Nikul Bhatt vs Dena Bank Through Chief Manager on 5 August, 2015

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Gujarat High Court

Nikul Bhatt vs Dena Bank Through Chief Manager on 5 August, 2015

Bench: R.M.Chhaya

                 C/SCA/3130/2015                                             ORDER



                  IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                    SPECIAL CIVIL APPLICATION NO. 3130 of 2015
         ===============================================================
                           NIKUL BHATT....Petitioner(s)
                                   Versus
              DENA BANK THROUGH CHIEF MANAGER, & 2....Respondent(s)
         ================================================================
         Appearance:
         MR MAULIK NANAVATI, FOR NANAVATI & CO., ADVOCATE FOR THE
         PETITIONER(S) NO. 1
         DS AFF.NOT FILED (N) FOR RESPONDENT(S) NO. 3
         MR DHARMESH SHAH FOR MR NR PARIKH, ADVOCATE FOR THE
         RESPONDENT(S) NO. 1
         MR BHARAT VYAS, AGP FOR RESPONDENT(S) NO. 2
         NO ONE APPEARS FOR RESPONDENT NO. 3
         ================================================================
                 CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA

                                   Date : 05/08/2015


                                    ORAL ORDER

1. Heard Mr.Maulik Nanavati, learned counsel for the petitioner, Mr.Dharmesh Shah, for Mr.N.R.Parikh, learned counsel for respondent No.1Bank and Mr.Bharat Vyas, learned Assistant Government Pleader for respondent No.2. Though served, no one appears on behalf of respondent No.3.

2. By way of this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged order dated 09.01.2013 passed by learned Additional Chief Metropolitan Magistrate, Ahmedabad, in Criminal Case No.80 of 2012 under Section 14 of the Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 ("The Page 1 of 10 HC-NIC Page 1 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER Act" for short) and has also prayed to quash the consequential action of the respondent-Bank in taking possession of the secured asset on 06.02.2015 on the strength of illegal order and has further prayed for directing the respondentBank to handover the possession of the flat in question.

3. This Court issued notice as well as granted status quo. As the pleadings are complete, the matter was taken up for its final disposal with consent of learned counsel for the respective parties.

4. The following noteworthy facts emerge from the record of the petition.

4.1 The respondentBank sanctioned cash credit facility of Rs.2.50 lacs to respondent No.3, who happens to be the sole proprietor of M/s.Ambika Plastic Industries. The flat in question being Flat No.A92, 9th Floor, Takshashila Apartments, Vibhag8, Satellite, Ahmedabad (Ajaydeep Cooperative Housing Society Ltd.), situated at Vastrapur, Ahmedabad, which belongs to the present petitioner was mortgaged, which is evident from the memorandum of entry, which is part of the record of this petition. Record further indicates that the account of respondent No.3 was declared to be Nonperforming Asset on 30.07.2004. It further appears that thereafter, the respondentBank gave a notice under Section 13(2) of the Act on 14.02.2009 calling upon the principal borrower as well as the petitioner as a guarantor to repay the amount of Rs.2,72,430/ with future interest at the rate of Page 2 of 10 HC-NIC Page 2 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER 13.50 % per annum within a period of 60 days.

4.2 As the said notice was not complied with, the authorized officer of the respondentBank took a symbolic possession of the flat in question on 07.10.2009. Record further indicates that further proceedings came to be initiated by the respondent Bank, under the provisions of the Act. Meanwhile, one Parag Girdharlal Ganatra filed an application being House Rent Application No.132 of 2013 before learned Small Cause Court, Ahmedabad claiming to be the tenant of the flat in question.

4.3 Record further indicates that said Parag Girdharlal Ganatra also filed Securitization Application No.79 of 2013 before learned Debts Recovery Tribunal (hereinafter referred to as "DRT" for short), Ahmedabad. However, learned DRT, Ahmedabad did not grant any interim relief. The petitioner filed Regular Civil Suit No.828 of 2006 before learned Civil Judge(S.D), Ahmedabad (Rural), which is also pending. The petitioner also filed Securitization Application No.6 of 2013 before learned DRT, Ahmedabad. It is further the case of the petitioner that after passing of the impugned order on 06.02.2015, the authorized officer of the respondentBank has taken actual possession of the flat in question after drawing necessary panchnama. It further appears that the present petition is filed on 23.02.2015 challenging the order dated 09.01.2014 with almost after a period of 13 months.

