Karnataka High Court
Johnson Kunji Pailan vs Canara Bank on 4 September, 2018
Author: B.V.Nagarathna
Bench: B.V.Nagarathna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF SEPTEMBER, 2018
BEFORE
THE HON'BLE MRS. JUSTICE B.V. NAGARATHNA
WRIT PETITION NO.24926/2018(GM-RES)
BETWEEN:
Johnson Kunji Pailan,
having address at Tip Top Tiles,
Mirjan P.P., Kumta,
Taluk Karwar District,
Karnataka, PIN : 581 440. ... PETITIONER
(By Sri. Mathews Joseph Nedumpara, Advocate for
Sri. Arvinda Kamath Puttur, Advocate.)
AND:
1. Canara Bank,Utility Building,
Car street, Kumta,
Uttara Kannada District,
Karnataka, PIN - 581343.
Represented by its Chief Manager
Mr. Vijay Kumar B. Patil.
2. Authorized Officer, Canara Bank,
NPA Management Cell,
Circle Office, Light House Hill,
Balmatta Road, Mangalore - 575 001.
3. Chief Manager, Canara Bank,
Circle Office, Light House Hill,
2
Balmatta Road, Mangalore - 575 001.
4. P.I.Thomas, Managing Partner,
Tip Top Tiles, Mirjan P.O.,
Kumta Taluk, Karwar District,
Karnataka, PIN : 581 440 (Land Lord)
5. Xavier, S/o. P.I.Thomas, Partner,
Tip Top Tiles, Mirjan P.O.,
Kumta Taluk, Karwar District,
Karnataka, PIN : 581 440.
6. District Magistrate (Deputy Commissioner),
District Commissioner's Court,
Karwar, Uttara Kannada,
Karwar - 581 301.
7. Sub Inspector of Police,
Kumta Police Station,
Bhatkal sub division,
Kumta, Uttara Kannada District,
Karnataka - 581 343.
8. Deputy Superintendent of Police,
Bhatkal sub-division,
Uttara Kannada District - 581 301.
9. Superintendent of Police,
Uttara Kannada District,
Karwar - 581 301.
10. Union of India,
Represented by its Secretary
in the Department of Financial Services
(Banking),
Jeevan Deep Building,
Parliament Street,
New Delhi - 110 001.
3
11. State of Karnataka,
Represented by its
Chief Secretary, Vidhana Soudha,
Bangalore - 560 001. ....RESPONDENTS
(By Sri. V .Haridas Bhat, Advocate for R1- R3,
Sri. A. Subramani, HCGP for R6- R9 and R11,
Sri. T.P.Srinivas, CGSC for R10.)
This writ petition is filed under Articles 226 and 227
of the Constitution of India praying to declare that the
orders passed by the respondent No.6 in proceeding
No.DCB/MAB/III/CR3/SECURITIZATION /2017-18 dated
26.03.2018 (Annexure-B) under section 14 of the
SARFAESI Act, subject matter being the schedule property
is void ab initio and quash the same, being in violation of
express statutory provisions and principles of natural
justice and etc.
This writ petition coming on for orders this day, the
Court made the following;
ORDER
Learned HCGP accepts notice for respondent Nos.6 to 9 and 11.
2. Heard learned counsel for petitioner, learned counsel for respondent Nos.1 to 3, learned HCGP for respondent Nos.6 to 9 and 11 and perused the material on record.
43. Petitioner has sought the following reliefs in this writ petition;
" (a) Declare that the orders passed by the Respondent No.6 in proceeding No.DCB/MAB/III/CR3/Securitization/2017-
18 dated 26/3/2018( Annexure B) under section 14 of the SARFAESI Act, subject matter being the schedule property is void ab initio and quash the same, being in violation of express statutory provisions and principles of natural justice;
(b) Quash the entire proceedings before the District Magistrate, Karwar, pending on the file of DCB/MAB/III/ CR3/SECURITIZATION/2017-18(Annexure- B), pending disposal of this writ as the same is one without jurisdiction as section 14 SARFAESI can no more be invoked in view of the schedule property being sold even before the order of physical possession is granted.
(c)Issue a writ in the nature of prohibition restraining and prohibiting the respondents (1-5) including the auction purchaser from 5 dispossessing the petition so too prohibiting and restraining the DISTRICT MAGISTRATE from proceeding any further with respect to the proceedings namely dcb/mab/iii/cr3/securitizatioin/2017-18 (Annexure A), Karwar, as one without jurisdiction as the schedule property is not more a secured asset that the Section 14 of the SARFAESI Act can no more be invoked to grant physical possession to the respondent bank.
