Gujarat High Court
Xl Alugraphics Mumbai Private Limited vs Internal Assets And Reconstruction ... on 2 January, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
C/SCA/24215/2022 ORDER DATED: 02/01/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 24215 of 2022
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2022
In R/SPECIAL CIVIL APPLICATION NO. 24215 of 2022
==========================================================
XL ALUGRAPHICS MUMBAI PRIVATE LIMITED
Versus
INTERNAL ASSETS AND RECONSTRUCTION COMPANY PRIVATE
LIMITED
==========================================================
Appearance:
MR. M.B.GANDHI, LD.SR.ADVOCATE WITH MR CHINMAY M
GANDHI(3979) for the Petitioner(s) No. 1
MS NIKITA C GANDHI(11570) for the Petitioner(s) No. 1
for the Respondent(s) No. 5
MS. NALINI S LODHA(2128) for the Respondent(s) No. 1
NOTICE SERVED for the Respondent(s) No. 4,5.2,5.3,5.4
NOTICE SERVED BY DS for the Respondent(s) No. 2,3,5.1,6
==========================================================
CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 02/01/2023
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. The petitioner is aggrieved with the order of Debt Recovery Tribunal - II, Ahmedabad (for short "the DRT" ) passed in Appeal No. 9 of 2019 in Transfer Recovery Proceeding No. 39 of 2012 with the following factual details :
2. A demand Notice was issued in the year 2003 by the respondent No.1 - Bank of Baroda against the original debtors and Page 1 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 thereafter, in the year 2009, the attachment was levied as per the directions of the Court. The dispute in the present petition is in relation to the property bearing Plot No. A/2/208 located in GIDC Estate at Sarigam, Valsad.
3. Mortgage originally was created as per the Bank with GIIC which had the first charge over the property situated at Gujarat and at the time, the contention was also raised with regard to the original defendant having agreed to create the second charge on the land, building plant and machinery belonging to it being Plot No. A/2/208, GIDC Estate, Sarigam, Valsad. The Presiding Officer of the DRT, Mumbai had referred only to two properties which were mortgaged namely Flat No.10 in Sita building and Flat No. 704 in the very building. The property in question at the time of recovery proceedings was found to be situated in the State of Gujarat and hence, the recovery proceeding was transferred to DRT, Ahmedabad and was numbered and registered as TRP No.39 of 2012.
4. TRP No.39 of 2012 was preferred before the DRT, Page 2 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 Ahmedabad where, the petitioner raised an objection that he is a bonafide purchaser for value without notice of the property in question and the property was never mortgaged. It enjoyed absolute title and it was held that there was no second charge ever created in favour of the Bank in the order dated 31st May, 2019 .
5. Further, challenge was made by respondent No.1 by way of Appeal No. 9 of 2019, it appears from the chronology of events, the challenge was also made by the present petitioner before this Court by way of preferring Special Civil Application No. 13402 of 2019 seeking declaration that the property was never mortgaged by the original debtor nor the property was ever subjected to mortgage and hence, it was an unencumbered property. This Court (Coram:
A.Y.Kogje, J) after affording opportunities to both the sides partly allowed the petition declaring that respondent No. 1 had no right to hold on to the original title deeds as per the First Schedule of Memorandum of Entries dated 25.3.1991 pertaining to original allotment letter, original conveyance deed and original lease agreement of Plot No. A/2/208 located at GIDC, Sarigam Industrial Page 3 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 Estate, in custody of respondent No.1 therefore, be released. This Court further directed that the petitioner to continue to hold such original title deeds which of course would be subjected to the final outcome of suit/recovery proceedings if any, filed or pending by respondent No.2, against Maheshwari Polyspin Pvt. Ltd.
6. This was challenged by Bank of Baroda by preferring Letters Patent Appeal No. 1725 of 2019 before the Division Bench of this Court Coram: (Hon'ble The Chief Justice Vikram Nath (as His Lordship then was) and A.J.Shastri, J) wherein, this Court had held and observed that the Bank failed to establish the plea of second charge over the plot in question and there was merely a bald assertion with no other material to substantiate. Eventually, Division Bench of this Court did not choose to interfere with the order of the learned Single Judge and appeal was dismissed.
