Gujarat High Court
Gujarat State Financial Corporation vs Export Import Bank Of India on 10 December, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
C/SCA/9153/2008 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9153 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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GUJARAT STATE FINANCIAL CORPORATION
Versus
EXPORT IMPORT BANK OF INDIA
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Appearance:
MR RD DAVE(264) for the PETITIONER(s) No. 1
BHASKAR SHARMA(9209) for the RESPONDENT(s) No. 3
MR BHARAT T RAO(697) for the RESPONDENT(s) No. 4
MR MIHIR H PATHAK(5261) for the RESPONDENT(s) No. 3
MR RASESH H PARIKH(3862) for the RESPONDENT(s) No. 5
MR.HEMANG H PARIKH(2628) for the RESPONDENT(s) No. 5
MS MINI M NAIR(2689) for the RESPONDENT(s) No. 3
NOTICE SERVED(4) for the RESPONDENT(s) No. 2
MR. MIHIR JOSHI, LD .SR. ADV. for SINGHI AND CO(2725) for the
RESPONDENT(s) No. 1,2
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 10/12/2018
ORAL JUDGMENT
Page 1 of 29
C/SCA/9153/2008 JUDGMENT 1. By this writ application under Article 226 of the
Constitution of India, the writ applicant, a Financial Corporation incorporated under the State Financial Corporation Act, 1951, has prayed for the following reliefs;
"(A) THAT THE HONOURABLE COURT MAY BE PLEASED TO issue a writ of mandamus and/or any other writ, direction or order in the nature of mandamus quashing and setting aside the impugned action of the respondent Nos.1,2 & 3 initiated by releasing advertisement in Gujarat Samachar, daily newspaper dated 14.12.2007 (annexure"I") inviting offers for sale of disputed property , namely, industrial unit, situated at S.No.215 admeasuring about 11431 Sq.Mtrs of land and superstructures thereon situated at village Ghanghli, Taluka Sihor, District Bhavnagar under Securitization Act;
and be further pleased to declare that the respondent Nos.1, 2 & 3 have no power or authority to initiate any action under Securitization Act in respect of the aforesaid disputed property without prior consent and/or permission of the GSFC;
(B) THAT THE HONOURABLE COURT MAY BE PLEASED TO issue a writ of mandamus and/ or any other writ, direction or order in the nature of mandamus to respondent Nos.1 to 3 to handover the disputed property, namely, industrial unit, situated at S.No.215 admeasuring about 11431 Sq.Mtrs of land and superstructures thereon situated at village Ghanghli, Taluka Sihor, District Bhavnagar to the petitioners to recover the outstanding dues;
OR IN THE ALTERNATIVE to direct the respondent Nos.1 to 3 to deposit the entire amount of sale proceeds with the petitioner if the respondents have already sold the disputed property without prejudice to the earlier prayers and without affecting the rights of the petitioner.
(C ) Pending hearing and final disposal of the petition, THE HONOURABLE COURT MAY BE PLEASED TO restrain Page 2 of 29 C/SCA/9153/2008 JUDGMENT the respondent Nos.1,2 and 3, their officers, servants, men and agents from taking any further action pursuant to advertisement in Gujarat Samachar, daily newspaper dated 14.12.2007 (annexure"I") issued under Securitisation Act and be further pleased to direct the respondent Nos. 1, 2 & 3 to hand over the property in question to the petitioner-GSFC forthwith;
(D) THE HONOURABLE COURT MAY BE PLEASED TO grant exparte ad interim relief in terms of prayers (B) and (C) aforesaid;
(E) THE HONOURABLE COURT MAY BE PLEASED TO award any such other and further reliefs deemed fit and expedient in the interest of justice;
(F) THE HONOURABLE COURT MAY BE PLEASED TO award the costs of the petition."
2. The case of the writ applicant, as pleaded in the writ application, is as under;
"(i) The respondent No.4 approached the petitioner GSFC for availing financial term loan to set up its industry considering the application with supporting documents, the GSFC has sanctioned loan of Rs.6O lacs vide sanction letter dated 4.6.1997. However, the respondent No.4 availed loan to the extent of Rs.57.21 lacs only which was required to be repaid by installments at quarterly rest. The last date of repayment was 1.8.2003. To avail term loan amount, the respondent No.4, its promoters and guarantors executed loan agreement, deed of hypothecation and other security documents including guarantee deed. Annexed hereto and marked as NNEXURE"A" is the copy of sanction letter, dated 4.6.1997.
(ii) The petitioner further says that the respondent No.4 had already created equitable mortgage in favour of respondent No.3-Bank of Baroda ("BOB" for short) on 17.11.1994 and 8.11.1996. Therefore, BOB upon request of respondent No.4 extended joint equitable mortgage in favour of petitioner-GSFC on 23.9.1997. Annexed hereto and marked as ANNEXURE"B" is the copy of extension of Page 3 of 29 C/SCA/9153/2008 JUDGMENT joint equitable mortgage deed dated 23.9.1997.
(iii) The petitioner states that again the respondent No.4-
Company approached the petitioner-GSFC to avail working capital loan. The petitioner-GSFC sanctioned working capital loan of Rs.50 lacs which has been fully disbursed wherein last date of repayment was 1.10.2000. In this regard also the company and its promoters executed various security documents like loan agreement, deed of hypothecation and other documents on 26.10.1998 and again the company with the consent of respondent No.3 Bank extended equitable mortgage to secure the said working capital loan amount on 19.11.1998. The respondent No.4-Company on 15.12.1998 registered the charge of the GSFC in respect of both term loan and working capital loan with the Registrar of Companies. The petitioner craves leave to refer to and rely upon the registration of charge at the time of hearing. Annexed hereto and marked as ANNEXURE"C" is the copy of sanction letter for working capital loan.
(iv) The petitioner further states that at the request of the respondent-company the GSFC sanctioned hire purchase loan of Rs..27 lacs on 24.11.1998 which was fully availed by the respondent company. Annexed hereto and marked as ANNEXURE-"D" is the copy of sanction letter dated 24.11.1998 of hire purchase loan. On 8.12.1998 the company executed various security documents for hire purchase loan agreement like extension of equitable mortgage and many other documents in favour of GSFC. The respondent company as well as BOB extended joint equitable mortgage on the disputed property so as to cover hire purchase loan amount also as well as to cover working capital loan of Rs.75 lacs granted by respondent No.3 BOB.
(v) The petitioner states that vide letter, dated 16.3.2000 the respondent No.3-BOB deposited all the title deeds and documents in respect of the disputed property with the petitioner-GSFC. Annexed hereto and marked as ANNEXURE"E" is the copy of letter, dated 16.3.2000 of the respondent No.3-BOB depositing all the title deeds and documents in respect of the disputed property with the petitioner-GSFC.
Page 4 of 29C/SCA/9153/2008 JUDGMENT
(vi) The petitioner further states that the respondent No.3-BOB further granted working capital loan of Rs.40 lacs to the respondent No.4-Company and again there was extension of joint equitable mortgage agreed by GSF'C so as to recover the said loan granted by the respondent No.3~BOB.
