Karnataka High Court
The Authorised Officer vs Rajeshwari B Shetty on 23 December, 2021
Author: Ritu Raj Awasthi
Bench: Ritu Raj Awasthi
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF DECEMBER, 2021
PRESENT
THE HON'BLE MR. RITU RAJ AWASTHI, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
WRIT APPEAL NO. 1305 OF 2021(GM-RES)
BETWEEN:
THE AUTHORISED OFFICER
KARNATAKA BANK
ASSET RECOVERY MANAGEMENT BRANCH
3RD FLOOR, KARANTAKA BANK BUILDING
KODIALBAIL, MANGALORE 575003
D K DISTRICT.
...APPELLANT
(BY SRI.SUDESH KUMAR ACHARYA U, ADVOCATE)
AND:
1. RAJESHWARI B SHETTY
AGED 53 YEARS
W/O K BHASKAR SHETTY
CTP NO 12292,
PRESENTLY IN PARAPPANA AGRAHARA JAIL
CENTRAL JAIL, NAGANATHAPURA
BENGALURU 560100
2. STATE OF KARNATAKA
REP BY SECRETARY
2
MINISTRY OF HOME AFFAIRS
VIDHANA SOUDHA
BENGALURU 560001
3. M/S DURGA INTERNATIONAL
S NO 114-B2
NEAR CITY BUS STAND
SHIRIBEEDU, UDUPI 576101
REP BY ITS MANAGER
...RESPONDENTS
(BY SMT.SANDHYA.U.PRABHU, ADVOCATE FOR R1;
SRI.S.S.MAHENDRA, AGA FOR R2)
THIS WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH
COURT ACT PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED
08.11.2021 PASSED IN WP NO.19509/2021 (GM) ON THE FILE OF
THE LEARNED SINGLE JUDGE OF THIS HONBLE COURT.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 17.12.2021, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, SACHIN SHANKAR MAGADUM J.,
DELIVERED THE FOLLOWING:
JUDGMENT
The captioned intra Court appeal is filed by the Bank assailing the interim order dated 8.11.2021 passed by the learned Single Judge in W.P.No.19509/2021.
2. The appellant-Bank has initiated recovery proceedings under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security 3 Interest Act, 2002 (for short "SARFAESI Act"). The appellant- Bank by having recourse to Section 13(4) of the SARFAESI Act has taken symbolic possession of the mortgaged properties. In continuation of the said proceedings, the appellant-bank has issued a public auction notice. The said public auction notice was challenged by respondents No.1 and 3 before the Debt Recovery Tribunal(for short "DRT"), Bengaluru. The DRT granted conditional order and since respondent No.1 failed to comply the conditional order, the appeal filed by the respondents was dismissed. Pursuant to dismissal of the appeal by the DRT, the appellant Bank issued a public auction notice by issuing a sale noticed dated 14.7.2020 and the date of public auction was fixed on 26.8.2020. The appellant claim that the said public auction did not attract any bidders and therefore, Bank could not finalize the auction sale process. Even the third auction process was again deferred on account of want of bidders.
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3. The appellant-Bank took out a fresh public auction process by issuing notice on 27.8.2021 and the said public notice was challenged by respondent No.1 in W.P.16659/2021. The learned Single Judge has stayed the said sale notice dated 27.08.2021 deferring the public auction subject to the condition that respondent No.1 deposits a sum of Rs.25 lakhs by way of first installment within a period of two weeks and the second installment within a period of another two weeks. The appellant Bank contends that, however, the later part of the order which required respondent No.1 to deposit second installment of Rs.25 lakhs was not complied with. It is in this background that the appellant-Bank on account of failure on the part of respondent No.1 in not complying the conditional order granted by the writ Court in W.P.16659/2021 has issued a fresh sale notice on 16.10.2021 notifying the date of public auction as 2.11.2021.
4. This public auction is again questioned by respondent No.1 before the learned Single Judge in 5 W.P.19509/2021. The learned Single Judge has granted interim order, not to confirm the auction said to have been conducted on 2.11.2021 recording the undertaking of Respondent No.1 that the second installment of Rs. 20 lakhs would be deposited within a period of three weeks and observing that non-compliance of the undertaking will result into confirmation of the auction in question.
