Telangana High Court
Vinod Kumar Shastri And 8 Others vs M/S. Encore Asset Reconstruction ... on 2 August, 2022
Author: P.Naveen Rao
Bench: P Naveen Rao, G.Radha Rani
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SMT DR.JUSTICE G.RADHA RANI
WRIT PETITION No.15479 OF 2022
Date:02.08.2022
Between:
Vinod Kumar Shastri, S/o.Kalidas Shastri,
Aged about 52 yrs, Occu : Business,
R/o.H.No.14-7-200/1, Chudi Bazar,
Begum Bazar, Hyderabad & others.
.....Petitioners
And
M/s.Encore Asset Reconstruction Company Pvt. Ltd.,
Rep., by its General Manager/Authorised Officer,
Sri Padma Kumar S/o.Sadasivan Nair K, V Floor,
Plot No.137, Sector 44, Gurgaon 122002 & others
.....Respondents
The Court made the following:
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HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SMT DR.JUSTICE G.RADHA RANI
WRIT PETITION No.15479 OF 2022
ORDER :(Per Hon'ble Sri Justice P.Naveen Rao) Heard Sri D. Vijaya Kumar, learned Counsel for the petitioners and Sri Ambadipudi Satyanarayana, learned counsel for the respondent-Bank.
2. Petitioners claim to be the tenants of house bearing No.14-7-196 to 203, Chudi Bazar, Begum Bazar, Hyderabad. In this writ petition petitioners challenge the order dated 12.11.2021 passed in Crl.M.P.No.49 of 2021 by the Chief Metropolitan Magistrate, Nampally at Hyderabad on an application filed by the 1st respondent under Section 14 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') ordering to take possession of the subject property.
3. Learned counsel for petitioners contend that the petitioners are the tenants of the subject premises, but there was no prior notice to them and the order passed by the Chief Metropolitan Magistrate, is not sustainable in law.
4. Learned counsel for the petitioners contend that petitioners have no remedy before the Debts Recovery Tribunal under the SARFAESI Act and therefore, the present writ petition is maintainable. He also sought to contend that having regard to the law laid down by the Hon'ble Supreme Court, writ petition is maintainable against any authority to -3- seek enforcement of statutory provisions. Therefore, in the instant case, though the 1st and 2nd respondents are private organizations, the writ petition is still maintainable.
5. In support of his contention that petitioners have no remedy under Section 17 of the SARFAESI Act, learned counsel for the petitioners placed reliance on the decision of the Hon'ble Supreme court in Standard Chartered Bank Vs V. Noble Kumar and others1.
6. It is not in dispute that the owner of property was the borrower and he defaulted in payment of loan, compelling the 1st and 2nd respondents to take recourse to the provisions of the SARFAESI Act to recover the amounts due to them.
7. Secured creditor can take recourse to Section 14(1)2 of the SARFAESI Act to file an application before Chief Metropolitan Magistrate or the District Magistrate to take possession of a secured asset within whose jurisdiction secured asset or other document relating thereto is situated.
1 (2013) 9 Supreme Court Cases 620 2 Section 14(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him--
(a) take possession of such asset and documents relating thereto; and
(b) forward such assets and documents to the secured creditor. -4-
8. On filing such an application, the Magistrate can pass appropriate orders for vesting possession of the secured asset in the secured creditor.
9. Section 13(4)3 of the SARFAESI Act vests in secured creditor right to take possession of the secured assets of the borrower including right to transfer by way of lease, assignment or sale for realising the debt. Section 174 of the SARFAESI Act creates a legal remedy to any person 3 Section 13(4): In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:--
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
[(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;]
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.4
Section 17 to the extent relevant reads as under :
Application against measures to recover secured debts --
(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:
[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] -5- aggrieved by action/decision taken by the secured creditor under Section 13(4) of the SARFAESI Act. It is exhaustive and any person including a tenant can avail the remedy.
10. Thus, if the secured creditor initiates measures under Section 13(4) of the SARFAESI Act, an aggrieved person can avail the remedy provided under Section 17 of the SARFAESI Act. In the instant case, petitioners claim to be the tenants of secured assets. That being so, if they have a grievance against taking possession under Section 13(4) of the SARFAESI Act, by taking recourse to Section 14(1) of the SARFAESI Act, it is open to them to file application before the Debts Recovery Tribunal having jurisdiction under Section 17 of the SARFAESI Act. [Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section] .....
(4-A) where-
i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have jurisdiction to examine whether lease or tenancy, -
(a) has expired or stood determined; or
(b) is contrary to Section 65-A of the Transfer of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of Section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause
(c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.] -6- Without availing the remedy provided under Section 17 of the SARFAESI Act, this writ petition is instituted.
11. Learned counsel for the petitioners emphasized on Paragraph No.27 in the decision of the Hon'ble Supreme Court in Standard Chartered Bank case. In the said paragraph the Hon'ble Supreme Court only refers to the provisions in Sections 17 and 13`(4) of the SARFAESI Act and holds that whether the secured creditor obtains possession either through the procedure contemplated under Section 14 of the SARFAESI Act or otherwise, a remedy under Section 17 of the SARFAESI Act is available. Thus, the Hon'ble Supreme Court holds that remedy is available under Section 17 of the SARFAESI Act. We do not understand how this judgment comes to the aid of the petitioners.
12. Further, in the recent judgment in Phoenix ARC Private Limited Vs Vishwa Bharati Vidya Mandir & Others [Civil Appeal Nos.257-259 of 2022], the Hon'ble Supreme Court dealt with similar issue of the Asset Reconstruction Company taking steps for recovery of money due to the Commercial bank. The Hon'ble Supreme Court reviewed the case law on the subject and held that the writ petition under Article 226 of the Constitution of India is not maintainable against Asset Reconstruction Company. Hon'ble Supreme Court held :
"12. Even otherwise, it is required to be noted that a writ petition against the private financial institution-ARC-appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are -7- normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/Arc cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in the cases of Praga Tools Corporation Vs Shri C.A.Imanual and others (1969) 1 SCC 585 and Ramesh Ahluwalia Vs State of Punjab and Others (2012) 12 SCC 331] relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers."
" ....
13.2 Applying the law laid down by this Court in the case of Authorized Officer, State Bank of Travancore & Anr Vs Mathew K.C. (2018) 3 SCC 85] to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court."
13. Though learned counsel for the petitioners sought to contend that the Coordinate Bench of the Hon'ble Supreme Court has earlier taken a different view, the judgment of the Hon'ble Supreme Court in Phoenix ARC Private Limited being the latest one, we are bound by the said proposition of law laid down by the Hon'ble Supreme Court, and the present writ petition is not maintainable on this ground also.
14. Thus, leaving it open to the petitioners to work out their remedies as provided by the SARFAESI Act, the writ petition is dismissed. Pending miscellaneous petitions, if any, shall stand closed.
__________________ P.NAVEEN RAO,J _________________________ DR. G.RADHA RANI, J 2nd August, 2022 Rds