Aurovill Appliances Pvt Ltd vs District Magistrate & 4 on 5 October, 2015

[Cites 33, Cited by 0]

Gujarat High Court

Aurovill Appliances Pvt Ltd vs District Magistrate & 4 on 5 October, 2015

Bench: Abhilasha Kumari

                C/SCA/8852/2015                                             CAV JUDGMENT




                    IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                       SPECIAL CIVIL APPLICATION NO. 8852 of 2015



         FOR APPROVAL AND SIGNATURE:



         HONOURABLE SMT. JUSTICE ABHILASHA KUMARI
         ==========================================================

1 Whether Reporters of Local Papers may be allowed Yes to see the judgment ?

2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of No the judgment ?

4 Whether this case involves a substantial question of No law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== AUROVILL APPLIANCES PVT LTD....Petitioner(s) Versus DISTRICT MAGISTRATE & 4....Respondent(s) ========================================================== Appearance:

MR JAL SOLI UNWALA, ADVOCATE, MS TEJAL A VASHI, ADVOCATE for the Petitioner MS SHRUTI PATHAK, ASSISTANT GOVERNMENT PLEADER for Respondents No. 1 - 2 MR KM PARIKH, ADVOCATE for the Respondent No. 3 RULE SERVED for Respondent No.4.

SERVED BY AFFIX.-(R) for Respondent(s) No. 5

========================================================== CORAM: HONOURABLE SMT. JUSTICE ABHILASHA KUMARI Date : 05/10/2015 C.A.V. JUDGMENT Page 1 of 50 HC-NIC Page 1 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT

1. This petition under Articles 226 and 227 of the Constitution of India has been preferred, inter alia, with a prayer to quash and set aside the impugned order dated 09.05.2014, passed by respondent No.2 - Additional District Magistrate, Valsad, under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("the SARFAESI Act" for short), on the ground that the said order is without jurisdiction and the authorised officer of respondent No.3 - Central Bank of India, has no power to evict the petitioner, who is a lessee, from the disputed property, in view of the provisions of subsection 13 of Section 13 of the SARFAESI Act. It is further prayed that the seals and lock applied by respondent No.3 - Bank on the premises of which the petitioner is a lessee be opened and the possession thereof be restored to the petitioner.

2. Briefly stated, the facts of the case emerging from the memorandum of the petition are to the following effect:

Page 2 of 50

HC-NIC Page 2 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT 2.1 The petitioner is a Company, duly registered under the provisions of the Companies Act, 1956 and is being represented through its Director. Respondent No.1 is the District Magistrate, Valsad, and respondent No.2 is the Additional District Magistrate, Valsad.

Respondent No.3 is the Central Bank of India, a Banking Company constituted under the Banking Companies Act (Acquisition and Transfer of Undertakings) Act, 1970.

2.2 The subjectmatter of the petition is the property at Plot No.6A, Ranchhodji Nagar, having three floors, situated near Dharampur road, Abrama, Taluka and District Valsad (hereinafter referred to as the disputed property), owned by respondent No.4 ("the original owner" for short).

2.3 The petitioner asserts that it is the lessee of the disputed property and is carrying on its business in the nature of a Mall known as "Mother Mall", which is being run by the petitionerCompany, of which he and his wife are Page 3 of 50 HC-NIC Page 3 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Directors. The husband of respondent No.4 Kokilaben Babubhai Patel, the original owner, had taken a loan, from the respondent Bank on 07.01.2012 by mortgaging the disputed property as a collateral security. The said loan was in the nature of a cashcredit facility, to the tune of Rs.75 lakhs, approximately. In the said loan, respondent No.4, the original owner, was named as a guarantor.

2.4 It is the case of the petitioner that somewhere in the month of December 2011, the petitioner intended to occupy the disputed property for the purpose of its business in the nature and style of a Mall, by taking the disputed property on hire. According to the petitioner, sometime around December, 2011, a sum of Rs.2 lakhs was paid by the petitioner to the original owner towards the lease between the original owner and the petitioner. 2.5 On 07.02.2012, the petitioner and the original owner completed the formality of signing the lease deed of the disputed property, Page 4 of 50 HC-NIC Page 4 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT for a period of ten years. The petitioner had also undertaken the exercise of renovating the disputed property and incurred expenses towards the same.

2.6 Thereafter, due to the default in the repayment of the installments of the cash credit facility availed of by the original owner, who was running the business in the name and style of M/s.B.G.Enterprises, the respondentBank issued a notice under the provisions of Section 13(2) of the SARFAESI ACT to M/s.B.G.Enterprises, on 28.10.2013. 2.7 On 13.02.2014, the respondent - Bank, through its authorised officer, issued a statutory notice under the provisions of Section 13(4) of the SARFAESI Act to M/s.B.G.Enterprises for taking over the possession of the said property. On 17.02.2014, the possession notice under section 13(4) of the SARFAESI Act was published in a daily newspaper.

2.8 According to the petitioner, though the respondentBank had knowledge that the Page 5 of 50 HC-NIC Page 5 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT petitioner is the lawful lessee of the disputed premises, its authorised officer did not join the petitioner as party to the proceedings under the SARFAESI Act. Without putting the petitioner to notice, an application was made to the Collector/ District Magistrate, Valsad, for taking over the possession of the disputed property, under the provisions of Section 14 of the SARFAESI Act. The petitioner asserts that it was not aware of the filing of the application by the respondentBank.

