Gujarat High Court
Harsora Hotels Pvt. Ltd. & 2 vs Kotak Mahindra Bank Limited & on 14 August, 2014
Author: Harsha Devani
Bench: Harsha Devani
C/SCA/11181/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO.11181 of 2014
With
SPECIAL CIVIL APPLICATION NO.11182 of 2014
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HARSORA HOTELS PVT. LTD. & 2....Petitioner(s)
Versus
KOTAK MAHINDRA BANK LIMITED & 1....Respondent(s)
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ppearance:
MR MIHIR JOSHI, SR. ADVOCATE with MR VIMAL M PATEL, ADVOCATE
for the Petitioner(s) No.1 - 3
MR NK PAHWA, ADVOCATE with MRS SANGEETA N PAHWA,
ADVOCATE for the Respondent(s) No.1
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CORAM: HONOURABLE MS. JUSTICE HARSHA DEVANI
Date : 14/08/2014
COMM0N ORAL ORDER
1. The learned advocate for the petitioners has tendered draft amendment in both the petitions. The amendments are allowed in terms of the draft. The same shall be carried out forthwith.
2. The order dated 14th July, 2014 passed by the Additional District Magistrate, Valsad, respondent No.2 herein, is subject matter of challenge in both these petitions. Since the facts and contentions raised in both the petitions are common and most of the parties are also common, the matters were taken up for hearing together.
3. Harsora Hotels Pvt. Ltd. is the first petitioner in Special Civil Application No.11181/2014 and the second Page 1 of 38 C/SCA/11181/2014 ORDER petitioner in Special Civil Application No.11182/2014 and is the owner of land bearing Survey No.572, 577 and 578 paiki admeasuring 5074 square metres (Plot B) situated at Vapi on which two buildings consisting of a hotel building and separate staff quarters are situated. The said petitioner is running a hotel by the name and style of 'Hotel Green View' on the said premises. M/s Numet Hotels, a partnership firm, is second petitioner in Special Civil Application No.11181/2014 and the third petitioner in Special Civil Application No.11182/2014 and is the owner of land bearing Survey No.572, 577 and 578 paiki admeasuring 4173.63 square metres situated at Vapi over which a dome admeasuring 30,000 square feet has been constructed which caters to various types of social functions, parties and seminars conducted by the various customers of Harsora Hotels Pvt. Ltd.
4. The respondent Bank sanctioned a loan of Rs.1.88 crores to the petitioner-Harsora Hotels Pvt. Ltd. in the month of July, 2010 which was revised by a sanction letter dated 20 th May, 2011 to the extent of Rs.4.15 crores. The respondent Bank also sanctioned a loan in the month of March, 2010 to N.H. Harsora Pvt. Ltd. the first petitioner in Special Civil Application No. 11182 of 2014. Against the said loans, the security given by the petitioner-Harsora Hotels Pvt. Ltd. is valued at Rs.20.33 crores as per the Valuation Report dated 15th February, 2010 and the security given by the petitioner - M/s Numet Hotels is valued at Rs.9.22 crores as per the Valuation Report dated 12th October, 2009. Thus, at the relevant time when such report came to be prepared, the combined value of both the properties was Rs.30.55 crores. According to the petitioners, the valuation made by the Page 2 of 38 C/SCA/11181/2014 ORDER respondent Bank is of the year 2009-10 and that the combined value of the said properties is much more than Rs.30.55 crores.
5. It appears that on account of slow down of their business, the petitioners defaulted in repayment of the above referred loan, in connection with which the respondent Bank issued individual notices dated 16 th December, 2013 to the petitioners under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the Act") in respect of alleged amounts of Rs.3.17 crores and 4.87 crores approximately as on 23rd November, 2013, respectively. It is the case of the petitioners that the notice was not served on all the partners of the petitioner-M/s Numet Hotels.
6. In response to the notices under section 13(2) of the Act, the petitioners submitted a representation/objections dated 15th February, 2014 inter alia pointing out that invoking the provisions of the Act was a hasty decision without giving opportunity of re-schedulement in line with the guidelines laid down by the Reserve Bank of India and further raised a dispute regarding the details as to how the figures of Rs.3.17,99,645.99 ps. and Rs.4,87,47,705.03 ps. respectively were arrived at by the Bank. The petitioners also requested the Bank to keep the notice dated 16 th December, 2013 in abeyance till re-schedulement is worked out and also to allow the petitioners to make a lumpsum payment of Rs.60 lakhs and waive all other charges.
