Gujarat High Court
Jamnadas Vishnubhai Patel vs Cosmos Cooperative Bank Ltd on 9 April, 2018
Author: R.Subhash Reddy
Bench: R.Subhash Reddy, Vipul M. Pancholi
C/LPA/1290/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 1290 of 2016
In SPECIAL CIVIL APPLICATION NO. 10388 of 2014
With
CIVIL APPLICATION NO. 1 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE
MR. R.SUBHASH REDDY
and
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
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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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JAMNADAS VISHNUBHAI PATEL
Versus
COSMOS COOPERATIVE BANK LTD
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Appearance:
MR DD VYAS, SENIOR ADVOCATE with MR JR DAVE(254) for
PETITIONERS
MR.VISHAL J DAVE(6515) for PETITIONERS
MR GM JOSHI(370) for RESPONDENT
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CORAM: HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY
and
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Page 1 of 11
C/LPA/1290/2016 JUDGMENT
Date : 09/04/2018
ORAL JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY)
1. This Letters Patent Appeal under clause-15 of the Letters Patent is filed by the original petitioners in Special Civil Application No. 10388 of 2014, aggrieved by the judgment dated 9.9.2016 passed by the learned single Judge.
2. Special Civil Application No. 10388 of 2014 was filed with the reliefs, which read as under:
"23(A) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction declaring the action of the respondent bank in initiating the proceedings under the SARFAESI Act, against the petitioner as void ab-initio and ultra virus.
(B) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction declaring the action of the respondent bank of executing a Sale Deed with respect to the petitioners property in its own favor, pursuant to the actions under SARFAESI Act as void ab-initio and ultra virus.
(C) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of Page 2 of 11 C/LPA/1290/2016 JUDGMENT mandamus or certiorari or any other writ, order or direction, directing the respondent bank to hand over the vacant and peaceful possession of the petitioners property situated at Moje: Babajipura, Rajmahal Road B Tika No.14/4, city survey no.24/4/A known as Mahavir Colony Yamunakunj along with the construction over it and also further be pleased to direct the respondent-bank to clear all the statutory dues integrated over the said property of the petitioners.
(D) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction to the respondent bank to compensate the petitioners to the breach of their constitutional right as enriched in Article 300A of the Constitution of India for initiating the proceedings under the SARFAESI Act, against the petitioners. (E) Pending hearing and the final disposal of the present petition this Hon'ble Court may be pleased to restrain the bank from dealing in any manner with the entire property of the petitioner which has been taken over by the bank under the SARFAESI Act. (E) Pass any such other and further orders that may be deemed just and proper in the facts and circumstances of the present case.
A. This Hon'ble Court may be pleased to issue writ of mandamus or certiorari or a writ in nature of mandamus or certiorari or any other writ, order or direction declaring action of the respondent bank Page 3 of 11 C/LPA/1290/2016 JUDGMENT selling the second, third and fourth floor of the property in question as illegal, untenable and arbitrary and be further pleased to declare that the bank has no right whatsoever to deal with the second, third and fourth floor of the property. B. This Hon'ble Court may be pleased to declare null and void the portion of the sale deed whereby the second, third and fourth floor of the property have been conveyed by the bank to itself and direct the bank to release the said property to the petitioners. C. This Hon'ble Court may be pleased to declare that the property in question was mortgaged only for securing advance of Rs.50,00,000/- and direct the respondent to adjust only such dues and refund the balance amount recovered by it from sale of the property.
D. Pending hearing and final disposal of the present petition this Hon'ble Court may be pleased to restrain the bank from dealing in any manner with the second, third and fourth floor of the property in question and also restrain the bank from dealing with the movable property lying in the second, third and fourth floor of the property in question. E. Pass any such other and further orders that may be thought just and proper in the facts and circumstances of the present case."
3. Learned single Judge, without going into merits of the matter, dismissed the petition on the ground that, there is effective alternative remedy available to the appellants Page 4 of 11 C/LPA/1290/2016 JUDGMENT under section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act" for short). Necessary facts, in brief, for disposal of the aforesaid appeal are as under:
3.1. One Dinesh Pharmaceuticals Pvt.Ltd. had availed Term Loan Facility as well as Bill Discounting Facility from one Unnati Cooperative Bank Ltd in the year 1998.
Against the said loan facility, both the petitioners have given personal securities by mortgaging their personal properties to the tune of Rs.50,00,000/-. Over and above, plant and machineries of the said Company were also pledged with the said Bank.
3.2. In the year 2006, the said Unnati Cooperative Bank Ltd merged with the respondent Cosmos Cooperative Bank Ltd, which is a Multistate Scheduled Bank. 3.3. After the merger, the respondent bank has initiated proceedings under the SARFAESI Act and issued notice under section 13(2) of the SARFAESI Act on 2.11.2006 calling upon the petitioners to pay in full and discharge the liability of the bank aggregating to Rs.361.63 Lakhs within 60 days. As the amount demanded was not paid by the appellants, further steps were taken by the respondent bank by issuing further notice under section Page 5 of 11 C/LPA/1290/2016 JUDGMENT 13(4) of the SARFAESI Act. The appellants have sold one of the mortgaged properties situated at Nandesari Industrial Estate and deposited an amount of Rs. 24.00 Lakhs in the respondent bank towards part payment of outstanding dues. Thereafter, the appellants made an application to the respondent bank requesting to accept One Time Settlement proposal and further requested to grant some installments for payment.
3.4. The respondent bank, vide communication dated 24.5.2010 informed the appellants that their request for One Time Settlement proposal has been sanctioned by its Board of Directors. The terms and conditions of restructuring/settlement were incorporated in the said communication.