2.9 The Additional District Magistrate (respondent No.2) passed the impugned order dated 09.05.2014, under Section 14 of the SARFAESI Act, providing police protection to the respondentBank for taking over the peaceful and vacant possession of the disputed property. The petitioner claims that this order was passed without verification regarding any leasehold rights created with regard to the disputed property. The petitioner has, therefore, impugned the order dated 09.05.2014 in the present petition.

Page 6 of 50 HC-NIC Page 6 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT 2.10 Subsequently, on 29.05.2014, the authorised officer of the respondentBank made an application to the Superintendent of Police regarding the execution and implementation of the impugned order. On 11.06.2014, the respondentBank forcefully and, according to the petitioner, under the guise of the impugned order, carried out an inventory of the disputed property and took over forceful possession in an allegedly illegal manner, despite the fact that the property was occupied by the petitioner. On the same day, the petitioner raised objections by making a representation to the respondent Bank against the taking over of the possession of the property. At the same time, the petitioner approached the Civil Court by instituting Regular Civil Suit No.50 of 2014 on 13.06.2014, with a prayer to declare it as a lawful tenant of the disputed property and for the grant of a permanent injunction, restraining the respondentBank from evicting the petitioner forcefully and without due process of law. 2.11 According to the petitioner, the husband Page 7 of 50 HC-NIC Page 7 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT of the original owner gave a proposal for a One Time Settlement to the respondentBank on 18.06.2014 and also paid an amount of Rs.10 lakhs.

2.12 On 19.06.2014, the application for interim relief at Ex.5, preferred by the petitioner in the suit, was partlyallowed. The defendantBank was ordered to unlock and remove the seal from the suit premises after observing the necessary formalities. The defendantBank was further restrained from obstructing the use and occupation of the petitioner as a tenant of the suit premises, till the final decision of the suit.

2.13 Being aggrieved by the said order passed below Ex.5, the respondentBank preferred Miscellaneous Civil Appeal No.19 of 2014. The appeal was allowed by the Principal District Judge, Valsad, by an order dated 31.07.2014, and the order below Ex.5 was quashed and set aside. 2.14 In the meanwhile, on 10.07.2014, the respondentBank issued an auction notice Page 8 of 50 HC-NIC Page 8 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT regarding the disputed property in the newspaper. According to the petitioner, this notice did not mention that the possession of the disputed property was with the petitioner and the goods of the petitioner were lying in the premises.

2.15 The original owner gave a public notice dated 05.08.2015 in the daily newspaper, inter alia, informing the general public interested in purchasing the disputed property by public auction, that the notice dated 10.07.2014 issued by the respondentBank did not mention the fact regarding tenancy and encumbrances on the property. On 07.08.2014, the respondentBank replied to the public notice by the original owner. Thereafter, on 12.08.2014, the petitioner issued another public notice, to the effect that it is in lawful and legal possession of the disputed property. This notice was also replied to by the respondentBank on 13.08.2014. 2.16 The original owner, who was arrayed as a defendant in the suit instituted by the Page 9 of 50 HC-NIC Page 9 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT petitioner, preferred an application for the review of the order passed by the Principal District Judge dated 31.07.2014 in Miscellaneous Civil Appeal No.19 of 2014. The review application came to be dismissed.

2.17 By a letter dated 28.08.2014, the petitioner requested the respondentBank to return the goods lying in the disputed property. This letter was replied to by the respondent Bank on 01.09.2014. On the very same day, the petitioner requested the Bank to compensate it under the provisions of Section 76 of the Transfer of Property Act, 1882 ("the T.P.Act"

for short). Thereafter, on 03.09.2014, the respondentBank addressed a communication to the Superintendent of Police, requesting for police protection to shift the goods of the petitioner that were lying in the disputed premises. A copy of the said letter was also sent to the petitioner. On 04.09.2014, the respondentBank addressed a letter to the petitioner, asking it to come on 08.09.2014, to take away its goods from the disputed property. On 08.09.2014 and Page 10 of 50 HC-NIC Page 10 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT 22.09.2014, the petitioner addressed two letters to the respondentBank, pointing out that its case was covered by the principles of law enunciated by the Supreme Court in the case of Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others reported in (2014)6 SCC 1. A legal notice was given by the respondentBank to the petitioner on 27.09.2014. The petitioner, thereafter, addressed a letter dated 30.10.2014 under Section 145 and 146 of the Code of Criminal Procedure, 1973, to respondent No.1, which is pending adjudication.

2.18 In the civil suit preferred by the petitioner, the respondentBank preferred an application under Order 7, Rule 11 of the Code of Civil Procedure, 1908, on 29.09.2014, which was allowed by the Trial Court vide its order dated 13.01.2015.

2.19 The petitioner, thereafter, preferred another civil suit on 10.12.2014, being Regular Civil Suit No.161 of 2014, under the provisions Page 11 of 50 HC-NIC Page 11 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT of Section 6 of the Specific Relief Act, 1963. 2.20 On 10.03.2015, the respondentBank gave a final notice to the petitioner to come and take possession of its goods, to which the petitioner replied vide communication dated 03.04.2015. The petitioner alleges that its goods were to be auctioned by the respondent Bank vide auction notice on 02.06.2015, but for the said purpose the petitioner has already filed a separate petition in the Court.

