Apex Court, after considering various judgments has held and observed that though the powers conferred under Article 226 of the Constitution of India are rather wide but are required to be exercised only in extraordinary circumstances in matters pertaining to proceedings and adjudicatory scheme qua a statute, more so in commercial matters involving a lender and a borrower, when the legislature has provided for a specific mechanism for appropriate redressal. Relevant paragraphs 16 to 18, are reproduced herein below:-
"16. Approaching the High Court for the consideration of an offer by the borrower is also frowned upon by this Court. A writ of mandamus is a prerogative writ. In the absence of any legal right, the Court cannot exercise the said power. More circumspection is required in a financial transaction, particularly when one of the parties would not come within the Page 8 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined purview of Article 12 of the Constitution of India. "When a statute prescribes a particular mode, an attempt to circumvent shall not be encouraged by a writ court. A litigant cannot avoid the noncompliance of approaching the Tribunal which requires the prescription of fees and use the constitutional remedy as an alternative. We wish to quote with profit a recent decision of this Court in Radha Krishan Industries v. State of H.P., (2021) 6 SCC 771, "25. In this background, it becomes necessary for this Court, to dwell on the "rule of alternate remedy" and its judicial exposition. In Whirlpool Corpn. v. Registrar of Trade Marks (1998) 8 SCC 1, a two-Judge Bench of this Court after reviewing the case law on this point, noted: (SCC pp. 9-10, paras 14-15) "14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose".
15. 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. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field".
(emphasis supplied)
26. Following the dictum of this Court in Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1], in Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107], this Court noted that: (Harbanslal Sahnia case, SCC p. 110, para 7) "7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the Page 9 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies:
(i) where the writ petition seeks enforcement of any of the fundamental rights;
(ii) where there is failure of principles of natural justice; or
(iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1].) The present case attracts applicability of the first two contingencies. Moreover, as noted, the appellants' dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings."
(emphasis supplied)
27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well. 27.2. The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where:
(a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution;
(b) there has been a violation of the principles of natural justice;
(c) the order or proceedings are wholly without jurisdiction; or
(d) the vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion. 27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the Page 10 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with."
17. We shall reiterate the position of law regarding the interference of the High Courts in matters pertaining to the SARFAESI Act by quoting a few of the earlier decisions of this Court wherein the said practice has been deprecated while requesting the High Courts not to entertain such cases. ● Federal Bank Ltd. v. Sagar Thomas, (2003) 10 SCC 733, "18. From the decisions referred to above, the position that emerges is that a writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State (Government); (ii) an authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positive obligation of public nature; and (viii) a person or a body under liability to discharge any function under any statute, to compel it to perform such a statutory function.
26. A company registered under the Companies Act for the purposes of carrying on any trade or business is a private enterprise to earn livelihood and to make profits out of such activities. Banking is also a kind of profession and a commercial activity, the primary motive behind it can well be said to earn returns and profits. Since time immemorial, such activities have been carried on by individuals generally. It is a private affair of the company though the case of nationalized banks stands on a different footing.
There may well be companies, in which majority of the share capital may be contributed out of the State funds and in that view of the matter there may be more participation or dominant participation of the State in managing the affairs of the company. But in the present case we are concerned with a banking company which has its own resources to raise its funds without any contribution or shareholding by the State. It has its own Board of Directors elected by its shareholders. It works like any other private company in the banking business having no monopoly status at all. Any company carrying on banking business with a capital of five lakhs will become a scheduled bank. All the same, banking activity as a whole carried on by various banks undoubtedly has an impact and effect on the economy of the country in general. Money of the shareholders and the depositors is with such companies, carrying on banking activity. The banks finance the borrowers on any given rate of interest at a particular time. They advance loans as against securities.
Therefore, it is obviously necessary to have regulatory check over such activities in the interest of the company itself, the shareholders, the depositors as well as to maintain the proper financial equilibrium of the national economy. The banking companies have not been set up for the purposes of building Page 11 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined the economy of the State; on the other hand such private companies have been voluntarily established for their own purposes and interest but their activities are kept under check so that their activities may not go wayward and harm the economy in general.
A private banking company with all freedom that it has, has to act in a manner that it may not be in conflict with or against the fiscal policies of the State and for such purposes, guidelines are provided by Reserve Bank so that a proper fiscal discipline, to conduct its affairs in carrying on its business, is maintained. So as to ensure adherence to such fiscal discipline, if need be, at times even the management of the company can be taken over. Nonetheless, as observed earlier, these are all regulatory measures to keep a check and provide guidelines and not a participatory dominance or control over the affairs of the company.
For other companies in general carrying on other business activities, maybe manufacturing, other industries or any business, such checks are provided under the provisions of the Companies Act, as indicated earlier. There also, the main consideration is that the company itself may not sink because of its own mismanagement or the interest of the shareholders or people generally may not be jeopardized for that reason. Besides taking care of such interest as indicated above, there is no other interest of the State, to control the affairs and management of the private companies. Care is taken in regard to the industries covered under the Industries (Development and Regulation) Act, 1951 that their production, which is important for the economy, may not go down, yet the business activity is carried on by such companies or corporations which only remains a private activity of the entrepreneurs/companies.