(vii) The petitioner further states that the respondent No.3-BOB clearly stated and declared by letter dated 23.3.2000 addressed to GSFC that the GSFC will have first charge on the disputed property for all the said three loans granted by the GSFC. Annexed hereto and marked as ANNEXURE"F" is the copy of letter dated 23.3.2000 addressed by respondent No.3-BOB to GSFC.
(viii) The petitioner further states that surprisingly the respondent No.1 gave advertisement under Securitization Act in Gujarat Samachar, Daily Newspaper published on 10.9.2007 indicating that the respondent No.1 has taken possession of the disputed property though the property has been charged with the petitioner by way of first charge and neither the respondent Nos.3 & 4 nor the respondent Nos.1 & 2 have ever disclosed and declared before the GSFC that the respondent Nos.1 and 2 also have any interest in the property by way of charge or otherwise. Annexed hereto and marked as ANNEXURE"G" is the copy of advertisement dated09.10.2007.
ix) Being aggrieved by the public notice the GSFC immediately addressed letter dated 22.11.2007 to respondent No.1 informing that the petitioner has already charge over the disputed property and requested not sell the property without prior sanction of the GSFC. Annexed hereto and marked as ANNEXURE"H" is the copy of letter dated 22.11.2007 addressed by GSFC to respondent No.1.
(x) The petitioner states that without giving any response to the letter dated 22.11.2007 of the GSFC, the respondent No.1 again released advertisement under Securitization Act on 14.12.2007 inviting offers for sale of disputed property by fixing date of auction on 22.1.2008. Annexed hereto and marked as ANNEXURE"I" is the copy of advertisement dated 14.12.2007. In the said advertisement, it is also stated that the dues of the Page 5 of 29 C/SCA/9153/2008 JUDGMENT respondent No.1 bank as on 31.1.2007 comes to Rs.3,27,55,435.19ps whereas the dues of respondent No.3 BOB comes to Rs.2,82,47,000/as on 31.1.2007. Surprisingly, the respondent No.1 illegally and incorrectly stated in the advertisement that there is no charge of anybody according to their best information and knowledge despite the fact that the petitioner had already informed the respondent Nos.1 and 2 vide their letter dated 22.11.2007 that the petitioner has first charge over the property in question. It is stated in the said advertisement that the respondent No.3-BOB has given consent vide letter dated 13.2.2007 to sell the property in favour of respondent No.1 and to take action under section 13(4) of Securitization Act.
(xi) The petitioner states that the respondent No.3-BOB has complete knowledge about the finances given by the petitioner and there is first charge of the petitioner on the property in question. Therefore, there is material suppression of important facts and fraudulently the respondent banks desire to dispose of the property. Not only that, but the petitioner has already informed respondent No.1 with a copy to respondent No.3 about the fact that the petitioner is having first charge over the property. However, the respondent No.1 has not even taken the cognizance of the said letter. (xii) The petitioner states that as the respondent No.1 has illegally fixed the date of auction on 22.1.2008 the petitioner addressed a letter dated 21.1.2008 sent by FAX upon respondent No.2 inter alia objecting the sale and requesting not to proceed with the auction proceedings on 22.1.2008 as the petitioner has first charge on the property. Again, on 23.1.2008 the petitioner addressed another letter to the respondent Nos.1 and 2 with copy to respondent Nos.3 and 4 inter alia stating that the petitioner GSFC has first charge over the property and the petitioner is holding original documents in respect of the suit property. Therefore, again, objected to alleged auction proceedings. Said letter was followed by another letter dated 6.2.2008. Annexed hereto and marked as ANNEXURE-"J" collectively are the copies of letters dated 21.1.2008, 23.1.2008 and 6.2.2008."
3. The writ applicant, being aggrieved and dissatisfied with the alleged illegal and improper action on the part of the Page 6 of 29 C/SCA/9153/2008 JUDGMENT respondents nos.1 and 2, has come up with this writ application under Article 226 of the Constitution of India.
4. The grounds of challenge raised in this writ application are as under;
"(a) The petitioner states that the petitioner GSFC has advanced huge amounts by way of different loans to the respondent No.4 against which the respondent No.4 has executed various security documents including the first charge on the disputed property by way of equitable mortgage and the respondent No.3 has admitted and accepted the said position that the petitioner is having first charge over the property in question. Under the circumstances, the respondent Nos.1 and 2 can not take any action under the Securitization Act and invite officers for sale of disputed property. In fact, the respondent No.1 does not get any authority to auction the property by taking action under Securitization Act without prior consent of the petitioner. The respondent No.1 does not get consent of 2/3rd majority of secured creditors even considering the total outstanding dues. The outstanding due4s to be recovered, as on 31.1.2007, by GSFC from respondent No.4 are as under;
Loan Particulars Amount in Rs.
Term Loan 29,66,821.99
Hypothecation Loan 19,97,601.14
Working Capital 2,42,52,734.00
Loan
Total Outstanding 2,92,17,156.14
(b) Thus comparing the outstanding amount of
petitioner with that of respondent Nos.1 and 3 the respondent No.1 does not get 3/4th majority so as to entitle to the action under section 13 of the Securitization Act. Thus the respondent No.1 does not fulfill mandatory preliminary requirement under section 13(9) of the Securitization Act. The respondent No.1 does not represent 3/4 in value of the amount outstanding as on th record date. Therefore, the very exercise initiated by the respondent No.1 with the consent of respondent No.3 Page 7 of 29 C/SCA/9153/2008 JUDGMENT as alleged does not represent 3/4th majority of secured creditors and as the petitioner has not been consulted them and the petitioner does not give any consent for such action and on the contrary the petitioner has objected to such an action initiated by the respondent No.1 under Securitization Ac, the whole exercise is illegal and contrary to provisions of Securitization Act and therefore it is not only illegal but it is forbidden and prohibited by section 13(9) of Securitization Act and such an action of the respondent No.1 is void ab initio and illegal.
(c ) The petitioner states that the Securitization Act does not override the effect and rights under State Financial Corporation Act.
(d) The petitioner states that the respondent No.1 does not have charge overriding the first charge on the disputed property in question. The first respondent No.1 does not disclose anywhere as to whether he has any charge over the disputed property and whether it was legally and validly created or not because the respondent No.4 has no authority to create any charge on the disputed property without prior consent or permission of the petitioner as once the charge s created in favour of petitioner.
(e) That the respondent No.1 is supposed to have the knowledge that the charge of the petitioner which has been registered with the Registrar of Companies. However, respondent Nos.1 and 2 deliberatly and intentionally did not disclose the said facts and deliberately false and incorrect facts are stated in the advertisement that there is no charge of anybody on the property which is a misleading statement so as to misguide the public at large who are interested to buy the property Therefore, it requires serious view of the matter and proper orders are required to be passed against the respondent Nos.1 and 2.
