Gujarat High Court
Urmiladevi Mahavirprasad Jain vs Union Of India on 4 January, 2024
Author: Nirzar S. Desai
Bench: Nirzar S. Desai
NEUTRAL CITATION
C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 18776 of 2023
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URMILADEVI MAHAVIRPRASAD JAIN Versus UNION OF INDIA ========================================================== Appearance:
MR PAVAN S GODIAWALA(2936) for the Petitioner(s) No. 1,2 MS FALAK A SAWLANI(12787) for the Petitioner(s) No. 1,2 for the Respondent(s) No. 1,2,3,4,5 ========================================================== CORAM:HONOURABLE MR. JUSTICE NIRZAR S. DESAI Date : 04/01/2024 CAV ORDER
1. By way of this petition, the petitioner has prayed for issuing a writ of Certiorari and/or any other appropriate writ, order or direction to quash and set aside the order dated 30.08.2023 qua the present petitioners passed by the Debt Recovery Tribunal - I at Ahmedabad in O.A. No. 7 of 2020. The petitioners have also prayed that this Court may by way of appropriate writ, order or direction, hold that there is no valid mortgage over the Properties of the Petitioner no.1, included in the Schedule I as mentioned in the impugned order dated 30.08.2023.
2. The matter was listed and heard on 26.10.2023 and on that day, following order was passed:-
"Heard learned advocate Mr. Mitul Shelat with learned advocate Mr. Pavan S. Godiawala for the petitioners.
Reserved for orders."Page 1 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024
NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined
3. The brief facts giving rise to the present petition are stated as under:-
3.1. According to the petitioners, the revised partnership deed was entered into between the petitioners and respondent no. 5 to carry on the business under the name of Vardhman Enterprise wherein the share of the petitioner no. 1 as partner was having 35% of share of profit/loss, the petitioner no. 2 was partner having 5% of share in profit/loss in the firm and respondent no. 5 as partner was having 60% of share in profit/loss of the respondent no. 4 - firm.
3.2. The petitioner no. 1 and respondent no. 5 in capacity of mortgagor approached the respondent no. 3 - Bank i.e Punjab National Bank in the year 2015 in order to acquire finance for their business. Initially a cash credit facility of Rs. 3,00,00,000/-
was sanctioned. However, later it was enhanced to Rs. 4,80,00,000/-. For the aforesaid cash credit facility, necessary security was provided by the petitioners and respondents no. 4 and
5. 3.3. The respondent no. 4 - Partnership Firm executed hypothecation of goods and book debts to secure the cash credit facility while the petitioners and respondent no. 5 in their capacity as Guarantors and mortgaged their properties as mentioned in schedule I in favour of the respondent no. 3 - Bank. The properties mentioned in the schedule no. I also includes personal Page 2 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined properties of the petitioner no.1 as per the petitioner.
3.4. Schedule no. I as stated in the impugned order is reproduced as under:-
SCHEDULE-I (HYPOTHECATION MOVABLE PROPERTIES) Defendant NO. 1 Goods
- Various raw materials viz manufacturing material, raw materials including excisable raw material stocks in process, semi-finished goods. finished goods (including bought out finished goods) viz. sugar.
Book Debts - Book debts outstanding decree, money receivables, government subsidies, claims, bill contracts and investments etc. (IMMOVABLE PROPERTIES) Renudevi Arunkumar Jain Defendant no.2
- "All that piece and parcel of the immovable property being shop no. GF/3, admeasuring 243 sq.fts i.e. 22.57.52 sq.mtrs on the ground floor in the scheme known as 'Thirthjal apartment' of Avantika part cooperative housing society limited vibhag -2 situate on the land bearing final plot no. 65 paikee of town planning scheme no. 5 of revenue survey (Vejalpur) no. 290/2 paikee and revenue survey (Jodhpur) no. 195/2 paikee lying and being at mouje jodhpur (formerly Vejalpur), taluka city (west) within limit of registration district Ahmedabad and sub-district Ahmedabad -
4 (Paldi)"
East: Shop no. GF/4 West: Shop no. GF/2 North: Marginal space South: Open to sky
- "All that piece and parcel of the immovable property being shop no. GF/4, admeasuring 392 sq.fts i.e. 36.41.76 Page 3 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined sq.mtrs on the ground floor in the scheme known as 'Thirthjal apartment' of Avantika park cooperative housing society limited vibhag -2 situates on the land bearing final plot no. 65 paikee of town planning scheme no.
