Allahabad High Court
M/S Sainov Spirits Pvt. Ltd. vs State Of U.P. And 4 Others on 15 February, 2019
Bench: B. Amit Sthalekar, Manju Rani Chauhan
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Court No. - 39 RESERVED Case :- WRIT - C No. - 43421 of 2018 Petitioner :- M/S Sainov Spirits Pvt. Ltd. Respondent :- State Of U.P. And 4 Others Counsel for Petitioner :- Kunal Ravi Singh,Manjari Singh Counsel for Respondent :- C.S.C.,Satish Chaturvedi,Shashi Dhar Sahai Hon'ble B. Amit Sthalekar,J.
Hon'ble Mrs. Manju Rani Chauhan,J.
(Delivered by Hon'ble B. Amit Sthalekar, J.) Heard Shri Shashi Nandan, learned Senior Counsel assisted by Shri Kunal Ravi Singh, for the petitioner, Sri Shashi Dhar Sahai and Shri Pankaj Srivastava, learned counsel for the respondents.
The petitioner in the writ petition is seeking a direction to the respondents no. 4 and 5 to consider the proposal of OTS amount of Rs.40 crores within a period of six months. The petitioner is also seeking quashing of the notice dated 17.12.2018 issued by the Addl. District Magistrate in exercise of powers under section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Secured Interest Act, 2002 (the Act, 2002). The petitioner as per the averments of the writ petition is stated to be engaged in the business of manufacturing bottling, marketing and selling of alcohol and alcoholic beverages having a unit in the name of Pilkhani Distillery and Chemical Works. It is stated that the petitioner was initially sanctioned a term loan of Rs. 35 crores and a working capital limit of Rs. 10 crores by the respondent no. 4 in 2011. In 2012 a working capital limit totaling Rs. 35 crores was sanctioned by erstwhile State Bank of Travancore, erstwhile State Bank of Hyderabad and erstwhile SBBJ, now merged with State Bank of India. In 2013 a further Term Loan of Rs. 20 crores was sanctioned by the respondent no. 4 and in 2014 Rs. 23 crores as Working Capital Limit was sanctioned as part of Restructuring by the respondent Banks. It is stated that the loan was reconstructed on 30.6.2014 and joint documents for reconstructing were executed on 8.9.2014. It is stated that in 2016 the total credit facility availed by the petitioner was Rs. 127.91 crores. It is stated that the petitioner came in serious financial crises and its country liquor operations were closed in March, 2017 and a notice under section 13(2) read with section 13(3) of the Act, 2002 was issued calling upon the petitioner to pay an amount of Rs.19,60,78,735.58/- alongwith interest. A further notice was issued requiring the petitioner to deposit Rs.20,48,48,063/-. The erstwhile Bank SBBJ also issued notice under section 13(2) of the Act, 2002 calling upon the petitioner and its guarantors to pay Rs.21,42,47,287/- with interest, total amount of Rs.133,43,99,162.18/-. The petitioner is stated to have filed his objections under section 13(3A) of the Act, 2002 on 11.2.2017 but it is stated that no reply has been given by the Bank. Thereafter a possession notice under section 14 (4) of the Act, 2002 has been issued on 24.3.2017 by the respondent no. 5-Bank on behalf of all the other respondent Banks taking symbolic possession of the mortgaged places and parcels of the factory land and building plant and machinery and all constructions therein and other construction on other land of the Company. The petitioner submitted a one time settlement (OTS) proposal for settling the dues of the Bank at Rs. 40 crores. It is stated that the Company is willing to execute OTS and there was no occasion for the respondent authorities to initiate proceedings under section 14 of the Act, 2002.
On 3.1.2019 we had directed the counsel for the respondent Bank to obtain instructions with regard to the proposal of the petitioner for payment of OTS amount of Rs. 40 crores within a period of six months as per the proposal submitted by the Company in its meeting held with the Bank on 3.9.2018. Learned counsel for the respondent Bank however passed on to the court an order dated 4.1.2019 which mentions that the proposal regarding the offer of the Company of Rs. 40 crores to settle the outstanding dues of both the Banks was disclosed in the lender's meeting and the petitioner was advised to increase the OTS amount so that the proposal may be considered. The matter was again discussed and it was held that as against the outstanding balance of the consortium of Rs. 167.61 crores the offer of Rs.45 crores cannot be accepted as the value is subdued. The Bank, however, advised the petitioner to resubmit the improved proposal at the earliest. The learned counsel for the respondents further submitted that since the petitioner was also seeking quashing of the notice dated 17.12.2018 issued under section 14 of the Act 2002 by the A.D.M. (Finance and Revenue), the petitioner had a remedy by way of an appeal before the Debt Recovery Tribunal under section 17 of the Act, 2002.