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5. Learned counsel for the petitioner has vehemently submitted that the impugned order passed by learned Additional Chief Metropolitan Magistrate, Ahmedabad is without jurisdiction. Relying upon the judgment of the Division Bench of this Court rendered in the case of Manjudevi R. Somani Vs. Union of India [2013 (2) GLH 390], it was contended that the order itself is bad in law for want of jurisdiction. Learned counsel for the petitioner has relied upon the undertaking on the affidavit, which is filed before this Court and has contended that the possession should be given back to the petitioner and the petitioner undertakes that he shall not create any charge over the flat in question or get the flat incumbent in any manner. It was asserted by learned counsel for the petitioner that no default is made by the petitioner and on the contrary, the petitioner has filed proceedings challenging the said claim before the competent Court. It was reiterated that the petitioner has willingness to pay the borrowed amount guaranteed by the petitioner and has drawn attention of this Court to the Affidavitin Rejoinder filed in this proceeding. It was further contended that the possession has been taken without any notice and therefore, the factum of not stating the fact of the suit as well as the Securitization Application filed by the petitioner would not amount to willful of suppression of material facts. Therefore, learned counsel for the petitioner submitted that the petition deserves to be allowed as Page 4 of 10 HC-NIC Page 4 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER prayed for.

6. Per contra, Mr.Dharmesh Shah, learned counsel for the respondentBank relied upon the affidavit of the Bank and contended that the petitioner is also guilty of willful suppression of material facts and therefore, on that count alone, the petition deserves to be dismissed. It was further contended that after the impugned order came to be executed by the respondentBank and after actual possession of the flat in question was taken over, Mr.Parag Girdharlal Ganatra has broken the seals and illegally taken possession of the flat in question. It was therefore, submitted that the petition is misconceived and the same deserves to be dismissed.

No other and further submissions are made by learned counsel for the respective parties.

7. It is a matter of record that the petitioner is a guarantor and has executed a Letter of Guarantee and has hypothicated the flat in question, which is quite evident from the photocopy of the memorandum of entry (at AnnexureR1 to the affidavit of the respondent Bank) and even the said fact is not denied by the petitioner. It may further be noted that the petitioner has also approached learned DRT, Ahmedabad challenging the notice under Section 13(2) of the Act, wherein the learned DRT, Ahmedabad has passed the following order: "Shri L.J.Golani, Ld.Advocate appeared as Counsel alongwith Shri S.J.Mackwana, Ld.Advocate for the Page 5 of 10 HC-NIC Page 5 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER Applicant. Ld.Advocate for the Applicant argued his case at length. Apart from various points, he submitted that Section 13 (2) notice has not been served to his client, who is the mortgager in the present case.

Shri Pankaj Saini, Law Officer of the Respondent Bank appeared alongwith Shri Shukla, Sr.Manager of the respondent Bank. Shri Saini has shown this Tribunal the original A.D.card bearing the signature of the Applicant from which it is established that Section 13 (2) notice was served upon the Applicant.

Ld.Counsel Shri, Golani further submitted that the Applicant is arranging funds from his close relatives and reply the entire dues or or before 20.03.2013. The Applicant is directed to deposit Rs.2.00 lacs on or before 25th February, 2013 failing which the respondent Bank is at liberty to take further action under SARFAESI Act. If the said amount is deposited then the respondent Bank is restrained from taking physical possession on the said property.

With above noted observations, I pass the following order:

O R D E R

1) S.A No.06/2013 is disposed off.

2) No order as to cost.

SD/ (K.GHOSE) PRESIDING OFFICER DRTI, AHMEDABAD."

8. Considering the main challenge in the petition, it clearly appears that learned Additional Chief Metropolitan Magistrate, Ahmedabad vide order dated 09.01.2013 allowed the application filed by the respondentBank under Section 14 of the Act.

In the case of Manjudevi R. Somani Vs. Union of India [2013 (2) GLH 390], the Division Bench of this Court has observed thus: "25. The SARFAESI Act was passed in the year 2002, Page 6 of 10 HC-NIC Page 6 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER and by virtue of Section 14 of the Act, the Chief Metropolitan Magistrates are vested with the powers to give possession under the circumstances mentioned in the said Section. The said Section does not refer to Additional Chief Metropolitan Magistrates, whereas in the case before us, it is the Additional Chief Metropolitan Magistrate, Ahmedabad, who has passed the order for facilitating handing over the possession with the help of the local police.

26. By our order dated 15th March 2013, we directed the registry to report to us whether any notification after the enactment of the SARFAESI Act 2002 has been issued authorizing the Additional Chief Metropolitan Magistrate, Ahmedabad, to exercise powers under Section 14 of the SARFAESI Act 2002. The registry vide report dated 19th March 2013 brought to our notice that no separate notification has been issued by this High Court authorizing the Additional Chief Metropolitan Magistrate, Ahmedabad, to exercise powers under Section 14 of the SARFAESI Act 2002.