5 of revenue survey (Vejalpur) no. 290/2 paikee and revenue survey (Jodhpur) no. 195/2 paikee lying and being at mouje jodhpur (formerly Vejalpur), taluka city (west) within limit of registration district Ahmedabad and sub-district Ahmedabad - 4 (Paldi)"
East : Common margin West: Shop no. GF/3 North: Marginal space South: Open to sky Urmiladevi Mahavirprasad jain Defendant no. 3
- "All that piece and parcel of the immovable property being shop no. GF/8, admeasuring 426 sq.fts i.e. 39.57.63 sq.mtrs on the ground floor in the scheme known as 'Thirthjal apartment' of Avantika park co-operative housing society limited' vibhag -2 situates on the land bearing final plot no. 65 paikee of town planning scheme no.
5 of revenue survey (Vejalpur) no. 290/2 paikee and revenue survey (Jodhpur) no. 195/2 paikee lying.and being at mouje Jodhpur (formerly Vejalpur), taluka city (west) within limit of registration district Anemdabad and sub-district Ahmedabad - 4 (Paldi)"
East: Marginal space West: Shop no. GF/9 and shop no. GF/10 North: Marginal space South: Open to sky Renudevi Arunkumar jain Defendant no. 2.
- "All that piece and parcel of the immovable property being shop no. N-14, admeasuring 41.80 sq.mtrs i.e. 50 sq.yrds on the ground floor in the scheme known as "The Madhavpura market shops and warehouse co-op. soc. Itd." situate on the land bearing survey nos. 274/313a, 314/a,314/b (final plot nos 102, 103, 104 of town planning scheme no. 14) situate lying and being at village Dariyapur --Kajipur (Sim), taluka city within limit of registration district Ahmedabad and sub-Page 4 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024
NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined district Anmedabad-6(Naroda)"
East: By shop no. N-17 West: By 40 ft. common road North: By shop no. N-13 South: By shop no. N-15 Urmiladevi Mahaviprasad Jain Defendant no. 3
- "All that piece and parcel of the immovable property being shop no. N-15, admeasuring 41.80 sq.mtrs i.e. 50 sq.yrds on the ground floor in block no. f-1 in the scheme known as ''The Madhavpura market shops and warehouse co-op. soc. Itd." situate on the land bearing survey nos. 274/313A, 314/A,314/B (final plot nos 102, 103, 104 of town planning scheme no. 14) situate lying and being at village Dariyapur -- Kajipur (Sim), taluka city within limit of registration district Ahmedabad and sub-district Ahmedabad-6 (Naroda)"
East: By shop no. N-14 West: By shop no. N-16 North: By other shop South: By Road Renudevi Arunkumar jain Defendant no. 2.
-All that piece and parcel of the immovable proeprty being shop no. N-26, admeasuring 48.69 sq.mtrs on the ground floor in block no f-1 in the scheme known as 'The Madhavpura market shops and warehouse co-op. soc. itd' situates on the land bearing survey nos. 274/313a, 314/a, 314/b (final plot nos 102, 103, 104 of town planning scheme no. 14) situate lying and being at village Dariyapur --Kajipur (sim), taluka city within limit of registration district Ahmedabad and sub-district Ahmedabad-6 (Naroda)"
East: By road West: By wall of the concerned property North: By shop no. N-27 South: By shop no. N-25 Page 5 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined 3.5. The respondent no. 4 - Firm utilized the cash credit facility of the respondent no. 3 - Bank but failed to repay the dues of the respondent no. 3 and therefore, the respondent no. 4 signed and acknowledged the dues of respondent no. 3 by executing the balance and security confirmation letter dated 23.07.2018. Ultimately, the account of the respondent no. 4 was classified as N.P.A. on 10.10.2019. The notice under section 13 (2) of SARFAESI Act, 2002 was issued by the Bank on 11.10.2019 upon the respondent no. 4 failure to repay the outstanding amounts and therefore, the respondent no. 3 took a symbolic possession of the mortgaged property under section 13 (4) of the SARFAESI Act, 2002 on 27.12.2019 and the said property was put to sale which was unsuccessful.