7. Challenge was made by the respondent No.1 before the Apex Court in Special Leave to Appeal No. 28417 of 2019 wherein, the Apex Court, in wake of pendency of appeal before the DRT- II, Ahmedabad did not entertain the Special Leave petition and also the Page 4 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 Contempt Petition and application for impleadment of the third party was also rejected vide order dated 22 nd August, 2022 with the following order:-
"Having heard learned counsel appearing for the respective parties and considering the fact that with respect to very property, an appeal before the Debts Recovery Tribunal-II, Ahmedabad being Appeal No. 9 of 2019 is pending, without expressing anything on merits in favour of the parties, we simply direct Debts Recovery Tribunal II, Ahmedabad to finally decide and dispose of Appeal No. 9 of 2019 at the earliest, but not later than 31.12.2022.
It goes without saying that all the contentions and defences, which may be available to the respective parties are kept open, to be considered by Debts Recovery Tribunal-II, Ahmedabad, which may be dealt with and considered in accordance with law and on its own merits.
In the meantime, as ordered earlier, the parties are directed to maintain status quo.
With this, the Special Leave Petition stands disposed of. In view of the above, the Contempt Petition stands disposed of.
Pending applications including the application for impleadment shall also stand disposed of.
8. Thereafter, the parties proceeded before the DRT-II, Page 5 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 Ahmedabad in Appeal No. 09 of 2019 in TRP No. 39 of 2012, the judgement was delivered on 14.11.2022.
9. Aggrieved petitioner is before this Court with the following prayers :-
"A. The Hon'ble Court may be pleased be issue writ of mandamus and/or certiorari or any other appropriate writ, order or direction in the nature of mandamus and/or certiorari holding and declaring that the impugned judgement/order passed by Debt Recovery Tribunal -II, Ahmedabad in Appeal No. 9 of 2019 in T.R.P.No. 39 of 2012 is bad illegal and without jurisdiction and be further pleased to quash and set aside the same. B. Pending admission, hearing and/or final disposal of this petition, this Hon'ble Court may be pleased to stay the execution, operation and implementation of the impugned judgement/order passed by Debt Recovery Tribunal-II, Ahmedabad in Appeal No. 9 of 2019 in T.P.P.No. 39 of 2012;
C. Suth other and further orders as this Hon'ble Court may deem just, fit and expedient be passed in favour of the petitioner. D. Costs of this petition be provided for to the petitioner.
10. This Court issued the notice vide order dated 30.11.2022 . The petitioner was apprehensive of the steps on the part of the respondent and therefore, while issuing urgent notice subject to the original Page 6 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 title deeds of the property in question to be deposited with the Registrar (Judicial), Gujarat High Court within a period of one week, the proceedings before the Recovery Officer,Ahmedabad were halted.
11. An application came to be moved seeking to vacate the ex- parte ad-interim relief against the continuation of the proceedings before the Recovery Officer, DRT-II, Ahmedabad in TRP No. 39 of 2019, pursuant to the judgement and order dated 14.11.2022 passed by the learned DRT, Ahmedabad .
12. This Court had extensively heard Mr. M.B.Gandhi, learned Sr.Advocate with Mr. Chinmay Gandhi, learned advocate for the petitioner and Ms. Nalini Lodha, learned advocate for the respondent No.1 .
13. Mr.M.B.Gandhi, learned Sr.Advocate assisted by Mr. Chinmay Gandhi , learned advocate for the petitioner has urged that the very appeal is not maintainable in wake of fact that DRT, Mumbai had already decided in relation to the property. There has Page 7 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 been decree passed in relation to the two of the flats and the property at Sarigam, Gujarat was without any second charge. There is a serious issue of res judicata raised on the part of the petitioner. Hence, this Court can entertain this petition, according to learned Counsel for the petitioner. He has urged that when the authorities after authorities have already held that there is no second charge created, the property in question which is situated at Gujarat could not have come under scanner. In support of his arguments, he has relied upon the decision of the Hon'ble Apex Court in case of Dr.Subramanian Swamy Vs. State of Tamil Nadu and others reported in (2014) 5 SCC 75 as well as another decision of this Court in case of Lupin Ltd. (Formerly Lupin Lab. Ltd. ) & Anr. Vs. Union of India & Anr. passed in Special Civil Application No. 7670 of 2001 decided on 27.6.2012.