3. In the background of the above factual scenario, the petitioner challenges the order dated 09.05.2014, passed by respondent No.2 - Additional District Magistrate, under Section 14 of the SARFAESI Act.

4. Mr.Jal Soli Unwala, learned advocate for the petitioner has made elaborate submissions, as follows:

4.1 That the impugned order dated 09.05.2014, is without jurisdiction, since it has been passed by the Additional District Page 12 of 50 HC-NIC Page 12 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Magistrate and not by the District Magistrate, as contemplated by Section 14 of the SARFAESI Act. Section 14 of the SARFAESI Act mandates that any application preferred by the secured creditor has to be decided and heard either by the District Magistrate or the Chief Metropolitan Magistrate, after being satisfied with the affidavit affirmed by the authorised officer of the Bank. In the present case, the impugned order, having been passed by the Additional District Magistrate, is without jurisdiction, illegal, nonest and against the mandate of Section 14 of the SARFAESI Act. In support of this submission, reliance has been placed upon the following judgments:

a) Shivam Water Treaters Pvt. Ltd. v. Authorised Officer, State Bank of India - 2013 (0) GLHELHC 230255

b) Aseena v. SubDivisional Magistrate Palakkad and Ors. AIR 2009 Kerala 1 (1)

c) Swastyayan Agro Industries & Another v.

Union of India & Others - 2015(1) Bankers' Journal 827

d) Manjudevi R.Somani v. Union of India and Ors. 2013(2) GLH 390 Page 13 of 50 HC-NIC Page 13 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT 4.2 That the impugned order and the resultant action of the respondent authorities is violative of Article 300A of the Constitution of India since, by virtue of the impugned order, the petitioner, who is a lessee, has been deprived of its possession of the leased property without any authority of law. The petitioner, being a lessee, has a right to be in possession of the secured asset during the period of such lease. There are no provisions in the SARFAESI Act that authorise the respondent authorities to dispossess a lawful lessee from the secured asset during the subsistence of the lease.

4.3 That the lease in favour of the petitioner is legal and valid in view of the provisions of subsection 13 of Section 13 of the SARFAESI Act. The petitioner could not have been dispossessed till its lease could be determined under Section 14 of the SARFAESI Act by the District Magistrate.

4.4 That the impugned order is bad, illegal Page 14 of 50 HC-NIC Page 14 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT and violative of the principles of natural justice, inasmuch as the petitioner was entitled to a notice and an opportunity of hearing from the District Magistrate before the application under Section 14 of the SARFAESI Act was decided. The District Magistrate was bound to satisfy himself as to whether there is a valid lease, or not. The authorised officer of the respondentBank has not declared in his application under Section 14 of the SARFAESI Act, that the petitioner is in possession of the secured asset under a lease agreement with the borrower. Nor has the District Magistrate inquired into this aspect, therefore, the petitioner has been deprived of an opportunity of hearing.

In support of the above submission, reliance has been placed upon the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra).

4.5 That the application under Section 14 of Page 15 of 50 HC-NIC Page 15 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT the SARFAESI Act, preferred by the respondent Bank, is premature. It could only have been preferred after the lessee became aware that the possession of the secured asset is sought to be taken by the secured creditor. This was revealed by the possession notice which was affixed on the premises on 11.06.2014. It is only when the lessee resists the attempt on the part of the secured creditor in taking possession of the secured asset that the application under Section 14 ought to be filed. In the present case, the notice was affixed on 11.06.2014, and the petitioner came to know for the first time about the possession being taken on that date. The petitioner immediately resisted by submitting objections on 11.06.2014 itself. The application under Section 14 of the SARFAESI Act was preferred on 17.04.2014, and the impugned order was passed on 09.05.2014. This clearly shows that on 17.04.2014, when the application was preferred, there was no cause of action with the secured creditor, therefore, the said application was premature.

Page 16 of 50 HC-NIC Page 16 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT In support of this submission as well, reliance has been placed upon the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra).

4.6 That the only remedy available to the petitioner is to challenge the impugned order under Section 14 of the SARFAESI Act by approaching this Court, therefore, this Court may grant the prayers made in the petition.

5. Ms.Shruti Pathak, learned Assistant Government Pleader for respondents Nos.1 and 2, has submitted that the present petition is not an adjudication under Section 14 of the SARFAESI Act. The impugned order has been passed by the Additional District Magistrate only for providing police protection to the respondent Bank. The role of the District Magistrate under Section 14 of the SARFAESI Act is very limited. It is only to assist the secured creditor in taking the possession of the secured asset, as the language of Section 14 would indicate. Page 17 of 50 HC-NIC Page 17 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT

6. The learned Assistant Government Pleader has referred to the following judgments in this regard:

(i) Mansa Synthetic Pvt. Ltd. And Ors. v.

Union of India - 2012(2) GLH 752

(ii) Standard Chartered Bank v. V.Noble Kumar And Others - (2013)9 SCC 620

7. The petition has been strongly resisted by Mr.K.M.Parikh, learned advocate for respondent No.3 - Bank, by making the following submissions:

7.1 That the petition ought not to be entertained as the petitioner has suppressed material facts. It is an admitted fact that the petitioner did not challenge the order under Section 14 of the SARFAESI Act at the relevant point of time, but participated in the auction proceedings of the secured asset conducted by the authorised officer of the respondentBank, though unsuccessfully. The participation of the petitioner in the public auction has conveniently not been mentioned in the petition Page 18 of 50 HC-NIC Page 18 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT and has been suppressed. It is further submitted that the possession of the secured asset has been handed over to respondent No.5, who is the successful auction purchaser, on 01.10.2014, prior to the filing of the present petition.

