Allahabad High Court
Mahendra Kumar Verma vs D.M. , Lucknow & Others on 31 January, 2020
Bench: Pankaj Kumar Jaiswal, Karunesh Singh Pawar
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH Court No. - 1 Case :- MISC. BENCH No. - 2494 of 2020 Petitioner :- Mahendra Kumar Verma Respondent :- D.M. , Lucknow & Others Counsel for Petitioner :- Salil Tripathi,Gitanjali Nayak,Gopal Krishna Dixit,Ragini Pandey,Rana Rahul Singh Counsel for Respondent :- C.S.C,Sharad Tewari Hon'ble Pankaj Kumar Jaiswal,J.
Hon'ble Karunesh Singh Pawar,J.
(1) Heard Sri Salil Tripathi, learned counsel for the petitioner, learned Standing Counsel for respondent no.1 and Sri Sharad Tewari, learned counsel for the respondents no. 2 and 3.
(2) By this writ petition under Article 226 of the Constitution of India, the petitioner is assailing the auction notice dated 11.11.2019 issued by the Authorized Officer of the Bank of India (respondent no.3).
(3) Brief facts of the case are that in pursuance of the e-auction notice dated 26.03.2019 in respect of mortgaged property bearing House No. 1/226, Vibhav Khand, Gomti Nagar, Lucknow, issued by the respondent no.2-Bank of India (hereinafter referred to as "BOI"), which is a Nationalized Bank, the petitioner participated in the auction and as he being the highest bidder, his bid of Rs.80,27,000/- was accepted on 26.03.2019 on part payment of Rs.20,20,000/- as Earnest Money Deposit (EMD). As per offer of purchase of assets, fifteen days time from the date of confirmation of sale was granted to the petitioner to deposit balance sale consideration of Rs.60,07,000/-. In this context, the Authorized Officer of the BOI, vide letter dated 27.03.2019, informed the petitioner that the BOI has confirmed the aforesaid sale and, therefore, deposit the balance sale consideration of Rs.60,07,000/- within fifteen days from the date of the letter, failing which, the deposit already made shall be forfeited and the assets shall be put to auction again and he shall forfeit all claim to the property or any part of the sum already paid.
(4) Learned counsel for the petitioner has submitted that in pursuance of the letter dated 27.03.2019, the petitioner approached the then Branch Manager of the BOI several times but the then Branch Manager of BOI told him that first the physical possession of the property in question will be taken by the bank and, thereafter, she will permit him to deposit the rest of the auction amount. Thereafter, the petitioner wrote a letter dated 08.04.2019 asking the then Branch Manager to deposit the rest of the amount of auction. Subsequently, all of a sudden, the Authorized Officer of BOI issued a letter dated 11.11.2019 to the petitioner, intimating him that since he has failed to deposit the balance sale consideration within the time as provided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as "2002 Act"), the BOI has cancelled the sale and further the BOI is also in the process to forfeit the amount deposited by him.
(5) Learned counsel for the petitioner has further submitted that on receipt of the aforesaid letter dated 11.11.2019, the petitioner has sent his reply vide letter dated 13.11.2019 through speed post on 13.11.2019 itself. The contention of the petitioner is that after acceptance of his bid, he was ready and willing to deposit the balance sale consideration within the time afforded to the petitioner in the letter dated 11.11.2019 and he has also approached the then Branch Manager several times but the same was not accepted by the BOI for the reasons best known to the BOI, therefore, the impugned action initiated by the BOI is contrary to law.
(6) In order to resolve the controversy, it would be apt to look into Section 13 (4) and Section 17 of 2002 Act and Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the Rules 2002") to the extent they are relevant for deciding the question involved in the present writ petition are quoted below:
"Section 13 (4)
13. Enforcement of security interest- (1) to (3A).......................................................
(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 realizing 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 realizing 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."
Section 17 "17. 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 authorized 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:
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,-
(a) to (c)........................
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.
(4A)......................................
(5).......................................
(6).......................................
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993(51 of 1993) and the rules made thereunder.
Rule 8
8. Sale of immovable secured assets- (1) to (8)..........................................................
Rule 9
9. Time of sale, issue of sale certificate and delivery of possession, etc.-
(1) to (3)....................................
(4) The balance amount of purchase price payable shall be paid by the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties.
(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited to the secured creditor and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.
(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules."
(7) Section 13(4) of 2002 is invoked by the secured creditor against their borrower when the borrower fails to discharge his liability in full within the specified time. The secured creditor then can take possession of the assets of the borrower, transfer the assets by lease or by assignment or sell the assets to recover the outstanding dues under clause (a). The secured creditor under clause (b) can also take over the management of the business of the borrower or transfer by way of lease, assignment or sale. However such power can be invoked only when the creditor holds substantial part of the borrower's business as security and further it satisfies the condition set out in second proviso. The secured creditor under clause (c) can also appoint any manager to manage the borrower's business and lastly under clause (d), the secured creditor can ask any person to whom the money is due or become due to pay to the secured creditor instead of paying to borrower which is sufficient to satisfy the debt.