(d) Declare that the petitioner, equitable tenant in respect of the schedule property namely, having absolute estate, right, title, possession and enjoyment in respect thereof, that his said rights as tenant cannot be interfered with, abrogated, abridged or taken away by disposing him except in the manner provided by law, namely, by an order at the hands of a Civil Court and in no other manner; that respondent Nos.1, 2, 3,6, 7 have no jurisdiction to secure his forcible dispossession including invoking Sections 13(4) and 14 of the Securitisation and 6 Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002;
(e) Direct the District Magistrate, Karwar to hear the petitioner, a tenant of suit property in the proceeding No. DCB/MAB/III/CR3/SECURITIZATION/2017- 18( Annexure-B) which was summarily dismissed on erroneous observation that the petitioner has no locus standi ; or in the alternatively to refer the disputes to the estate, title, right, possession, enjoyment of the property in the occupation of the petitioner as a tenant of which the respondent bank, a purported secured creditor seeks to secure possession of, disputing the estate, title, right, which the petitioner claims as a tenant, to a court of competent jurisdiction upon hearing the parties as to the question as, which is such competent forum be it the civil court or the Court of Small Causes or the DRT;
(f) To declare that Civil Courts are invested with the jurisdiction to declare an Act of Parliament as unconstitutional if it is in 7 violation of fundamental rights or is beyond the legislative competence; so too a statutory instrument if it is ultra vires the statute or in violation of the fundamental rights or, at any rate, where a plea is made before a Civil Court, as aforersaid, it is duty bund to refer the question as to the constitutionality of the statute; so too of the statutory instrument to the High Court under Section 113 of the Civil Procedure Code read with Order XXVIIA thereof;
(g) To declare that Sections 22 and 23 of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, namely, by which Section 31(e) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 was repealed, which repeal came into force as of 1st September, 2016, is beyond the legislative competence of the Parliament since, by virtue of the said amendment/repeal, lease, which is a subject matter falling within the exclusive province of the State Legislature under 8 Entry 18 in List II of the State List to the Seventh Schedule of the Constitution, has been brought within the ambit of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, an enactment in the realm of banking which the Parliament is competent to legislate;
(h) To declare that Section 17A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, by which the Debts Recovery Tribunal is invested with the jurisdiction to determine a dispute in the realm of lease, even assuming that the jurisdiction so invested is a limited one, is unconstitutional and void because lease a subject matter which falls within the exclusive province of the State Legislature under Entry 18 in List II of the State List to the Seventh Schedule of the Constitution;
(i) Without prejudice to relies(a) to (c) above, to declare that Sections 22 and 23 of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous 9 Provisions (Amendment) Act, 2016, by which clause (e) of Section 31 of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 was deleted and Section 17A was incorporated, will only have prospective effect and will not in any manner affect the rights and obligation created or incurred prior to the said amendment and further that in so far as the right, title, estate, possession, property and enjoyment which the petitioner asserts as a tenant in respect of schedule property, which the Defendant Bank claims to be a secured assets at its hands, is concerned, the Civil Court alone will have exclusive jurisdiction to adjudicate the lis between the petitioner and the defendant;
(j)To declare that in the light of the division of legislative powers between the Centre and State Legislatures, the jurisdiction to determine disputes in the realm of tenancy, including those of secured creditors, as in the instant case, falls within the exclusive jurisdiction of the Civil Courts and the 10 jurisdiction vested in the Debts Recovery Tribunal in terms of Sections 17(4)(a) and Section 31(e), which stand deleted, is a narrow one, not a substantive or procedural one, and the Debts Recovery Tribunal exercising jurisdiction under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is duty bound to refer to a Civil Court any substantial dispute as the existence of tenancy and the rights and obligations flowing therefrom;
(k) Declare that Section 14 of the Enforcement of Security Interest and
Recovery of Debts Laws and Miscellaneous Provisions ( Amendment) Act, 2016, by which jurisdiction is invested in the Debts Recovery Tribunals to decide an assertion by a person that he is a tenant having absolute right, title, estate, possession, property and enjoyment over a property which is denied or controverter by a Bank or Financial Institution, is unconstitutitional, null and void inasmuch as the jurisdiction to decide whether a tenancy exists or not is 11 the core of the rights invested in a tenant under the State Rent Control Act and a subject matter which falls within the exclusive domain of the State Legislature and the said Section by investing such jurisdiction in the Debts Recovery Tribunals has trenched upon the legislative competence of the State Legislature;
(l) Declare that Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is
unconstitutional and void in so far as it does not expressly provide that the borrower/secured debtor or tenants or third parties whose absolute right, title, estate, possession, property and enjoyment in respect of a property are liable to be heard or, in the alternative, declare that such an obligation has to be read into the statute;
(m) That by an order and permanent injunction against the respondent 1 -5, their agents, servants, representatives, workers, subordinates or any other person claiming through and under them be restrained from 12 dispossessing the petitioners or interfering, obstructing, disturbing quiet an peaceful use, occupation and possession of the petitioners in respect f the suit premises namely morefully described in the schedule property below.