This fact is known to the petitioner but has not been disclosed. Hence, the petitioner has not come with clean hands. This Court may, therefore, not entertain the petition and dismiss it without entering into the merits, as the petitioner is not entitled to any relief. In support of this submission, reliance has been placed upon the judgment of the Supreme Court in Prestige Lights Ltd. v. State Bank of India - (2007)8 SCC 449.

7.2 That the petition is not maintainable in view of the fact that the petitioner has challenged the order dated 09.05.2014, passed by respondent No.2, but has not challenged the concluded auction proceedings and the auction sale which has been completed and concluded by the authorised officer of the respondentBank, Page 19 of 50 HC-NIC Page 19 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT in exercise of statutory powers under Section 13(4) of the SARFAESI Act. The order dated 09.05.2014, passed by respondent No.2, has already been implemented by the respondentBank which is the secured creditor of the secured asset. It is not open to the petitioner to challenge the said order at this stage. The present petition is not maintainable in the eye of law, and may not be entertained.

In support of the above submissions, reliance has been placed upon the following judgments:

(i) United Bank of India v. Satyawati Tondon And Others - (2010)8 SCC 110 and

(ii) Kanaiyalal Lalchand Sachdev And Others v.

State of Maharashtra And Others (2011)2 SCC 782 7.3 That the petition is also not maintainable on the ground that the petitioner has an alternative, efficacious, statutory remedy of filing an appeal under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal. The action under Section 14 of the SARFAESI Act constitutes an action taken after Page 20 of 50 HC-NIC Page 20 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT the stage of Section 13(4), therefore, it would fall within the ambit of Section 17(1) of the SARFAESI Act.

Reliance has been placed upon a judgment of a Division Bench of this Court in the case of Bharatbhai Ramniklal Sata v. Collector and District Magistrate and Anr. reported in AIR 2010 Gujarat 72, wherein it is held that the order passed by the District Magistrate/ Chief Metropolitan Magistrate is a measure under Section 13(4) and the remedy lies under Section 17 of the SARFAESI Act.

7.4 That when an application is made under Section 17 of the SARFAESI Act by a person claiming to be a tenant under the borrower, or any person under whom the borrower claims title, the Debt Recovery Tribunal has jurisdiction to entertain the application and inquire into the question whether the applicant had any right, title, interest or possession, anterior to the creation of the security interest and to what extent such interest could be protected. Page 21 of 50 HC-NIC Page 21 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT In support of this submission, reliance has been placed upon a judgment of Kerala High Court in the case of N.P.Pushpangadan and Ors. v. The Federal Bank Ltd. And Ors. AIR 2012 Kerala

27. Another judgment relied upon by the learned advocate for the respondentBank is of the High Court of Madras in Shree Lakshmi Products Rep. By its Partner v. State Bank of India - AIR 2007 Madras 148, wherein it is held that any tenancy created by the mortgagor after the mortgage in contravention of Section 65A of the T.P.Act would not be binding on the Bank and in any event, such tenancy rights should stand determined once action under Section 13(4) of the SARFAESI Act had been taken by the Bank. Hence, when the tenancy is disputed by the Bank, the remedy available to the petitioner is to approach the Debt Recovery Tribunal by way of an application under Section 17 of the SARFAESI Act.

7.5 That the decision in the case of Page 22 of 50 HC-NIC Page 22 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra) turns on its own facts and would have no application when the person aggrieved is someone who is not a premortgage lessee or a lessee to whom Section 65A of the T.P.Act applies.

In support of this submission, reliance has been placed upon the judgment of High Court of Calcutta in Jawahar Singh and Ors. v. The United Bank of India and Ors. W.P. Nos.11828(W), 12210(W), 11993(W), 11787(W), 5651(W) and 10048(W) of 2015 decided on 06.08.2015.

7.6 That the ratio of the judgment in the case of Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra) would not apply to the facts of the present case. In the said judgment, the situation post Section 13(4) measures were not examined by the Supreme Court, which only examined the right of a tenant to Page 23 of 50 HC-NIC Page 23 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT challenge an order passed under Section 14 of the SARFAESI Act. In the present case, the order passed by respondent No.4 under Section 14 of the SARFAESI Act has already been implemented by the respondentBank and the secured asset has been disposed of by a public auction in favour of respondent No.5. In view of the above facts, the impugned order passed by respondent No.2 is no longer operative.