7. It appears that the petitioners as well as the Page 3 of 38 C/SCA/11181/2014 ORDER respondent Bank had talks in connection with re-schedulement of the loan. By a communication dated 11 th March, 2014, the respondent bank informed the petitioners, that the request made vide letter dated 10th March, 2014 is not acceptable and called upon the first petitioner to make the entire payment as mentioned in the statutory notice dated 16th December, 2013, failing which further action would be taken. Thereafter, the petitioners received a caveat on 25 th July, 2014 whereupon they came to know that an order dated 14 th July, 2014 had been passed by the Additional District Magistrate, Valsad under section 14 of the Act pursuant to which, by a letter dated 26th July, 2014, the petitioners called upon the respondent bank to furnish a copy of the order dated 14 th July, 2014. Subsequently, to the surprise of the petitioners, on 28 th July, 2014, the respondent Bank, with the help of the police who came along with gunmen, took over the physical possession of the running hotel.
8. Mr. Mihir Joshi, Senior Advocate, learned counsel for the petitioners at the outset submitted that whereas the powers under section 14 of the Act are vested in the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction the secured asset is situated, in the facts of the present case, the powers under section 14 of the Act have been exercised by the Additional District Magistrate and hence, the impugned order dated 14th July, 2014 is without jurisdiction. In support of such submission, reliance was placed upon the decision of a Division Bench of this court in the case of Manjudevi R. Somani v. Union of India and Others, 2013 (2) GLH 390 wherein the court had held that the order passed by the Additional Chief Metropolitan Magistrate is Page 4 of 38 C/SCA/11181/2014 ORDER without jurisdiction.
8.1 On the merits of the case, it was pointed out that pursuant to the notice issued under section 13(2) of the Act, the petitioners had filed objections/representation on 15 th February, 2014. That in view of the provisions of sub-section (3A) of section 13 of the Act, it is mandatory for the secured creditor to consider such representation or objection and in case the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he is required to communicate, within 15 days of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection to the borrower. It was submitted that compliance with the provisions of sub-section (3A) of section 13 of the Act is mandatory in nature and that in the absence of compliance thereof, the Additional District Magistrate could not have exercised powers under section 14 of the Act. The attention of the court was invited to the provisions of section 14 of the Act to point out that the first proviso to sub-section (1) thereof provides that an application made by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor inter alia declaring that the objection/representation in reply to the notice received by the borrower has been considered by the secured creditor and reasons for non- compliance of such objection/representation has been communicated to the borrower. It was submitted that the second proviso thereto mandates that the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit, pass suitable orders for taking possession of the secured assets. It was Page 5 of 38 C/SCA/11181/2014 ORDER submitted that in the facts of the present case, when the provisions of sub-section (3A) of section 13 of the Act had not been complied with by the respondent bank, the learned Additional District Magistrate could not have passed any order under section 14 thereof. Thus, the learned Additional District Magistrate has not satisfied himself about the contents of the affidavit prior to passing the order for taking over possession of the secured assets. Under the circumstances, the impugned order being contrary to the provisions of section 14 cannot be sustained.
8.2 In support of his submissions, the learned counsel placed reliance upon the decision of this court in the case of Tensile Steel Limited v. Punjab & Sind Bank, 2006 (4) GLR 3013, wherein the court had held that sub-section (3A) of section 13 of the Act of 2002 enjoins the Bank to consider and decide such reply/objection and to communicate the decision thereof. Unless and until the said exercise is completed, the Bank is not authorised to proceed further and take any measures under sub-section (4) of section 13. In the facts of the said case, since the bank without complying with the mandatory requirement under sub-section (3A) of section 13, had proceeded further under sub-section (4) of section 13 and taken the assistance of District Magistrate under section 14 of the Act and had taken over possession of the secured assets, the court held that the action of the bank was contrary to the statutory mandate and was required to be quashed.
8.3 Reliance was also placed upon the decision of a Division Bench of this court in the case of Manjudevi R. Somani (supra), wherein the court had held that section 14 of the Page 6 of 38 C/SCA/11181/2014 ORDER SARFAESI Act is one of the most drastic measures provided by the legislature in aid of a secured creditor for the purpose of taking over the possession of a secured asset. Such being the position, it becomes the duty of the court to see that the secured creditor takes over the possession of the secured asset within the bounds of law. The court referred to the mandatory provisions of section 14 of the Act and more particularly, the proviso to sub-section (1) thereof and held that it is manifest that the legislature having realised the drastic nature of the provision, has now provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor as regards the details contained in sub-clause (I) to
(ix) of the proviso to section 14 of the Act.
