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Mamta Anand & Ors vs Karvy Financial Servcies Ltd on 25 November, 2021

Author: Prateek Jalan

Bench: Prateek Jalan

                    $~38 (2021 Cause List)
                    *     IN THE HIGH COURT OF DELHI AT NEW DELHI

                    +           W.P.(C) 13208/2021 with CM APPL. 41705/2021

                                MAMTA ANAND & ORS.                                ..... Petitioners
                                           Through:            Mr. Tanmay Mehta, Advocate with
                                                               Mr. Manish Gandhi, Mr. S. K.
                                                               Singh and Mr. Ankit, Advocates

                                                          versus

                                KARVY FINANCIAL SERVCIES LTD           ..... Respondent
                                             Through: Mr. Akshay Uppal, Advocate with
                                                      Ms. Surbhi, Mr. Rahul Kumar,
                                                      Advocate

                    CORAM:
                    HON'BLE MR. JUSTICE PRATEEK JALAN

                                             ORDER

% 25.11.2021 The proceedings in the matter have been conducted through hybrid mode [virtual and physical hearing].

1. Issue notice. Mr. Akshay Uppal, learned counsel, accepts notice on behalf of the respondent.

2. The petitioners have approached this Court against an order dated 11.10.2021 passed by the Additional Chief Metropolitan Magistrate ["ACMM"] on the application of the respondent herein, and a notice dated 09.11.2021, by which the Receiver appointed by the ACMM has proposed to take possession of the petitioners' property [Ground Floor (Without Roof/Terrace Right) built on said 1/2 Portion (Corner Side Adjoining To Main Road) Of Free Hold Property No. EG-70, Area Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 1 of 9 Measuring Approx. 4x9, 13x11½ , 17x4, 6½x11½ ,8x5 Total 367.8 Sqft (34.169 Sq .Mtrs), Area Admeasuring 64 Sq Yards (out Of 128 Sq Yards), situated in approved colony known as Inderpuri, area of village Naraina, Delhi] ["the property"] today, i.e. 25.11.2021, at 02:00 PM.

3. The petitioners were borrowers and guarantors in respect of facilities taken from the respondent against the security of the property described in the order of the ACMM. The petitioner No. 1 is the wife of the petitioner No. 3. The petitioner No. 2 is the wife of the brother of the petitioner No. 3. The petitioners were served with the respondent's notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ["SARFAESI Act"] dated 12.03.2020, to which they filed objections under Section 13(3A) of the SARFAESI Act on 31.07.2020. The petitioners' objections were ultimately rejected by the respondent, and the respondent approached the ACMM under Section 14 of the SARFAESI Act. The ACMM first appointed a Receiver by the order dated 19.01.2021, and the Receiver gave notice of taking physical possession of the property on 19.02.2021.

4. Against these measures, the petitioners approached the DRT-I, Delhi by way of an interlocutory application in SA No.156/2020 [which had been filed against earlier notices dated 24.09.2020 and 03.11.2020 by which symbolic possession of the property was taken by the respondent].

5. By an order dated 09.03.2021, the petitioners' interlocutory application was rejected by the DRT-I, Delhi, against which it filed Miscellaneous Appeal No. 78/2021 before the Debts Recovery Appellate Tribunal ["DRAT"], Delhi. Notice was issued by the DRAT, Delhi in the Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 2 of 9 appeal and the interlocutory application vide order dated 22.03.2021. The last order passed by the DRAT, Delhi is dated 07.10.2021, wherein it is stated that the respondent had not entered appearance, and the appeal was, therefore, adjourned to 02.12.2021.

6. In the meanwhile, proceedings before the DRT-I, Delhi and the DRAT, Delhi remain suspended as all the DRTs in Delhi are, at present, non-functional for want of Presiding Officers. The learned Chairperson of the DRAT, Delhi has also demitted office on 30.10.2021 in terms of a notification dated 29.10.2021, issued by the Department of Financial Services, Ministry of Finance, Government of India. It is in these circumstances that the petitioners have approached this Court under Article 226 of the Constitution.