The Supreme Court has not dealt with a situation after the dispossession of the tenant/ lessee or held that such dispossessed tenant/ lessee is entitled to file a petition under Article 226 of the Constitution of India after the secured asset has been disposed of by public auction. In the present case, the auction sale has been confirmed and concluded in favour of respondent No.5 and the physical possession of the disputed premises has already been handed over to respondent No.5 on 01.10.2014, that is, prior to the filing of the petition. The judgment in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Page 24 of 50 HC-NIC Page 24 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Others (supra) would, therefore, not benefit the petitioner on the facts of the present case, as the petitioner is a postmortgage lessee. 7.7 The learned advocate for the respondent Bank has placed reliance upon a judgment of the High Court of Punjab and Haryana in the case of Punjab Chemical Industries v. District MagistratecumDeputy Commissioner, reported in 2014 Lawsuit (P&H) 3850, which, according to him, has been delivered after the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra), wherein it is held that the order under Section 14 by the District Magistrate is to aid the Bank in order to realize the secured assets. It is submitted that the order under Section 14 of the SARFAESI Act has no independent existence but is an order analogous to execution proceedings, and is appealable under Section 17 of the SARFAESI Act. 7.8 Reliance has also been placed on another judgment of the Punjab and Haryana High Court in Page 25 of 50 HC-NIC Page 25 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT the matter between Padam Motors Pvt. Ltd. v. District MagistratecumDeputy Commissioner and Ors. Civil Writ Petition No.6691 of 2015 (O&M), decided on 28.04.2015.

8. On the strength of the above submissions, it is prayed that the petition be rejected.

9. Though served with notices of Rule, respondents Nos.4 and 5 have chosen not to appear before this Court.

10. In rejoinder, Mr.Jal Soli Unwala, learned advocate for the petitioner, has advanced the following submissions:

10.1 The contention of the respondentBank that the petitioner has suppressed material facts is totally misconceived and of no avail to the respondentBank, as the auction proceedings are not under challenge in the petition. The fact that the petitioner had participated in the auction proceedings is not a material fact, as the petitioner has not derived any benefit from not disclosing it. By not mentioning this fact Page 26 of 50 HC-NIC Page 26 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT in the petition, the merits of the case would not be affected as it does not go to the root of the matter.

In support of this submission, reliance has been placed upon a judgment of the Supreme Court in S.J.S.Business Enterprises (P) Ltd. v. State of Bihar And Others (2004)7 SCC 166. 10.2 The petitioner has no alternative remedy available to it, as the relief claimed in the present petition is for the quashing of the order passed under Section 14 of the SARFAESI Act and the consequential relief of putting the petitioner back into possession of the secured asset, which cannot be granted by the Debt Recovery Tribunal. However, this Court, under its extraordinary jurisdiction can always restore the possession of the secured asset to the petitioner.

10.3 That the judgments in the case of Padam Motors Pvt. Ltd. v. District Magistratecum Deputy Commissioner and Ors. (supra) and Punjab Page 27 of 50 HC-NIC Page 27 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Chemical Industries v. District Magistrate cumDeputy Commissioner (supra), relied upon by the learned advocate for the respondentBank are not applicable to the facts of the case, inasmuch as the High Court of Punjab and Haryana in Padam Motors Pvt. Ltd. v. District MagistratecumDeputy Commissioner and Ors. (supra) has referred to the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra), but has not considered the principles of law laid down by the Supreme Court in the said judgment. Insofar as the judgment in the case of Punjab Chemical Industries v. District MagistratecumDeputy Commissioner (supra) of the Punjab and Haryana High Court is concerned, it is submitted that the High Court of Punjab and Haryana has not followed the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra), though later in point of time, but has chosen to follow the judgment in Page 28 of 50 HC-NIC Page 28 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Kanaiyalal Lalchand Sachdev And Others v. State of Maharashtra And Others (supra) etc. which is an earlier one.

10.4 That the submission of the respondent Bank that the lease deed has been executed after the mortgage deed and, therefore, the same would be hit by the provisions of Section 65A of the T.P.Act is not tenable, inasmuch as the law has now been settled by the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra), wherein it is clearly stated that Section 65A of the T.P.Act will have no applicability in view of Section 35 of the SARFAESI Act, which has the overriding effect on the provisions of Section 65A of the T.P.Act. In any event, the lease of the petitioner is in consonance with Section 13(13) of the SARFAESI Act.

11. This Court has heard learned counsel for the respective parties at length and has thoughtfully considered the submissions Page 29 of 50 HC-NIC Page 29 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT advanced at the Bar.

12. The main ground canvassed by the learned advocate for the petitioner is that the petitioner is a lessee which has been deprived of its possession of the disputed property by the impugned order dated 09.05.2014, passed by the Additional District Magistrate under Section 14 of the SARFAESI Act. To buttress this point, the petitioner has taken the shelter of the judgment of the Supreme Court in Harshad Govardhan Sondagar's case. It is the case of the petitioner that no notice was issued to it, or an opportunity of hearing granted, by the Additional District Magistrate before deciding the application. It has been submitted that the lease in favour of the petitioner was executed on 07.02.2012, which is before the issuance of the notice under Section 13(2) of the SARFAESI Act, on 28.10.2013, therefore, as per the provisions of Section 13(13) of the SARFAESI Act, the lease is valid. In view of the provisions of Section 35 of the SARFAESI Act, there is an overriding effect over the Page 30 of 50 HC-NIC Page 30 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT provisions of Section 65A of the T.P.Act. The petitioner, therefore, could not have been dispossessed from the disputed property by the respondentBank. It has further been submitted that the petitioner came to know, for the first time on 11.06.2014, when the notice was affixed on the premises regarding the possession of the property being taken over by the respondent Bank.

13. After hearing the learned counsel for the respective parties and perusing the documents on record, this Court is of the view that the facts obtaining in the present case would have to be examined in the first instance, and then the law be applied to the facts.