5. The learned counsel appearing for appellant reiterating the grounds urged in the writ appeal would vehemently argue and contend before this Court that the provisions of SARFAESI Act provides for a complete machinery to challenge the orders and therefore, respondent No.1 cannot repeatedly invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. To buttress his arguments, he has placed reliance on the judgment rendered by this Court in W.A.No.1102/2021 disposed of on 30.11.2021.
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6. Learned counsel appearing for respondent No.1 however would strenuously argue and counter the arguments canvassed by the learned counsel for the appellant. She has filed objections to the writ appeal and has placed on record, the record of right pertaining to Survey No.114/B2. She has placed reliance on following judgments:
1. "2021 SCC Online SC 383 [ Uttar Pradesh Power Transmission Corporation Ltd Vs CG Power and Industrial solutions]
2. (2021) 6 Supreme Court Cases 771 [Radhakrishnan Industries vs State of Himachal Pradesh]
3. (2015) 15 SCC 431 [D R Enterprises Ltd Vs Assistant Collector of Customs and others]
4. (2010) 14 Supreme Court Cases 553 [Union of India and Others vs Mangal Textile Mills India Pvt. Ltd.,]
5. (2016) 10 SCC 214 [Oasis Dealcom Private Ltd Vs Khazana Dealcom Private Ltd]
6. News uploaded in LibeLaw dated16/12/2021.
Placing reliance on the judgment rendered by the Apex Court in Radhakrishna Industries .vs. State of Himachal 7 Pradesh1 would submit to this Court that alternative remedy is not a bar and that in itself will not divest the High Court of its powers under Article 226 of the Constitution of India in an appropriate case. She would place reliance on the judgment rendered by the Apex Court in Union of India and others .vs. Mangal Textiles Mills India Private Ltd.2 and reitertated the principle that it is a self imposed restriction by the High Courts and therefore, this Rule of exclusion of writ jurisdiction on account of availability of an alternative remedy does not operate as an absolute bar in entertaining a writ petition. Therefore, she would submit to this Court that having regard to the facts and circumstances, the learned Single Judge has exercised the discretion judiciously and as such, there is no scope for interference. She has placed reliance on an article reported in LiveLaw dated 16.12.2021 and contend that even in cases arising out of SARFAESI Act, Apex Court has opined that in a given case High Courts can exercise 1 (2021)6 SCC 771 2 (2010)10 SCC 214 8 its discretion and invoke extraordinary jurisdiction under Article 226 and pass suitable orders having regard to the facts and circumstances of the case.
7. Heard the learned counsel for the appellant and learned counsel appearing for respondent No.1. Perused the grounds urged in the writ appeal and also contentions raised by respondent No.1 in the objections. We have also perused the judgments cited by rival parties.
8. Respondent No.1 has invoked the writ jurisdiction by questioning the public auction notice issued by appellant- Bank. In the backdrop of these facts, the central question that would arise for consideration is :
"Whether the learned Single Judge was
justified in entertaining a writ petition filed by
respondent No.1 in matters squarely falling within the ambit of SURFAESI Act? "
The said question is no more resintegra. The Apex Court in the case of K. Virupaksha and another .vs. State of 9 Karnataka3 has held at paragraph 15, which is culled out as under:
"15. The SARFAESI Act is a complete code in itself which provides the procedure to be followed by the secured creditor and also the remedy to the aggrieved parties including the borrower. In such circumstance as already taken note by the High Court in writ proceedings if there is any discrepancy in the manner of classifying the account of the appellants as NPA or in the manner in which the property was valued or was auctioned, the DRT is vested with the power to set aside such auction at the stage after the secured creditor invokes the power under Section 13 of SARFAESI Act. This view is fortified by the decision of this Court in the case of Authorised Officer, Indian Overseas Bank & Anr. vs. Ashok Saw Mill (2009) 8 SCC 366 wherein it is held hereunder: "34. The provisions of Section 13 enable the secured creditors, such as banks and financial institutions, not only to take possession of the secured assets of the borrower, but also to take over the management of the business of the borrower, including the right to transfer by way of lease, assignment or sale for realising secured assets, subject to the conditions indicated in the two provisos to clause
(b) of sub-section (4) of Section 13.
