Karnataka High Court
Arshad Ispat vs Union Of India on 10 July, 2020
Bench: Chief Justice, M.Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF JULY, 2020
PRESENT
THE HON'BLE MR. JUSTICE ABHAY S. OKA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT APPEAL No.395 OF 2020 (GM - RES)
BETWEEN:
1. ARSHAD ISPAT
PARTNERSHIP FIRM
II CROSS, KHANBUILDING,
VIJAYNAGAR COLLEGE ROAD,
HOSPET - 583 201
BY ITS PARTNER,
MOHAMED ASGHAR KHAN.
2. MOHAMED ASGHAR KHAN
SON OF SRI AKTHAR KHAN,
AGED ABOUT 43 YEARS,
II CROSS, KHANBUILDING,
COLLEGE ROAD,
VIJAYNAGAR COLLEGE ROAD,
HOSPET - 583 201.
3. SMT. RUKSANA KHAN
WIFE OF SRI K MOHAMMED ASGHAR KHAN
AGED ABOUT 35 YEARS,
II CROSS, KHANBUILDING,
COLLEGE ROAD,
2
VIJAYANAGAR COLLEGE ROAD,
HOSPET - 583 201.
... APPELLANTS
(BY SRI X.M.JOSEPH, ADVOCATE)
AND:
1. UNION OF INDIA
MINISTRY OF LAW AND JUSTICE
LEGISLATIVE DEPARTMENT,
SHASTRI BHAVAN, 4TH FLOOR,
DR RAJEDNRA PRASAD ROAD,
NEW DELHI - 110 001
BY ITS SECRETARY.
2. STATE OF KARNATAKA
BY ITS CHIEF SECRETARY
VIDHANA SODUHA,
BENGALURU - 560 001.
3. THE DISTRIC T MAGISTRATE
OFFICE OF THE DEPUTY COMMISSIONER,
BELLARI DISTRICT,
BELLARI - 583 101.
4. CORPORATION BANK
CORPORATE OFFICE
MANGALADEVI TEMPLE ROAD,
PANDESHWAR,
MANGALURU - 575 001
BY ITS MANAGING DIRECTOR.
5. THE MANAGER AND AUTHORISED OFFICER
CORPORATION BANK
SRI SAI DHAM COMPLEX,
3
1ST FLOOR, NEAR MAHADESHWARA TEMPLE,
DAM ROAD, HOSPET - 582 301.
6. SMT. SUNITHA SINGH
WIFE OF LATE MURALIDHAR SINGH
AGED ABOUT 45 YEARS
NO.366, BASAVESHWARA BADAVANE,
HOSPET - 583 201
ALSO AT BEHIND HOYSALA HOTEL
SHESHADRIPURAM, BENGALURU - 560 002.
... RESPONDENTS
(BY SRI M.N.KUMAR, CENTRAL GOVERNMENT COUNSEL,
FOR RESPONDENT NO.1;
SRI VIJAY KUMAR A PATIL, ADDITIONAL
GOVERNMENT ADVOCATE FOR RESPONDENT NOS.2
AND 3;
SRI V.B.RAVISHANKAR, ADVOCATE FOR CAVEATORS
RESPONDENT NOS.4 TO 6)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT PRAYING TO SET
ASIDE THE FINAL ORDER DATED 29.05.2020 DISMISSING
WRIT PETITION NO.51184/2017 AND PASS SUCH OTHER
ORDER.
THIS WRIT APPEAL COMING ON FOR ORDERS,
THIS DAY, THROUGH VIDEO CONFERENCE,
NAGAPRASANNA J., DELIVERED THE FOLLOWING:
JUDGMENT
Aggrieved by the order dated 29th May 2020 passed by the learned Single Judge in W.P.No.51184/2017, whereby the 4 learned Single Judge dismissed the writ petition, the writ petitioners have filed the instant writ appeal.
2. Shorn of unnecessary details, the facts material for the adjudication of this appeal, may be stated thus:
The appellants are a partnership firm engaged in the business of manufacture and trade of Sponge Iron from Iron Ore. The appellants sought and were sanctioned financial assistance from the 4th respondent-Corporation Bank (hereinafter referred to as 'Bank' for short), who on 14th October 2009 sanctioned the term loan of Rs.12.00 crores and thereafter, sanctioned an additional sum of Rs.3.00 crores on hypothecation and mortgage of immovable properties which was of deposit of title deeds, this appeal concerns mortgage of a residential apartment built on a land measuring 3990 sq. ft.
situated at No.39, Ward No.11, Assessment No.39, Opposite Municipal School Ground, College Road Area, Hospet, Bellary District.5
3. The appellants having defaulted in payments, the Bank issued a notice on 6th January 2012 invoking section 13(2) of the Securitization and Reconstruction of Financial Assets And Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act' for short) calling upon the appellants to pay a sum of Rs.14,85,16,675/- which was the outstanding loan amount and interest accrued at the relevant point of time. The appellants failed to comply with the terms of the notice issued by the Bank pursuant to which a symbolic possession of the property of the appellants was taken on 4th July 2012 and a possession notice was issued under Section 13(4) of the Act.