(n) That pending the hearing and final disposal of the Writ Petition, by an order an ad interim injunction the respondents, including the purported auction purchaser their agents, servants, representatives, workers, subordinates or any other person claiming through and under them be restrained from disposing the petitioners or interfering, obstructing, disturbing quiet and peaceful use, occupation and possession of the petitioner's in respect of the suit premises namely morefully described in the schedule property;
(o) Any other order which this Honourable Court deems fit in the facts and circumstance of this case which would strike equity and justice is seen to be done.
13Interim Prayer;
a) Grant order of ex-arte ad interim stay to the proceedings before the District Magistrate, Karwar, pending on the file of DCB/MAB/III/CR3/SECURITIZATION/2017- 18 (Annexure-B)pending disposal of this writ as the same is one without jurisdiction and also that the order dated 26/3/2018 is a unreasoned order dismissing the impleading of the petitioner.
b)That pending hearing and final disposal of the Writ Petition, by an order and injunction the respondents (1-5), including the purported auction purchaser, their agents, servants, representatives, workers, subordinates or any other person claiming through and under them be restrained from dispossessing the petitioners or interfering, obstructing, disturbing quiet and peaceful use, occupation and possession of the petitioner from the schedule property without due process of law.
4. Learned counsel for the petitioner submitted that petitioner is aggrieved by the order passed by 14 respondent No.6- Deputy Commissioner on 26/03/2018 inasmuch as petitioner's application seeking impleadment in the proceeding filed under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securitisation Act, 2002 (hereinafter referred to as the ' Act for brevity) was not allowed and was dismissed.
5. Learned counsel for petitioner also drew my attention to the reliefs sought by the petitioner in the Civil Suit filed by him in O.S.No.106/2017 which is pending on the file of the Court of Civil Judge (Jr. Dn) and JMFC, Kumta, Uttara Kannada. The reliefs sought for by the petitioner in the civil suit read as under;
" (a) To declare that the petitioner is the tenant entitled to de-facto possession; that his right, title and interest in respect of the said suit premises should not be disturbed in any manner whatsoever without due process of law; and that the dispossession of the plaintiff by virtue of Section 13(2), 13(4) and 14 of Securitisation 15 and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 are nullity not merely for violation of the principles of natural justice, but also hit by Article 13, 14 and 21 of the Constitution of India being vitiated by fraud and other illegalities;
b) declare that the plaintiff is an equitable tenant in respect of the suit premises namely premises a Tip Top Tiles Mirjan P.O., Kumta Taluk, Karwar District, Karnataka, Pin: 581440 having absolute estate, right, title, possession and enjoyment in respect thereof, with a simultaneous obligation to pay Rs.25,000/- per month to Defendant No.4 as rent that his said rights as tenant cannot be interfered with, abrogated, abridged or taken away by dispossessing him except in the manner provided by law, namely, by an order at the hands of a Rent Control Act and in no other manner, that Defendant Nos. 1 to 3 have no jurisdiction to secure his forcible dispossession invoking Sections 13(4) and 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, that the Deputy Commissioner, 16 Karwar is a coram non judice in so far as he has no jurisdiction to entertain an application at the hands of Defendant Nos. 1 to 3 under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, and pass an order thereunder inasmuch as he is not invested with any jurisdiction in respect of a property of which the estate, right, title, possession and enjoyment are claimed by a tenant, and further that the Deputy Commissioner cannot even decide a question as to his own jurisdiction where it is disputed because only the Civil Court and constitutional Courts, namely, the Supreme Court and High Courts alone have jurisdiction to decide its own jurisdiction where such jurisdiction is questioned.
(c) declare that the judgment of the Supreme Court in Harshad Govardhan Sondagar v.
