Gujarat High Court
Jilichem Laboratories (India) Ltd vs Union Of India & on 4 September, 2015
Author: Jayant Patel
Bench: Jayant Patel, N.V.Anjaria
C/SCA/9442/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 9442 of 2015
With
SPECIAL CIVIL APPLICATION NO. 10642 of 2015
With
SPECIAL CIVIL APPLICATION NO. 11203 of 2015
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JILICHEM LABORATORIES (INDIA) LTD....Petitioner(s)
Versus
UNION OF INDIA & 1....Respondent(s)
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Appearance:
MR MASOOM K SHAH, ADVOCATE for the Petitioner(s) No. 1
MS MOHINI K SHAH, ADVOCATE for the Petitioner(s) No. 1
MR KK NANAVATI FOR NANAVATI ASSOCIATES, ADVOCATE for the
Respondent(s) No. 2
NOTICE SERVED for the Respondent(s) No. 1
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CORAM: HONOURABLE THE ACTING CHIEF JUSTICE
MR.JAYANT PATEL
and
HONOURABLE MR.JUSTICE N.V.ANJARIA
Date : 04/09/2015
COMMON ORAL ORDER
(PER : HONOURABLE THE ACTING CHIEF JUSTICE MR.JAYANT PATEL)
1. As in all the petitions similar questions arise for consideration, they are being considered simultaneously.
2. In Special Civil Application No.9442 of 2015 the petitioner has prayed as under.
Page 1 of 10 HC-NIC Page 1 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER "(a) be pleased to declare section 2 (1) (c) (iva) of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 as ultra vires the Constitution of India and the Principal Act (Securitisation And Reconstruction Of Financial Assets and Enforcement Of Security Interest Act, 2002) and declare it as null, void ab initio and non-est and action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(b) Be pleased to declare s. 2(d)(vi) of the Recovery of debts due to bank and financial institutions act, 1993 as unconstitutional and ultra vires the Principal act (Recovery of debts due to bank and financial institutions act, 1993) and declare it as null, void ab initio and non-est.
(c) Be pleased to declare the s. 56 of Banking Regulation Act (Act No. 10 of 1949) as ultra vires the Constitution of India, 1950.
(d) Be pleased to quash and set aside entire proceedings under Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 (Act No.54 of 2002) as ultra vires the Constitution of India and the Principal Act (Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002) and declare it as null, void ab initio and non-est and action taken by Respondent Bank under Securitisation Act, 2002 (Act NO. 54 of 2002) as illegal, without authority of law, null and void.
(e) Be pleased to declare action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(f) Be pleased to quash and set aside the section 13(4) Notice dated 23.04.2015 issued by the Respondent Bank as unconstitutional, illegal, void ab initio, non est and null in the eyes of law and restore the possession of Plot No. 1, Survey No. 143 / 1, Pharmaceuticals Industries Owners Association, Moje Adhana, Tal : Kalol, Dist : Gandhinagar to the petitioner.
(g) Be pleased to quash and set aside the auction sale notice issued by the Respondent No. 2 Bank dated 08.05.2015."
3. In Special Civil Application No.10642 of 2015 the petitioner has prayed as under. Page 2 of 10 HC-NIC Page 2 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER "(a) be pleased to declare section 2 (1) (c) (iva) of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 as ultra vires the Constitution of India and the Principal Act (Securitisation And Reconstruction Of Financial Assets and Enforcement Of Security Interest Act, 2002) and declare it as null, void ab initio and non-est and action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(b) Be pleased to quash and set aside s. 2(d)(vi) of the Recovery of debts due to bank and financial institutions act, 1993 as unconstitutional and ultra vires the Principal act (Recovery of debts due to bank and financial institutions act, 1993) and declare it as null, void ab initio and non-est.
(c) Be pleased to declare the s. 56 of Banking Regulation Act, 1949 as ultra vires the Constitution of India, 1950.
(d) Be pleased to declare the Reserve Bank of India's Master Circular- Income Recognition, Asset Classification, Provisioning and Other Related Matters
- UCBs dated July 1, 2014 as ultra vires the Constitution of India, 1950 and/or Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act no. 54 of 2002).