4. The aforestated property was put out for sale by an e-auction under a sale notice dated 29th December 2016 fixing the date of auction on 30th January 2016. The 6th respondent herein participated in the e-auction and was declared to be the successful bidder. It is at that point of time, the appellants challenged the sale proceedings conducted by the Bank 6 before the Debt Recovery Tribunal at Bangalore (hereinafter referred to as 'the Tribunal' for short) in appeal I.R. No.652/2016. The Tribunal granted an interim order subject to the condition that the petitioners to deposit a sum of Rs.25.00 lakhs on or before 25th February 2016. The petitioners pursuant to the interim order deposited only Rs.10.00 lakhs as partial compliance of the order of the Tribunal. The appellants later filed an application before the Tribunal seeking extension of time to comply with the conditional interim order of deposit of Rs.25.00 lakhs.
5. The Tribunal directed that the appellants should deposit a sum of Rs.1.00 crore on or before 30th March 2016. The appellants failed to deposit the amount so directed. On such failure, the Tribunal vacated the interim order and dismissed the appeal. Thus, the challenge to the auction sale before the Tribunal failed. After the dismissal of the appeal the bank confirmed the sale in favour of the 6th respondent on 24th August 2016. The appellants filed the W.P. Nos.9687- 7 9689 of 2017 seeking a prayer, inter alia, to set aside the auction sale made in favour of the 6th respondent herein on 24th August 2016.
6. The Bank later moved the District Magistrate with an application under Section 14 of the SARFAESI Act seeking assistance to take physical possession of the property in question. By an order dated 16.10.2017, the District Magistrate directed the Tahsildar to take possession of the immovable property and handover the same to the Bank.
7. The appellants filed another writ petition challenging the order dated 16.10.2017 passed by the District Magistrate and also sought a declaration that Section 6(c) of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 (hereinafter referred to as 'Amendment Act of 2012' for short) as arbitrary, running contrary to Section 13(2) read with Section 2(1)(o) of the SARFAESI Act. Thus, the appellants filed two writ petitions 8 substantially for the same relief . A learned single judge by order dated 20th February 2019 dismissed W.P. Nos.9687- 9689 of 2017 wherein the prayer was to set aside the auction sale. The dismissal of writ petition Nos.9687-9689 of 2017 have become final.
8. Subsequently, the learned Single Judge by his order dated 29th May 2020 dismissed the second writ petition i.e. W.P. No.51184/2017, impugned herein, on the ground that the issue with regard to invocation of Section 14 by the Bank subsequent to the auction sale in favour of the 6th respondent was no longer res integra and the issue is more or less covered by the judgment of Apex Court in the case of ITC LTD. Vs. BLUE COAST HOTELS LTD. AND OTHERS reported in (2018)15 SCC 99. Insofar as the other argument that the declaration made by the 5th respondent declaring the account/assets of the appellants as non performing asset being contrary to RBI circulars, the learned Single Judge held that the issue was again covered by a judgment in 9 KESHAVLAL KHEMCHAND AND SONS PRIVATE LILMITED AND OTHERS Vs. UNION OF INDIA AND OTHERS reported in (2015)4 SCC 770 and above all, the act of the appellants having failed to raise the issue with regard to non performing assets which it could have done in the previous writ petition in W.P. Nos.9687-89/2017 would be estopped from raising the same subsequently. The petitioners being aggrieved by the order of the learned Single Judge have filed the instant writ appeal.
9. We have heard Sri X.M. Joseph, learned Counsel appearing for the appellants, Sri M.N. Kumar, learned Central Government Counsel appearing for the 1st respondent, Sri Vijay Kumar A Patil, learned Additional Government Advocate appearing for the 2nd and 3rd respondent, Sri V.B. Ravishankar, learned Counsel appearing for caveat respondent Nos.4 to 6, all appeared through video conferencing.