14. Insofar as the principles of law enunciated by the Supreme Court in Harshad Govardhan Sondagar's case are concerned, there can be no dispute regarding the same. The learned advocate for the petitioner has laid emphasis upon the following paragraphs of the said judgment:

"21. When we read the different Page 31 of 50 HC-NIC Page 31 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT provisions of Section 13 of the SARFAESI Act extracted above, we find that subsection (4) of Section 13 provides that in case the borrower fails to discharge his liability in full within sixty days from the date of notice provided in subsection (2) of Section 13 of the SARFAESI Act, the secured creditor may take recourse to one or more of the measures mentioned therein to recover his secured debt. One of the measures mentioned in clause (a) in subsection (4) of Section 13 of the SARFAESI Act is to take possession of the secured assets of the borrower including the right to transfer by way of lease. Where, however, the lawful possession of the secured asset is not with the borrower, but with the lessee under a valid lease, the secured creditor cannot take over possession of the secured asset until the lawful possession of the lessee gets determined. There is, however, no mention in subsection (4) of Section 13 of the SARFAESI Act that a lease made by the borrower in favour of a lessee will stand determined on the secured creditor deciding to take any of the measures mentioned in Section 13 of the said Act. Subsection (13) of Section 13 of the SARFAESI Act, however, provides that after receipt of notice referred to in subsection (2) of Section 13 of the SARFAESI Act, no borrower shall lease Page 32 of 50 HC-NIC Page 32 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT any of his secured assets referred to in the notice, without the prior written consent of the secured creditor. This provision in sub section (13) of Section 13 of the SARFAESI Act and the provisions of the Transfer of Property Act enabling the borrower or the mortgagor to make a lease are inconsistent with each other. Hence, subsection (13) of Section 13 of the SARFAESI Act will override the provisions of Section 65A of the Transfer of Property Act by virtue of Section 35 of the SARFAESI Act, and a lease of a secured asset made by the borrower after he receives the notice under sub section (2) of Section 13 from the secured creditor intending to enforce that secured asset will not be a valid lease.

22. ..... Section 105 thus provides that a lessee of an immovable property has a right to enjoy such property, for a certain time or in perpetuity when a lessor leases an immovable property transferring his right to enjoy such property for a certain time or in perpetuity. Section 111 of the Transfer of Property Act, 1882 provides the different modes by which a lease gets determined.

Thus, so long as a lease of an immovable property does not get determined, the lessee has a right to enjoy the property and this right is a right to property and this right Page 33 of 50 HC-NIC Page 33 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT cannot be taken away without the authority of law as provided in Article 300A of the Constitution. As we have noticed, there is no provision in Section 13 of the SARFAESI Act that a lease in respect of a secured asset shall stand determined when the secured creditor decides to take the measures mentioned in Section 13 of the said Act. Without the determination of a valid lease, the possession of the lessee is lawful and such lawful possession of a lessee has to be protected by all courts and tribunals.

... ... ...

25. ....We have already held that Section 13 of the SARFAESI Act does not provide that the lease in respect of a secured asset will get determined when the secured creditor decides to take the measures in the said section. Hence, possession of the secured asset from a lessee in lawful possession under a valid lease is not required to be taken under the provisions of the SARFAESI Act and the Chief Metropolitan Magistrate or the District Magistrate, therefore, does not have any power under Section 14 of the SARFAESI Act to take possession of the secured asset from such a lessee and hand over the same to the Page 34 of 50 HC-NIC Page 34 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT secured creditor. When, therefore, a secured creditor moves the Chief Metropolitan Magistrate or the District Magistrate for assistance to take possession of the secured asset, he must state in the affidavit accompanying the application that the secured asset is not in possession of a lessee under the valid lease made prior to creation of the mortgage by the borrower or made in accordance with Section 65A of the Transfer of Property Act prior to receipt of a notice under subsection (2) of Section 13 of the SARFAESI Act by the borrower......

26. ....Where, therefore, such a request is made by the secured creditor and the Chief Metropolitan Magistrate or the District Magistrate finds that the secured asset is in possession of a lessee but the lease under which the lessee claims to be in possession of the secured asset stands determined in accordance with Section 111 of the Transfer of Property Act, the Chief Metropolitan Magistrate or the District Magistrate may pass an order for delivery of possession of secured asset in favour of the secured creditor to enable the secured creditor to sell and transfer the same under the provisions of the SARFAESI Act. Sub section (6) of Section 13 of the SARFAESI Act provides that any transfer of secured Page 35 of 50 HC-NIC Page 35 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT asset after taking possession of secured asset by the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. In other words, the transferee of a secured asset will not acquire any right in a secured asset under subsection (6) of Section 13 of the SARFAESI Act, unless it has been effected after the secured creditor has taken over possession of the secured asset....."

15. Having noticed the above principles of law, it falls for the determination of this Court, whether the petitioner is entitled to the benefit of the above position of law, on the peculiar facts of the present case, or not?

