Calcutta High Court (Appellete Side)
Hotel Private Limited & Anr vs The State Of West Bengal & Ors on 22 August, 2022
01
22.08.2022
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
W.P.A. No. 12769 of 2022
Guha Roy Food Joint And
Hotel Private Limited & Anr.
Vs.
The State of West Bengal & Ors.
Mr. Rupak Ghosh,
Ms. Sweta Gandhi Murgai
...for the petitioners
Mr. Anirban Ray,
Mr. Suman Sengupta,
Mr. Saikat Chatterjee,
Mr. Prantik Garai
...for the State
Mr. Debnath Ghosh,
Ms. Ranjabati Ray
...for the respondent nos. 3 and 4
The present writ petition has been preferred against an order passed by the Magistrate under Section 14 of the Securitisation and Reconstitution of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the 2002 Act'). The matter has come up before this Court for consideration of the petitioners' prayer for an ad interim prayer. Learned counsel for the petitioners cites an unreported judgment of the Supreme Court delivered in State Bar Council of Madhya Pradesh Vs. Union of India in Special Leave to Appeal (C) No. 10911/2021, in which the Supreme Court observed 2 that with a view to resolve the problem being faced by the parties, that is, dearth of appointees to the Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs), for the time being and purely as a stop-gap arrangement, the concerned High Courts were requested to entertain matters falling within the jurisdiction of DRTs and DRATs under Article 226 of the Constitution of India till further orders. It was further observed that once the Tribunal(s) is/are constituted, the matters can be relegated to the Tribunal(s) by the High Courts. Learned counsel then cites a Single Judge decision reported at AIR 2016 Cal 100 [Dimension Realtors Private Limited and another Vs. The District Magistrate, North 24 Parganas and others] in support of the proposition that a petition under Article 226 of the Constitution against anything done or not done under Section 14 of the 2002 Act is maintainable; but such a petition should, ordinarily, not be received to be assessed on merits if filed by a person, other than the secured creditor, who claims to be affected or likely to be affected thereby. As a corollary, it was held, a petition under Article 226 of the Constitution can be entertained on merits against an order passed or any act done under Section 14 of the Act, if the complaint pertains to the lack of jurisdiction (primarily, on 3 territorial considerations) or when the absurdity of that which is complained against is demonstrable.
Learned counsel next cites Krishna Builders and Developers Vs. Shriram Housing Finance Limited, reported at 2019 SCC OnLine Cal 342, where Dimension Realtors (supra) was followed.
Learned counsel for the petitioners next relies upon (2014) 6 SCC 1 [Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited and others] in support of the proposition that statutory provisions attaching finality to the decision of an authority executing the power of any other authority or court to examine such a decision will not be a bar for the High Court or the Supreme Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution.
Learned counsel next cites another Single Judge decision of this Court reported at AIR 2015 Cal 306 [Sri Jawahar Singh Vs. The United Bank of India and others] where it was held, inter alia, that statutory provisions attaching finality to the decision of an authority executing power of any other authority or court will not be a bar for the High Court to exercise jurisdiction vested by the Constitution. It was further held that the decision of the Chief Metropolitan Magistrate or District Magistrate under Section 14 of the 2002 Act 4 can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, in accordance with the settled principles of law. It was further reiterated that the remedy available under Section 17 of the 2002 Act has to be regarded illusory for pre-mortgage lessees for the reason that even though sufficient ground may have been made out for the Tribunal to direct restoration of possession with the secured asset, such restoration could only be in favour of the borrower and not anyone else.
Learned counsel for the petitioners further contends that the petitioners were entitled to loans and reliefs under different schemes floated by the Government of India during the relevant period, that is, the pandemic period. As, for instance, the Emergency Credit Line Guarantee Scheme (ECLGS) floated by the National Credit Guarantee Trustee Company Limited (NCGTCL) of the Ministry of Finance, Government of India. It was provided therein that the eligible institutions have to register themselves for the scheme with NCGTCL as a Member Lending Institution (MLI) by submitting an undertaking on stamp paper of the requisite value, on the form as specified therein. Learned counsel also relies on the Resolution 5 Framework for COVID-19 Related Stress floated by the Reserve Bank of India on August 6, 2020. Under the said Scheme, provided in paragraph 13 of the "Prudential Framework", except compromise settlements which shall continue to be governed by the provisions of the Prudential Framework or relevant instructions applicable to specific category of lending institutions where the Prudential Framework is not applicable, the Resolution Plan may also include sanctioning of additional credit facilities addressed to financial stress of the borrower on account of COVID- 19 if there is no re-negotiation of existing debt. Learned counsel places further reliance on the Resolution Framework for COVID-19 Related Stress where the financial parameters dated September 7, 2020 issued by the Reserve Bank of India, included "hotels, restaurants and tourism" (the petitioners are in the hospitality industry) as one of the sectors coming within the purview of the said Framework.