3.6. Despite the aforesaid action as the respondent no. 4 did not clear the outstanding dues of respondent no. 3, the respondent no. 3 preferred an Original Application before Debt Recovery Tribunal - I, Ahmedabad to recover the residual amount from the respondent no. 4.
3.7. According to the petitioners, to uphold the object of RDDB Act as well as by exercising the powers to invite the offer for settlement to the borrower and Guarantors as the respondent no. 3 exercise such powers, the petitioners opted as 40% stakeholder in aggregate to discharge their loss in form of repaying the loan and as per their share i.e. Rs. 1,60,000/- and they disposed of their Page 6 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined personal valuables and paid off their part of the obligation to the respondent no. 3 and vide letters dated 18.07.2020 and 20.07.2020 discharged the petitioners from their liabilities and also released their properties.
3.8. According to the petitioners, after full payment the respondent no. 3 released the charge on the properties of the petitioners and also issued a No Due Certificate on 04.08.2020 in favour of the petitioners. Not only that the respondent no. 3 also executed two release deed dated 29.07.2020 and 05.08.2020 in favour of the petitioner no. 1 and release the personal properties of the petitioners.
3.9. The grievance of the petitioners and one of the main ground to challenge the impugned order dated 30.08.2023 is that despite the aforesaid release deed and though the petitioners have discharged their part of obligation and liability fully, the Tribunal has held that for entire remaining liability all the partners shall be jointly and severally liable while allowing the Original Application preferred by the respondent no. 3 - Bank and therefore, being aggrieved by the impugned order dated 30.08.2023 in O. A. No. 7 of 2020 which was allowed by Debt Recovery Tribunal- I, Ahmedabad by holding that all the defendants (including petitioners) are jointly and severally liable to pay sum of Rs. 2,39,91,884.01 alongwith interest @ 12.55 % p.a. with effect from the date of filling of O.A. i.e. 27.12.2019 till Page 7 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined the date of realisation within a period of 60 days from the date of this order and has further held that in case of failure of the aforesaid amount within stipulated period, the same would be recovered from the hypothecated property and mortgaged properties of the defendants as described in schedule -I of the Original Application.
4. Before learned advocate Mr. Mitul Shelat with learned advocate Mr. Godiawala appearing for the petitioners started to address the Court on merits of the matter, it was pointed out to learned advocate Mr. Shelat that in view of settled preposition of law that any order passed by the Debt Recovery Tribunal in respect of proceedings under section 17 are appealable before Debt Recovery Tribunal and therefore, when the petitioners are having alternative efficacious remedy of challenging the impugned order dated 30.08.2023 passed by Debt Recovery Tribunal - 1, Ahmedabad in O.A. No. 7 of 2020, why the Court should entertain the present Special Civil Application bypassing the statutory remedy, learned advocate Mr. Shelat made following submissions:-
4.1. According to learned advocate Mr. Mitul Shelat, he has preferred this petition straightway before this Court for the reason that as the property owned by the petitioners were discharged from the petitioners' liability by way of two separate release deed, the order passed by the Tribunal in respect of properties held by the petitioners as well is an order without jurisdiction and therefore, Page 8 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined the petitioners have approached this Court directly.
4.2. According to learned advocate Mr. Shelat, since the impugned order is passed without any authority and jurisdiction of law available to the Tribunal, the impugned order can be challenged straightway before this Court.
4.3. Though learned advocate Mr. Shelat made submissions on merits of the matter as well by contending that as the petitioners have fulfilled their liability to the extent of 40% as per the partnership deed for which a release deed has already been executed between the petitioners and Bank, the Tribunal could not have included the petitioners' properties in schedule - I and could not have held the petitioners' liable to pay the dues of the respondent no. 4 - Firm jointly and severally. It was also argued by learned advocate Mr. Shelat that properties of the petitioner no. 1 were mortgaged in capacity of Guarantors and not in capacity of debtors and therefore, as per the section 140 of the Indian Contract Act, the Guarantor enjoys the right of subrogation wherein the Guarantor gets to claim indemnity from the principal debtor when the principal debtors defaults.