(f) The petitioner states that despite repeated letters addressed to the respondent No.1 who is an authorized officer established under Securitization Act, the respondent No.1 did not think fit to take cognizance of the said letters and respond to the same and on the contrary false statement has been made in the Page 8 of 29 C/SCA/9153/2008 JUDGMENT advertisement that there is no charge of anybody else on the property in dispute. Therefore, whole action is malafide, illegal, arbitrary, violative of Article 14 of the Constitution of India as well as against the provisions of Securitization Act since 3/4th majority is not acquired for taking action under the said Act. "
5. Thus, to put it briefly, the case of the Corporation is that it has the first charge over the subject property and, therefore, the entire amount received by the respondents Nos.1,2, and 3 to the tune of Rs.205 Lakh from the auction sale proceedings should come to the Corporation. In other words, it is the case of the Corporation that the respondents Nos.1,2 and 3 should pay the amount of Rs.205 Lakh to the Corporation which they recovered from the sale of the subject property in the auction proceedings. It is also the case of the writ applicant that a huge fraud has been played upon by the original borrower, i.e, the respondent No.4 and this fraud is a subject matter of criminal prosecution.
6. On the other hand, this writ application has been vehemently opposed by the respondents. Mr. Mihir Joshi, the learned Senior Counsel, has appeared with Mr. Singhi for Singhi & Co. for the respondents Nos.1,2 and 3. Mr. B.T. Rao, the learned counsel, has appeared for the respondent No.4 and Mr. R.H. Parikh, the learned counsel has appeared on behalf of the respondent No.5, i.e, the auction purchaser.
7. Mr. Joshi vehemently submitted that as there are highly disputed questions of fact involved in the matter, the writ applicant should be relegated to the remedy of going before the Debts Recovery Tribunal and question the legality and validity of the auction proceedings under section 17 of the Page 9 of 29 C/SCA/9153/2008 JUDGMENT SARFAESI Act. According to Mr. Joshi, this Court may not grant a declaration that the Corporation has the first charge over the subject property. Mr. Joshi requested this Court to take notice of the following dates and events;
"LIST OF DATES AND EVENTS Date Particulars Annexure/ Page Nos.
April 1994 The Respondent No.3 sanctioned Term Loan of Rs.40 Para 7, lacs and Working Capital Loan of Rs.28 lacs in favour Page 200 of the Respondent No.4 Company for setting up Dehydration Plant for Onion and Garlic.
17.11.1994 The Respondent No.4 created equitable mortgage by Para 7, deposit of title deeds to secure the loan of Rs. 68 lacs Pg. 201 in favour of the Respondent No.3 for mortgage of immovable properties being:
Land situate at Survey No. 215, Village Ghanghli, Taluka Sihor, District Bhavnagar admeasuring about 11432 sq.mtrs together with building and structures thereon, fixed plant and machineries, fixtures and fittings permanently fastened or attached to earth and;
04.06.1997 Sanction Letter of the Petitioner sanctioning Term Para 3(i), Loan of Rs.60 lacs in favour of the Respondent No.4. Pg. 5-6 The Respondent No.4 availed loan to the extent of Rs.57.21 lacs only which was required to be repaid by Ann. A installments by the Respondent No.4 at quarterly Pg. 23-27 rests. The last date of repayment was 1.8.2003.
In case of mortgage and charge so created, the same shall rank pari passu interse with the Bank of Baroda for their Term Loan of Rs. 32,00,000/-
23.09.1997 The Respondent No. 3- Bank of Baroda upon request Ann. B of Respondent No.4 - Borrower Company extended Pg. 28-33 joint equitable mortgage in favour of Petitioner-GSFC.
Pg. 81-86 Deed of extension of equitable mortgage executed by Branch Manager, Bank of Baroda in respect of Respondent No.4 Company's lands and other immovable properties situate and lying at Survey No. 215, Village Ghanghli, Taluka: Sihor, Dist. Bhavnagar for loan of Rs. 60 lakhs granted by GSFC. Pg. 87-95 Memorandum of Confirmation of pari passu arrangement between Respondent No.3 for its principal Term Loan of Rs. 40,00,000/- and Working Capital Limit of Rs. 45,00,000/- and Rs. 60,00,000/- Term Loan of the Petitioner shall rank pari passu Page 10 of 29 C/SCA/9153/2008 JUDGMENT without any preference or priority of one over the other or others.
03.06.1998 Sanction Letter of the Petitioner sanctioning Working Para 3(iii), Capital Loan of Rs.50 lacs which has been fully Page 7 disbursed and the last date of repayment was Ann. C, 1.10.2000. Pg. 34-37 It has been further mentioned that the unit shall extend mortgage, hypothecation of land, building, plant & machinery as security.
26.10.1998 The Respondent No.4 and its promoters executed Para 3(iii), loan agreement and various security documents like Pg. 7 deed of hypothecation and other documents in favour of the Petitioner for Working Capital Loan of Rs. 50 lakhs.
19.11.1998 The Respondent No.4 with the consent of Respondent Para 3(iii), No.3 extended equitable mortgage to secure the Pg. 7 working capital loan of Rs.50 lacs sanctioned by the Petitioner.
(not produced by the Petitioner)
24.11.1998 Sanction Letter of the Petitioner sanctioning hire Para 3(iv),
purchase loan of Rs.27 lacs. Pg. 7
Ann. D
Pg. 38-42
08.12.1998 The Respondent No.4 Company executed various Para 3(iv),
security documents for hire purchase loan like Pg. 7-8
extension of equitable mortgage and many other documents in favour of the Petitioner.
The Respondent No.4 as well as the Respondent No.3 extended joint equitable mortgage so as to cover Hire Purchase loan amount as well as working capital loan of Rs.75 lacs granted by Respondent No.3. (not produced by the Petitioner) 15.12.1998 The Respondent No.4 registered the charge of GSFC Para 3(iii), in respect of Term Loan and Working Capital Loan. Pg. 7 (not produced by the Petitioner) 16.03.2000 Letter sent by the Respondent No.3 to the Petitioner Para 3(v) for delivery of the original title deeds and documents (vi), of the mortgaged property to the Petitioner. Pg. 8 Ann. E, Further stating that the Respondent No.3 has granted Pg. 43-44 working capital limit to the Respondent No.4 and the Also at Pg. Respondent No.3 is going to extend second charge on 101-103 the fixed machinery under the first charge of the Petitioner.
Pg. 97- Deed for delivery of original title deeds stating that 100 the Respondent No. 3 has received all the amounts of Term Loan on 5.12.1998 and the Respondent No. 3 herewith releases the first charge over the property at Survey No. 215, Village Ghanghli, Taluka Sihor, District Bhavnagar, but continue with the second Page 11 of 29 C/SCA/9153/2008 JUDGMENT charge for the Cash Credit facility of Rs. 25 lakhs and Packing Credit cum Foreign Bill Purchase for Rs. 90 lakhs and the Petitioner agrees to hold the title deeds as an agent of the Respondent No.3.
23.03.2000 The Respondent No.3 further granted Working Capital Para 3(vi), Loan of Rs.40 lacs to the Respondent No.4 Company. Pg. 8 To secure the said loan, the Petitioner at the request of the Respondent No.4 Company executed an extension of joint equitable mortgage by way of second charge in favour of the Respondent No. 3.
23.03.2000 Letter sent by Respondent No.3 to the Petitioner Para stating that the mortgage charge of the Petitioner 3(vii), shall rank first on the fixed assets of the Company Pg. 9 situated at Survey No. 215, Village Ghanghli, Taluka:
Sihor, Dist. Bhavnagar for their Term Loan of Rs.60 Ann. F, lacs, Working Capital Loan of Rs.50 lacs and Hire Pg. 45 Purchase Loan of Rs.27 lacs.