(8) So far as Section 17 of 2002 Act is concerned, it provides a remedy to a person who is aggrieved by the measures taken by the secured creditor or his authorized officer under Section 13 (4) in relation to secured assets of the borrower. It says that "any person (including borrower)" may make an application to the DRT within 45 days from the date of measures taken under Section 13 (4). Sub-section (2) of Section 17 of 2002 Act was added by way of amendment w.e.f. 11.11.2004. It provides that the Tribunal, on such application being made under Section 17 (1), shall consider whether the measures referred to and taken under Section 13 (4) by the secured creditor are in accordance with the "provisions of this Act and the Rules made thereunder". Similarly, sub- sections (3), (4) and (7) of Section 17 of 2002 Act which deal with the power of the DRT also use the expression "in accordance with provisions of the Act and the Rules made thereunder".
(9) Rule 8 of 2008 Rules, which has 8 sub-rules, deals with the manner of sale of immovable secured assets and provides detail procedure as to how and in what manner the sale of secured assets, is to be held. Rule 9 deals with time of sale, issue of sale certificate and delivery of possession. Rule 9 (6) of 2008 Rules empowers the authorized officer to issue sale certificate in favour of the purchaser. Rule 9 (9) then empowers the authorized officer to deliver the properties to the purchaser whereas Rule 9(10) empowers the authorized officer to mention in sale certificate that the property is free from encumbrances.
(10) So far as this case is concerned, sub-rule (5) of Rule 9 is relevant. It provides that, if the auction purchaser commits any default in payment of sale consideration within the time specified, the deposit made by auction purchaser shall be "forfeited" to the secured creditor and the auctioned property shall be resold and the defaulting purchaser shall "forfeit" all claims to the property or its part of the sum for which it may be sold subsequently.
(11) On co-joint reading of the aforesaid provisions of 2002 Act and the 2002 Rules, particularly, Section 17(2) of 2002 Act and Rule 9 (5) of 2002 Rules reveals that it would clearly go to show that an action of secured creditor in forfeiting the deposit made by the auction purchaser is a part of the measures taken by the secured creditor under Section 13 (4) of 2002 Act for the reason that Section 17 (2) of the Act, 2002 empowers the Tribunal to examine all the issues arising out of the measures taken under Section 13 (4) including the measures taken by the secured creditor under Rules 8 and 9 of 2002 Rules for disposal of the secured assets of the borrower. The expression "provisions of this Act and the Rules made thereunder" occurring in sub-sections (2), (3), (4) and (7) of Section 17 clearly suggests that it includes the action taken under Section 13 (4) as also includes therein the action taken under Rules 8 and 9 which deal with the completion of sale of the secured assets. In other words, the measures taken under Section 13 (4) of the 2002 Act would not be completed unless the entire procedure laid down in Rules 8 and 9 of 2002 Rules for sale of secured assets is fully complied with by the secured creditor. It is for this reason, the Tribunal has been empowered by Section 17 (2), (3) and (4) to examine all the steps taken by the secured creditor with a view to find out as to whether the sale of secured assets was made in conformity with the requirements contained in Section 13 (4) read with the 2002 Rules or not?
(12) Rule 9 (5) of 2002 Rules confers express power on the secured creditor to forfeit the deposit made by the auction purchaser in case the auction purchaser commits any default in paying installment of sale money to the secured creditor. Such action taken by the secured creditor is, in our opinion, a part of the measures specified in Section 13 (4) of the 2002 Act and, therefore, it is regarded as a measure taken under Section 13 (4) read with Rule 9 (5) of 2002 Rules.
(13) Considering the aforesaid, we are of the considered opinion that the measures taken under Section 13 (4) commence with any of the action taken in clauses (a) to (d) and end with measures specified in Rule 9 and, therefore, the expression "any of the measures referred to in Section 13 (4) taken by secured creditor or his authorized officer" in Section 17 (1) of 2002 Act would include all actions taken by the secured creditor under the 2002 Rules which relate to the measures specified in Section13(4) 2002 Act.
(14) The auction purchaser/petitioner herein is one such person, who is aggrieved by the action of the secured creditor to forfeit his money. The petitioner, therefore, falls within the expression "any person" as specified under Section 17 (1) of 2002 Act and, therefore, he is entitled to challenge the action of the secured creditor (BOI) before the Debts Recovery Tribunal by filing an application under Section 17 (1) of the 2002 Act.
(15) In United Bank of India vs. Satyawati Tondon & Ors., (2010) 8 SCC 110, the Apex Court had the occasion to examine in detail the provisions of the 2002 Act and the question regarding invocation of the extraordinary power under Article 226/227 of the Constitution of India in challenging the actions taken under the 2002 Act.. Their Lordships gave a note of caution while dealing with the writ filed to challenge the actions taken under the 2002 Act and made following pertinent observations which, in our view, squarely apply to the case on hand:
"42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression "any person" used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.
43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance."
(16) Considering the aforesaid so also the fact that the petitioner is having alternative statutory remedy of filing an application under Section 17 (1) of 2002 Act before the concerned Tribunal to challenge the action of the BOI in forfeiting the petitioner's deposit under Rule 9(5) of 2002 Rules, we are not inclined to interfere with the impugned action taken by the respondent no.3, Authorized Officer of BOI.
(17) However, we grant liberty to the petitioner to file an application before the concerned Tribunal (DRT) under Section 17 (1) of the 2002 Act. If the petitioner files any such application within 30 days from today, the Tribunal shall decide the same on its merits in accordance with law uninfluenced by any of the observations made by this Court.
(18) With these observations and liberty granted to the petitioner, the writ petition fails and is, accordingly, dismissed.
(Karunesh Singh Pawar, J.) (Pankaj Kumar Jaiswal, J.) Order Date :- 31.1.2020 Arnima/Ajit/-