16. The decision on this aspect would entail dealing with the objection raised by the learned advocate for the respondentBank, regarding suppression of material facts on the part of the petitioner. It has been stated on behalf of the respondentBank that the petitioner has suppressed the material fact that after the passing of the impugned order dated 09.05.2014, Page 36 of 50 HC-NIC Page 36 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT by the Additional District Magistrate, the disputed property had been auctioned. The petitioner had unsuccessfully participated in the auction. It has been urged on behalf of the respondentBank that the impugned order passed by the Additional District Magistrate has already been implemented and the petitioner was very well aware of this fact as it had participated in the auction. These facts have not been disclosed in the petition, and the order under Section 14 of the SARFAESI Act has been challenged after the auction proceedings are over and the possession of the secured asset has been handed over to respondent No.5 on 01.10.2014.

17. On the other hand, the learned advocate for the petitioner has stated that the nondisclosure of the participation of the petitioner in the auction does not amount to the suppression of a material fact as the auction proceedings have not been challenged in the petition. According to the learned advocate for the petitioner, the petitioner has not derived any benefit from the Page 37 of 50 HC-NIC Page 37 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT alleged suppression and not mentioning the petitioner's participation in the auction would not adversely affect the merits of the matter or go to its roots.

18. In S.J.S.Business Enterprises (P) Ltd. v. State of Bihar And Others (supra), relied upon by the learned advocate for the petitioner, the Supreme Court has held as below:

"13. As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the courts to deter a litigant from abusing the process of court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the court, whatever view the Court may have taken......"

19. Per contra, the learned advocate for the respondentBank has relied upon Prestige Lights Ltd. v. State Bank of India (supra), wherein, the Supreme Court has stated as under: Page 38 of 50

HC-NIC Page 38 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT "33. It is thus clear that though the appellant Company had approached the High Court under Article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a court of law is also a court of equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must place all the facts before the court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the writ court may refuse to entertain the petition and dismiss it without entering into merits of the matter.

34. The object underlying the above principle has been succinctly stated by Scrutton, L.J., in R v. Kensington Income Tax Commrs,. [(1917) 1 KB 486 : 86 LJ KB 257 : 116 LT 136 (CA)], in the following words:

"(I)t has been for many years the rule of the court, and one which it is of the greatest importance to maintain, that when an applicant comes to the Court to obtain relief on an ex parte statement he should made a full and fair disclosure of all the material facts facts, not law. He must not misstate the law if he can help it Page 39 of 50 HC-NIC Page 39 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT the court is supposed to know the law.

But it knows nothing about the facts, and the applicant must state fully and fairly the facts, and the penalty by which the court enforces that obligation is that if it finds out that the facts have not been fully and fairly stated to it, the court will set aside, any action which it has taken on the faith of the imperfect statement".

35. It is well settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a writ court will indeed bear in mind the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppresses relevant materials or is otherwise guilty of misleading the court, the court may dismiss the action without adjudicating the matter. The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of court by deceiving it. The very basis of the writ jurisdiction rests in disclosure of true, complete and correct facts. If the material facts are not candidly stated or are suppressed or are distorted, the very functioning of the writ courts would become impossible."

(emphasis supplied)

20. It is not denied on behalf of the petitioner Page 40 of 50 HC-NIC Page 40 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT that the petitioner had participated in the auction of the disputed property though it has not been disclosed in the petition. An assertion is made that the nondisclosure is not of a material fact.

21. In this regard, it may be significant to note that the order under challenge is dated 09.05.2014. Admittedly, the possession of the disputed property after the auction, has been handed over to respondent No.5 on 01.10.2014. The petition has been admitted to file on 25.05.2015. The petitioner was in full knowledge of the fact that much before the petition was filed, the disputed property had already been auctioned and its possession handed over to respondent No.5. Third party rights have been created over the property. The failure on the part of the petitioner in disclosing the fact that it had unsuccessfully participated in the auction and that the possession of the property had been handed over to respondent No.5 on 01.10.2015, is, in the view of this Court, a material fact, which would go to the very roots Page 41 of 50 HC-NIC Page 41 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT of the matter.

22. The petitioner is attempting to derive advantage from the principles of law enunciated by the Supreme Court in Harshad Govardhan Sondagar's case, at a stage when the auction has been concluded and the possession of the disputed property is no longer with the respondentBank. Had the petitioner approached the Court immediately after the passing of the order under Section 14 of the SARFAESI Act, the situation would have been different as, at that point of time, no auction had taken place. At this stage, the petitioner is trying to put back the clock and ignore the subsequent events of the auction taking place and the handing over of the possession of the property to respondent No.5. The said events cannot be ignored as the petitioner is seeking to do.

23. In Harshad Govardhan Sondagar's case, the facts of the case before the Supreme Court were to the effect that the appellants therein claimed to be tenants of different premises in Mumbai that Page 42 of 50 HC-NIC Page 42 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT were mortgaged to different Banks as securities for the loans advanced by the Banks. The borrowers defaulted in the payment of their secured debts and their accounts in respect of such debts were classified as NPAs. Proceedings under Section 13(2) of the SARFAESI Act commenced and the borrowers failed to discharge their liability in full within the statutory period of sixty days from the date of the notice under Section 13(2). The secured creditors exercised their rights under subsection 4 of Section 13 of the SARFAESI Act to take possession of the secured assets of the borrowers. The secured assets were under the possession of the appellants who claimed that they were not the borrowers but were the lessees of the borrowers and entitled to remain in possession of the secured assets. Threatened by dispossession of the premises under their possession by the Chief Metropolitan Magistrate, Mumbai, under Section 14 of the SARFAESI Act, they approached the Apex Court.

