Allahabad High Court
M/S Kaushambi Paper Mills Pvt. Ltd. And 2 ... vs Additional District Magistrate And 2 ... on 31 August, 2020
Bench: Surya Prakash Kesarwani, Jayant Banerji
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 5 Case :- WRIT - C No. - 12699 of 2020 Petitioner :- M/S Kaushambi Paper Mills Pvt. Ltd. And 2 Others Respondent :- Additional District Magistrate And 2 Others Counsel for Petitioner :- Gyan Prakash Shrivastava Counsel for Respondent :- C.S.C.,Veerendra Kumar Shukla Hon'ble Surya Prakash Kesarwani,J.
Hon'ble Jayant Banerji,J.
Heard learned counsel for the petitioners, learned Standing Counsel for respondent no.1 and Sri Vivek Yadav, learned counsel holding brief of Sri Arnab Banerji appearing for respondent nos. 2 and 3.
Briefly stated facts of the present case are that the petitioners took some loan from respondent No.2-Bank and the dues accrued to Rs. 3,64,46,861.60. Consequently, the respondent Bank proceeded under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as "SARFAESI Act). In the said matter, the mortgaged immovable property being House No. R-12/24, Rajnagar, Tehsil and District Ghaziabad, was proceeded to be attached by the impugned order dated 25.6.2020 under Section 14 of the SARFAESI Act and possession thereof was directed to be given to the respondent Bank. Aggrieved with this, the petitioner has filed the present writ petition.
The only submission of the learned counsel for the petitioners is that the necessary requirements as provided under Section 14 of the SARFAESI Act were not fulfilled by the respondent no. 2 and no opportunity of hearing was afforded by the respondent Bank to the petitioners before passing the impugned order dated 25.6.2020. He, therefore, submits that in view of the law laid down by the Division Bench of this Court in Writ-C No. 38578 of 2018 (Kumkum Tentiwal Vs. State of U.P. and 3 others decided on 11.12.2018), the impugned order deserves to be quashed and a fresh order needs to be passed by the respondent No.1 after affording opportunity of hearing to the petitioners. He further submits that against the aforesaid Division Bench judgement, a Special Leave to Appeal (C) No. 8191 of 2019 (Syndicate Bank Vs. Kumkum Tentiwal and others) was filed before the Supreme Court which was dismissed by order dated 6.5.2019.
Learned Standing Counsel as well as learned counsel appearing for respondent nos. 2 and 3 do not dispute the aforesaid legal position that an opportunity of hearing was necessary to be afforded to the petitioners before passing the impugned order which has not been done by the respondent no.1.
We have carefully considered the submissions of the learned counsels for the parties.
We find that the Division Bench of this Court in Kumkum Tentiwal (supra) has laid down the law as under:
"As regards the insertion of Section 17 sub-section 4-A with effect from 1.9.2016, it is no doubt true that the rights of the lessees can be gone into before the Debt Recovery Tribunal in an appeal filed under Section 17 of the SARFAESI Act, however, there being no consequent amendment in Section 14. It cannot be said that an appeal lies against an order passed under Section 14 of the SARFAESI Act or that the necessity of hearing can be dispensed with under Section 14 by the District Magistrate.
From the scheme of the Act, it is implicit that the procedure of Sections 13(2) and 13(4) is mandatory before initiating action under Section 14 of the Act. The borrower on initiation of action under section 14 of the Act, may at times plead that he was not provided any opportunity of hearing as envisaged under Section 13(2) of the Act entitling him to payment of the dues within 60 days and therefore the action under section 14 is illegal and misconceived. Thus, notice or opportunity of hearing is also necessary to the borrower or guarantor although it may be as a formality at times, before initiating action under Section 14 of the Act.
The Hon'ble Supreme Court further analysed the provisions of Section 17 while holding that the only recourse available against an order passed under Section 14 of the SARFAESI Act is under Articles 226 and 227 of the Constitution of India. The Hon'ble Supreme Court in catena of decisions have held that principles of natural justice are engrained and and have read into every statute even if not specifically provided for. Reliance is placed upon the judgement of the Supreme Court in the case of M/s. Dharampal Satyapal Ltd. vs. Deputy Commissioner of Central Excise, Gauhati & Ors, 2015 (8) SCC 519. Para 20, 21, 25, 28, 29, 35 and 42 of the said judgement are quoted as under:
20. Though the aforesaid principles of natural justice are known to have their origin in Common Law, even in India the principle is prevalent from ancient times, which was even invoked in Kautilya's 'Arthashastra'. This Court in the case of Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, New Delhi & Ors.[4] explained the Indian origin of these principles in the following words:
"Indeed, natural justice is a pervasive facet of secular law where a spiritual touch enlivens legislation, administration and adjudication, to make fairness a creed of life. It has many colours and shades, many forms and shapes and, save where valid law excludes, it applies when people are affected by acts of authority. It is the bone of healthy government, recognised from earliest times and not a mystic testament of judge-made law. Indeed from the legendary days of Adam - and of Kautilya's Arthashastra - the rule of law has had this stamp of natural justice, which makes it social justice. We need not go into these deeps for the present except to indicate that the roots of natural justice and its foliage are noble and not new-fangled. Today its application must be sustained by current legislation, case law or other extant principle, not the hoary chords of legend and history. Our jurisprudence has sanctioned its prevalence even like the Anglo-American system".