That the mortgage charge for credit facilities of Rs.115 lacs sanctioned by the Respondent No.3 shall rank second and subservient to the charge of GSFC created on the assets of the Company.
29.06.2001 Sanction Letter issued by the Respondent No. 1 i.e Para 3.2 Exim Bank sanctioning Term Loan of Rs. 2.50 crores Page 368 to the Respondent No. 4 Company.
Ann. A Page 375- 385 05.07.2001 Extract of the Resolution passed at the meeting of the Para 3.2 board of the directors of M/a. Unique Dehydrates Page 368 Limited held on 02.07.2001, inter alia, stating as under:
Ann. B The Company do borrow from the EXIM Bank, a loan Page 386- up to the limit of Rs. 250.00 lacs for the purpose of 387 expansion cum modernization of the existing production capacity and also to avail bridge loan or interim disbursement(s) from time to time as may be allowed by EXIM Bank.
16.07.2001 Rupee Loan Agreement executed in favour of Exim Para 3.2 Bank by the Respondent No.4 for Rs. 250 lakhs. Page 369 Ann. C Page 388- 408 16.07.2001 Deed of Hypothecation of movable fixed assets Para 3.2 executed by the Respondent No. 4 Company in Page 369 favour of the Respondent No. 2 creating first charge on movable plant & machinery, spares & stores, tools Ann. D and accessories, whether or not installed. Page 409- 424 Page 12 of 29
C/SCA/9153/2008 JUDGMENT
16.07.2001 Undertaking to create mortgage security within a Para 3.2
period of 8 months executed by Respondent No. 4 in Page 369
favour of Respondent No. 2.
Ann. E
Page 425-
428
17.07.2001 Deed of Guarantee executed by Shri Rajendra Para 3.2
Sharma, Managing Director of the Respondent No. 4 Page 369
for Term Loan of Rs. 2.50 lakhs in favour of Respondent No. 2. Ann. F Page 429- 438 01.01.2003 Letter sent by the Respondent No. 2 to the Para 3.3 Respondent No. 3 authorising the Respondent No. 3 Page 369 to act as an agent of Respondent No. 2, to continue to hold and retain documents of title, evidences, deeds and writings in respect of immovable property situate Ann. G at Survey No. 215, Village Ghanghli, Taluka Sihor, Page 439 District Bhavnagar for the purpose of creating mortgage by deposit of title deeds by constructive delivery for securing by way of first charge the due repayment of its Term Loan of Rs. 250 lacs.
06.03.2003 Letter addressed by the Petitioner to the Respondent Pg. 163 No.4 approving the payment of an amount of Ann. A Rs.69.09 lacs to settle all accounts on or before 15.3.2003 in full and final settlement. Page 514 (Produced (Produced by the Respondent No. 1 along with by BoB) Affidavit dated 18.11.2009) 17.03.2003 Letter addressed by the Petitioner to the Respondent Pg. 164 No.3 in response to the letter dated 31.1.2003 sent Ann. B by the Respondent No. 3, authorizing Mr. A.C. Pandya to represent the Petitioner to hand over the title Page 515 deeds of the properties of the Respondent No.4 (Produced Company and collect demand draft of Rs.69.09 lacs in by BoB) favour of the Petitioner.
(Produced by the Respondent No. 1 along with Affidavit dated 18.11.2009) 18.03.2003 Letter addressed by the Respondent No.3 to the Pg. 165 Petitioner enclosing demand drafts no. 390123 to Ann. C 390130 totaling to Rs. 69.09 lakhs and for issuing the No Due Certificate. Page 516 (Produced (Produced by the Respondent No. 1 along with by BoB) Affidavit dated 18.11.2009) 22.03.2003 Covering letter sent by the Respondent No.4 Para 3(a), Company to the Petitioner enclosing demand draft Pg. 64-65 bearing No. 390125 drawn on Bank of Baroda for Rs.9 lacs against two cheques aggregating to Rs.5 lacs Ann. K which have been dishonoured. Pg. 71 25.03.2003 Letter addressed by the Respondent No.3 to the Pg. 166- Page 13 of 29
C/SCA/9153/2008 JUDGMENT
Respondent No.2 stating that the Respondent No.3 167
has taken over the term loan from the Petitioner and Ann. D
sending the drafts of Memorandum of Entry and Paripassu Agreement for approval by the Respondent No.2 for creating pari-passu charge.
(Produced by the Respondent Nos. 1 along with Affidavit dated 18.11.2009) 26.03.2003 Board Resolution passed by the Respondent No. 4 for Ann. H to creation of mortgage of the disputed property and the giving consent to the Respondent No. 3 acting as Affidavit agent of the Respondent No. 1 & 2 to continue to hold in Reply of and retain all title deeds of the disputed property with Resp. No. intent to create mortgage by deposit of title deeds by 1 way of constructive delivery with respect to Rupee Page 440- Term Loan of Rs. 250 lakhs sanctioned by the 442 Respondent No. 1 & 2.
31.03.2003 Extract of the balance sheet of the Respondent No.4 Pg. 168-
as on 31.3.2003 showing the amount due to the 169
Petitioner as NIL. Ann. E
(Produced by the Respondent No. 1 along with Affidavit dated 18.11.2009) 31.03.2003 The Petitioner received demand draft no. 390123 of Para 2(iii), Rs.6.09 lacs from the Respondent No.4 at the Pg. 63 Gandhinagar office.
Letter dated 31.3.2003 sent by Deputy Manager Para 3(a), (FS&R), Gandhinagar to DGM, Bhavnagar of the Pg. 65 Petitioner informing about payment of Rs.6.09 lacs received by them. Ann. L Pg. 72 08.04.2003 No Due Certificate issued by the Petitioner to the Pg. 170 Respondent No.4 Company stating that the Petitioner Ann. F has received Rs. 69.09 lacs as full and final payment towards the credit facilities granted to the Respondent No.4 Company and as on date, no dues are pending.
(Produced by the Respondent No. 1 along with Affidavit dated 18.11.2009) 08.04.2003 Declaration on oath by the Respondent No. 4 that the Para 3.4 disputed property is free from all encumbrances, Page 370 claims & demands and that the said property is at present mortgaged to the Respondent No. 3 by way Ann. I to of second charge for its Working Capital Loan and are the intended to be mortgaged by deposit of title deeds Affidavit with Respondent No. 3 acting as agent of Respondent in Reply No. 1 & 2 with intent to create security of the Page 443- disputed property. 446 08.04.2003 Joint Mortgage by deposit of title deeds created by Para 3.5 the Respondent No. 4 in respect of the immovable Page 370 properties i.e Survey No. 215, Village Ghanghli, Taluka Sihor, District Bhavnagar together with Ann. J to Page 14 of 29 C/SCA/9153/2008 JUDGMENT building and other structures, erection and godowns the and anything attached to the earth for paripassu first Affidavit charge in favour of the Respondent No.1 for Term in Reply Loan of Rs. 2.50 crores & in favour of the Respondent Page 447- No. 3 for Term Loan of Rs. 77 lacs and second charge 455 for Packing Credit Limit cum Foreign Bills Purchase of Rs. 150 lacs and Cash Credit Limit of Rs. 50 lacs.
fixed plant and machineries, fixtures and fittings permanently fastened or attached to the earth.