8.4 Reliance was also placed upon the decision of a Division Bench of this court in the case of Kirandevi Bansal and Others v. Deputy General Manager (Authorised Officer), 2009 (2) G.L.H. 1, wherein the court has observed that the view expressed by the Apex Court in the case of Mardia Chemicals has been incorporated in sub-section (3A) of section 13 of the Act and, therefore, it is obligatory on the part of the secured creditor to consider the representation/objections submitted by the borrower on receipt of notice under sub-section (2) of section 13 of the Act, and to communicate the decision to the borrower. If the representation/objections is/are not acceptable or tenable to the secured creditor, communication of the reasons for non- acceptance of the representation/objections to the borrower is a mandatory requirement. It was submitted that in the facts of the present case, firstly, the respondent bank has not dealt Page 7 of 38 C/SCA/11181/2014 ORDER with the representation/objections submitted by the petitioners. That assuming without admitting that the communication dated 11th March, 2014 whereby the respondent bank has informed the petitioners that their request for seeking time is not acceptable to them and is rejected, is in response to the objections/representations made by the petitioner pursuant to the notice under section 13(2), the same does not assign any reasons for non-acceptance of the objection/representation and hence, the mandatory provisions of sub-section (3A) of section 13 of the Act are not satisfied.
8.5 Referring to the contents of paragraph 7 of the decision of a Division Bench of this court in the case of Consumer Protection and Analytic Committee v. State of Gujarat, 2012 JX (Guj) 1098, it was submitted that this court has held that whenever an application under section 14 of the Act is filed, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, should first affix a notice of taking possession on a conspicuous part of the property in question and should also give notice to the person who is in actual possession thereof indicating its intention of taking possession after a period of a fortnight, whereas in the facts of the present case no such procedure has been followed by the Additional District Magistrate prior to the possession being taken over.
8.6 Inviting attention to the averments made in paragraphs 14, 15 and 16 of the petitions, it was submitted that the hotel in question was a running concern and that there were guests residing in the said hotel and that by taking Page 8 of 38 C/SCA/11181/2014 ORDER over possession on 28th July, 2014, the premises have been locked up, including the belongings of the customers. It was further submitted that in April, 2014, the respondent bank had taken over symbolic possession of the property in question. Thereafter, there was no valid reason for taking over the physical possession. However, within a period of three months, the respondent bank had moved the Additional District Magistrate and has taken over physical possession of the premises in question. It was submitted that prior to taking over possession of the premises, the respondent bank ought to have considered the reasonableness of shutting down a running hotel. It was emphatically argued that the action taken by the respondents is also bad on the count of proportionality, inasmuch as, the respondents had taken over possession of the properties which are valued at more than three times the outstanding amount. It was pointed out that as against alleged dues of about Rs.8.5 crores, possession of properties worth more than Rs.30 crores has been taken over. The attention of the court was drawn to the inventory prepared by the respondent bank at the time of taking over possession of the secured assets to submit that the same is on the face of it false, inasmuch as, the same discloses that an officer viz. Siddharth Shah was present with the officers at Vapi whereas in fact, he was not physically present at Vapi but was having a meeting with the third petitioner at Mumbai. It was contended that even in case of attachment, the same must be in proportion to the outstanding dues and hence, the action of the respondents also fails on the ground of proportionality as well as reasonableness.
9. Vehemently opposing the petition, Mr. N.K. Pahwa, Page 9 of 38 C/SCA/11181/2014 ORDER learned advocate for the first respondent Bank raised a preliminary objection to the very maintainability of the petitions on the ground that under the provisions of section 17 of the Act, the petitioners have an alternative efficacious remedy available in law and all contentions including the contention with regard to non-compliance with the provisions of section 13(3A) of the Act can be raised before the Debts Recovery Tribunal. Reliance was placed upon the decision of the Supreme Court in the case of General Manager, Sri Siddheshwara Cooperative Bank Limited and Another v. Ikbal and Others, (2013) 10 SCC 83, wherein the court has observed that an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but it is by now well settled that where a statute provides efficacious and adequate remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented.
9.1 Reliance was also placed upon the decision of the Supreme Court in the case of Kanaiyalal Lalchand Sachdev and Others v. State of Maharashtra and Others, (2011) 2 SCC 782, wherein the Supreme Court had approved of the High Court dismissing the petition on the ground that an efficacious remedy was available to the appellants under section 17 of the Act. The court observed that it is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to an aggrieved person. The court reiterated what has been observed in its earlier decision in the case of City and Industrial Development Corporation v. Dosu Aardeshir Page 10 of 38 C/SCA/11181/2014 ORDER Bhiwandiwala, (2009) 1 SCC 168, which reads thus:-
"30. The Court while exercising its jurisdiction under Article 226 is duty-bound to consider whether:
(a) adjudication of the writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;
(b) the petition reveals all material facts;
(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;
(d) the person invoking the jurisdiction is guilty of unexplained delay and laches;
(e) ex facie barred by any laws of limitation;
(f) grant of relief is against public policy or barred by any valid law; and host of other factors."