4.4. Though learned advocate Mr. Shelat made the aforesaid submissions on merits as well, the Court pointed out to learned advocate Mr. Shelat that in view of catena of judgments of Hon'ble Supreme Court including the latest judgment in the case Page 9 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined of Celir LLP V/s Bafna Motors (Mumbai) Private Limited and others dated 21.09.2023 wherein while summarizing the final conclusion the Hon'ble Supreme Court has observed that the Hon'ble Supreme Court has time and again reminded the High Courts that the High Courts should not entertain the petition under Article 226 of the Constitution of India, if an efficacious remedy is available to the aggrieved the person under the provisions of the SARFAESI Act, why this petition should be entertained, learned advocate Mr. Shelat tried to make good his case for entertaining this petition, despite the availability of alternative remedy by relying upon the following judgments:-
a) in the case of Dugra Hotel Complex V/s Reserve Bank of India and Others reported in (2007) 5 SCC 120 (paragraphs no. 13 and 14)
b) in the case of Transcore V/s Union of India and Another reported in (2008) 1 SCC 125 (paragraphs no. 66,67 and 68)
c) in the case of Nahar Industrial Enterprise Limited V/s Hong Kong and Shanghai Banking Corporation reported in (2009) 8 SCC 646 (paragraphs no. 96,97,117 and 118)
d) in the case of Rajeev Hitendra Pathak and Others V/s. Achyut Kashinath Karekar and Another reported in (2011) 9 SCC 541 (paragraphs no. 34) Page 10 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined
e) in the case of Standard Chartered Bank V/s.
Dharminder Bhohi and Others. reported in (2013) 15 SCC 341 (paragraphs no. 35,36,37,38)
f) in the case of Tamil Nadu Pollution Control Board V/s. Sterlite Industries (India) Limited and Others reported in (2019) 19 SCC 479 (paragraphs no. 41 and 43) 4.5. By relying upon the judgment in the case of Durga Hotel Complex (supra) and more particularly on paragraphs no. 13 and 14, it was submitted by learned advocate Mr. Shelat that the exercise of jurisdiction or power by the ombudsman or Tribunal would depend on having jurisdiction not only to entertain a claim but also to bring it an end. In the instant case, according to learned advocate Mr. Shelat as there was a release deed in favour of the petitioners in respect of subject property, those properties were outside the purview of jurisdiction of Debt Recovery Tribunal and therefore, the order passed by the Tribunal was without jurisdiction and therefore, straightway a petition before this Court could be preferred and is required to be entertained.
4.6. By relying upon the judgment in the case of Transcor (supra) and more particularly by relying upon the paragraphs no. 66, 67 and 68 of judgment, it was submitted by learned advocate Mr. Shelat that insertion of section 19 (1) of DRT Act while amending the Act 30 of 2204, the Debt Recovery Tribunal is a Tribunal which is creature of statue and therefore, it has no Page 11 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined inherent power which exists in the Civil Court and therefore, looking to the provisions of Partnership Act when the release deed has already been executed between the parties, the Debt Recovery Tribunal could not have exercised its jurisdiction over the properties in question in respect of the petitioners.
4.7. By relying upon the judgment in the case of Nahar Industiral Enterprice Limited (supra), learned advocate Mr. Shelat further submitted that in view of the observation made in paragraph no. 97 of the aforesaid judgment, a Debtor under the common law of contract as also in terms of the loan agreement may have an independent right and there is no forum for endorcement of that right. Jurisdiction of a Civil Court is barred only in respect of the matters which strictly comes within the purview of Section 17 of the Act and not beyond the same and therefore, Civil Court will continue to have jurisdiction and as the subject matter in question, the depends upon the interpretation of the provisions of Contract Act and Partnership Act, the Tribunal's order can be said to be without jurisdiction.
4.8. By relying upon the judgment in the case of Rajeev Hitendra Pathak (supra), learned advocate Mr. Shelat submitted that the Tribunals are creatures of the statue and derive their power from the express provisions of Statute as Debt Recovery Tribunal is not given the powers of Civil Court, the Debt Recovery Tribunal has committed an error by holding that the properties of petitioners Page 12 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined as mentioned in Schedule - I would be within the jurisdiction of Debt Recovery Tribunal without appreciating the fact that those properties were already released by way of release deed.