The charge created in favour of Respondent No. 1 i.e Exim Bank under the aforesaid Joint Mortgage shall be the first charge ranking paripassu with the charge created by the borrower in favour of BOB for its term loan, but shall however rank prior and paramount over the rights of BOB for its working capital facilities secured by the Joint Mortgage.
08.04.2003 Form No. 8 & 13 filed showing registration of pari Para 3.5 passu first charge of the Survey No. 215, Village Page 370 Ghanghli, Taluka Sihor, Dist. Bhavnagar in favour of Respondent No. 1 & 3. Ann. K to the Affidavit in Reply Page 456- 459 13.02.2007 Letter sent by the Respondent No.3 giving consent to Para 3(x), the Respondent No.1 to take possession and sell the Pg. 11 property.
(stated in the advertisement dated 14.12.2007) 13.09.2007 Advertisement published by the Respondent No.1 in Para Gujarat Samachar, Gujarati daily and Business 3(viii), Standard, English Daily indicating that the Pg. 9 Respondent No.1 has taken over the possession of the property situated at Survey No. 215, Village Ann. G Ghanghli, Taluka: Sihor, Dist. Bhavnagar under Pg. 46 Section 13(4) of the SARFAESI Act.
Ann. L to the Affidavit in Reply Page 460- 461 19/22.11.2 Letter sent by the Petitioner to the Respondent No.1 Para 3(ix), 007 informing that the Petitioner has a charge over the Pg. 10 disputed property and requested the Respondent No.1 not to sell the said property without the prior Ann. H sanction of the Petitioner Pg. 47 11.12.2007 Reply sent by Respondent No. 1 to the Petitioner's Page 530 letter dated 19/22.11.2007 requesting to provide the total outstanding amount as on date, along with the account details such as the amounts disbursed and Page 15 of 29 C/SCA/9153/2008 JUDGMENT the amounts repaid by the Company and furnish certified copy of the accounts.
Further requesting to provide details of the security created in favour of the Petitioner for the loans given to the Respondent No. 4 Company.
14.12.2007 Advertisement published by the Respondent No.1 Para 3(x), under the SARFAESI Act inviting offers for sale of Pg. 10 disputed property and fixing the date of auction on 22.1.2008.
Ann. I, In the said advertisement, it is also stated that the Pg. 49 dues of the Respondent No.1 as on 31.1.2007 comes to Rs.3,27,55,435.19 whereas the dues of Respondent No.3 comes to Rs.2,82,47,000/- as on 31.1.2007.
In the said advertisement, it is also stated that there is no charge of any other bank according to their information and knowledge.
22.01.2008 Letter sent by GSFC, Gandhinagar to GSFC, Ashram Para Road enclosing office note to get the sale stayed. 3(xii), Pg. 11-12 (note not annexed) Ann. J, Pg. 50 23.01.2008 Letter sent by the Petitioner through U.P.C to the Para Respondent Nos. 1 and 2 with copy to Respondent 3(xii), Nos. 3 and 4, inter alia, stating that the Petitioner has Pg. 11-12 exclusive charge over the disputed property and that the Petitioner is holding original documents in respect Ann. J, of the said property. Pg. 51-52 The Petitioner objected to the auction proceedings and stated that the proposed auction on 22.1.2008 should not be pursued without confirming the consent of the Petitioner.
4/6.2.2008 Letter sent by the Petitioner to the Respondent Nos. 1 Para and 2 with copy to Respondent Nos. 3 and 4, stating 3(xii), that the Petitioner has exclusive charge on the fixed Pg. 12 assets of the Respondent No. 4 Company and the Petitioner holds the original title documents and the Ann. J, charge of the Petitioner is registered with ROC. Pg. 53-55 Further stating that the Respondent Nos. 1, 2 and 3 without the consent of the Petitioner has taken Ann. O possession of the assets charged in favour of the Pg. 75-77 Petitioner and requesting to vacate the possession.
19.02.2008 Reply sent by the Respondent No.3 to the letter dated Para 5, 4/6.2.2008 of the Petitioner informing that the original Pg. 68 title deeds of the property at Survey No. 215 is held Ann. P by the Respondent No.3. Pg. 78 Further stating that as per our records, we have issued DD No. 390130 dated 18.3.2003 in favour of GSFC for Rs. 9,00,000 each totaling to Rs. 69.09 lacs in taking over the term loan as per the letter dated Page 16 of 29 C/SCA/9153/2008 JUDGMENT 17.3.2003 of GSFC.
The original title deeds of the said property are handed over by the authorized representative Mr. A.C. Pandya of the Petitioner to the Respondent No. 3.
18.03.2008 Present Petition filed. Pg. 1 to 22 02.04.2008 Letter sent by the Petitioner to the Respondent No.3 Para 6, stating that though the Petitioner has received an Pg. 69 amount of Rs.69.09 lacs from the Respondent No.4, the Petitioner is unable to confirm the payment Ann. Q alleged to have been made by the Respondent No.3 Pg. 79-80 directly to the Petitioner.
Further stating that the letter dated 17.3.2003 has not been issued by GSFC to the Bank.
08.12.2008 Further affidavit filed by the Petitioner stating that as Pg. 56-58 per the information orally given by the office of the Respondent No.3 Bank, the Respondent No.1 to 3 has sold the disputed property of the Respondent No.4 Company, namely, land, building, plant and machinery for Rs.205 lacs.
It is further stated in the said affidavit that out of the sale proceeds of Rs.205 lacs, the Respondent Nos. 1 & 2 have appropriated Rs.7.61 lacs towards the expenses incurred by them for the sale of property and out of the remaining amount of Rs.197.39 lacs, the Respondent Nos. 1 & 2 have retained Rs.152.87 lacs, whereas an amount of Rs.44.52 lacs has been given to the Respondent No.3 Bank.
12.03.2009 List of documents filed by the Respondent Nos. 1 to 3 alongwith the documents, namely:
(i) letter dated 6.3.2003 addressed by the Ann. A Petitioner to the Respondent No.4;
(ii) letter dated 17.3.2003 addressed by Ann. B the Petitioner to the Respondent No.3;
(iii) letter dated 18.3.2003 addressed by Ann. C the Respondent No.3 to the Petitioner;
(iv) letter dated 25.3.2003 addressed by Ann. D the Respondent No.3 to the Respondent No.2;
(v) extract of the balance sheet of the Ann. E Respondent No.4 as on 31.3.2003;
(vi) No Due Certificate dated 8.4.2003 Ann. F issued by the Petitioner to the Respondent No.4 Company.
31.03.2009 Further affidavit filed by the Petitioner with Pg. 59-70 documents stating that the documents submitted by the Respondent No. 1, 2 and 3 alleged to be one time Page 17 of 29 C/SCA/9153/2008 JUDGMENT settlement sanctioned by the Petitioner to the Respondent No.4 Company for Rs.69.09 lacs and the alleged No Due Certificate by the Petitioner are bogus and concocted letters.
