Karnataka High Court
M/S.Sri Basaveshwara Rice Industries vs The Assistant General Manager on 6 June, 2019
Author: S G Pandit
Bench: S G Pandit
IN THE HIGH COURT OF KARNATAK A,
DHARWAD BENCH
DATED TH IS THE 6 t h DAY OF JUNE 2019
BEFORE
THE HON'BL E MR.JUSTICE S.G. PANDIT
WP NO 110509 OF 2019 (GM-RES)
BETWEEN
M/S.SRI BASAVES HWARA RICE INDU STRIES ,
SY.NO.174, BEHIND HULUGI HOSPITAL,
BUDAGUMPA ROAD,KARA TAGI POS T,
GANGAVATHI TALUK,KOPPAL DIS TRICT- 583229,
REPRESENTED BY ITS MANAGING PA RTNER,
SRI.SHARANAPPA S/O SIDDAPPA KO TAGI.
... PETITIONER
(BY SRI. BALAGOUDA A PATIL, ADV.)
AND
THE ASSIS TANT G ENERAL MANAGER,
STA TE BANK OF INDIA,
ASSET RECO VERY MANAGEMENT BRANCH (40564)
2ND FLOOR, A BLOCK,
B.K. G . COMPLEX,
MYSORE BANK CIRCLE,
AVENUE ROAD,
BENGALURU-560009.
... RESPONDENT
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A
WRIT OF CERTIORARI OR SUCH OTHER WRIT QUASHING THE E
AUCTION SALE NOTICE DATED 18.05.2019 PRODUCED AS PER
ANNEXURE-D WHEREIN THE SALE IS SCHEDULED TO BE HELD
ON 10.06.201 AND ETC.
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THIS WRIT PETITION COMING ON FOR
PRELIMINARY HEA RING THIS DAY, THE COURT MADE
THE FOLLOWING:
ORDER
The petitioner is before this Court under Article 226 of the Constitution of India praying to quash E-Auction sale notice dated 18.05.2019, issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act) and to grant 6 months time to pay balance OTS amount from the date of disposal of the writ petition.
2. It is stated that the petitioner-M/s. Sri. Basaveshwara Rice Industries had availed financial assistance from the respondent-Bank for setting up and functioning of the rice mill. Since, the petitioner failed to repay the loan amount, the respondent-Bank initiated recovery proceedings 3 under the SARFAESI Act. The petitioner made a proposal to settle the loan amount under one time settlement. The respondent-Bank by communication dated 28.09.2018 accepted the petitioner's proposal and offered OTS to close the dues by remitting Rs.3,89,15,393/-. The petitioner agreed to pay the balance amount within six months, that is from 28.09.2018. The petitioner failed to adhere to terms of one time settlement. Hence, the respondent-Bank issued auction sale notice on 18.05.2019, in pursuance of the recovery proceedings initiated under SARFAESI Act. The said sale notice is challenged in this writ petition.
3. Heard the learned counsel for the petitioner and perused the writ papers.
4. Learned counsel for the petitioner would submit that action taken by the respondent-Bank 4 is wholly arbitrary and opposed to the provisions of SARFAESI Act. The petitioner counsel seeks extension of time for payment of remaining OTS amount. Hence, prays for allowing the writ petition.
5. Admittedly the petitioner has availed financial assistance from the respondent-Bank. Thereafter, the petitioner committed default in repayment of the loan amount with interest. The respondent- Bank initiated recovery proceedings under SARFAESI Act. The petitioner offered to settle the loan account under one time settlement. The respondent-Bank sanctioned OTS to the petitioner and intimated under communication dated 28.09.2018. The respondent-Bank came forward to accept Rs.3,89,15,393/- to clear the loan amount and granted six months time to the petitioner to pay the amount. The petitioner failed to pay the 5 amount as indicated in the one time settlement. Therefore, the respondent-Bank issued auction sale notice dated 18.05.2019, under the provisions of the SARFAESI Act
6. The recovery proceedings is initiated under SARFAESI Act. The SARFAESI Act provides for alternative remedy under Section 17 of the SARFAESI Act. Since, the petitioner has alternate remedy available under the Statue, it may not be appropriate for this Court to entertain the writ petition. But, it is not total bar to entertain the writ petition, when the petitioner makes out extraordinary ground. In the case on hand, no extraordinary ground is made out to entertain the writ petition except saying that if petitioner is granted some time he would make payment. The petitioner has not complied with the terms of one time settlement.
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7. The Hon'ble Supreme Court in a case reported in AIR 2018 SC 676 (Authorized Officer, State Bank of Travancore and another V. Mathew K.C.) has held at paras 9 and 16, which read as follows:
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 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 8 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.
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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 14 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 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. 15 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 8 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."
Hence, as the petitioner has alternate and efficacious remedy under the SARFAESI Act. I decline to entertain the writ petition. Accordingly, the writ petition is dismissed with liberty to the petitioner to approach the appropriate forum for redressal of his grievances.
SD JUDGE Vb