4.9. By relying upon the judgment in the case of Standard Chartered Bank (supra), it was submitted by learned advocate Mr. Shelat that the points raised by the petitioners are in respect of jurisdiction of Civil Court as the same involves the interpretation of the provisions of Partnership Act and Contract Act and therefore, the Debt Recovery Tribunal could not have exercised the jurisdiction about the aforesaid aspect in respect of properties owned by the petitioners and therefore, the order passed by the Debt Recovery Tribunal is without jurisdiction qua the petitioners.
4.10. Lastly by relying upon the judgment in the case of Tamil Nadu Pollution Control Board (supra), it was submitted by learned advocate Mr. Shelat that the order passed by the Debt Recovery Tribunal qua the petitioners is without jurisdiction and therefore, the present petition may be entertained by this Court despite the availability of alternative remedy.
4.11. By making the aforesaid submissions, learned advocate Mr. Shelat prayed for entertaining the present petition despite the availability of alternative remedy.
5. I have heard learned advocate Mr. Mitul Shelat with learned Page 13 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined advocate Mr. Godiawala appearing for the petitioners. Though by citing the various judgments, learned advocate Mr. Shelat tried to canvass a point that availability of alternative remedy is not a bar in entertaining the petition as the order passed by the Debt Recovery Tribunal is without jurisdiction qua the present petitioners.
6. Learned advocate Mr. Shelat has made submissions mainly on two grounds, (i) alternative remedy is not a bar in entertaining a petition under Article 226 of the Constitution of India and (ii) order passed by the DRT is without jurisdiction as in respect of subject property, there was already a Release Deed by the Bank in favour of the petitioner. Considering the fact that it is true that availability of an alternative remedy is no bar in entertaining the writ petition, under Article 226 of the Constitution of India, but at the same time, the Court is required to see whether by not entertaining the petition, the petitioner would be left without any efficacious remedy or not. Considering the fact that Section 18 of the Act already provides for an appeal, and as can be seen from the aforesaid arguments made by learned advocate Mr. Shelat, as learned advocate for the petitioner could not point out that the alternative remedy available to the petitioner is not an efficacious remedy and, therefore, in absence of making out a case that the alternative remedy available to the petitioner is not an efficacious remedy, the present petition cannot be entertained as the petitioner has alternative remedy to challenge the impugned order before the Page 14 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined DRAT. Further, the grounds stated in the petition and canvassed before this Court at the time of argument are legal grounds which can be considered by the Appellate Tribunal as well. Therefore also, when the DRAT is competent to hear and decide the appeal that the petitioner may prefer, unless there are any compelling grounds shown by the petitioner, such writ petition is not required to be entertained. In the instant case, I do not find any reason either from the pleadings or from the submissions made by learned advocate Mr. Shelat to entertain this petition despite availability of alternative remedy.
7. Further while considering the submissions made by learned advocate Mr. Shelat, this Court is required to bare in mind the various judicial pronouncements of the Hon'ble Supreme Court wherein the Hon'ble Supreme Court has considered the question as to whether the High Court should entertain a writ petition under Article 226 of Constitution of India when there is alternative remedy available to the petitioner or not, for that very recently this Court in the case of Jyotsnaben Ashokbhai Dodia V/s Raj Radhe Finance Ltd. while deciding the Special Civil Application No. 16433 of 2023 vide judgment dated 06.10.2023 in paragraphs no. 9.1, 9.2 , 10, 11 and 12 as under:-
9.1 The Hon'ble Supreme Court while considering the availability of alternative remedy, in SARFAESI Act matter, in case of Varimadugu Obi Reddy v. B. Sreenivasulu and others, (2023) 2 SCC 168, in paragraph 36, observed as under :-Page 15 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024
NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined "36. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed was appealable under Section 18 of the Act subject to the compliance of condition of pre-deposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre-deposit contemplated under 2nd proviso to Section 18 of the 2002 Act."
9.2 The aforesaid observation would make it amply clear that one of the possible reason for insistence of entertaining present petition by the petitioner is the fact that for preferring any appeal under Section 18 before DRAT, the petitioner would require to pay the amount of pre-
deposit and just with a view to avoid the same, the petitioner has preferred this petition challenging the order passed under Section 17 by DRT and, therefore, the Hon'ble Supreme Court deprecated the practice of entertaining the writ petition by the High Court by exercising jurisdiction under Article 226 of the Constitution of India.