21. Aristotle, before the era of Christ, spoke of such principles calling it as universal law. Justinian in the fifth and sixth Centuries A.D. called it 'jura naturalia', i.e. natural law.
25. It is on the aforesaid jurisprudential premise that the fundamental principles of natural justice, including audi alteram partem, have developed. It is for this reason that the courts have consistently insisted that such procedural fairness has to be adhered to before a decision is made and infraction thereof has led to the quashing of decisions taken. In many statutes, provisions are made ensuring that a notice is given to a person against whom an order is likely to be passed before a decision is made, but there may be instances where though an authority is vested with the powers to pass such orders, which affect the liberty or property of an individual but the statute may not contain a provision for prior hearing. But what is important to be noted is that the applicability of principles of natural justice is not dependent upon any statutory provision. The principle has to be mandatorily applied irrespective of the fact as to whether there is any such statutory provision or not.
De Smith [8] captures the essence thus - "Where a statute authorises interference with properties or other rights and is silent on the question of hearing, the courts would apply rule of universal application and founded on plainest principles of natural justice".
Wade [9] also emphasizes that principles of natural justice operate as implied mandatory requirements, non-observance of which invalidates the exercise of power. In Cooper v. Sandworth Board of Works [10] the Court laid down that: '...although there is no positive word in the statute requiring that the party shall be heard, yet justice of common law would supply the omission of Legislature". Exhaustive commentary explaining the varied contours of this principle can be traced to the judgment of this Court in Managing Director, ECIL, Hyderabad & Ors. v. B. Karunakar & Ors.[11], wherein the Court discussed plenty of previous case law in restating the aforesaid principle, a glimpse whereof can be found in the following passages:
"20. The origins of the law can also be traced to the principles of natural justice, as developed in the following cases: In A. K. Kraipak v. Union of India, (1969) 2 SCC 262 : (1970) 1 SCR 457, it was held that the rules of natural justice operate in areas not covered by any law. They do not supplant the law of the land but supplement it. They are not embodied rules and their aim is to secure justice or to prevent miscarriage of justice. If that is their purpose, there is no reason why they should not be made applicable to administrative proceedings also especially when it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial ones. An unjust decision in an administrative inquiry may have a more far reaching effect than a decision in a quasi-judicial inquiry. It was further observed that the concept of natural justice has undergone a great deal of change in recent years. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the inquiry is held and the constitution of the tribunal or the body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice has been contravened, the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case. The rule that inquiry must be held in good faith and without bias and not arbitrarily or unreasonably is now included among the principles of natural justice.
21. In Chairman, Board of Mining Examination v. Ramjee, (1977) 2 SCC 256, the Court has observed that natural justice is not an unruly horse, no lurking landmine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. The Courts cannot look at law in the abstract or natural justice as mere artifact. Nor can they fit into a rigid mould the concept of reasonable opportunity. If the totality of circumstances satisfies the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity, the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures.
22. In Institute of Chartered Accountants of India v. L. K. Ratna, (1986) 4 SCC 537, Charan Lal Sahu v. Union of India, (1990) 1 SCC 613 (Bhopal Gas Leak Disaster Case) and C. B. Gautam v. Union of India, (1993) 1 SCC 78, the doctrine that the principles of natural justice must be applied in the unoccupied interstices of the statute unless there is a clear mandate to the contrary, is reiterated."
In his separate opinion, concurring on this fundamental issue, Justice K. Ramaswamy echoed the aforesaid sentiments in the following words:
"61. It is now settled law that the proceedings must be just, fair and reasonable and negation thereof offends Articles 14 and 21. It is well settled law that principles of natural justice are integral part of Article 14. No decision prejudicial to a party should be taken without affording an opportunity or supplying the material which is the basis for the decision. The enquiry report constitutes fresh material which has great persuasive force or effect on the mind of the disciplinary authority. The supply of the report along with the final order is like a post mortem certificate with putrefying odour. The failure to supply copy thereof to the delinquent would be unfair procedure offending not only Arts. 14, 21 and 311(2) of the Constitution, but also, the principles of natural justice."