(e) Be pleased to quash and set aside entire proceedings under Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 as ultra vires the Constitution of India and the Principal Act (Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002) and declare it as null, void ab initio and non-est and action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(f) Be pleased to declare action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(g) Be pleased to quash and set aside the section 13(4) Notice dated 27.04.2015 issued by the Respondent Bank as unconstitutional, illegal, void ab initio, non est and null in the eyes of law.
(h) Be pleased to quash and set aside the sale notice dated 26.05.2015 and Auction Sale Notice dated 10.06.2015 and impugned Section 14 proceedings initiated by the Respondent No.2 Bank by filing Cr.MA No. 141 of 2015."
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4. In Special Civil Application No.11203 of 2015 the petitioner has prayed as under.
"(a) be pleased to declare section 2 (1) (c) (iva) of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 as ultra vires the Constitution of India and the Principal Act (Securitisation And Reconstruction Of Financial Assets and Enforcement Of Security Interest Act, 2002) and declare it as null, void ab initio and non-est and action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(b) Be pleased to quash and set aside s. 2(d)(vi) of the Recovery of debts due to bank and financial institutions act, 1993 as unconstitutional and ultra vires the Principal act (Recovery of debts due to bank and financial institutions act, 1993) and declare it as null, void ab initio and non-est.
(c) Be pleased to declare the s. 56 of Banking Regulation Act, 1949 as ultra vires the Constitution of India, 1950.
(d) Be pleased to declare the Reserve Bank of India's Master Circular- Income Recognition, Asset Classification, Provisioning and Other Related Matters
- UCBs dated July 1, 2014 as ultra vires the Constitution of India, 1950 and/or Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act no. 54 of 2002).
(e) Be pleased to quash and set aside entire proceedings under Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 as ultra vires the Constitution of India and the Principal Act (Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002) and declare it as null, void ab initio and non-est and action taken by Respondent Bank under Securitisation Act, 2002 as illegal, without authority of law, null and void.
(f) Be pleased to quash and set aside the section 13(2) Notice dated 04.12.2002 and Section 13(4) Notice dated 18.05.2013 issued by the Respondent Bank as unconstitutional, illegal, void ab initio, non est and null in the eyes of law.
(fa) Be pleased to quash and set aside the appointment of the Authorised Officer i.e. Respondent no.2, made under Rule 2(a), Security Interest Rules, 2002 vide Page 4 of 10 HC-NIC Page 4 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER Board of Directors' resolution No. 14 dated 29-09-05.
(g) Be pleased to quash and set aside the impugned order passed by the Collector Ahmedabad in DC/MAG/SECURITIZATION/ S.R No. 59 of 2013 and order passed by the Collector and District Magistrate Kheda in SRFAESI S.R No. 179 of 2015 dated 22.04.2015 and 30.04.2015 respectively under Section 14 of the Securitisation Act, 2002 as unconstitutional, illegal, void ab initio, non est and null in the eyes of law."
5. We have heard Mr.Vishwas Shah with Mr.Masoom Shah for the petitioner in all the three petitions, Mr.K.K. Nanavati for the respondent Bank, Mr.Amar Bhatt for Reserve Bank of India and Mr.G.M. Joshi for the Metro Court. Other respondents are served, but none appears.