01.04.2009 Respondent No. 1 filed Original Application No. 50 of Para 3.7 2009 before Debts Recovery Tribunal No. 1, Mumbai Page 372 to recover the balance outstanding amount of Rs. 2,50,82,395/-.
10.08.2009 The following documents are produced by the Pg. 81- Petitioner with the list: 129
(i) Extension of equitable mortgage dated 23.9.1997
(ii) Memo of confirmation of pari passu arrangement dated 23.9.1997
(iii) Deed of Delivery of Original Title Deeds dated 16.3.2000.
(iv) Letter dated 16.3.2000 sent by Respondent No.3 to the Petitioner confirming first charge of the Petitioner and delivery of original documents mentioned in the letter to the Petitioner.
(v) Registered Sale Deed dated 20.11.1975 executed by Kantilal Becharlal Trivedi in favour of Kanbi Dharamshi Jeram Vadhari
(vi) Irrevocable power of attorney dated 31.3.1994 executed by Kanbi Dharamshi Jeram Vadhari and 3 others in favour of Govindbhai Jerambhai Vadhari
(vii) Registered Sale Deed dated 13.4.1994 executed by Kanbi Dharamshi Jeram Vadhari and others in favour of Unique Dehydration Pvt. Ltd.
29.09.2009 The following documents are produced by the Respondent Nos. 1 to 3 alongwith the list:
1) Registered Sale Deed dated 20.11.1975 executed by Kantilal Becharlal Trivedi in favour of Kanbi Dharamshibhai Jerambhai Vadhani.
2) Irrevocable Power of Attorney dated 31.3.1994 executed by Kanbi Hareshbhai Dharambhai and three others in favour of Govindbhai Jerambhai Vadhani.
3) Registered Sale Deed dated 13.4.1994 executed by Kanbi Hareshbhai Dharambhai and others in favour of Unique Dehydration Pvt. Ltd.
30.10.2009 Search report of Shri S. B. Vadodaria, Advocate filed Ann. P-1 Page 18 of 29 C/SCA/9153/2008 JUDGMENT by the Petitioner. Pg. 134- 159 18.11.2009 Affidavit filed by the Respondent No.1 for the limited Pg. 160- purpose of bringing on record the following 162 documents.
1) Letter dated 6.3.2003 addressed by the Ann.A Petitioner to the Respondent No.4;
2) Letter dated 17.3.2003 addressed by the Ann.B Petitioner to the Respondent No.3;
3) Letter dated 18.3.2003 addressed by the Ann.C Respondent No.3 to the Petitioner;
4) Letter dated 25.3.2003 addressed by the Ann.D Respondent No.3 to the Respondent No.2;
5) Extract of the balance sheet of the Respondent Ann.E No.4 as on 31.3.2003;
6) No Due Certificate dated 8.4.2003 issued by Ann.F the Petitioner to the Respondent No.4 Company.
7) Registered Sale Deed dated 20.11.1975 Ann. G executed by Kantilal Becharlal Trivedi in favour of Kanbi Dharamshibhai Jerambhai Vadhani.
8) Irrevocable Power of Attorney dated 31.3.1994 Ann.H executed by Kanbi Hareshbhai Dharambhai and three others in favour of Govindbhai Jerambhai Vadhani.
9) Registered Sale Deed dated 13.4.1994 Ann.I executed by Kanbi Hareshbhai Dharambhai and others in favour of Unique Dehydration Pvt. Ltd.
23.11.2009 Further affidavit filed by the Petitioner stating that the Pg. 130- documents produced by the Respondent Nos. 1 to 3 133 with the list dated 29.9.2009 are false and concocted and the genuineness of the said documents is doubtful.
26.11.2009 Order passed by the Hon'ble High Court of Gujarat passing the following orders:-
• Rule. Respondents No.1, 2, and 3, Respondent No.4, and Mr. Malkan, learned Counsel for newly added respondent waive service of notice of Rule.
• Respondent No.4 is directed to submit reply in light of the observations made by this Court in the present order on or before 18.12.2009, failing which the Managing Director of respondent No.4 shall remain personally present.Page 19 of 29
C/SCA/9153/2008 JUDGMENT • It is also observed that the money of the sale, which is the subject matter of the petition, realized and disbursed amongst respondents No.1 and 3 Banks, may be held by them, subject to further orders, which may be passed by this Court in the present petition in light of the observations made hereinabove. S.O. to 23.12.2009 for passing further interim orders. Mr. Rao shall communicate this order to his client and he shall also declare the present address of the Managing Director and the Chairman of respondent No.4 Company.
18.12.2009 Affidavit in reply filed by the Respondent No.4 stating Pg. 198- that: 212
Para 11 The Respondent No. 3 sanctioned loan of Rs. 77 lakhs towards full and final settlement of the account of the Petitioner and issued DDs of Rs. 69.09 lakhs in favour of the Petitioner directly, which were handed over by the Respondent No. 4 to the Petitioner.
The Respondent No. 3 sanctioned this loan in consultation with the Petitioner and it was agreed by the Petitioner, that on receipt of the amount, the account will be settled, and No Due Certificate will be issued by the Petitioner.
30.03.2010 Order passed by the Hon'ble High Court of Gujarat directing the Petitioner to file a police complaint in the subject matter within six weeks from today and to place the investigation report as and when ready on the record of this petition.
11.04.2014 Assignment Agreement executed by Respondent No. Ann. M to
1 in favour of Edelweiss Asset Reconstruction the
Company Limited assigning the debts of the Affidavit
Respondent No. 4 Company. in Reply
Page 462-
497
24.04.2015 List of documents filed by the Petitioner. Ann. P-1
16.05.2015 (Colly)
Pg. 223-
225
28.05.2015 Copy of Police Report stating that the Police Officers Ann. P-2
made search of accused at various places and it was Pg. 225-
learnt that the promoters have left Gujarat and are in 228
Uttar Pradesh. Pg. 229-
230
20.06.2015 Further Affidavit filed by the Petitioner stating that Pg. 220-
Criminal Complaint No. 7 of 2013 filed with Sihor 222
Police Station is pending before First Additional Judicial Magistrate at Sihor, wherein an order for investigation under Section 202 of Cr.P.C was passed.
29.07.2015 Affidavit filed by the Respondent No.5 i.e. the newly Pg. 234- Page 20 of 29
C/SCA/9153/2008 JUDGMENT
added auction purchaser Jain Irrigation Systems Ltd. 333
13.12.2015 Interim Investigation Report of the Investigation Pg. 337-
Officer i.e. Mr. J.N. Desai, Deputy Superintendent of 339
Police, Palitana. Ann. P-1
18.01.2016 Additional Affidavit filed by the Petitioner producing Pg. 334-
the Interim Investigation Report dated 13.12.2015. 346 14.03.2016 Further Interim Investigation report filed by the Pg. 351- Investigating Officer. 359 Ann. P-2 03.06.2016 Final Investigation Report filed by the Investigating Pg. 360- Officer concluding that the Petitioner GSFC was 366 holding second charge on the disputed property. Ann. P-3 22.12.2016 Further Affidavit filed by the Petitioner producing Pg. 347- further interim report dated 14.3.2016 and Final 350 Investigation Report dated 3.6.2016.