Shri Shashi Nandan, learned senior counsel has relied upon a judgement of the Supreme Court in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited and other reported in (2014) 6 SCC 1 and submits that the High Court can itself decide the issue since sub section (3) of Section 14 of the Act, 2002 attaches a finality to the order of the District Magistrate or the Chief Metropolitan Magistrate or any Officer authorized by the District Magistrate or the Chief Metropolitan Magistrate. Paragraph 29 of the said judgement reads as under:
"22. Sub-section (3) of Section 14 of the SARFAESI Act provides that no act of the Chief Metropolitan Magistrate or the District Magistrate or any officer authorised by the Chief Metropolitan Magistrate or District Magistrate done in pursuance of Section 14 shall be called in question in any court or before any authority. The SARFAESI Act, therefore, attaches finality to the decision of the Chief Metropolitan Magistrate or the District Magistrate and this decision cannot be challenged before any court or any authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an authority excluding the power of any other authority or Court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution. To quote, the observations of this Court in Columbia Sportswear Company v. Director of Income Tax, Bangalore (SCCp. 234, para 17) "17. Considering the settled position of law that the powers of this Court under Article 136 of the Constitution and the powers of the High Court under Articles 226 and 227 of the Constitution could not be affected by the provisions made in a statute by the Legislature making the decision of the tribunal final or conclusive, we hold that Sub-section (1) of Section 245S of the Act, insofar as, it makes the advance ruling of the Authority binding on the applicant, in respect of the transaction and on the Commissioner and income-tax authorities subordinate to him, does not bar the jurisdiction of this Court under Article 136 of the Constitution or the jurisdiction of the High Court under Articles 226 and 227 of the Constitution to entertain a challenge to the advance ruling of the Authority. "
In our view, therefore, the decision of the Chief Metropolitan Magistrate or the District Magistrate can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, in accordance with the settled principles of law. "
The case of Harshad Govardhan (supra) was one where the secured asset was in the occupation of a lessee of the borrower and the Supreme Court held that a lessee had no remedy under section 17 of the Act, 2002 before the D.R.T. and that in any case proceedings under section 14 of the Act could not have been initiated against a lessee as he was protected by the Maharashtra Rent Control Act, 1999 which alone is the prescribed the mode under which a lessee could be evicted from the premises in question.
However, the Supreme Court in the case of United Bank of India vs. Satyawati Tandon and others, reported in (2010) 8 SCC 110 in paragraph 42 & 43 has held as under :
"42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression "any person" used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pas interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.
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."
In the case of Standard Chartered Bank Vs. V. Noble Kumar and others reported in (2013) 9 SCC 620, the Supreme Court in paragraph 27 has held as under:
"27.The "appeal" under section 17 is available to the borrower against any measure taken under section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditor. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under section 13(4). Alienating the asset either by lease or sale, etc. and appointing a person to manage the secured asset are some of those possible measures. On the other hand, section 14 authorises the Magistrate only to take possession of the property and forward the asset along with the connected documents to the borrower (sic the secured creditor). Therefore, the borrower is always entitled to prefer an "appeal" under section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4)(a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under section 14. We are of the opinion that by whatever manner the secured creditor obtains possession either through the process contemplated under section 14 or without resorting to such a process obtaining of the possession of a secured asset is always a measure against which a remedy under section 17 is available."
In the case of Kanaiyalal Lalchand Sachdev & others vs. State of Maharashtra and others reported in 2011 (2) SCC 782, the Supreme Court in paragraph 20 has held as under:
"20. We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT."
In a recent judgement of the Supreme Court dated 5.10.2018 passed in Civil Appeal No. 10251-10265 of 2018 (ICICI Bank Ltd. Vs. Umakant Mahapatra), the Supreme Court has held as under:-
"Delay Condoned.
Leave granted.
Despite several judgements of this Court, including a judgment by Hon'ble Mr. Justice Navin Sinha, as recently as on 30.01.2018 , in Authorized Officer, State Bank of Travancore and Anr. vs. Mathew K.C., (2018) 3 SCC 85, the High Courts continue to entertain matters which arise under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), and keep granting interim orders in favour of persons who are Non-Performing Assets (NPAs).
The writ petition itself was not maintainable, as a result of which, in view of our recent judgment, which has followed earlier judgments of this Court, held as follows :
"18. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industrict Ltd. vs. Prem Heavy Engineering Works (P) Ltd. and Another, (1997) 6 SCC 450, observing :-
"32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops."
The writ petition, in this case, being not maintainable, obviously, all orders passed must perish, including the impugned order, which is set aside.
The appeals are allowed in the aforesaid terms.
Pending applications, if any, shall stand disposed of."
No doubt the judgment in the case of Harshad Govardhan (supra) is of the year 2014 whereas the other judgements are of previous years but considering the dictum of Supreme Court in the case of Satyawati Tandon, V. Noble Kumar, Kanaiyalal Lalchand Sachdev and Umakant Mahapatra (supra) and in view of the disputed questions of fact involved in the present case, we are not inclined to interfere with the impugned order dated 17.12.2018. The petitioner is at liberty to avail his remedy before the Debt Recovery Tribunal under section 17 of the Act, 2002. He will be also at liberty to submit a fresh OTS proposal before the respondent-Bank in terms of the letter of the Bank dated 4.1.2019.
The writ petition is accordingly dismissed.
Order Date :- 15th February, 2019 o.k.