9.2 The decision of the Supreme Court in the case of United Bank of India v. Satyawati Tandon, (2010) 8 SCC 110, was relied upon for the proposition that it is settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution of India if an effective remedy is available to an 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. Mr. Pahwa submitted that the contention that the response or reply to the objection/representation made pursuant to the notice under section 13(2) of the Act does not record reasons as required under section 13(3A) of the Act can be agitated under section 17 of the Act. It was argued that there is no averment in the memorandum of petitions as to why the remedy under section 17 of the Act is not an efficacious remedy and that the Page 11 of 38 C/SCA/11181/2014 ORDER petitioners should justify their act of approaching this court and as to why the alternative remedy has not been resorted to.
9.3 Next it was submitted that the remedy under section 17 of the Act is an efficacious and speedy remedy, inasmuch as, in view of the provisions of sub-section (5) thereof, any application under sub-section (1) has to be dealt with by the Tribunal as expeditiously as possible and is required to be disposed of within sixty days from the date of such application. That the proviso thereto provides for an outer limit of four months from the date of the application. Hence for all purposes, the alternative remedy is efficacious, fast and expeditious. It was urged that the legality of the action of the Bank may not be examined in exercise of powers under Article 226 of the Constitution of India and the petitioners should be relegated to the alternative remedy under section 17 of the Act.
9.4 The decision of a Division Bench of the Bombay High Court in the case of M/s Trade Well v. Indian Bank, 2007 Cri.L.J. 2544, was cited for the proposition that to secure its object the NPA Act has by necessary implication ruled out giving hearing either to the borrower or third parties till the application is filed under section 17. That nothing prevented the legislature from specifically making a provision in section 14 for notice to the borrower or third party. It purposely did not make provision for notice or hearing being given to the borrower or third party at the stage of section 14. Looking to the scheme of the NPA Act, the court was of the view that notice or hearing to the borrower or third party is excluded at the stage of section 14 by necessary implication. The learned Page 12 of 38 C/SCA/11181/2014 ORDER counsel for the respondent Bank submitted that the principle of natural justice has various facets. In case the petitioners are not put to any prejudice for not giving reasons, then the violation thereof would not entitle them to get the entire action restored.
9.5 Reliance was also placed upon the decision of the Supreme Court in the case of Devi Ispat Ltd. v. State Bank of India, (2014) 5 SCC 762 wherein the writ petition filed by the appellant against notice under section 13(2) issued by the Bank demanding outstanding liabilities had been dismissed by the High Court since statutory remedy of making representation against the said notice is provided under section 13(3-A) of the Act. The representation made by the appellant in the meantime pending appeal before the Division Bench, was considered by the Bank and rejected and the Division Bench of the High Court dismissed the appeal. The Supreme Court held that since the appellant (debtor) had availed statutory remedy of representation which was duly considered, nothing survived in the dispute.
9.6 As regards non-compliance with the provisions of sub-section (3A) of section 13 of the Act, it was submitted that by the communication dated 11th March, 2014, the respondent Bank had informed the petitioners that their request was not acceptable to it and hence the requirements of section 13(3A) of the Act stand duly satisfied. Besides, the petitioners, in their representation pursuant to the notice under section 13(2) had merely sought re-schedulement of the loan and had not raised any objection which required reasons to be furnished, and hence, non furnishing of the reasons for not accepting the Page 13 of 38 C/SCA/11181/2014 ORDER representation does not in any manner cause any prejudice to the petitioners and consequently, there is substantial compliance with the provisions of section 13(3A) of the Act. It was submitted that all the while talks were going on between the petitioners and the Bank and therefore, also the submission regarding non compliance with the provisions of section 13(3A) of the Act is misplaced. It was also submitted that the Bank has followed all the necessary procedure as required under the Act and possession notice had been affixed at the site on 10th April, 2014 and hence, there is no warrant for interference by this court.
9.7 Lastly, referring to the interim relief prayed for in the petitions, it was submitted that grant of interim relief would amount to allowing the petitions and hence, no interim relief as prayed for can be granted. In support of such submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of Union of India v. Modiluft Limited, AIR 2003 SC 2218, wherein the court had held that the High Court had erred in granting the impugned relief to the respondent which in the opinion of the court was in the nature of final relief which on the facts and circumstances of the case, without deciding the issues involved in the writ petition, could not be granted. It was, accordingly, urged that the petitions being devoid of merit, deserve to be dismissed and the petitioners are required to be relegated to the remedy available under the provisions of the Securitisation Act.