14. Ms. Lodha, learned advocate for the respondent No.1 has given list of events and urged that if there is grievance on the part of the petitioner, an alternative remedy is available under Section 20 the Recovery of Debts and Bankruptcy Act, 1993 (for short "the Page 8 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 Recovery of Debts Act"). Where all the issues raised before this Court can be determined. There was not a whisper before the Apex Court with regard to the non- maintainability of the Appeal No. 9 of 2019. Therefore, that issue can not be raised at this stage. She has pointed out that various transfers have been effected without the possession of the original title deeds which continued to remain with the GIIC. Therefore, it is wrong on the part of the petitioner to say that it is a bonafide purchaser of the property for value without notice. She has also made a grievance that before the learned Single Judge and also Division Bench, transfer which has been effected in the year 2019 had not been revealed and it was for the first time before the Apex Court that the relevant and substantive material had come on record. In support of her arguments, she has relied upon the decision of the Apex Court rendered in the case of (1)Punjab National Bank Vs. O.C.Krishnan and Ors. reported in (2001) 6 SCC 569(2)The State of Madhya Pradesh and others Vs. Commercial Engineers and Body Building Company Ltd. reported in MANU/SC/1342/2022(3)Authorized Officer, State Bank of Travancore and Ors. Vs. Mathew K.C. reported in Page 9 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 MANU/SC/0054/2018 (4) Phoenix Arc Pvt. Ltd. Vs. Vishwa Bharati Vidya Mandir and Ors. reported in MANU/SC/0036/2022
15. Having heard both the sides and also essentially looking at the order passed by the Hon'ble Apex Court on 22nd August, 2022, it can be noticed that the challenge was made to the judgement and order of the Division Bench of this Court passed in Letters Patent Appeal No. 1725 of 2019 dated 17th October, 2019. Appeal No. 9 of 2019, was pending for adjudication and that was the reason for the Apex Court not to enter into the merits and instead of permitted the parties to raise all the contentions and defences available to the respective parties at their command to be raised before the Debts Recovery Tribunal- II, Ahmedabad for the tribunal to decide that in accordance with law on its own merits. In the meantime, the parties were also directed to maintain status quo. Present petitioner as can be pointed out from substantiating material by virtue of the Deed of Assignment cum conveyance has become the owner on 9.8.2019. In the said Deed of Assignment, reference is made of the property being free from all encumbrances except the third parties litigation Page 10 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 pending before the DRT-II, Ahmedabad. The matter having been disposed of by RO, DRT-II, Ahmedabad in favour of the Assignor cum vendor as also referred to above. However, this document of dtd. 9th August, 2019 does not have any reference of Special Civil Application No. 13402 of 2019 which was pending before the High Court at that point of time. Thereafter, the litigation has travelled to the Division Bench and then to the Hon'ble Apex Court where, for the first time, present petitioner had revealed of the Deed of Assignment cum Conveyance on 9th August, 2019.
16. The only defence emphasized on the part of the petitioner is of Appeal No.9 of 2019 not being maintainable and for it not to have raised the issue of second charge and since the same had already been finalized in the earlier round of litigation. The fact remains that the appeal was already pending when the matter travelled to the Apex Court in Special Leave to Appeal No. 28417 of 2019. The every contentions raised by both the sides had been kept open by the Apex Court for the parties to adjudicate the same, assuming that this issue though on merit otherwise could have come in favour of the Page 11 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 petitioner in wake of the the earlier findings and the recovery certificate issued only in relation to the two of the flats, the fact remains that the challenge can surely lie before the appellate authority. Apt would be to refer to Section 20 which provides in the following manner:-
Section 20: Appeal to the Appellate Tribunal (1) Save as provided in sub-section (2), any person aggrieved by an order made, or deemed to have been made, by a Tribunal under this Act, may prefer an appeal to an Appellate Tribunal having jurisdiction in the matter.