In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in subsection (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days 3 (2020) 4 SCC 440 10 from the date of such measures having taken for the reliefs indicated in subsection (3) thereof. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.
The consequences of the authority vested in the DRT under subsection (3) of Section 17 necessarily implies that the DRT is entitled to question the action taken by the secured creditor and the transactions entered into by virtue of Section 13(4) of the Act. The legislature by including subsection (3) in Section 17 has gone to the extent of vesting the DRT with authority to even set aside a transaction including sale and to restore possession to the borrower in appropriate cases.
Resultantly, the submissions advanced by Mr Gopalan and Mr Altaf Ahmed that the DRT has no jurisdiction to deal with a post Section 13(4) situation, cannot be accepted.
9. On reading the dictum laid down by the Apex Court in the judgment cited supra, it is clearly evident that the Legislature by including sub-section (3) of Section 17 has entrusted the authority and jurisdiction in DRT to examine the action taken by the secured creditor. The Apex Court in the 11 judgment cited supra while examining the provisions of Section 13(4) of the SARFAESI Act has opined that the Legislature by including sub-section (3) in Section 17 has gone to the extent of vesting the DRT with authority to even set aside a transaction including sale and to restore possession to the borrower in appropriate cases.
10. The Apex Court in the case of United Bank of India .vs. Satyawati Tondon and others4 has heavily come down on High Courts entertaining writ petitions pertaining to the proceedings arising out of SARFAESI Act. The Apex Court in the said judgment has clearly held that High Court should not entertain writ petitions when the aggrieved party has a efficacious remedy before the Tribunal. It would be useful to refer Paragraph 55 of the judgment which reads as under:
"55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on under Article 226 for 4 (2010) 8 SCC 110 12 passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
In catena of judgments the Apex Court has held that SURFAESI Act is a complete code in itself which provides procedure to be followed by the secured creditor. The Act also contemplates remedy for a borrower also. In catena of judgments, the Apex Court has held that any grievance in regard to classifying the accounts as NPA or a dispute in regard to valuation of property or any discrepancies in auction are all brought within the ambit of Section 17 of SARFAESI Act.
11. If the grounds urged in the present writ petition are examined, we would find that the respondent No.1-petitioner's grievance that her account was declared as NPA on account of her arrest and therefore, respondent No.1-petitioner claims that the demand notice dated 2.11.2017 was never served on 13 her as she was in judicial custody. The other grounds raised reveals that the respondent No.1-petitioner's contention is that the property brought in auction is a valuable property worth Rs.25 crores and her business is a revenue earning venture and therefore, she is seeking restructuring of loan. Respondent No.1 has also pleaded that on account of her arrest for the offence punishable under Section 302 of IPC, her business has collapsed and since she is sent to Central Jail at Parappana Agrahara, her movements are curtailed and therefore, the appellant-Bank cannot take advantage of her confinement when she could not exercise her rights.
12. If these grounds are examined meticulously, then we are of the view that respondent No.1-petitioner's case does not fall under any of the exceptions which would warrant interference by a writ Court in exercise of an extraordinary jurisdiction under Article 226 of the Constitution of India. We are also not inclined to accept the contention of the *respondent No.1 that since she is undergoing confinement, she is entitled to * Corrected vide order dated: 24.03.2022. 14 invoke the writ jurisdiction of this Court. If she has resources to approach this Court, then we do not find any impediment for appellant to approach the Tribunal and seek redressal of her grievances.
13. In an identical case, borrower had approached the learned Single Judge and the learned Single Judge granted the interim order and stayed the auction. The Bank preferred an appeal before the Division Bench in W.A.No.1235/2021. This Court not only interfered with the interim order granted by the learned Single Judge but also held that the writ petition before the learned Single Judge is not at all maintainable. The facts of the present case are identical to the one cited supra. Therefore, the writ appeal is allowed. Interim order is set aside. Consequently, the writ petition is held to be not maintainable before the learned Single Judge. It is open for the *respondent No.1 to approach the competent forum and seek redressal of her grievance.
* Corrected vide order dated: 24.03.2022. 15 The pending interlocutory applications, if any, stand disposed of.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE *alb/-