10. In rejoinder, Mr. Joshi, learned counsel for the petitioners invited the attention of the court to the reply submitted by the petitioners in response to the notice under Page 14 of 38 C/SCA/11181/2014 ORDER section 13(2) of the Act to point out that the petitioners had not only made a representation for rescheduling of the loans but had also raised objection to the effect that the SOA outstanding amounts to Rs.7,78,31,896/- whereas the demand in the Sarfaesi Notice is Rs.8,05,74,351/-. Thus, it is not as if in their objection/representation in response to the notice under section 13(2) of the Act, the petitioners had only sought re- schedulement of the loans. Referring to the communication dated 11th March, 2014 of the respondent, it was pointed out that the same was in response to a letter dated 10 th March, 2014 and not in response to the objections raised against the notice under section 13(2) of the Act. It was pointed out that on 12th March, 2014, the petitioners had brought to the notice of the bank that they have not received any reply in connection with their objection/representation dated 15 th February, 2014. Reference was made to the communication dated 17th May, 2014 (Ann-L) addressed by the petitioners to the respondent Bank once again pointing out that there was no response to the objections raised vide letter dated 15 th February, 2014. It was, accordingly, urged that there was a complete breach of the provisions of sub-section (3A) of section 13 of the Act.
10.1 Dealing with the preliminary objection with regard to the non-maintainability of the petitions in view of the alternative remedy available under section 17 of the Act, the learned counsel placed reliance upon the decision of this court in the case of Manjudevi R. Somani v. Union of India (supra) wherein the court had observed that it was not impressed with the submission advanced on behalf of the respondent as regards the alternative remedy available for the reason that Page 15 of 38 C/SCA/11181/2014 ORDER the order passed by the Additional Chief Metropolitan Magistrate was wholly without jurisdiction and hence, the petition should not be rejected on the ground of alternative remedy. It was submitted that in the present case also it is the Additional District Magistrate and not the District Magistrate who has exercised powers under section 14 of the Act, and hence the order under section 14 of the Act is without jurisdiction. Referring to the proviso to sub-section (1) of section 14, it was pointed out that certain statutory requirements are required to be complied with by the applicant under section 14 as well as by the District Magistrate or the Chief Metropolitan Magistrate, as the case may be. In the present case there is non-compliance of the said provision, both, on the part of the bank, inasmuch as, the application under section 14 of the Act was not accompanied with an affidavit with the necessary averments as stipulated under section 14, as well as, on the part of the District Magistrate in not recording satisfaction regarding compliance thereof. Thus, there is a clear breach of the mandate of section 13 (3A) as well as the provisos to sub-section (1) of section 14 of the Act, warranting intervention by this court. It was contended that the Supreme Court has held that ordinarily the High Court would not interfere when there is an alternative remedy, but it has not laid down any absolute proposition that in no case the court would interfere. It was submitted that grave prejudice is caused to the petitioners, inasmuch as, properties valued far in excess of the outstanding dues have been taken possession of more so because possession of a running business has been taken over causing inconvenience to the customers as well other persons who had bookings with the petitioners.
Page 16 of 38 C/SCA/11181/2014 ORDER10.2 Mr. Joshi further submitted that rule 8 of the Security Interest (Enforcement) Rules, 2002, contemplates either symbolic possession or actual possession. The respondent Bank had already taken over symbolic possession of the secured assets on 10 th April, 2014. Therefore, once symbolic possession has been taken, there should be some justification for taking over the actual possession. Besides considering the high level of security furnished to the respondent Bank, there was no warrant for such action. It was urged that having regard to the averments made in paragraphs 15 and 16 of the memorandum of the petitions, the interim relief as prayed for is required to be granted on such terms and conditions as may be deemed fit by this court.
11. In the backdrop of the facts and contentions noted hereinabove, the first question that arises for consideration is as regard the maintainability of the petitions in the light of the fact that against the order of the District Magistrate the petitioners have an alternative remedy under section 17 of the Act.
11.1 In this regard reference may be made to the decisions on which reliance has been placed by the learned counsel for the respondent Bank. In General Manger, Shri Siddeshwara Cooperative Bank Limited v. Ikbal (supra), the Supreme Court has held that no doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but it is by now well-settled that where a statute provides for an alternative efficacious remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures Page 17 of 38 C/SCA/11181/2014 ORDER cannot be allowed to be circumvented. In the facts of the case before the Supreme Court, before issuance of notice under section 13(2) of the Act, a demand notice had been given by the Bank calling upon him to pay the outstanding amount but he did not comply with that notice. Thereafter, section 13(2) notice was given to him but he did not bother to pay the outstanding dues. The secured interest which was immovable property was put up for auction more than six months after the notice under section 13(2) was given to him by the Bank but still the outstanding payment was not made. The auction was held in his presence and he did not raise any objection about the time of the auction. When the auction-purchaser did not pay the balance amount in time, the borrower gave his written consent to the Bank that the purchase price may be accepted from the auction-purchaser and sale certificate may be issued to him. The writ petition was filed by the borrower more than four years after the issuance of sale certificate. In that backdrop the Supreme Court found that the observations made by the Single Judge that the borrower was victimized and fraud was practiced upon, have no basis and that the borrower had disentitled himself from the relief under Article 226 by his conduct. Hence, the Supreme Court observed that on misplaced considerations, statutory procedures cannot be allowed to be circumvented.