(2) No appeal shall lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.
(3) Every appeal under sub-section (1) shall be filed within a period of 1[thirty days] from the date on which a copy of the order made, or deemed to have been made, by the Tribunal is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of 1[thirty days] if it is satisfied that there was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under sub-section (1), 2[ or under sub-
section (1) of section 181 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)] the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Tribunal. Page 12 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023
C/SCA/24215/2022 ORDER DATED: 02/01/2023 (6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.
17. The decision of the Hon'ble Apex Court rendered in the case of Punjab National Bank (Supra) is the base judgement wherein the Apex Court has held that the order passed by the Tribunal directing sale of mortgaged property is Appealable under Section 20 of Recovery of Debts Debts Due to Banks and Financial Institutions Act (For short "the Recovery of Debts Act"). High Court's interference by way of jurisdiction under Article 227 of the Constitution of India in wake of the alternative remedy has not been approved by the Apex Court. Thus, the correctness of the decision of the Tribunal, according to the Apex Court can be decided before an appropriate forum and not in a jurisdiction under Article 227 of Constitution of India. This has been reiterated by the Apex Court by referring to the decision in the case of The State of Madhya Pradesh and others (Supra) wherein, the Apex Court has observed as under:-
"5. While entertaining the writ petition under Article 226 of the Constitution of India challenging the Assessment Order denying Page 13 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 the Input rebate, the High Court has observed that there are no disputed question of facts arise and it is a question to be decided on admitted facts for which no dispute or enquiry into factual aspects of the matter is called for. The aforesaid can hardly be a good/valid ground to entertain the writ petition under Article 226 of the Constitution of India challenging the Assessment Order denying the Input rebate against which a statutory remedy of appeal was available.
6. At this stage, a recent decision of this Court in the case of The State of Maharashtra and Others v. Greatship (India) Limited (Civil Appeal No. 4956 of 2022, decided on 20.09.2022) is required to be referred to. After taking into consideration the earlier decision of this Court in the case of United Bank of India v. Satyawati Tondon and others, reported in (2010) 8 SCC 110, it is observed and held that in a tax matter when a statutory remedy of appeal is available, the High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India against the Assessment Order by-passing the statutory remedy of appeal. While holding so, this Court considered the observations made by this Court in paragraphs 49 to 53 in Satyawati Tondon (supra), which read as under:
"49. The views expressed in Titaghur Paper Mills Co. Ltd. vs. State of Orissa (1983) 2 SCC 433 were echoed in CCE v. Dunlop India Ltd. (1985) 1 SCC 260 in the following words: (SCC p. 264, para 3) "3. ... Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution. But then the Court must have good and sufficient reason to bypass the alternative remedy provided by statute.
Surely matters involving the revenue where statutory remedies are available are not such matters. We can also Page 14 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged."
50. In Punjab National Bank v. O.C. Krishnan (2001) 6 SCC 569 this Court considered the question whether a petition under Article 227 of the Constitution was maintainable against an order passed by the Tribunal under Section 19 of the DRT Act and observed: (SCC p. 570, paras 5-6) "5. In our opinion, the order which was passed by the Tribunal directing sale of mortgaged property was appealable under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'the Act'). The High Court ought not to have exercised its jurisdiction under Article 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the Tribunal was correct or not has to be decided before an appropriate forum.
6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the Court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not Page 15 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."
51. In CCT v. Indian Explosives Ltd. [(2008) 3 SCC 688] the Court reversed an order passed by the Division Bench of the Orissa High Court quashing the show-cause notice issued to the respondent under the Orissa Sales Tax Act by observing that the High Court had completely ignored the parameters laid down by this Court in a large number of cases relating to exhaustion of alternative remedy.