3.5. Subsequent to acceptance of One Time Settlement proposal, the appellants have paid the amount of Rs.54.00 Lakhs to the respondent bank within a period of one year. However, stating that the business did not work as expected, the appellants have not fulfilled the commitment as per One Time Settlement proposal. Since the dues were not paid in terms of the One Time Settlement proposal, the respondent bank issued possession intimation notice on 15.1.2013, which Page 6 of 11 C/LPA/1290/2016 JUDGMENT followed notice under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 issued on 28th January, 2013, notice of sale of immovable property issued to the appellant company on 1.3.2013 and thereafter, the respondent bank sold the property situated at Moje Babajipura Rajmahal Road B Tika No.14/4, City Survey No. 24/4/A known as Mahavir Colony "Yamunakunj". While it is the case of the appellants that, only ground plus first floor of the property were mortgaged, but the respondent bank has taken possession of the entire building consisting of ground plus 4 flours and the entire property was purchased by the respondent bank itself after the initial notice of auction.
4. Measures taken under the SARFAESI Act by the respondent bank are questioned on the ground that, Multistate Cooperative Banks were not included within the definition of "Bank" as per section 2(c) of the SARFAESI Act and such banks were brought within the definition of "Bank" only w.e.f. 15th January, 2013, therefore, all actions undertaken by the respondent bank are illegal, null and void and are required to be quashed and set aside. Further, it is the case of the appellants that, the appellants have availed term loan facility as well as bill discounting facility Page 7 of 11 C/LPA/1290/2016 JUDGMENT from Unnati Cooperative Bank Ltd, which was a cooperative society registered under the provisions of the Gujarat Cooperative Societies Act, 1961. The said bank was merged with the Cosmos Co-operative Bank Ltd on 18.6.2006, which merger had been declared as illegal by a Division Bench of this Court in the case of Jagdishbhai Ishwarbhai Rochani V/s. Cosmos Co-operative Bank Ltd and others, reported in 2013(1) GLH 477. As such, the respondent bank has no locus to initiate proceedings under the SARFAESI Act. It is also the case of the appellants that, the property document submitted by the appellants discloses that ground floor and first floor were mortgaged, however, the respondent bank took over possession of second floor, third floor and fourth floor and sold the entire property including second, third and fourth floors. It is further case of the appellants that, the respondent bank has committed breach of Rules 8 and 9 of Security Interest (Enforcement) Rules, 2002 by not adhering to the period of notice while selling the property by way of auction, therefore, the entire proceedings undertaken by the respondent bank are illegal.
5. It is submitted by Shri D.D. Vyas, learned Senior Counsel appearing with learned counsel Shri Vishal Dave, Page 8 of 11 C/LPA/1290/2016 JUDGMENT appearing for the appellants that, the respondent bank itself has purchased the property in violation of the aforesaid provisions and got registered the document in its own favour, and therefore, the entire proceedings are illegal and arbitrary. In support of his submission, the learned counsel relied on the judgment of the Hon'ble Supreme Court in the case of Greater Bombay Coop. Bank Ltd.vs. United Yarn Tex (P) Ltd. reported in (2007) 6 Supreme Court Cases 236 and also the judgment of the Hon'ble Supreme Court in the case of Mathew Varghese vs. M. Amritha Kumar and others, reported in (2014) 5 Supreme Court Cases 610.
6. At this stage, learned counsel Shri G.M. Joshi, appearing on behalf of the respondent Bank has today filed a statement made on oath by authorized officer of the respondent bank, relevant part of which reads as under:
"As the action of the answering respondent bank is prior to January 2013, in view of the judgment delivered by this Honourable Court in Special Civil Application No. 1012 of 2014 and cognate matters, at paragraph 43, the action taken prior to amending act cannot be maintained, but at the same time, it will be open for the respondent bank to initiate fresh action under Securitisation Act. The bank will also take necessary steps to get the sale certificate cancelled and get the entry in the records of the Registrar reversed. Accordingly, the bank is withdrawing the Page 9 of 11 C/LPA/1290/2016 JUDGMENT impugned action commencing with the notice under Secularization Act and would hand over the possession of the property to the applicants with a request to the Honourable Court to direct the applicant to maintain the status quo in respect of the property for a period of 6 weeks from today."
7. In view of the statement made on oath by the authorized officer of the respondent bank, as referred above, which is filed today, it is not necessary to deal with all the contentions raised in this appeal. In view of the statement made, as referred above, this Letters Patent Appeal can be allowed on the ground stated in the statement itself. In view of the same, Letters Patent Appeal is allowed. The judgment dated 9.9.2016 passed by the learned single Judge in Special Civil Application No. 10388 of 2014 stands set aside. Consequently, the proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 with regard to property situated at Moje Babajipura Rajmahal Road B Tika No.14/4, City Survey No. 24/4/A known as Mahavir Colony "Yamunakunj" are declared as illegal, as much as the respondent Bank had no authority to initiate proceedings under the SARFAESI Act, during the relevant time. Resultantly, the sale certificate/sale deed in favour of the respondent Bank is quashed and set aside. The Civil Page 10 of 11 C/LPA/1290/2016 JUDGMENT Application stands disposed of.
8. The respondent Bank shall handover possession of the said property, i.e. the property situated Moje Babajipura Rajmahal Road B Tika No.14/4, City Survey No. 24/4/A known as Mahavir Colony "Yamunakunj" to the appellants within a period of two weeks from the date of receipt of this order.
9. It is made clear that it is open to the respondent bank to initiate fresh proceedings in accordance with the provisions of the SARFAESI Act and the rules framed thereunder. The appellants shall not transfer or create any third party interests on the property in question for a period of 6 weeks from today.
(R.SUBHASH REDDY, CJ) (VIPUL M. PANCHOLI, J) A.M. PIRZADA Page 11 of 11