Learned counsel next submits that the relevant provisions of Section 14(1)(b) of the 2002 Act was not complied with by the District Magistrate, South 24- Parganas while passing the impugned order under Section 14 of the 2002 Act. It is contended by placing reliance on the said provision that nine points are to be considered while passing such an order. In the case of the petitioners, the repayments made by the 6 petitioners, which had to be mandatorily considered, were not considered by the Magistrate.
By placing reliance on the Notice under Section 13(2) of the 2002 Act issued to the petitioners, annexed to the writ petition, learned counsel for the petitioners contends that it was mentioned therein that as the interest and/or instalment of principle had remained overdue for a period of more than 90 days, the loan accounts of the petitioners were to be classified as Non-Performing Asset (NPA), on December 15, 2020. Subsequently, there were orders passed by the Supreme Court which extended such time. Moreover, the subject loan accounts, admittedly, were not classified as NPA on December 15, 2020 in view of the benefit of moratorium period being extended by the RBI in aggregate for six months on payment of all instalments falling due between March, 2022 to August 31, 2020 vide Circulars of the RBI as per interim order dated September 3, 2020 passed by the Hon'ble Supreme Court, whereby it was directed that the loan accounts which were not declared till August 31, 2020 shall not be declared NPA till further orders.
As such, it is submitted, in the absence of the aforesaid factors being considered by the Magistrate, the impugned order was vitiated in law.
Learned counsel appearing for the respondent nos. 3 and 4 places reliance on an unreported judgment of 7 the Supreme Court in Phoenix ARC Private Limited Vs. Vishwa Bharati Vidya Mandir and others in Civil Appeal Nos. 257-259 of 2022 where it was held, applying the law laid down by the Supreme Court in the case of Mathew K.C., that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution is an abuse of the process of Court. The writ petitions, it was held, had been filed against the action taken under Section 13(4) which ought not to have been entertained by the High Court in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the 2002 Act.
Learned counsel next places reliance on a Division Bench judgment of this Court in FMAT No.75 of 2022 [Aditya Birla Finance Limited Vs. Aniruddha Guharoy], to contend that a similar prayer had been sought by way of a restraint order on the respondents from dealing with immovable property, which is the subject- matter of the present litigation, in any way. Such order had been granted under Section 9 of the Arbitration and Conciliation Act, 1996 by the District Court, against which the appeal had been preferred before this Court. Vide order dated March 17, 2022, the said order of the District Court dated February 22, 2022 was set aside, directing the court below to consider the interim application afresh. As such, a similar relief having been refused by a Division Bench 8 of this Court in connection with the proceeding under Section 9 of the Arbitration and Conciliation Act, 1996, this Court ought not to pass a contrary order by granting an interim order of stay/status quo.
Learned counsel for the respondent nos.3 and 4 further contends that the ingredients of Section 14 were considered by the Magistrate in passing the impugned order. By placing reliance on the tabular statement filed before the District Magistrate in the application under Section 14 of the 2002 Act, it is submitted that the relevant considerations under Section 14 were fully adverted to by the Magistrate.
It was categorically pleaded in the application under Section 14 as to the details of the properties involved and that in view of the successive non- payment of the equated monthly instalments and interest, the loan account of the borrowers/petitioners was declared NPA on May 5, 2021 itself. In support of such statement, the position of the borrowers in respect of the loan accounts, as evident from the statement of account, copies of which were annexed to the said application, were relied upon.
It is, thus, submitted that in view of the DRT, Kolkata functioning with one Bench only and having not come to a total stand-still, this Court ought not to grant interim order at this stage.
9Upon hearing learned counsel for the parties, it transpires that the Supreme Court, in Phoenix ARC Private Limited (supra), categorically relied upon on Mathew K.C.'s judgment and came to the conclusion that petitions by borrowers before the High Court under Article 226 is an abuse of process of Court. The writ petition filed against proposed action to be taken under Section 13(4) of the 2002 Act was amenable to a statutory and efficacious alternative remedy available by way of an appeal under Section 17 of the 2002 Act. Although the petitioners claim that the DRT is functioning with truncated strength at present, it has not come to a total stand-still and it was well within the means of the petitioners to approach the concerned Bench of the DRT with the prayer of assigning their matter before the said functioning Bench. The said course of action would also be in consonance with the opinion of the Supreme Court in State Bar Council of Madhya Pradesh (supra), cited by the petitioners themselves. The Supreme Court clearly permitted the interference under Article 226 of the Constitution as a "stop-gap arrangement" and made it clear that once the Tribunals were constituted, the matters could be relegated to the Tribunals. In the present case, temporary absence of some Benches cannot be sufficient justification for granting an ad interim order 10 at the outset, thereby granting the relief prayed in the writ petition itself.