7. Mr. Tanmay Mehta, learned counsel for the petitioners, submits that after the order of the DRT-I, Delhi dated 09.03.2021, and during the pendency of the proceedings before the DRAT, Delhi, the petitioners and the respondent entered into a one-time settlement ["OTS"] dated 31.03.2021 in the sum of ₹29 lakhs. A document dated 31.03.2021 [annexed to the writ petition as Annexure-R] shows that the amount of ₹24.5 lakhs out of the aforesaid settlement of ₹29 lakhs was paid, and the balance amount of ₹4.5 lakhs was to be paid by 17.04.2021. Mr. Mehta states that the balance amount could not be paid on the stipulated date due to exigencies arising out of the COVID-19 pandemic, but the petitioners have made arrangements to deposit the said amount forthwith.

8. Mr. Uppal disputes the aforesaid contention of the petitioners. In particular, he submits that the settlement alleged by the petitioners was not entered into by the respondent at all, and that the aforesaid document Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 3 of 9 is forged and fabricated. Mr. Uppal further submits that the mortgage was in respect of a single shop, which, according to him, has already been sold by the petitioners to a third party. Mr. Uppal states that these contentions regarding the sale have already been placed before the DRT.

9. In rejoinder, Mr. Mehta draws my attention to the settlement documents, which prima facie bear a stamp of the respondent. The documents placed on record include photocopies of the three demand drafts [amounting in total to ₹24.5 lakhs] which bear the endorsement, allegedly on behalf of the respondent, that the demand drafts were received "As per MOU settlement letter". The petitioner has also annexed copies of three receipts allegedly issued by the respondent which also bear the remarks "As per MOU settlement" or "As per MOU/part payment".

10. Mr Mehta also denies that the mortgaged property has been sold by the petitioners. The petitioner No. 3 has affirmed an affidavit dated 24.11.2021 to this effect. The affidavit has been filed electronically before this Court, but has not come on record. The original of the affidavit has been shown to me in Court. In the affidavit, the deponent has taken the position that the petitioners have never sold the mortgaged shop [which has been marked in a site plan annexed thereto], although they have admittedly sold certain other shops which were part of the same property. According to the petitioners these shops were not part of the mortgaged property at all.

11. There appears to be some dispute as to the extent of the mortgaged property, as also the existence of the settlement dated 31.03.2021.

12. As all the three DRTs in Delhi and DRAT are, at present, non-

functional, several similar proceedings have come before this Court. This Court has taken the view that it is preferable to enable parties to invoke their statutory remedies under Section 17 of the SARFAESI Act rather than to entertain writ petitions of this nature against measures taken under the SARFAESI Act on merits. With this objective, the Court has also, in cases of urgency, transferred petitions from the DRTs in Delhi to the DRT, Jaipur [which is the only functional DRT within the jurisdiction of the DRAT, Delhi] in exercise the power under Section 17(7) of the SARFAESI Act read with Section 17A(2) of the Recovery of Debts and Bankruptcy Act, 1993 ["RDB Act"].The said provisions read as follows:-

Section 17(7) of the SARFAESI Act -

"17- Right to Appeal-

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder."

Section 17A(2) of the RDB Act -

"17A - Power of Chairperson of Appellate Tribunal xxxx xxxx xxxx (2) The Chairperson of an Appellate Tribunal having jurisdiction over the Tribunals may, on the application of any of the parties or on his own motion after notice to the parties, and after hearing them, transfer any case from one Tribunal for disposal to any other Tribunal"

13. It is clear from the above that the Chairperson of the DRAT has jurisdiction to transfer a case from one DRT under his/her jurisdiction to another DRT. In the present situation where the office of the Chairperson of DRAT, Delhi is also vacant, this Court has taken the view that exercise of such power by this Court would be the appropriate course, as the Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 5 of 9 petitioner's ordinary statutory remedy has been rendered unavailable for reasons beyond its control. Enabling a party to invoke that remedy is preferable to entertaining the case on merits in writ proceedings. Although the existence of an alternative remedy is not an absolute bar to the exercise of jurisdiction under Article 226, this Court has relied upon the judgments of the Supreme Court which make it clear, particularly in the context of proceedings under the SARFAESI Act, that the writ jurisdiction should rarely be exercised.