24. In Harshad Govardhan Sondagar's case, the Page 43 of 50 HC-NIC Page 43 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Supreme Court has not dealt with a situation that would arise after the secured asset has been disposed of by a public auction and the auction sale confirmed and concluded in favour of the auction purchaser. In the case before the Supreme Court, the lessees were in possession of the secured assets, whereas, in the present case, the possession of the secured asset has been handed over to respondent No.5 by the respondentBank on 01.10.2014, much prior to the filing of the present petition.

25. This aspect has been suppressed by the petitioner, as well as its participation in the auction and the creation of third party rights and interest over the property. The order under Section 14 of the SARFAESI Act has already been implemented even before the filing of the present petition. In this factual scenario, the principles of law enunciated in Harshad Govardhan Sondagar's case would not be applicable to the present case for the reason that, the order under Section 14 has already been implemented and complied with, the property Page 44 of 50 HC-NIC Page 44 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT has been auctioned and its possession delivered to the successful auction purchaser. The situation is no longer at the stage when there is a threat of dispossession of the petitioner, who did not choose to challenge the order under Section 14 of the SARFAESI Act at the relevant point of time.

26. In addition thereto, the suppression by the petitioner of the vital fact of the auction, its participation in it and handing over of the possession of the property to respondent No.5, makes it clear that though the petitioner has not come to the Court with clean hands, it is seeking to derive advantage from the principles of law enunciated by the Supreme Court in Harshad Govardhan Sondagar's case at this belated stage, without even challenging the auction proceedings. By suppressing material facts, the petitioner is seeking to obtain an order that would result in nullifying the proceedings of the auction in which thirdparty rights and interest have already been created. Page 45 of 50 HC-NIC Page 45 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT

27. As stated by the Supreme Court in Prestige Lights Ltd. v. State Bank of India (supra), it is of utmost importance that when a party approaches the High Court praying for the exercise of its discretionary and extraordinary jurisdiction under Article 226 of the Constitution of India, it must place all the facts before the Court candidly and without any reservation. If there is a suppression of material facts on the part of the petitioner or twisted facts have been placed before the Court, the writ Court may refuse to entertain the petition and dismiss it without entering into the merits of the matter. Following the principles of law enunciated in Prestige Lights Ltd. v. State Bank of India (supra), in the firm view of this Court, the petition deserves to be rejected on this ground alone.

28. In addition to the suppression of material facts, the petitioner is seeking to regain the possession of the disputed property in which thirdparty rights have been created, as is revealed from the prayerclause. The judgment of Page 46 of 50 HC-NIC Page 46 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT the Supreme Court in Harshad Govardhan Sondagar's case does not envisage the granting of relief in a situation where the property has already been auctioned and its possession delivered to the successful auction purchaser. The petitioner has participated in the auction, which amounts to acquiescence to the order dated 09.05.2014 under Section 14 of the SARFAESI Act. It is deemed to have waived its objections to the said order. An opportunity was available to the petitioner to challenge the order after it was passed but it chose not to do so. Once the order has been implemented, statusquo ante cannot be directed, which is exactly what the petitioner is demanding.

29. It is a settled position of law that under Section 14 of the SARFAESI Act, the Chief Metropolitan Magistrate or the District Magistrate, acts in assistance of the secured creditor in taking possession of the secured assets. In the present case, the power under Section 14 has been exercised by the Additional District Magistrate by assisting the respondent Page 47 of 50 HC-NIC Page 47 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT Bank in taking possession of the secured asset. By auctioning the disputed property, the respondentBank is no longer in possession. The possession of the disputed property is with respondent No.5. Without any challenge to the auction, the auction purchaser cannot be dispossessed of the property purchased in a public auction, the possession of which has been handed over to it, solely because the petitioner now seeks to assert its rights as a lessee at this stage.

30. This Court is of the view that the petitioner is guilty of suppression of material facts which would have a vital effect on the adjudication of the petition. Further, in view of the implementation of the impugned order under Section 14 of the SARFAESI Act, the petitioner cannot seek to undo the auction and its legal consequences, without even raising a challenge to it.

31. For the aforestated reasons, this Court does not consider it necessary to deal with the Page 48 of 50 HC-NIC Page 48 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT submissions regarding the availability of an alternative remedy under Section 17 of the SARFAESI Act.

32. Similarly, the issue regarding the jurisdiction, or the lack of it, of the Additional District Magistrate to pass an order under Section 14 of the SARFAESI Act, as contended by the petitioner, is not required to be dealt with as the said order has already been implemented.

33. For similar reasons, it is not necessary to examine whether, or not, the petitioner is/ was a lessee of the secured asset.

34. For the reasons indicated hereinabove, this Court considers the present petition to be devoid of merit.

35. The petition is rejected. Rule is discharged. There shall be no order as to costs.

36. It is clarified that the rejection of the petition would not hamper any other statutory remedy that maybe available to the petitioner. Page 49 of 50 HC-NIC Page 49 of 50 Created On Tue Oct 06 02:09:20 IST 2015 C/SCA/8852/2015 CAV JUDGMENT (SMT. ABHILASHA KUMARI, J.) sunil Page 50 of 50 HC-NIC Page 50 of 50 Created On Tue Oct 06 02:09:20 IST 2015

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