10. Apart from the aforesaid aspect of suppression, I have also considered the fact that what is termed and insisted upon by the petitioner for entertaining this petition was a submission that the legal questions are involved in this petition and, therefore, instead of relegating the petitioner to the alternative remedy of filing an appeal before the DRAT, the Court may entertain the petition. But on perusal of the memo of Securitization Application No.247 of 2023 as well as the impugned order, I found that the petitioner has already raised those legal contentions before the DRT and DRT has already considered it and dealt with the same in the impugned judgment. Once the aforesaid questions were raised before the DRT and DRT has duly considered those submissions and dismissed the Securitization Application. Hence, after having availed the remedy prescribed under the Act by filing Securitization Application under Section 17 of the Act, the petitioner now cannot take a different route and by-pass the statutory remedy available to the petitioner.
11. Further, I have considered the latest judgment of the Hon'ble Supreme Court in the case of Celir LLP v. Bafna Motors (Mumbai) Private Limited and others rendered on 21.9.2023 in Civil Appeal Page 16 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined Nos.5542 - 5543 of 2023 wherein while considering the aspect of exercise of extraordinary jurisdiction by the High Court under Article 226 of the Constitution of India in SARFAESI matters, the Hon'ble Supreme Court has observed in paragraphs 89 to 96 as under :-
"EXERCISE OF EXTRAORDINARY JURISDICTION BY THE HIGH COURT UNDER ARTICLE 226 OF THE CONSTITUTION IN SARFAESI MATTERS
89. We shall now consider whether in the factual score of the present matter, any interference was warranted by the High Court in exercise of its discretionary powers under Article 226.
90. The undisputed position that emerges is;
(a) the appellant was the successful auction purchaser with a bid of Rs. 105.05 crore;
(b) On 30.06.2023, the Bank confirmed the sale of the secured asset in the appellant's favour;
(c) On 27.07.2023, the appellant had paid the entirety of the bid amount of Rs. 105.05 Crore to the Bank;
(d) Out of this, a sum of Rs. 63,50,45,000/- was appropriated by the Bank against the Borrowers' dues;
(e) The Bank did not issue the sale certificate in the appellant's favour which it ought to have on 27.07.2023;
(f) After having initially invoked the jurisdiction of the DRT-I, Mumbai and invited an order on an application for redemption, the Borrowers invoked the Writ Jurisdiction of the Bombay High Court under Article 226 apprehending that the DRT may disallow their application;
(g) By the Impugned Judgment dated 17.07.2023, the Bombay High Court allowed the Writ Petition on the basis of a consent granted by the Bank to give the Borrowers, time till 31.08.2023 to repay the outstandings and this has been treated as a redemption.
91. The only justification for entertaining the Writ Petition is contained in paragraphs 11 and 14 respectively of the Impugned Judgment. Whilst the High Court has accepted that normally, such a Writ Petition would not be maintainable, it proceeded to entertain the same because of the "peculiar facts and circumstances of the present case", "it would be in the interest of all concerned if the consensus reached between the Respondent Bank and the Page 17 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined Petitioners is taken cognizance of by us." Thereafter, it went on to say that the "arrangement referred to above is in the interest of all, including the Auction Purchaser". A perusal of paragraph 14 would indicate that since the outcome which the High Court considered to be ideal could be achieved, it did not hold the Writ Petition to be an abuse of process.
92. This Court has time and again, reminded the High Courts that they should not entertain petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person under the provisions of the SARFAESI Act. This Court in Satyawati Tondon (supra) made the following observations :-
"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.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that Page 18 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined power but, at the same time, we cannot be oblivious of the rules of selfimposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
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 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.