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10. Learned Counsel for the appellants would contend that the learned Single Judge has failed to appreciate the fact that the declaration of the account of the appellants as NPA is in contravention of RBI Master circular. He would further contend that the 4th respondent having sold the property in question to the 6th respondent was incompetent to invoke Section 14 of the SARFAESI Act to request the District Magistrate to take steps to deliver physical possession of the secured property. It is also contended that the designated authority under Section 14 of the SARFAESI Act does not have the power to adjudicate on the bona fide correctness or otherwise of classification of an asset as NPA and act upon the request made to take physical possession of the property in terms of the Act.
11. On the other hand, Learned Counsel for the respondents would contend that the issues raised in the instant appeal are all covered by the judgments of the Hon'ble Supreme Court in the cases of ITC LIMITED (supra) and 11 KESHAVLAL KHEMCHAND (supra). It is further contended that the appellants having failed to urge all the points available at the earliest point of time when they filed writ petitions in W.P.Nos.9687-89/2017 which were disposed of on 20.2.2009, against the very same the appellants cannot be permitted to raise the issues left over earlier in a subsequent petition against the same parties and the same cause of action.
12. We have given our anxious consideration to the contentions urged by the learned Counsel appearing for the parties and have perused the materials on record.
13. We are deciding an appeal arising out of a writ petition filed under Article 226 of the Constitution of India. Jurisdiction of the High Court under Article 226 is always equitable and discretionary. In this appeal, we are testing an order made in exercise of discretionary jurisdiction under Article 226. Therefore, the conduct of the appellants who invoked the discretionary jurisdiction under Article 226 is 12 very relevant. The undisputed facts are that the appellants sought and were granted financial assistance to the tune of Rs.12.00 Crores on 14th October 2009 against mortgage of a property viz., No.39, Ward No.11, Assessment No.39, Opposite Municipal School Ground, College Road Area, Hospet, Bellary District, and further Rs.3.00 Crores on 5th March 2011 under hypothecation stock-in-trade, book debts and mortgage of immovable properties by deposit of title deeds. The appellants having defaulted on their payment led the Bank declaring the loan account to have become Non Performing Asset (NPA). On such declaration, a notice was issued to the appellants on 6th January 2012 under Section 13(2) of the SARFAESI Act calling upon the appellants to pay a sum of Rs.14,85,16,775/- along with interest. On failure of the appellants to comply with the notice issued under section 13(2) of the SARFAESI Act, the Bank took symbolic possession of the aforestated immovable property invoking Section 13(4) of the SARFAESI Act on 4th July 2012 and issued a possession notice to the appellants. 13
14. The appellants even then failed to pay any amount to the Bank which constrained the Bank to put the property for sale through e-auction in terms of the sale notice dated 29th December 2016 fixing the date of auction sale on 30th January 2016. The 6th respondent who participated in the e-auction was declared to be the successful bidder. The appellants herein challenged this auction proceedings before the Tribunal in I.R. No.652/2016, in which the Tribunal by its order dated 12th January 2016 issued an interim order directing the Bank not to issue a sale certificate in favour of the 6th respondent till 25th February 2016, subject to the condition that the appellants herein would deposit a sum of Rs.25.00 lakhs on or before the 25th February 2016.
15. The appellants however made a deposit of Rs.10.00 lakhs as against Rs.25.00 lakhs which was a partial compliance of the interim order, but filed an application seeking extension of time to pay the remaining Rs.15 lakhs. 14 The Tribunal by its order dated 25th February 2016, passing orders on the application seeking time to deposit the balance of Rs.15.00 lakhs, directed the appellants to deposit Rs.1.00 crore on or before 30th March 2016 failing which the interim order would stand vacated. The appellants failed to deposit any amount before 30th March 2016. It transpires that the Tribunal vacated the interim order and subsequently dismissed the appeal. Thus, the challenge to the auction proceedings before the Tribunal was concluded with its dismissal, this became final as the appellants did not challenge it any further. The respondent-Bank later i.e. on 24th August 2016, issued sale certificate/confirmation of sale of the property in favour of the 6th respondent.
16. Long after the Bank issuing Sale Certificate in favour of the sixth respondent, the appellants filed a writ petition before this Court in W.P.Nos.9687-89/2017 on 2nd March 2017 seeking the following prayer.:
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A) Direct the respondent No.3 and 4 to consider the Petitioners' "Compromise One Time Settlement" offer made vide ANNEXURE- B dated 12.01.2016.
B) Direct the respondent No.3 and 4, members of the respondent No.2-State Level Bankers Committee-Karnataka to defer recovery action against petitioners in the light of respondent No.2-State Level Bankers Committee-Karnataka's letter-cum directions vide ANNEXURE-K-3 dated 20.09.2016 and ANNEXURE-K-4 dated 29.09.2016.