52. In City and Industrial Development Corpn. v. Dosu Aardeshir Bhiwandiwala [(2009) 1 SCC 168] the Court highlighted the parameters which are required to be kept in view by the High Court while exercising jurisdiction under Article 226 of the Constitution. Paras 29 and 30 of that judgment which contain the views of this Court read as under: (SCC pp. 175-76) "29. In our opinion, the High Court while exercising its extraordinary jurisdiction under Article 226 of the Constitution is duty-bound to take all the relevant facts and circumstances into consideration and decide for itself even in the absence of proper affidavits from the State and its instrumentalities as to whether any case at all is made out requiring its interference on the basis of the material made available on record. There is nothing like issuing an ex parte writ of mandamus, order or direction in a public law remedy. Further, while considering the validity of impugned action or inaction the Court will not consider itself restricted to the pleadings of the State but would be free to satisfy itself whether any case as such is made out by a person invoking its extraordinary jurisdiction under Article 226 of the Constitution.
30. The Court while exercising its jurisdiction under Article 226 is duty- bound to consider whether:
Page 16 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023
C/SCA/24215/2022 ORDER DATED: 02/01/2023
(a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;
(b) the petition reveals all material facts;
(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;
(d) person invoking the jurisdiction is guilty of unexplained delay and laches;
(e) ex facie barred by any laws of limitation;
(f) grant of relief is against public policy or barred by any valid law; and host of other factors.
The Court in appropriate cases in its discretion may direct the State or its instrumentalities as the case may be to file proper affidavits placing all the relevant facts truly and accurately for the consideration of the Court and particularly in cases where public revenue and public interest are involved. Such directions are always required to be complied with by the State. No relief could be granted in a public law remedy as a matter of course only on the ground that the State did not file its counter-affidavit opposing the writ petition. Further, empty and self-defeating affidavits or statements of Government spokesmen by themselves do not form basis to grant any relief to a person in a public law remedy to which he is not otherwise entitled to in law."
53. In Raj Kumar Shivhare v. Directorate of Enforcement [(2010) 4 SCC 772] the Court was dealing with the issue whether the alternative statutory remedy available under the Foreign Exchange Management Act, 1999 can be bypassed and jurisdiction under Article 226 of the Constitution could be invoked. After examining the scheme of the Act, the Court observed: (SCC p. 781, paras 31-32) "31. When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition Page 17 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go-by by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating this aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction.
32. No reason could be assigned by the appellant's counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum."
7. In view of the above, the impugned judgment and order passed by the High Court entertaining the writ petition under Article 226 of the Constitution of India against the Assessment Order denying the benefit of Input rebate is unsustainable and the same deserves to be quashed and set aside and the original writ petitioner is to be relegated to prefer an appeal against the Assessment Order dated 28.02.2015 passed by the Divisional Deputy Commissioner, Commercial Tax, Jabalpur, which may be available under Section 46(1) of the MP VAT Act, 2002.
18. Yet another decision of the Apex Court rendered in case of Authorized Officer, State Bank of Travancore and Ors. (Supra) where, the challenge was made under Section 13(4) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). High Court stayed the further proceedings under Section 13(4) of Page 18 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 SARFAESI Act on deposit of certain amount. The question before the Apex Court was whether the High Court is justified in staying further proceedings.
19 Apex Court has also held that it is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for the reasons recorded in the case falling under a defined exception on duly discussing and noticing the relevant law. The grant of ex-parte stay in the financial matters, according to the Apex Court would have a deleterious effect and the aggrieved persons would always have the remedy to move for vacating the interim order.
20 It has also referred to the case of Punjab National Bank (Supra), of course, along with the discussion of object and reasons of the SARFAESI Act.
"9. The statement of objects and reasons of the SARFAESI Act states that the banking and financial sector in the country was felt not to have a level playing field in comparison to other participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of Page 19 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 securities and sell them. The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of banks and financial institutions. The Narasimhan Committee I and II as also the Andhyarujina Committee constituted by the Central Government Act had suggested enactment of new legislation for securitisation and empowering banks and financial institutions to take possession of securities and sell them without court intervention which would enable them to realise long term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as 'the DRT Act') with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order.
10. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank vs. O.C. Krishnan and others, (2001) 6 SCC 569, that :-
"6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."Page 20 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023
C/SCA/24215/2022 ORDER DATED: 02/01/2023
11. In Satyawati Tandon (supra), the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding :-
"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.
55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in Page 21 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
12. In Union Bank of India and another vs. Panchanan Subudhi, 2010 (15) SCC 552, further proceedings under Section 13(4) were stayed in the writ jurisdiction subject to deposit of Rs.10,00,000/- leading this Court to observe as follows :
"7. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one-time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act."
13. The same view was reiterated in Kanaiyalal Lalchand Sachdev and others vs. State of Maharashtra and others, 2011 (2) SCC 782 observing:
"23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd.; Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)"
14. In Ikbal (supra), it was observed that the action of the Bank under Section 13(4) of the 'SARFAESI Act' available to challenge by the aggrieved under Section 17 was an efficacious remedy and the institution directly under Article 226 was not sustainable, relying upon Satyawati Tandon (Supra), observing :
"27. No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is well settled that where a statute provides efficacious and adequate remedy, the High Court Page 22 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 will do well in not entertaining a petition under Article
226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented.
*** 28.......In our view, there was no justification whatsoever for the learned Single Judge to allow the borrower to bypass the efficacious remedy provided to him under Section 17 and invoke the extraordinary jurisdiction in his favour when he had disentitled himself for such relief by his conduct. The Single Judge was clearly in error in invoking his extraordinary jurisdiction under Article 226 in light of the peculiar facts indicated above. The Division Bench also erred in affirming the erroneous order of the Single Judge."
15. A similar view was taken in Punjab National Bank and another vs. Imperial Gift House and others, (2013) 14 SCC 622, observing:-
"3. Upon receipt of notice, the respondents filed representation under Section 13(3-A) of the Act, which was rejected. Thereafter, before any further action could be taken under Section 13(4) of the Act by the Bank, the writ petition was filed before the High Court.
4. In our view, the High Court was not justified in entertaining the writ petition against the notice issued under Section 13(2) of the Act and quashing the proceedings initiated by the Bank."
16. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public Page 23 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:-
"46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation.Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order."
17. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference.
18. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. vs. Page 24 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023 C/SCA/24215/2022 ORDER DATED: 02/01/2023 Prem Heavy Engineering Works (P) Ltd. and Another, 1997 (6) SCC 450, observing :-
"32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops."
21. Noticing the well settled law on the subject, without expressing anything on merits in favour of the either of the parties, writ petition is hereby not entertained and stands dismissed on the ground of availability of alternative efficacious statutory remedy of appeal to the petitioner by relegating it to prefer an appeal before the Appellate Authority under Section 20 of "The Recovery of Debts Act". If such an appeal is preferred within period of four (4) weeks from the date of receipt of this order, the same shall be decided expeditiously by the concerned Tribunal. In the meantime, the interim relief granted earlier by this court shall continue to govern the parties for four weeks.
Page 25 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023
C/SCA/24215/2022 ORDER DATED: 02/01/2023
22. Original title deeds which are deposited with the Registry of this Court shall continue to be with the Registrar (Judicial) for the period of four weeks within which petitioner can prefer to approach the appellate authority, thereafter the appellate authority shall take a call in relation to those original documents at the request of the parties.
23. In the event of petitioner not preferring to challenge the order by way of appeal, at the end of eight weeks' period, either side is permitted to approach this Court for the purpose of original deeds.
Petition is in the above terms disposed of, with no order as to cost.
(SONIA GOKANI, J) (SANDEEP N. BHATT,J) ORDER IN CIVIL APPLICATION NO. 1 OF 2022 In view of the disposal of the main matter i.e. Special Civil Application No.24215 of 2022, this application does not survive and stands disposed of.
(SONIA GOKANI, J) (SANDEEP N. BHATT,J) BEENA SHAH Page 26 of 26 Downloaded on : Fri Jan 06 20:42:38 IST 2023