11.2 In United Bank of India v. Satyawati Tandon (supra). the Supreme Court has held that in cases relating to recovery of dues of bank, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the Page 18 of 38 C/SCA/11181/2014 ORDER economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. The court further observed that if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, AIR 1965 SC 556, Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1 and Harbanslal Sahnia v. Indian Oil Corporation Limited, (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.
11.3 It may therefore, be apposite to refer to the above referred decisions of the Supreme Court. In Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad (supra), the Supreme Court held that there are at least two well-recognised exceptions to the doctrine with regard to the exhaustion of statutory remedies. In the first place, it is well- settled that where proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the High Court under Article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course. In the second place, the doctrine has no application in a case where the impugned order has been made in violation of the principles of natural justice.
11.4 In Whirlpool Corporation v. Registrar of Trade Marks (supra), the Supreme Court, in the context of exercise Page 19 of 38 C/SCA/11181/2014 ORDER of prerogative writs under Article 226 of the Constitution of India, held thus:
"14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose".
15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field.
16. Rashid Ahmed v. Municipal Board, Kairana1 laid down that existence of an adequate legal remedy was a factor to be taken into consideration in the matter of granting writs. This was followed by another Rashid case, namely, K.S. Rashid & Son v. Income Tax Investigation Commission2 which reiterated the above proposition and held that where alternative remedy existed, it would be a sound exercise of discretion to refuse to interfere in a petition under Article 226. This proposition was, however, qualified by the significant words, "unless there are good grounds therefor", which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 could still be entertained in exceptional Page 20 of 38 C/SCA/11181/2014 ORDER circumstances.
17. A specific and clear rule was laid down in State of U.P. v. Mohd. Nooh3 as under:
"But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies."
18. This proposition was considered by a Constitution Bench of this Court in A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwan4 and was affirmed and followed in the following words:
"The passages in the judgments of this Court we have extracted would indicate (1) that the two exceptions which the learned Solicitor General formulated to the normal rule as to the effect of the existence of an adequate alternative remedy were by no means exhaustive, and (2) that even beyond them a discretion vested in the High Court to have entertained the petition and granted the petitioner relief notwithstanding the existence of an alternative remedy. We need only add that the broad lines of the general principles on which the Court should act having been clearly laid down, their application to the facts of each particular case must necessarily be dependent on a variety of individual facts which must govern the proper exercise of the discretion of the Court, and that in a matter which is thus pre- eminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case which comes up before the Court."
19. Another Constitution Bench decision in Calcutta Discount Co. Ltd. v. ITO, Companies Distt. 5 laid down:
"Though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a Page 21 of 38 C/SCA/11181/2014 ORDER person to lengthy proceedings and unnecessary harassment, the High Courts will issue appropriate orders or directions to prevent such consequences. Writ of certiorari and prohibition can issue against the Income Tax Officer acting without jurisdiction under Section 34, Income Tax Act."
20. Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation.
11.5. In Harbanslal Sahnia v. Indian Oil Corporation Ltd. (supra), the Supreme Court inter alia observed thus:-
"7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks.) The present case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings."Page 22 of 38 C/SCA/11181/2014 ORDER
11.6 Examining the facts of the present case in the light of the above decisions, the petitioners have raised the question of jurisdiction of the learned Additional District Magistrate to entertain an application under section 14 of the Act in the light of the provisions of section 14 of the Act by placing reliance upon a Division Bench of this court in the case of Manjudevi R. Somani v. Union of India (supra) wherein the court had held that the learned Additional Chief Metropolitan Magistrate did not have the jurisdiction to decide an application under section 14 of the Act. Moreover, possession of the petitioners' running hotel business has been taken over in flagrant breach of mandatory statutory provisions, which shall be discussed in detail hereinafter. This court is, therefore, of the view that, at this stage, the parameters laid down in the decisions of the Supreme Court in the case of Whirlpool Corporation v. Registrar Trade Marks and Harbanslal Sahnia v. Indian Oil Corporation (supra), for exercise of powers under Article 226 of the Constitution of India are duly satisfied. Hence, the contention that the petitions are not maintainable as there is an efficacious alternative remedy available under section 17 of the Act does not deserve to be accepted.