International Assets Reconstruction Co. Ltd. & Ors., (2014) 6 SCC 1 is rendered sub- silentio, nay, per incuriam in so far as in the said judgment the only question which fell for consideration or put forward or which was present in the mind of the Court was the right, 17 title estate, possession and enjoyment of an immovable property asserted by a tenant based on a contract of tenancy for a period exceeding one year and such a document conferring title on a tenant, though required to be registered under Section 17(1)(d) of the Indian Registration Act, was not registered and, therefore, the learned Chief Metropolitan Magistrate exercising jurisdiction under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, could construe that where the document creating tenancy for more than one year was not registered, he could presume that no tenancy existed and the question as to the right of an equitable tenant where such tenancy is the result of conduct of the parties, by implication or by application of the doctrines of estoppel and atonement was not present in the mind of the Hon'ble Court and, therefore, the words "Hence, if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he has to produce proof of execution of a registered instrument in his favour by the lessor. Where 18 he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate/DM/DC as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than an year from the date of the instrument or from the date of delivery of possession in his favour by the landlord" appearing in paragraph 27 of the said judgment constitute to be no stare decisis, if not per incuriam.
(d) declare that the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. & Ors., (2014) 6 SCC 1, is rendered sub- silentio, if not per incuriam, since the question as to the manner in which a secured creditor could enforce his right to possession of a secured asset where such asset is in the occupation of a person claiming right, title, estate and enjoyment as a tenant, which the secured creditor disputes, which could only fall into the jurisdiction of the Civil Court or the Rent 19 Control Act, was not at all considered, for the said issue was not raised or was not present in the mind of the Hon'ble Court.
(e) without prejudice to prayers (b) and (c) above, to hold that the words "Hence, if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he has to produce proof of execution of a registered instrument in his favour by the lessor. Where he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate or the District Magistrate, or the Deputy Commissioner, as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than an year from the date of the instrument or from the date of delivery of possession in his favour by the landlord" appearing in paragraph 27 of the judgment in Harshad Govardhan Sondagar v. International Assets 20 Reconstruction Co. Ltd. & Ors., (2014) 6 SCC 1, constitute no precedent, but are in the nature of obiter dicta which has no bearing on the rights of an equitable tenant, a tenant by conduct of the parties, estoppel, tenant at will, etc.
(f) declare that investiture of a jurisdiction upon the learned CMM/DM/DC, which on a superficial reading of paragraph 27 of the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. & Ors., (2014) 6 SCC 1, would lead to the very destruction/negation of one of the inalienable, transcendental and primordial features of the Constitution, namely, separation of judicial and executive function and that, in any event, even if the concept of separation of such power is not destroyed by conferment of such power on the District Magistrate, then also a proper construction of Sections 34 and 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 could only lead to the conclusion that the Court of Small Causes exercising jurisdiction 21 under said Section enjoys jurisdiction in respect of any controversy involving the right to tenancy;
(g) grant leave in terms of Order II Rule 2 of the Code of Civil Procedure, 1908;
(h) cost of the suit be provided for."
The subject matter of this writ petition as well as the subject of the suit are one and the same, namely the schedule property bearing Sy. No.33, village Ettinbail, Kumta, District Karwar, having the following boundaries and description:
Boundaries :
East : Private land
West : Road
South : Surrounded by forest S.No. 31
North : Surrounded by forest S.No. 31
Description of property :- 10 Acres 28 Guntas of land in Sy.No.33 situated in Ettinbail, Mirjan, Kumta, consisting of tile factory building, office building, a residential house, labour/staff quarters, stock shed, drying yard and plant and machineries which stand in the name of 4th respondent 22 (Residential house and staff quarters not part of the secured asset with the respondent - bank).
6. Learned counsel for petitioner drew my attention not only to the impugned order dated 26/03/2018 (Annexure-B), but also to the other prayers sought by him in this writ petition and also in the civil suit filed by him.
7. Per contra, learned counsel for respondent Nos.1 to 3 submitted that the proceeding initiated under Section 14 of the Act has concluded and order dated 14/07/2018 has been passed by respondent - Deputy Commissioner.
8. In the circumstances, without going into the merits of this writ petition, liberty is reserved to the petitioner to assail impugned order at Annexure-B which is on an interim application as well as final order dated 14/07/2018 before the Debts Recovery Tribunal in accordance with Section 17(4-A) of the Act. Since the petitioner has also availed a civil remedy and filed a suit, liberty is also reserved to the petitioner to prosecute 23 O.S.No.106/2017 in accordance with law. Petitioner is also at liberty to seek any interim or protective orders before the civil court or in an appeal to be filed before the Debts Recovery Tribunal, as the case may be.
9. With the aforesaid liberty, writ petition is disposed off.
Sd/-
JUDGE Msu