M/S Mp Agro Brk Energy Ltd. Through Its ... vs Bank Of India Through Its Authorised ... on 21 August, 2024

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Madhya Pradesh High Court

M/S Mp Agro Brk Energy Ltd. Through Its ... vs Bank Of India Through Its Authorised ... on 21 August, 2024

1. Petitioners have filed this present petition challenging the interim order dated 23.3.2023 passed by the DRT, Jabalpur, whereby interlocutory application seeking quashment of demand notice dated 2.9.2022, possession notice dated 19.12.2022, auction notice dated 24.12.2022 and auction proceedings held on 9.3.2023 and restoration of possession has been dismissed.

2. The aforesaid order is appealable before the DRAT but the petitioners have wrongly declared in the petition that they do not have any other alternate efficacious remedy available to them and filed this miscellaneous petition under Article 227 of the Constitution of India.

3. The facts of the case in short are that petitioners No.2 to 6 are the Directors of the petitioner No.1-Company. Petitioner No.1 is engaged in the Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 2 MP-2004-2023 business of trading of food and agro processing, for which financial assistance was taken from the respondent No.1-Bank. In order to avail the financial assistance, the petitioners as well as guarantor have mortgaged their immovable properties. Since there was a default in returning the loan amount, the bank has classified the account as NPA in the month of April, 2017. The bank issued a demand notice dated 6.11.2017 to the petitioners under the provisions of SARFAESI Act. The petitioners submitted a detailed representation in the form of objection on 19.1.2018. The symbolic possession was taken of the mortgaged properties by issuing notice dated 17.9.2018. The petitioners applied for restructuring of the loan by submitting a detailed proposal and thereafter deposited Rs.24 Lacs with the bank. According to the petitioners, during the pendency of the aforesaid proposal, respondent-Bank filed an application under Section 14 for taking physical possession of the mortgaged properties, but later on withdrawn vide order dated 3.6.2019. Thereafter communications were made between the parties in respect of one time settlement.

4. The respondent-Bank again issued demand notice dated 7.1.2020 to the petitioners as well as to the guarantor. The respondent-Bank approached the NCLT against the petitioner No.1 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as "IBC") seeking initiation of corporate insolvency resolution process (in short "CIRP"). Vide order dated 5.3.2020 NCLT admitted the aforesaid application. The petitioners submitted a representation alongwith new OTS proposal. Simultaneously the petitioners challenged the order dated 5.3.2020 passed by the NCLT, by way of appeal, before the NCLAT, New Delhi. Vide order dated 4.5.2020 the learned NCLAT granted the stay of constitution of committee of creditors.

5. According to the petitioners, during this moratorium period the bank took Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 3 MP-2004-2023 the symbolic possession of the mortgaged properties on 31.10.2020 and thereafter filed an application under Section 14 for taking physical possession of the mortgaged properties. However, later on vide communication dated 6.4.2022 the respondent-Bank withdrew the aforesaid application submitted under Section 14 of SARFAESI Act. According to the petitioners, during pendency of the matter before the NCLAT and currency of moratorium period, the bank issued another demand notice dated 27.4.2022 demanding the outstanding amount from the petitioners but upon submitting an objection dated 6.7.2022, the second time SARFAESI action was withdrawn vide communication dated 28.7.2022. Again the bank initiated the process under Section 13 & 14 of SARFAESI Act by issuing demand notice dated 2.9.2022 demanding outstanding amount of Rs.17,23,44,911.32/- from the petitioners. Again the petitioners submitted a representation objecting the aforesaid action.

6. Meanwhile, the learned NCLAT, New Delhi vide order dated 14.11.2022 set aside the order dated 5.3.2020 passed by the NCLT and remitted the matter back to the NCLT. The respondent-bank took possession of the alleged mortgaged properties by issuing possession notice dated 19.12.2022 and thereafter published the notice for conducting auction of the mortgaged properties by publishing in the newspaper.

7. Challenging the aforesaid action of the respondent-bank, the petitioners approached the DRT, Jabalpur by filing Securitization Application No.208/2023 along with an application for interim relief. The arguments were heard on 7.3.2023 and vide order dated 23.3.2023 the DRT has dismissed the application. Hence this petition before this Court.