28. In the case of East India Commercial Company Ltd., Calcutta & Anr. v. The Collector of Customs, Calcutta [15], this Court held that whether the statute provides for notice or not, it is incumbent upon the quasi-judicial authority to issue a notice to the concerned persons disclosing the circumstances under which proceedings are sought to be initiated against them, failing which the conclusion would be that principle of natural justice are violated. To the same effect are the following judgments:
a) U.O.I. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr.[16]
b) Morarji Goculdas B & W Co. Ltd. & Anr. v. U.O.I. & Ors.[17]
c) Metal Forgings & Anr. v. U.O.I. & Ors.[18]
d) U.O.I. & Ors. v. Tata Yodogawa Ltd. & Anr.[19]
29. Therefore, we are inclined to hold that there was a requirement of issuance of show-cause notice by the Deputy Commissioner before passing the order of recovery, irrespective of the fact whether Section 11A of the Act is attracted in the instant case or not.
35. At the same time, it cannot be denied that as far as Courts are concerned, they are empowered to consider as to whether any purpose would be served in remanding the case keeping in mind whether any prejudice is caused to the person against whom the action is taken. This was so clarified in the case of Managing Director, ECIL (supra) itself in the following words:
"Hence, in all cases where the enquiry officer's report is not furnished to the delinquent employee in the disciplinary proceedings, the Courts and Tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the Court/ Tribunal and given the employee an opportunity to show how his or her case was prejudiced because of the non-supply of the report. If after hearing the parties, the Court/Tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the Court/Tribunal should not interfere with the order of punishment. The Court/ Tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished as it regrettably being done at present. The courts should avoid resorting to short cuts. Since it is the Courts/Tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, (and not any internal appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the Court/Tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment."
Section 14 on bare perusal does not provide for any opportunity of hearing. However, it is also clear that the order passed under Section 14 is a coercive measure for taking possession and thus the officer is bound to observe the principles of natural justice while passing the order under Section 14 of the SARFAESI Act. The District Magistrates have in passing orders under Section 14 without hearing or affording any opportunity to the affected parties have relied upon a letter issued by izeq[k lfpo m0iz0 'kklu] laLFkkxr foRr dj ,oa fucU/ku vuqHkkx&6] y[kum i= la0 300¼ch½@d0fu0&6&2010 fnukad 17&2&2010 .
We are unable to understand as to under what powers the Chief Secretary has issued such instructions to the District Magistrates. The said instructions are prima facie illegal as the Act to be enforced is Central Act and no amendments/changes can be brought about or suggested by the State authorities and, secondly, the said letter dated 17.2.2010 is in the teeth of judgement of the Hon'ble Supreme Court in the case of Harsh Govardhan Sondagar (supra) as well as in the teeth of principles of natural justice which are ingrained in every statutory enactment while exercising the powers which have the effect of depriving any affected person of his valuable rights. The Hon'ble Suprem Court further in the case of M/s. Dharampal Satyapal Ltd. (supra) has clearly held that the authority exercising the powers cannot even take a ground to the effect that no useful purpose would be served in hearing the affected parties prior to passing of the order.
The Court also issues directions holding that i= la0 300¼ch½@d0fu0&6&2010 fnukad 17&2&2010 will be treated to be ignored by all the competent officers while exercising powers under Section 14 of the SARFAESI Act.
In view of the findings and on the analysis of the judgements, the Court is of view that the order dated 31.12.2016 deserves to be quashed. We are making it clear that we have gone into the merits of the matter which shall be done to be considered by the authority concerned while deciding the matter in the light of the directions given above. Let a copy of the judgement be sent to the Chief Secretary State of U.P for withdrawal of the letter dated 17.2.2010.
The said order is hereby quashed and the petitioner is directed to appear before the Additional Collector/Additional District Magistrate (Finance & Revenue) Mathura (respondent no. 3) on 26.12.2018 and he may file whatever objections he desires to file against the application of the Bank seeking the possession and, on filing of the said objections, the Collector/District Magistrate, Mathura will hear and decide the matter afresh after following the principles of natural justice and giving a due hearing to the parties.
The writ petition is allowed insofar as it relates against the order dated 31.12.2016".
By the aforequoted judgement, the Division Bench of this Court has laid down a law that an opportunity of hearing should be afforded before passing an order under Section 14 of the SARFAESI Act.
In the impugned order dated 25.6.2020, there is no whisper of affording any opportunity of hearing to the petitioners before passing the order. The aforesaid position is also not disputed by the learned counsel for the respondents.
In view of the aforesaid and respectfully following the Division Bench judgement of this Court in the case of Kumkum Tentiwal (supra), we quash the impugned order dated 25.6.2020, passed by the respondent no.1 and remit back the matter to him with a direction to pass an order afresh in accordance with law within four weeks from today after affording opportunity of hearing to the petitioners.
It is made clear that we have not expressed any opinion on the merits of the claim of the petitioners.
The petitioners shall submit a copy of this order before respondent no.1 within ten days from today.
The writ petition stands allowed to the extent indicated above.
Order Date :- 31.8.2020 sfa/