xxx xxx xxx
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 future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
93. In Commissioner of Income Tax & Ors. v. Chhabil Dass Agarwal reported in (2014) 1 SCC 603, this Court in para 15 made the following observations :-
"15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case [AIR 1964 SC 1419], Titaghur Paper Mills case [Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 : 1983 SCC (Tax) 131] and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective Page 19 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
94. In Phoenix ARC Private Limited v. Vishwa Bharati Vidya Mandir & Ors. reported in (2022) 5 SCC 345, it was observed as under :-
"18. Even otherwise, it is required to be noted that a writ petition against the private financial institution -- ARC -- the appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in Praga Tools Corpn. [Praga Tools Corpn. v. C.A. Imanual, (1969) 1 SCC 585] and Ramesh Ahluwalia [Ramesh Ahluwalia v. State of Punjab, (2012) 12 SCC 331 : (2013) 3 SCC (L&S) 456 : 4 SCEC 715] relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers xxx xxx xxx
21. Applying the law laid down by this Court in Mathew Page 20 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined K.C. [State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85 : (2018) 2 SCC (Civ) 41] to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13-8- 2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs 1 crore only (in all Rs 3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs 117 crores. The ad interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of court. It appears that the High Court has initially granted an ex parte ad interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed."
95. In Varimadugu OBI Reddy (supra), it was held as under :-
"36. In the instant case, although the respondent borrowers initially approached the Debts Recovery Tribunal by filing an application under Section 17 of the SARFAESI Act, 2002, but the order of the Tribunal indeed Page 21 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined was appealable under Section 18 of the Act subject to the compliance of condition of pre-deposit and without exhausting the statutory remedy of appeal, the respondent borrowers approached the High Court by filing the writ application under Article 226 of the Constitution. We deprecate such practice of entertaining the writ application by the High Court in exercise of jurisdiction under Article 226 of the Constitution without exhausting the alternative statutory remedy available under the law. This circuitous route appears to have been adopted to avoid the condition of pre-deposit contemplated under 2nd proviso to Section 18 of the 2002 Act."
96. More than a decade back, this Court had expressed serious concern despite its repeated pronouncements in regard to the High Courts ignoring the availability of statutory remedies under the RDBFI Act and the SARFAESI Act and exercise of jurisdiction under Article 226 of the Constitution. Even after, the decision of this Court in Satyawati Tondon (supra), it appears that the High Courts have continued to exercise its writ jurisdiction under Article 226 ignoring the statutory remedies under the RDBFI Act and the SARFAESI Act."
The Hon'ble Supreme Court while summarizing the final conclusion has observed in paragraph 105 as under :-
"105. We summarise our final conclusion as under :-
(i) The High Court was not justified in exercising its writ jurisdiction under Article 226 of the Constitution more particularly when the borrowers had already availed the alternative remedy available to them under Section 17 of the SARFAESI Act.
(ii)..............................
(iii).............................
(iv).............................
(v)..............................
(vi).............................
(vii)............................"
12. The aforesaid observations makes it very clear that the Hon'ble Supreme Court has not approved the practice of entertaining a writ petition under Article 226 of the Constitution of India in SARFAESI matters despite availability of alternative remedy. In the instant case, Page 22 of 23 Downloaded on : Thu Jan 04 20:46:54 IST 2024 NEUTRAL CITATION C/SCA/18776/2023 CAV ORDER DATED: 04/01/2024 undefined the petitioner has failed to point out any extraordinary circumstances and, therefore also, the petition is required to be dismissed on the ground of availability of alternative remedy.
8. In view of above consistent view of the Hon'ble Supreme Court, this Court is of the view that the petitioners can always raise all the grounds raised in this petition even by filing an appeal before Debt Recovery Tribunal and merely because availability of alternative remedy is no bar in exercising the writ jurisdiction which does not mean that the Court may exercise the writ jurisdiction under Article 226 of Constitution of India by overlooking a catena of decision of the Hon'ble Supreme Court directly on the point which are referred to in foregoing paragraphs and therefore, the present petition is not entertained only on the ground of availability of alternative remedy as the petitioners are having alternative remedy to challenge the impugned order dated 30.08.2023 passed by Debt Recovery Tribunal- I, Ahmedabad in O.A. No. 07 of 2023 by way of preferring an appeal as provided under section 18 of SARFAESI Act.
9. Accordingly, without opine anything on merits of the matter or entertaining into the merits of the matter, the present petition is not entertain with a liberty to the petitioners to avail the alternative remedy available to the petitioners. Resultantly, this petition is required to be dismissed and the same is dismissed.
(NIRZAR S. DESAI,J) VARSHA DESAI0.
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