8. On 6.4.2023, learned counsel for the petitioners argued before this Court that since the moratorium/prohibition under Section 14 of the Code of 2016 was in Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 4 MP-2004-2023 operation with effect from 5.3.2020 till 14.11.2022, the bank has wrongly issued the notice under Section 13(2) of the SARFAESI Act. According to learned counsel for the petitioners this is purely a legal question to be answered by this Court and placing reliance upon the judgment of Hon'ble Apex Court in the case of M/s Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer-cum-Assessing Authority and others reported in 2023 SCC OnLine SC 95 submitted that the miscellaneous petition is maintainable despite availability of alternate remedy. The coordinate Bench entertained the miscellaneous petition and granted the order of status quo in favour of the petitioners. Immediately the respondent-Bank has filed an application for vacating stay raising an objection about the maintainability of the miscellaneous petition.

9. Shri Satish Agrawal, learned counsel for the petitioners submitted that the miscellaneous petition is maintainable as the Tribunal has not acted in accordance with law. The Hon'ble Apex Court in the case of PHR Invent Educational Society Vs. UCO Bank reported in 2024 INSC 297 in Para-29 has carved out certain exceptions when a petition under Article 226 of the Constitution could be entertained in spite of availability of alternative remedy. According to learned counsel, the petitioners falls in Clause (i), therefore, this miscellaneous petition is maintainable. Learned counsel for the petitioners has also placed reliance upon the judgments in the case of Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer- cum-Assessing Authority and others [2023 SCC OnLine SC 95] , Red Chilli International Salex Vs. Income Tax Officer and another [(2023) 452 ITR 222] , M/s Shri Krishnan Tradings Vs. Union Bank of India and others [vide order dated 7.2.2023 passed in WP No.3300/2023 by the MP High Court, Bench Indore] , M/s MP Agro BRK Energy Ltd. Vs. Bank of India and others [vide order dated Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 5 MP-2004-2023 6.4.2023 passed in MP No.2004/2023 by the MP High Court, Bench Indore], M/s Carnival Films Pvt. Ltd. and another Vs. Yes Bank Limited and others [vide order dated 3.5.2023 passed in MP No.2186/2023 by the MP High Court at Jabalpur], M/s Goyal Energy Pvt. Ltd. and others Vs. Punjab National Bank and Another [vide order dated 6.7.2023 passed in WP (227) No.490/2023 by the High Court of Chhattisgarh, Bilaspur], Kabeer Reality Pvt. Ltd. and others Vs. LIC Housing Finance Limited and others [vide order dated 11.7.2023 passed in MP No.3786/2023 by MP High Court, Indore Bench], IDFC First Bank Limited Vs. Ramesh Pal and others [vide order dated 11.8.2023 passed in MP No.4309/2023 by High Court of MP at Jabalpur], United Bank of India Vs. Satyawati Tondon and others [(2010) 8 SCC 110], Baburam Prakash Chandra Maheshwari Vs. Antarim Zila Parish Ad Now Zila Parishad, Muzaffarnagar [AIR 1969 SC 556], Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and others [(1998) 8 SCC 1], Harbanslal Sahnia and another Vs. Indian Oil Corpn. Ltd. and others [(2003) 2 SCC 107], M/s Om Dutta Industries and others Vs. Bank of Maharashtra and others [vide order dated 2.4.2024 passed in WP No.422/2024 by High Court of MP, Indore Bench], Smt. Smriti Baheti and another Vs. Punjab National Bank [vide order dated 5.4.2024 passed in MP No.1858/2024 by High Court of MP, Indore Bench], Kabeer Reality Pvt. Ltd. and others Vs. LIC Housing Finance Limited and another [ vide order dated 5.10.2023 passed in MP No.3786/2023 by the High Court of MP, Indore Bench], HDFC Bank Ltd. Vs. M/s Endolabs and others [ vide order dated 26.7.2024 passed in MP No.6402/2023 by High Court of MP at Jabalpur] and Smt. Kusum Jagdishchandra Singh Vs. LIC Housing Finance Limited and others [vide order dated 31.7.2024 passed in WP No.14010/2024 by High Court of MP, Indore Bench].