6. Mr.Shah at the outset submitted that he is not pressing the relief for challenging vires of Section 56 of the Banking Regulation Act and he would restrict all the petitions for challenging Section 2(1)(c)(iva) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Securitisation Act') and Section 2(d)(vi) of the Recovery of Debts due to the Banks and Financial Institution Act, 1993 (herienafter referred to as RDDB Act) as unconstitutional. However he fairly concedes that both the aforesaid prayers are already covered by Page 5 of 10 HC-NIC Page 5 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER the decision of this Court in case of Neel Oil Industries Vs Union of India in Special Civil Application No.1012 of 2014 and allied matters decided on 24-25th June, 2015 and therefore, he submitted that the said aspect may not be required to be examined by this Court in the present petition. However Mr.Shah submitted that action taken under the Securitisation Act prior to the amendment under Securitisation Act would not survive even as per the above-referred decision of this Court and more particularly in view of the observations made at Paragraph 43 and hence it would be required for the respondent Bank to initiate fresh action under Section 13 of the Securitisation Act, if they are so desirous and at that stage rights and contentions of both the sides may be kept open. He also submitted that in all the three cases respondent Bank in the purported exercise of powers under the Securitisation Act prior to the amendment in Securitisation Act has taken over the possession of the property in question. Since the action cannot be said to be legal as per the above- referred decision of this Court in case of Neel Oil Industries (supra), the same should be returned to the petitioner with any condition which may be deemed Page 6 of 10 HC-NIC Page 6 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER fit by this Court.
7. Whereas Mr.K.K. Nanavati, learned counsel appearing for the respondent Bank submitted that as the action was prior to the amendment made for inclusion of Multi State Cooperative Bank, the Bank may re-entrust the possession but interest of the Bank may also be sufficiently protected inasmuch as the petitioner should not transfer or alienate the possession of the property to any one else. He also submitted that the respondent Bank should be at liberty to initiate fresh action under the Securitisation Act by issuance of Notice under Section 13(2) of the Securitisation Act in accordance with law and the Bank should also be at liberty to take further action if the demand in Notice under Section 13(2) is not satisfied.
8. In our view, in the above-referred decision of this Court at Paragraph 43 it has been observed that since the amendment has been brought into force with effect of January, 2013, any action taken by the Bank against borrower prior to the amendment in the Securitisation Act cannot be maintained. In the present case, action was initiated in any case, Page 7 of 10 HC-NIC Page 7 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER admittedly, prior to January, 2013 and therefore when the amending Act was not in force, action of the respondent Bank under the Securitisation Act at the given point of time cannot be maintained. However in any case, amending Act has come into force and the remedy under the Securitisation Act is available to the respondent Bank. Respondent Bank if desirous, may initiate action by issuing fresh Notice under Section 13 of the Securitisation Act in accordance with law.
9. As Mr.K.K. Nanavati appearing for the respondent Bank is agreeable for re-entrustment of the possession of the property with liberty to the Bank to take further action under the Securitisation Act, we do not find that further observations and discussion are necessary to be issued in this regard.
10. Hence it is observed and directed that the action taken by the respondent No.2 Bank under the Securitisation Act prior to the amending Act, i.e. January, 2013 is held to be bad in law.
Consequentially, property in question, possession of which is taken over, will be required to be re- entrusted by respondent Bank to the petitioner by drawing appropriate Panchnama, with further condition Page 8 of 10 HC-NIC Page 8 of 10 Created On Thu Sep 10 00:26:16 IST 2015 C/SCA/9442/2015 ORDER that it would be open to the respondent Bank to deploy security for guarding of the property and there will be further prohibitory injunction against the petitioner not to transfer or alienate the possession, title or rights in the property in any manner whatsoever for a period of four months from the date of re-entrustment of the property by the respondent Bank to the respective petitioners. It is also further observed that the respondent Bank after re-entrustment of the property shall be at liberty to initiate fresh action under Section 13 of the Securitisation Act qua security interest of the respondent Bank in the property in question and at that stage, rights and contentions of both the sides shall remain open.
11. In view of the aforesaid direction, as the action taken by the Bank under the Securitisation Act prior to January, 2013 is not held to be legal and valid and is declared illegal, consequential action as that of authorisation or order passed under Section 14 of the Securitisation Act would also no more survive.
12. Other reliefs, if any, are not required to be considered further in view of directions given hereinabove.
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13. Hence considering the facts and circumstances of the case all the petitions are disposed of accordingly. No order as to cost.
(JAYANT PATEL, ACJ.) (N.V.ANJARIA, J.) Anup Page 10 of 10 HC-NIC Page 10 of 10 Created On Thu Sep 10 00:26:16 IST 2015