14. In United Bank of India vs. Satyawati Tondon and Others (2010) 8 SCC 110, the Court held as follows:-

"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.

xxxx xxxx xxxx

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 6 of 9 Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.

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 itscase falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad [AIR 1969 SC 556] , Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order."

(Emphasis supplied.)

15. The observations in Satyawati Tondon (supra) have been followed by the Supreme Court inter alia in Authorized Officer, State Bank of Travancore and Another vs. Mathew K.C. (2018) 3 SCC 85 [paragraphs 5, 9 to 15], and the recent judgment in C. Bright vs. District Collector and Others (2021) 2 SCC 392 [paragraph 22].

16. I am of the view that the transfer of the proceedings in the present case also to a functional DRT would be consistent with this approach of the Supreme Court, rather than entertaining the proceedings under Article Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 7 of 9 226 of the Constitution. The determination of factual disputes such as those raised in the present case can more appropriately be undertaken before the statutory tribunal rather than the writ court.

17. For the reasons aforesaid, the present writ petition, alongwith the pending application, is disposed of with the following directions:-

a. The petitioners are at liberty to file an interlocutory application challenging the subsequent measures taken by the respondent under Section 13(4) of the SARFAESI Act in SA No. 156/2020 pending before the DRT-I, Delhi. The application, if any, be filed by 29.11.2021.

b. SA No.156/2020, alongwith all pending interlocutory applications therein, will be transferred from the DRT-I, Delhi to the DRT, Jaipur thereafter.

c. The Registrar, DRT-I, Delhi, is directed to transmit the records of the said securitisation application to the DRT, Jaipur in digitised form.

d. Learned counsel for the petitioners is also directed to coordinate with the Registrar, DRT, Jaipur, to transmit the digital records of the case to the DRT, Jaipur directly, if so permitted. e. The matter be listed before the DRT, Jaipur for directions/hearing on 02.12.2021 at 2:00 PM. The DRT, Jaipur will permit the parties to appear online [through video conference], if they so request. f. The DRT, Jaipur is directed to hear the petitioners' case, at least on the question of interim relief, and pass appropriate orders as expeditiously as possible, and latest by 10.12.2021.

g. Subject to any other orders passed by the DRT, Jaipur in terms of these directions, the Receiver is directed to defer the proceedings for taking physical possession of the property until 14.12.2021 at 11:00 AM. No further notice is required to be given to the petitioners to take possession on the said date, subject to the orders of the DRT.

h. The petitioners are directed not to create any third-party interests in the title or possession of the property, and to maintain status quo with regard to the character of the property.

18. Mr. Mehta states that the amount of ₹4.5 lakhs which, even according to the petitioners, is pending in terms of the alleged settlement dated 31.03.2021, will be deposited with the respondent by tomorrow, i.e. 26.11.2021. This amount may be accepted by the respondent without prejudice to its rights and contentions.

19. It is made clear that this Court has not entered into the merits of the parties' contentions, which are to be adjudicated by the DRT in accordance with law.

20. As the possession of the property scheduled to be taken today, i.e. 25.11.2021, learned counsel for the parties are at liberty to communicate the aforesaid directions to the Receiver.

PRATEEK JALAN, J NOVEMBER 25, 2021 'j' Signature Not Verified Digitally Signed By:SHITU NAGPAL Signing Date:25.11.2021 21:43:38 W.P.(C) 13208/2021 Page 9 of 9