12. Examining the merits of the case on the question of grant of interim relief, apart from the contention with regard to lack of jurisdiction on the part of the Additional District Magistrate to decide the application under section 14 of the Act, the main contentions raised on behalf of the petitioners are that:
Page 23 of 38 C/SCA/11181/2014 ORDER(i) The action taken by the respondent Bank is bad on account of non-compliance of the provisions of sub-section (3A) of section 13 of the Act, inasmuch as, the respondent Bank has not communicated to the petitioners the reasons for non-
acceptance of the representation/objection raised by it in response to the notice issued under section 13(2) of the Act.
(ii) The application made by the respondent Bank under section 14 of the Act does not meet with the requirements of the first proviso to sub-section (1) of section 14.
(iii) The impugned order dated 14th July, 2014 is also bad on the count that the Additional District Magistrate has not examined the factual correctness of the assertions made in the affidavit and has not recorded his satisfaction as regards the requirements of the proviso to sub-section (1) of section 14.
(iv) The possession taken over by the respondent Bank of the properties in question is disproportionate to the outstanding amount namely, that in respect of an outstanding amount of about Rs.8 crores and odd, possession of properties worth more than Rs.30 crores has been taken over, more so when the property in question was a running hotel.
12. Insofar as the contention as regards non-
compliance of the provisions of sub-section (3A) of section 13 of the Act is concerned, reference may be made to section 13 of the Act, which to the extent the same is relevant for the present purpose reads as under:
"13. Enforcement of security interest.-- (1) Notwithstanding anything contained in section 69 or Page 24 of 38 C/SCA/11181/2014 ORDER section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).
(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.
(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non- acceptance of the representation or objection to the borrower.
Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.
13. In the context of section 13 and 14 of the Securitisation Act, it may be germane to refer to the decision of the Supreme Court in the case of Standard Chartered Page 25 of 38 C/SCA/11181/2014 ORDER Bank v. Noble Kumar and Others, (2013) 9 SCC 620, wherein the court has held thus:
17. Section 13, as originally enacted, did not contain any provision for consideration of objections (if any) the borrower may have to the demand made under sub-section (2). However, this Court in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311, where the constitutionality of the Act fell for the consideration of this Court, noticed that Section 13(2) is a very stringent provision and opined:
"77. It is also true that till the stage of making of the demand and notice under Section 13(2) of the Act, no hearing can be claimed for by the borrower. But looking to the stringent nature of measures to be taken without intervention of court with a bar to approach the court or any other forum at that stage, it becomes only reasonable that the secured creditor must bear in mind the say of the borrower before such a process of recovery is initiated so as to demonstrate that the reply of the borrower to the notice under Section 13(2) of the Act has been considered applying mind to it. The reasons, howsoever brief they may be, for not accepting the objections, if raised in the reply, must be communicated to the borrower. True, presumption is in favour of validity of an enactment and a legislation may not be declared unconstitutional lightly more so, in the matters relating to fiscal and economic policies resorted to in the public interest, but while resorting to such legislation it would be necessary to see that the persons aggrieved get a fair deal at the hands of those who have been vested with the powers to enforce drastic steps to make recovery."
18. Consequent upon the said decision in Mardia Chemicals Ltd., Parliament introduced sub-section (3-A) by Act 30 of 2004, which now provides for consideration of the objections, if any raised by the borrower. By definition under Section 2(f) of the Act a borrower includes the guarantor of the debt.
19. Sub-section (3-A) further provides that if the secured creditor reaches a conclusion that the objections raised by the borrower are not acceptable or tenable, the Page 26 of 38 C/SCA/11181/2014 ORDER creditor shall communicate the reasons for non-acceptance of the objections within a period of 15 days. The proviso to the said sub-section declares that the rejection of the objections does not confer any right on the borrower to resort to the proceedings, contemplated either under Section 17 or 17-A. We may indicate here both Sections 17 and 17-A afford an opportunity to the borrower to approach the Debts Recovery Tribunal or (in the cases of Jammu & Kashmir) the District Court concerned against any measure taken under Section 13(4).
20. In every case where the objections raised by the borrower are rejected by the secured creditor, the secured creditor is entitled to take possession of the secured assets. In our opinion, such action - having regard to the object and scheme of the Act - could be taken directly by the secured creditor. However, visualising the possibility of resistance for such action, Parliament under Section 14 also provided for seeking the assistance of the judicial power of the State for obtaining possession of the secured asset, in those cases where the secured creditor seeks it.