C) Direct the Government of Karnataka-
Respondents No.1 to expedite the consideration pending vide Annexure-K, Annexure-K-1 and Annexure-K-2, dated 04-03-2015, 29-06-2015 and 04-01-2016 respectively for grant of reliefs in respect of loans in iron ore based sectors and extend such benefit to the loans of Petitioners No.1 to 3 given by respondent Corporation Bank.
D) Set aside the auction sale made in favour of respondent No.5 vide Annexure-G dated 16 24-08-2016 under valuing and underselling the writ petition schedule property.
E) Issue any other order/direction as deem fit and proper in the circumstances of the present case and to allow this writ petition with costs.
In terms of the prayers extracted hereinabove, the appellants sought to set aside the Confirmation of Sale made in favour of the sixth respondent dated 24.08.2016 and has also sought a direction to the Bank to consider their proposal for one time settlement.
17. The respondent-Bank after issuance of a sale certificate in favour of the 6th respondent in order to deliver possession of the property to the successful bidder in terms of Section 14 of the SARFAESI Act communicated to the District Magistrate seeking his assistance to deliver possession of the property, who in turn directed the jurisdictional Tahsildar to take steps to deliver possession of the property to the bank. 17 It is at that stage, the appellants herein preferred another writ petition in Writ Petition No.51184/2017 seeking the following prayer:
"A. Issue a writ of certiorari to quash ANNEXURE - E in Ref No.Rev/SARFAESI/ Appeal/17/2017-18 dated 16.10.2017 issued by Respondent No.3 - District Magistrate subsequent to sale and delivery of possession of schedule property to Respondent No.6 vide ANNEXURE - C dated 24.08.2016, as illegal and without jurisdiction;
B. Issue an appropriate writ to declare Section 6(c) of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act 2012 vide ANNEXURE - D, Gazette Notification Dated 04.01.2013 issued by Respondent No.1 by its Secretary, as arbitrary running contrary to Section 13(2) read with Section 2(1)(o) of SARFAESI Act, 2002 and contrary to judgments of the Hon'ble Supreme Court in Transcore : 2008 (1) SCC 125 @ Para 63 and Keshavlal : 2015 (4) SCC 770 @ Para 22, 23;
18C. Issue any other order / direction as deem fit and proper in the circumstances of the present case and to allow this writ petition with costs." If the prayers sought in the later writ petition are seen, they are differently worded but in effect, the challenge is to the Confirmation of Sale in favour of sixth respondent on 24.08.2016, which was the same prayer that was sought in the earlier writ petition.
18. If the prayers sought in writ petition Nos.9687- 89/2017 are juxtaposed with the prayers sought in W.P. No.51184/2017, it becomes unmistakably clear that the reliefs sought in both the writ petitions were substantially the same. In the garb of raising a challenge to the constitutional validity of Section 6(c) of the Amendment Act of 2012, the relief sought was to quash the order of the District Magistrate dated 16th October 2017 and confirmation of sale in favour of 6th respondent dated 24th August 2016. The prayer (d) in earlier 19 W.P.Nos.9687-89/2017 and the prayer (a) in the later W.P.No.51184/2017 are one and the same.
19. Writ Petition Nos.9687-89/2017 came to be dismissed by this Court by its order dated 20th February 2019 following an order passed in identical Writ Petition Nos.33885- 33888/2016 and connected cases. The order passed in writ petition Nos.9687-9689/2017 dated 20th February 2019 became final as the appellants accepted the same and did not chose to challenge it any further. Thus, the appellants accepted the rejection of their challenge to the Auction Sale, by the Tribunal and rejection of the challenge to the Confirmation of Sale, by this Court.
20. The Amendment Act of 2012 was promulgated on 3rd January 2013. The 1st writ petition in W.P.Nos.9687- 89/2017 was filed by the appellants on 2nd March 2017. This ground of challenge to the constitutional validity of the Amendment Act of 2012 was always available when they filed 20 a writ petition at the earliest point of time. Having failed to raise the challenge to the Amendment Act of 2012 in the earlier writ petitions could not have later challenged the same in a subsequent writ petition No.51184/2017 filed with the same cause of action after having accepted the rejection of their prayers in the earlier writ petition viz. W.P.Nos.9687- 89/2017. This was mischievous ingenuity on the part of the appellants, clearly to circumvent the rights of the parties namely, the Bank and the auction purchaser after having defaulted in payment.