27. We are of the opinion that in such circumstances the Chief Metropolitan Magistrate, Ahmedabad, by virtue of his authority under Section 19, Clause (3) of the Code of Criminal Procedure, 1973 could not have entrusted the Additional Chief Metropolitan Magistrate with his own determination and the allocation of business to an Additional Metropolitan Magistrate must be in tune with the jurisdiction conferred upon him by the High Court in exercise of powers under Section 17, Clause (2) of the Act. It is a well settled position of law that special orders to be made by the Chief Metropolitan Magistrate as to distribution of business must be consistent with the Code. Unless an Additional Chief Metropolitan Magistrate was expressly conferred the power by way of a notification to entertain an application under Section 14 of the SARFAESI Act 2002, he would have no jurisdiction to deal with such a proceeding. To say that Section 17, Clause (2) of the Code is expressed in disjunctive form, and therefore, as a matter of plain language that the words as the High Court may direct can qualify only the words any of the powers of a Chief Metropolitan Magistrate under this Code or under any other law for the time being in force cannot be read as qualifying the words all the powers of a Chief Metropolitan Magistrate under this Code or under any law for the time being in force will amount to causing violence to the object of the very Section itself. We are not impressed by the submission of Page 7 of 10 HC-NIC Page 7 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER Mr.Jani, the learned counsel appearing for the bank that to read those words as qualifying the latter words would result in a construction which is not even grammatical in form. If such a construction is accepted then the very power of the High Court to restrict those powers under Section 17, Clause (2) of the Code and to confer only some or particular powers upon the Additional Chief Metropolitan Magistrate would be rendered nugatory. In such circumstances, we are left with no other option but to hold that the office order dated 4th February 2012 issued by the Chief Metropolitan Magistrate, Ahmedabad, in exercise of his powers under Section 19, Clause (3) of the Code of Criminal Procedure 1974 read with Rule 10, Clause (1) of Chapter XXXII of the Criminal Manual 1977 regarding the distribution of business amongst the Metropolitan Magistrates, Ahmedabad, thereby empowering the Additional Chief Metropolitan Magistrate, Ahmedabad, to accept and decide cases under the provisions of the SARFAESI Act 2002 arising within the limits of Ahmedabad Municipal Corporation is without jurisdiction and consequently the order passed by the Additional Chief Metropolitan Magistrate, Ahmedabad, below Exhibit 1 in Miscellaneous Application No.73 of 2012 dated 17th July 2012 would also be without jurisdiction, and therefore, void ab initio."

9. Learned counsel for the respondentBank has not been able to point out as to how the learned Additional Chief Metropolitan Magistrate has jurisdiction to decide the application under Section 14 of the Act and therefore, on that short ground, the impugned order deserves to be quashed.

10. This Court upon hearing learned counsel for the respective parties, called for report of respondent No.2Police Inspector of Vastrapur Police Station and pursuant to the same, respondent No.2 submitted a report dated 28.07.2015, which indicates that one Ms.Chhayaben Manubhai Parmar is in occupation of the flat in question. Though on the ground of want of Page 8 of 10 HC-NIC Page 8 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER jurisdiction, the impugned order deserves to be quashed and set aside as observed hereinabove. The fact remains that the said order was executed and the seals were applied after taking out the panchnama and therefore, though the petitioner may not be directly concerned, the fact which has come on record that one Ms.Chhayaben Manubhai Parmar is in actual and physical possession of the flat in question is not only shocking but alarming. It is therefore, clarified that this order shall have no effect on the criminal proceedings, if any, pending against the petitioner or Mr.Parag Girdharlal Ganatra as it is alleged by the respondentBank in its affidavit that the seals applied were broken by the said person and this Court has not expressed any opinion on such aspect. Considering the fact that the respondentBank has already taken measure as provided under Section 13 of the Act, the Court could have relegated the petitioner to avail remedy available under Section 17 of the Act, however, the facts of this case exhibits that the respondentBank is not in physical possession of the flat in question.

11. Resultantly, following the ratio laid down by the Division Bench of this Court in the case of Manjudevi R. Somani (supra), the impugned order dated 09.01.2013 passed by learned Addl. Chief Metropolitan Magistrate, Ahmedabad in Criminal Case No.80 of 2012 is hereby quashed and the proceedings thereof are remitted back to the Court of learned Chief Metropolitan Magistrate, Ahmedabad for its rehearing Page 9 of 10 HC-NIC Page 9 of 10 Created On Fri Aug 07 02:01:37 IST 2015 C/SCA/3130/2015 ORDER on merit, who shall take into consideration the police report dated 28.07.2015 and following the ratio laid by the Apex Court down in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited & Ors. [(2014) 6 SCC 1], and after hearing all the parties, pass appropriate order afresh within a period of 4 weeks from the date of receipt of this order. It is further clarified that this Court has not expressed any opinion on merits of the application under Section 14 of the Act, but the impugned order is quashed only on the ground of want of jurisdiction.

12. For the foregoing, the petition is party allowed. The proceedings of Criminal Case No.80 of 2012 are remitted back as observed hereinabove. Rest of the prayers are not granted. Order of status quo stands vacated. Direct Service is permitted.

(R.M.CHHAYA, J.) Suchit Page 10 of 10 HC-NIC Page 10 of 10 Created On Fri Aug 07 02:01:37 IST 2015

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