14.03.2018 Affidavit in Reply filed by the Respondent No. 1 and 2 Page 367- stating that the Petition raises serious questions of 374 fact, which will require leading oral and documentary evidence and such an exercise is not warranted to be undertaken while dealing with Petitions under Article 226 of the Constitution of India.
Further stating that the Petitioner has an efficacious alternative remedy to challenge the sale and raise the grievances raised in the present Petition, before an appropriate civil court.
Further stating that the Petitioner in a writ jurisdiction cannot seek a prayer for declaration and the only remedy available to the Petitioner is filing a Civil Suit before the appropriate court.
15.09.2018 Affidavit filed by the Respondent No. 3 to place on Page 511- record copy of certain documents. 513 20.09.2018 Affidavit in Rejoinder filed by the Petitioner to the Page 517- Affidavit in Reply by Respondent No. 3. 519 17.10.2018 Affidavit in sur-rejoinder filed by the Respondent No. Page 521- 1 and 2. 529
8. Mr. Joshi has also placed reliance on the averments made in the affidavit-in-reply filed on behalf of the respondents Nos.1 and 2 dated 14th March, 2018.
9. In such circumstances, referred to above, Mr. Joshi prays Page 21 of 29 C/SCA/9153/2008 JUDGMENT that as there are highly disputed questions of fact involved in this petition, this Court may not adjudicate such question in exercise of the writ jurisdiction under Article 226 of the Constitution of India.
10. Mr. R.H. Parikh, the learned counsel appearing for the respondent No.5, the auction purchaser, submitted that his client is a bona fide purchaser of the property for value without notice. According to Mr. Parikh, his client has made the entire payment of Rs.205 Lakh and the sale has also been confirmed in favour of his client. According to Mr. Parikh, his client is noway concerned with the dispute between the Corporation and the respondents Nos.1,2 and 3.
11. Let me look into few orders passed by this Court time to time.
12. While admitting this petition, this Court passed the following order dated 26th November, 2009.
"1. Heard Mr.Dave, learned Counsel for the petitioner, Mr.Mihir Joshi, learned Counsel appearing with Mr.Singhi, learned Counsel for respondents No.1, 2, and 3, and Mr.Rao, learned Counsel for respondent No.4 and I have also heard Mr.Malkan, learned Counsel for the applicant of Civil Application No.7773 of 2009, who has been permitted to be impleaded as party respondent in the present proceedings as per the order passed by this Court in C.A. No.7773 of 2009.
2. Prima facie it appears that as per Gujarat State Financial Corporation (hereinafter 'GSFC' for short), it is holding the mortgage and is having charge over the property and is also in possession of the original documents. As per GSFC, it has not released the charge, nor is there any settlement with respondent No.4 and in order to support the said contention, documentary Page 22 of 29 C/SCA/9153/2008 JUDGMENT evidence is produced in the present petition. It is the case of GSFC that since it is having first charge, respondents No.1 to 3 could not exercise the power under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Securitisation Act') by frustrating the rights of GSFC over the property of respondent No.4 Company and sell the property.
3. Whereas, as per respondents No.1, 2, and 3, on the basis of the documents supplied by respondent No.4 submits that GSFC had settled the loan account for Rs.69 lac and the said amount of Rs.69 lac was disbursed by Bank of Baroda and the original documents are also returned. Thereafter, respondent No.1 Bank has extended the finance on the basis of which the action was taken under the Securitisation Act.
4. The pertinent aspect is that there are two sets of original documents as contended by GSFC as well as respondents No.1, 2, and 3. As per GSFC, there is concoction of letters under the signature of the so-called officer, Mr.Pandya, of GSFC and as per GSFC, he was at no point of time, an officer of GSFC. It is the case of GSFC that the amount of Rs.69.09 lac was tendered towards the outstanding amount and GSFC has not taken any decision for settling the account for Rs.69.09 lac and on the contrary, the writ petition was filed by respondent No.4 Company, seeking settlement of the account after the so-called payment in the year 2003.
5. Whereas, as per respondents No.1 to 3, the original documents were handed over to Bank of Baroda.
6. In view of the aforesaid, it appears that there may be concoction of documents by the respective officers of respondent No.4, or of GSFC, or of respondents No.1, 2, and 3 or respondent No.4 Company might have misrepresented for the availability of the finance. The allegation and the statement for existence of two original sets of documents for one property itself creates a serious doubt upon the conduct of the party concerned or those, who are directly or indirectly connected therein. This Court may not be in a position to conclude the aforesaid aspects until appropriate investigation is made Page 23 of 29 C/SCA/9153/2008 JUDGMENT by appropriate agency to which the work may be assigned by this Court and the report is submitted to this Court. It is only after the report is submitted the matter may be required to be considered further.
7. Hence, before this Court passes further order, it would be just and proper to direct respondent No.4 company to submit the reply, clarifying the factual position, if it is in its possession or otherwise and after the reply is submitted, the Court may pass appropriate orders for ordering investigation and if yes, by appropriate authority or agency.
8. Further, as the amount is already realized by the sale, which is the subject matter of the present proceedings and since the respondent No.1 is the bank under the control of Government of India and respondent No.3 is a nationalized Bank, the amount realized and disbursed may be retained for the present by the respective Banks, subject to the further orders but with clarification that in the event the petitioner GSFC succeeds in establishing its rights over the property and consequently the Court passes the order directing the respondents No.1, 2, and 3 Bank to pay the amount to the petitioner, such shall be with the reasonable bank rate interest at the rate of 8% per annum.
9. In view of the aforesaid, the following orders:-
(a) Rule. Mr.Singhi, learned Counsel for respondents No.1, 2, and 3; Mr.Rao, learned Counsel for respondent No.4; and Mr.Malkan, learned Counsel for newly added respondent waive service of notice of Rule.
(b) Respondent No.4 is directed to submit reply in light of the observations made by this Court in the present order on or before 18.12.2009, failing which the Managing Director of respondent No.4 shall remain personally present.
(c) It is also observed that the money of the sale, which is the subject matter of the petition, realized and disbursed amongst respondents No.1 and 3 Banks, may be held by them, subject to further orders, which may be passed by this Court in the present petition in light of the observations made hereinabove.Page 24 of 29
C/SCA/9153/2008 JUDGMENT
10. S.O. to 23.12.2009 for passing further interim orders.
11. Mr.Rao shall communicate this order to his client and he shall also declare the present address of the Managing Director and the Chairman of respondent No.4 Company."
13. On 30th March, 2010, this Court passed the following order;
"By order dated 26th November 2009 (Coram : Mr. Justice Jayant Patel), this petition is admitted to final hearing.
The Subject matter of challenge is the sale of the assets of the respondent No.4 M/s. Unique Dehydrate Limited by the respondent Nos.1, 2 and 3 in exercise of power conferred by the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and realization of the sum of Rs.2,50,00,000/-. It is the claim of the petitioner Gujarat State Financial Corporation that the petitioner had first charge over the assets sold by the respondent Nos.1, 2 and 3. The sale by the respondent Nos.1, 2 and 3 is without the authority of law, bad and illegal. Both, the petitioner and the respondent Nos.1, 2 and 3 Banks claim possession of the original title documents. Learned Single Judge has noted that a fraud has been perpetrated that calls for investigation.