The provisions of Section 14 of the 2002 Act have been substantially complied with by the District Magistrate while passing the impugned order by taking into consideration all the relevant factors under the said provision, which is reflected from the impugned order itself, thus, leaving little scope of interference at lease at the ad interim stage by granting an interim order in writ jurisdiction which lies within the purview of Section 17 of the 2002 Act.
In fact, Dimension Realtors Private Limited (supra) and Krishna Builders and Developers (supra) clearly provided that an application under Article 226 of the Constitution is maintainable against an action taken under Section 14 of the 2002 Act on the limited grounds of lack of jurisdiction (primarily territorial) and demonstrable absurdity. In the present case, no demonstrable absurdity has been shown by the petitioners on such a high footing that an ad interim order must be granted at this stage.
It may be noted that the matter had come up for hearing before the regular Bench of this Court on certain occasions but there is no reflection in the order-sheet to indicate that the petitioners urged pressing urgency for an ad interim order. The regular Bench, it is evident, intended to hear out the main writ 11 petition itself. Hence, it would not be proper, all on a sudden, to grant an interim order despite the matter being fixed for hearing before the regular Bench after only two weeks, thereby virtually pre-judging the merits of the writ petition itself.
Even on a prima facie view, no jurisdictional error or absurdity has been made out on the face of the records by the petitioners. Even apart from the similar Section 9 prayer having been refused by a Division Bench of this Court at the behest of the petitioners themselves, the arguments advanced by the petitioners touch upon the merits of the actions taken by the respondent-authorities under Section 13(2) and Section 13(4) of the 2002 Act. In the absence of any challenge to such action, in an application under Article 226 preferred against an order passed by the Magistrate under Section 14, which is a mere consequence of the measures taken under Sections 13(2) and 13(4), the petitioners cannot be permitted to have an ad interim order of status quo/stay at this premature stage.
I do not find any palpable absurdity having been established by the petitioners on such an urgent war footing that the petitioners should be granted a blanket ad interim stay/status quo prior to final hearing of the writ petition which is soon due before the regular Bench.
12
That apart, as rightly submitted by learned counsel for the respondent nos.3 and 4, there is no pleading in the writ petition worth the name to the effect that the DRT is not functioning at present.
Insofar as the entitlement of the petitioners to the Pandemic loans/schemes is concerned, there is nothing on record to show that the petitioner had ever applied for such loans or taken steps to get coverage of the relief schemes. Such consideration is also not germane in an action under Section 14 of the 2002 Act.
The criterion of repayment was duly considered by the Magistrate in the impugned order and it was found, inter alia, that the secured creditor observed all formalities as laid down in the SARFEASI Act, 2002 for realization of the outstanding amount from the secured debtor. All the necessary ingredients of Section 14 find place in the impugned order and were substantially complied with by the Magistrate.
That apart, as held in Dimension Realtors Private Limited (supra) itself, which is referred to by the petitioners, the process under Section 14 of the 2002 Act is non-adjudicatory and administrative in nature. The Magistrate has only to ascertain whether the nine aspects referred to in the first proviso to Section 14(1) of the 2002 Act are covered by the declaration furnished in the affidavit filed by the authorized officer of the secured creditor.
13
The Magistrate, it was held, cannot make any enquiry into the truth of the contents of the affidavit. Thus, at this stage, it is beyond the jurisdiction of the writ court to explore and examine the veracity of the averments made in connection with the application under Section 14 of the Act on merits and/or to reopen the merits of the measure taken under Section 13(2) and/or Section 13(4) of the 2002 Act, more so, in the absence of any substantive challenge against the said measures.
As such, I do not find that a strong prima facie case has been made out by the petitioners for the purpose of granting ad interim order in the nature of stay and/or status quo at this stage, prior to the hearing of the writ petition itself.
However, it is made clear that the merits of the writ petition have not been gone into by this Court and the above observations are only the result of an examination of the prima facie case of the petitioners for the purpose of passing an ad interim order and shall not prejudice the rights and contentions of the parties at the final hearing of the writ petition.
In the light of the above observations, the interim order prayed for by the petitioners is refused at this stage.
The matter is released from this list with liberty to the parties to mentions for enlistment before the 14 regular Bench having determination for hearing of the writ petition, of course, subject to the convenience of the said Bench.
(Sabyasachi Bhattacharyya, J.)