21. Now, after all the aforestated sequence of events, entertaining this appeal will be opposed to the principles of public policy. It is in the interest of public at large that a finality should attach to the decisions pronounced by the Courts of competent jurisdiction and is also in public interest that none should be vexed twice over the same kind of litigation. Parties should not be permitted to bring fresh litigations because of new views that they may entertain every time. If this were 21 permitted, litigations would have no end except when legal ingenuity is exhausted. If the facts obtaining in the case on hand are considered qua the principles of public policy, it would be clear that the appellants having not chosen to raise a challenge to the Amendment Act of 2012 in W.P. Nos.9687- 89/2017, after its dismissal, cannot now in W.P. No.51184/2017 urge that the Amendment Act of 2012 is contrary to the SARFAESI Act resulting in prejudice to the appellants. The appellants filing another writ petition substantially for the same relief, substantially on the same allegation cannot be permitted, as the previous decision of this Court which has became final cannot be reopened in the present case as the earlier order passed will govern the rights and obligations of the parties.
22. Every ground that was urged in W.P. No.51184/2017 was always available to the appellants when they filed the earlier writ petitions in W.P. Nos.9687-89/2017. The Amendment Act of 2012 is notified on 3rd January 2013 22 and had a clear nexus with the nature and character of the writ petitions filed earlier in W.P. Nos.9687-89/2017. The appellants having failed to raise a challenge to the Amendment Act of 2012 in the earlier proceeding would be debarred from agitating the same in the subsequent writ petition in W.P. No.51184/2017. Permitting repeated filing of writ petitions on the same cause of action and is an abuse of the process and opposed to the principles of public policy.
23. It is germane to notice that the appellants have not paid any amount even as on date against a claim of a public sector nationalised bank which was more than Rs.14.85 crores in the year 2012, and would submit that they have not paid the amount due to frustration of business losses. This bogey of frustration is uttered like a swan song by every borrower who has defaulted in payment. The demand notice was issued on 6th January 2012 and much water has been flown beneath the bridge till this date. Rights of the parties are altered and sale certificate is issued in favour of the 6th 23 respondent. If we, at this juncture, consider the issue on merits of the claim of the borrower, who has throughout been litigating without making any payment to the Bank, it would be putting a premium on his litigative persistence.
24. It is trite law that the extra ordinary jurisdiction of this Court under Article 226 of the Constitution of India is discretionary in nature as reiterated by the Hon'ble Supreme Court in the case of ITC LTD Vs. BLUE COAST HOTELS LTD. AND OTHERS reported in (2018)15 SCC 99 wherein the Hon'ble Supreme Court has held as follows:.
" 54. This Court in State of Maharashtra v. Digambar (1995) 4 SCC 683] observed as follows: (SCC p. 692, para 19) "19. Power of the High Court to be exercised under Article 226 of the Constitution, if is discretionary, its exercise must be judicious and reasonable, admits of no controversy. It is for that reason, a person's entitlement for relief from a High Court under Article 226 of the Constitution, 24 be it against the State or anybody else, even if is founded on the allegation of infringement of his legal right, has to necessarily depend upon unblameworthy conduct of the person seeking relief, and the court refuses to grant the discretionary relief to such person in exercise of such power, when he approaches it with unclean hands or blameworthy conduct."
It relied on the judgment of the Privy Council in Lindsay Petroleum Co. v. Hurd [Lindsay Petroleum Co. v. Hurd, (1874) LR 5 PC 221] , where the Privy Council observed: (PC p. 240) "... Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as it relates to the remedy."
55. Therefore, the debtor is not entitled for the discretionary equitable relief under Articles 226 and 136 of the Constitution of India in the present case."
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25. In terms of the law declared by the Apex Court, if the facts obtaining in the case on hand are noticed, we would have no hesitation to hold that the appellants have no equity in their favour which may justify our interference in exercise of equitable, discretionary and extraordinary jurisdiction under Article 226 of the Constitution of India. The actions of the appellants cannot but be turned as blameworthy in not making good any payment prior to the issuance of the sale certificate in favour of the auction purchaser and intermittently stonewalling the efforts of the Bank to redeem its secured credit. This discretionary jurisdiction will have to be declined to be exercised in order to bring a finality to the crafty evasions, new subtleties and ingenuities invented by the appellants to evade law. In our considered view, the order of the learned Single Judge does not warrant any interference on the sheer conduct of the appellants.
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26. For the aforementioned reasons, the writ appeal being devoid of merit, is dismissed.
No order as to costs.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE Cs