Learned advocate Mr. R.D. Dave appears for the petitioner Corporation. He states that the petitioner Corporation shall file a police complaint in the subject matter within six weeks from today.
The investigation report as and when ready will be placed on the record of this petition."
14. I also take notice of the fact that the Corporation filed a private complaint in the court of the Judicial Magistrate, First Class, Shihor, District: Bhavnagar as regards the fraud. The complaint came to be lodged for the offences punishable under Page 25 of 29 C/SCA/9153/2008 JUDGMENT sections 406, 409, 420, 465, 466, 467, 468 and 471 of the IPC. The Magistrate took cognizance upon the complaint and ordered police inquiry under section 202 of the Cr.P.C. The Deputy Police Superintendent, Palitana, undertook the police inquiry as directed by the Magistrate and filed his report stating that more than a prima facie case is made out of the offence of cheating and forgery. The relevant findings as recorded in the inquiry report are as under;
"From the above investigation it transpires from the inquiry that, this Unique Dehydrate Pvt. Ltd. Company is registered company on 28.10.1991 and deed of land bearing Survey number 215 paiki of Dhandhli executed on 13/4/1994 by original owner to Shri Rajendrakumar Sharma director of Unique Dehydrate and directors of Unique Dehydrate company had taken loan from G.S.F.C. and Bank of Baroda. For security of these loans the respondents mortgaged this land bearing Survey no. 215 paiki and original title deed were deposited in corporation by respondents. thereafter on 5/9/1997 corporation initiated procedure writing to Bank of Baroda Shihor regarding second charge of respondent and property bearing Survey Number 215 paiki mortgaged to Corporation and this documents was in mortgage in G.S.F.C., G.S.F.C. was as second charge, Thereafter on 29/12/2002 loan Rs. 69,00,000/-(Rupees Sixteen lacs only) was granted from Bank of Baroda Shihor in name of Unique Dehydrate Pvt. Ltd and for security of loan land bearing Survey number 215 paiki was mortgaged and original Title deed deposited to Corporation. Rajendra Sharma director of this company in his statement admitted. as Unique Dehydrate not paid loan, Bank of Baroda sold the land bearing Survey number 215 paiki to Export Import Bank and money of loan of Unique Dehydrate of Bank of Baroda paid, Bank after receiving its dues ought toinform to GSFC who has second charge and remaining amount to be deposited them, though there was such third party agreement Bank of Baroda not done so and document of Survey number 215 paiki land which mortgaged before Bank of Baroda, document of this land bearing Survey number 215 paiki was given Page 26 of 29 C/SCA/9153/2008 JUDGMENT to Export and Import Bank, that land was auctioned by EXIM bank that purchased by Jain Irrigation of Shihor and during this investigation officer of Jain irrigation produced copy of document which was lying with Jain irrigation, on comparing that copy with document which obtained from office of Sub Registrar in case of investigation then it does not tally, wherein there is discrepancy that in true document obtained from sub-
Registrar office Shihor there is stamp paper of Rs.23760/and other disputed document which obtained from Jain Irrigation wherein stamp paper of Rs.23,770/- in true stamp last stamp is Rs.10/- while in document obtained in investigation from Jain Irrigation last stamp is of Rs.20/-. Moreover in document obtained from office of Sub-Registrar from page-14 of document writings not perfect. From the above it transpires that, there is similarity between document produced in case of investigation by G.S.F.C. and document of land bearing Survey number 215 paiki obtained from office of Sub Registrar. Therefore document taken in possession for investigation from Jain Irrigation is false, got up later on. It seems two documents are executed of one land bearing Survey Number 215 paiki, wherein one which is mentioned as disputed, that not tally with Government copy, therefore document seems bogus. By preparing such bogus document committed offense under Section 406,409, 420, 465,466,467,468,471, 471, by Unique Dehydrate Pvt Ltd and its directors, committed fraud with G.S.F.C. and Bank of Baroda. In this regard requested to pass appropriate order. "
15. On receipt of the inquiry report under section 202 of the Cr.P.C., the next step in the process should have been to take an appropriate decision for the purpose of issue of process to the accused persons under section 204 of the Cr.P.C. However, the Corporation thought fit to prefer an application before the Magistrate for police investigation under section 156(3) of the Cr..P.C. Such application came to be rejected by the Magistrate, and in my opinion, rightly so because the Magistrate had already taken cognizance on the complaint and, therefore, he could not have, thereafter, passed an order Page 27 of 29 C/SCA/9153/2008 JUDGMENT of police investigation under section 156(3) of the Code.
16. It appears that the Corporation, being dissatisfied with the order passed by the Magistrate declining to order police investigation under section 156(3) of the Cr.:P.C., has preferred a criminal revision application before the Sessions Court and the said revision application is pending as on date for hearing before the Sessions Court.
17. Having heard the learned counsel appearing for the parties and having gone through the materials on record, I am of the view that this petition involves disputed questions of fact. It will be in the fitness of things if the Corporation is asked to go before the DRT under section 17 of the SARFAESI Act. The DRT will be in a position to look into the matter closely by recording oral evidence.
18. I am of the view that I should not go into such highly disputed questions of fact in exercise of my writ jurisdiction under Article 226 of the Constitution of India. Whether the Corporation has the first charge over the subject property, whether the Corporation received an amount of Rs.69.09 Lakh from the respondent No.4 for discharge of its liability, whether the respondent No.4, thereafter, mortgaged the subject property with the respondents Banks, are all questions of fact. For the adjudication of such disputed questions, recording of oral evidence, in my view, is necessary. In such circumstances, without expressing any opinion on the merits of the case put up by the writ applicant-Corporation, I relegate the Corporation to avail the legal remedy of going before the DRT under section 17 of the SARFAESI Act. As the writ applicant had been pursuing this litigation before this Court past almost 10 Page 28 of 29 C/SCA/9153/2008 JUDGMENT years, the issue with regard to limitation shall be considered appropriately by the DRT. The DRT shall adjudicate the entire matter very closely and expeditiously.
19. I also direct the JMFC, Shihor to proceed further with the Criminal Inquiry No.7/2013 at the earliest and pass appropriate orders. The pendency of the revision application filed by the Corporation before the Sessions Court should not come in the way of the Magistrate in proceeding further. At this stage, I deem it fit and proper to observe that it shall be open for the Corporation to file an appropriate first information report as regards the fraud at the concerned police station. The concerned police station shall look into the first information report and proceed further in accordance with law. I may only say that if the first information report, that may be lodged by the Corporation, discloses commission of a cognizable offence, then it shall be the duty of the concerned police officer of the police station to register the first information report at the earliest and undertake the investigation in accordance with law. If such first information report is registered at the concerned police station, the learned Judicial Magistrate, Shihor, shall proceed in accordance with the provisions of section 210 of the Cr.P.C.
20. With the above, this writ application is disposed of. The connected civil applications, if any, also stands disposed of.
(J.B.PARDIWALA, J) Vahid Page 29 of 29