10. After arguing on the objection about maintainability of petition for want Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 6 MP-2004-2023 of the remedy by way of appeal, Shri Satish Agrawal, learned counsel for the petitioners has also argued on merit of the case. He has been made clear that after hearing this case on merit, the petitioners would not be given any liberty to file an appeal before DRAT.

11. Per contra, Shri Nair learned counsel for the respondent No.1 submitted that the petitioners have filed this petition in order to avoid deposition of the fee before filing the appeal before the DRAT. It is further submitted in the reply that the SARFAESI proceedings can be initiated against the guarantor during currency of moratorium period as held by the Hon'ble Apex Court in the case of State Bank of India vs. V. Ramakrishnan and others [(2018) 17 SCC 394] . This issue again came up for consideration before the Apex Court in the case of P. Mohanraj and others Vs. Shah Brothers Ispat Private Limited [(2021) 6 SCC 258]. Therefore, the petition is not maintainable and liable to be dismissed. Appreciation & Conclusion:-

12. In this case on 5.3.2020 the NCLT admitted the application filed under Section 7 of IBC filed by the respondent-Bank declining moratorium against the petitioners. Being aggrieved by the aforesaid order, the petitioners preferred an appeal before the NCLAT, in which vide order dated 4.5.2020 operation of the order dated 5.3.2020 was stayed, hence there was no moratorium w.e.f. 4.5.2020. Later on, vide order dated 14.11.2022 the NCLAT set aside the order dated 5.3.2020. As on today, no proceedings under Section 7 of IBC is pending against the petitioners. The respondent-Bank initiated the proceedings under Section 13(2) of SARFAESI Act by issuing a composite demand notice dated 2.9.2022 against the petitioner-Company, its directors and guarantor. Thereafter the physical possession was taken on 19.12.2022 after passing the order dated 14.11.2022 by NCLAT. Shri Satish Agrawal, learned counsel for the petitioners has only Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 7 MP-2004-2023 contended that NCLT passed the order on 5.3.2020 under Section 7 of IBC declining moratorium, hence Section 14 prohibits institution of the suit, continuation of pending suits or proceedings against the corporate debtor i.e. petitioners. Under Section 14(1)(b) of IBC the Bank is prohibited from transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right. In the present case only demand notice dated 2.9.2022 was issued not only to the petitioner No.1 but to its directors and guarantor because at that time a stay order dated 4.5.2020 was in operation. Thereafter vide order dated 14.11.2022 the order dated 5.3.2020 has been set aside. Therefore, there was no prohibition for the Bank to take possession of the mortgaged properties on 19.12.2022. As observed by the learned DRT in its order, the auction proceedings has been completed and the sale certificate has been issued.

13. In view of the above, we are of the considered opinion that there is no complex question of law involved in this case which warrants High Court to entertain the miscellaneous petition bypassing the statutory remedy under the law. The learned DRT has passed the impugned order within its jurisdiction in accordance with the provisions of SARFAESI Act. There is no violation of any fundamental principles of judicial procedure or violation of principles of natural justice while passing the impugned order. The petitioners challenged the order passed under Section 7 of IBC before the NCLAT, but in this case instead of filing an appeal before the DRAT, petitioners have filed miscellaneous petition in order to avoid deposition of mandatory fees.

14. In view of the aforesaid, this miscellaneous petition is dismissed with the cost of Rs.20,000/- (Twenty Thousand only) which will be paid by the Signature Not Verified Signed by: TRILOK SINGH SAVNER Signing time: 24-08-2024 10:43:39 NEUTRAL CITATION NO. 2024:MPHC-IND:24237 8 MP-2004-2023 petitioners to the respondent-Bank.

C.C. as per rules.

                                    (VIVEK RUSIA)                    (BINOD KUMAR DWIVEDI)
                                        JUDGE                                JUDGE


                           trilok




Signature Not Verified
Signed by: TRILOK SINGH
SAVNER
Signing time: 24-08-2024
10:43:39

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Madhya Pradesh High Court