27. Such private companies would normally not be amenable to the writ jurisdiction under Article 226 of the Constitution. But in certain circumstances a writ may issue to such private bodies or persons as there may be statutes which need to be complied with by all concerned including the private companies. For example, there are certain legislations like the Industrial Disputes Act, the Minimum Wages Act, the Factories Act or for maintaining proper environment, say the Air (Prevention and Control of Pollution) Act, 1981 or the Water (Prevention and Control of Pollution) Act, 1974 etc. or statutes of the like nature which fasten certain duties and responsibilities statutorily upon such private bodies which they are bound to comply with. If they violate such a statutory provision a writ would certainly be issued for compliance with those provisions. For instance, if a private employer dispenses with the service of its employee in violation of the provisions contained under the Industrial Disputes Act, in innumerable cases the High Court interfered and has issued the writ to the private bodies and the companies in that regard. But the difficulty in issuing a writ may arise where there may not be any non-compliance with or Page 12 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined violation of any statutory provision by the private body. In that event a writ may not be issued at all. Other remedies, as may be available, may have to be resorted to."
● United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, "42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression "any person"
used in Section 17(1) is of wide import.
It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.
43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions.
In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasijudicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a Page 13 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
● State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85, "5. We have considered the submissions on behalf of the parties. Normally this Court in exercise of jurisdiction under Article 136 of the Constitution is loath to interfere with an interim order passed in a pending proceeding before the High Court, except in special circumstances, to prevent manifest injustice or abuse of the process of the court. In the present case, the facts are not in dispute.
The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in CIT v. Chhabil Dass Agarwal [(2014) 1 SCC 603], as follows:
(SCC p. 611, para 15) "15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal v. Supt.
of Taxes [AIR 1964 SC 1419], Titaghur Paper Mills Co. Ltd. v. State of Orissa [(1983) 2 SCC 433: 1983 SCC (Tax) 131] and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
8. The Statement of Objects and Reasons of the SARFAESI Act states that the banking and financial sector in the country was felt not to have a level playing field in comparison to other Page 14 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of securities and sell them.
The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of banks and financial institutions. Narasimhan Committee I and II as also the Andhyarujina Committee constituted by the Central Government Act had suggested enactment of new legislation for securitisation and empowering banks and financial institutions to take possession of securities and sell them without court intervention which would enable them to realise long-term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as "the DRT Act") with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order.
9. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank v. O.C. Krishnan [(2001) 6 SCC 569] that: (SCC p. 570, para 6) "6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred.
Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."
15. It is the solemn duty of the court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating Page 15 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined the interim order. Loans by financial institutions are granted from public money generated at the taxpayer's expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in United Bank of India v. Satyawati Tondon [(2010) 8 SCC 110:
(2010) 3 SCC (Civ) 260], has also not been kept in mind before passing the impugned interim order: (SCC pp. 123-24, para 46) "46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation.
Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad [AIR 1969 SC 556], Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order." ● Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir, (2022) 5 SCC 345, "18. Even otherwise, it is required to be noted that a writ petition against the private financial institution - ARC - the appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor.
The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities.
Page 16 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined
If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in Praga Tools Corpn. v. C.A. Imanual, [(1969) 1 SCC 585] and Ramesh Ahluwalia v. State of Punjab, [(2012) 12 SCC 331: (2013) 3 SCC (L&S) 45: 4 SCEC 715] relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers.
21. Applying the law laid down by this Court in State Bank of Travancore v. Mathew K.C., [(2018) 3 SCC 85: (2018) 2 SCC (Civ) 41] to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13-8-2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs 1 crore only (in all Rs 3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs 117 crores.
The ad interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of court. It appears that the High Court has initially granted an ex parte ad interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced.
The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed."
● Varimadugu Obi Reddy v. B. Sreenivasulu, (2023) 2 SCC 168, "36. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable under Section 18 of the Act subject to the compliance of condition of pre-deposit Page 17 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023 NEUTRAL CITATION C/SCA/6501/2023 ORDER DATED: 27/04/2023 undefined and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of predeposit contemplated under 2nd proviso to Section 18 of the 2002 Act."
18. While doing so, we are conscious of the fact that the powers conferred under Article 226 of the Constitution of India are rather wide but are required to be exercised only in extraordinary circumstances in matters pertaining to proceedings and adjudicatory scheme qua a statute, more so in commercial matters involving a lender and a borrower, when the legislature has provided for a specific mechanism for appropriate redressal."
17. In view of the above discussion, and the above-mentioned principles laid down by the Apex Court, no case is made out, warranting interference and the petition, therefore, does not deserve to be entertained and is hereby dismissed. No order as to costs.
18. The interim relief granted by this Court, stands vacated.
(SANGEETA K. VISHEN,J) BINOY B PILLAI Page 18 of 18 Downloaded on : Sun Sep 17 18:56:21 IST 2023