23. We must make it clear that these provisions were not in existence on the date of the order impugned in the instant proceedings. These amendments are made to provide safeguards to the interest of the borrower. These provisions stipulate that a secured creditor who is seeking the intervention of the Magistrate under Section 14 is required to file an affidavit furnishing the information contemplated under various sub-clauses (I) to (ix) of the proviso and obligates the Magistrate to pass suitable orders regarding taking of the possession of the secured assets only after being satisfied with the contents of the affidavits.
24. An analysis of the nine sub-clauses of the proviso which deal with the information that is required to be furnished in the affidavit filed by the secured creditor indicates in substance that:
24.1.(i) there was a loan transaction under which a borrower is liable to repay the loan amount with interest.
24.2.(ii) there is a security interest created in a secured asset belonging to the borrower.
24.3.(iii) that the borrower committed default in the Page 27 of 38 C/SCA/11181/2014 ORDER repayment.
24.4.(iv) that a notice contemplated under Section 13(2) was in fact issued.
24.5.(v) in spite of such a notice, the borrower did not make the repayment.
24.6.(vi) the objections of the borrower had in fact been considered and rejected.
24.7.(vii) the reasons for such rejection had been communicated to the borrower, etc.
25. The satisfaction of the Magistrate contemplated under the second proviso to Section 14(1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset.
36. Thus, there will be three methods for the secured creditor to take possession of the secured assets:
36.1.(i) The first method would be where the secured creditor gives the requisite notice under Rule 8(1) and where he does not meet with any resistance. In that case, the authorised officer will proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realise the amounts that are claimed by the secured creditor.
36.2.(ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under Rule 8(1) is given. In that case he will take recourse to the mechanism provided under Section 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinise the application as provided in Section 14, and then if satisfied, appoint an officer subordinate to him as provided under Section 14(1-A) to take possession of the assets and documents. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.Page 28 of 38 C/SCA/11181/2014 ORDER
36.3.(iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly under Section 14 of the Act. The Magistrate will thereafter scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under clause 36.2(ii) above.
36.4.In any of the three situations above, after the possession is handed over to the secured creditor, the subsequent specified provisions of Rule 8 concerning the preservation, valuation and sale of the secured assets, and other subsequent rules from the Security Interest (Enforcement) Rules, 2002, shall apply."
14. The facts of the case are required to be examined in the context of the above referred statutory provisions. A perusal of the record of the case reveals that the respondent bank had issued notice dated 16th December, 2013 to the petitioners under section 13(2) of the Act. In response to the said notice, the petitioners filed a representation/objection dated 15th February, 2014, which was not responded to by the respondent bank. However, subsequently by a communication dated 11th March, 2014, the petitioners were informed with reference to their letter dated 10th March, 2014 that they had requested for grant of time for making payment of their outstanding dues up to 30th April, 2014 and that their request for seeking time was not acceptable to the bank and is rejected. It is the case of the respondent bank that the communication dated 11th March, 2014 satisfies the requirements of sub-section (3A) of section 13 of the Act, inasmuch as, the respondent bank has conveyed to the petitioners that the request for time is not acceptable to the respondent bank. In this regard, a perusal of the communication dated 11th March, 2014 reveals that the same Page 29 of 38 C/SCA/11181/2014 ORDER is with reference to a letter dated 10th March, 2014 of the petitioners and not in connection with the representation/objection dated 15th February, 2014 made by the petitioners pursuant to the statutory notice issued by the respondent bank under section 13(2) of the Act. Besides, even if, for the sake of argument, it were to be accepted that the said communication is in response to the representation/objections raised by the petitioners, the same does not communicate any reasons as to why the representation/objections have not been accepted by the bank.
Clearly therefore, the mandatory provisions of sub-section (3A) of section 13 of the Act have not been complied with.
15. The next contention raised on behalf of the petitioners is that the application made by the respondent Bank under section 14 of the Act does not meet with the requirements of the first proviso to sub-section (1) of section
14. It may therefore be germane to refer to the provisions of sub-section (1) of section 14 of the Act, which reads thus:
14. Chief Metropolitan Magistrate or District Magis-
trate to assist secured creditor in taking possession of secured asset.--(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other docu- ments relating thereto may be situated or found, to take pos- session thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such re- quest being made to him--
(a) take possession of such asset and documents relating thereto; and Page 30 of 38 C/SCA/11181/2014 ORDER
(b) forward such asset and documents to the secured creditor:
Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that--
(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;
(ii) the borrower has created security interest over vari-
ous properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;
(iii) the borrower has created security interest over vari- ous properties giving the details of properties referred to in sub-clause (ii) above;
(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;
(v) consequent upon such default in repayment of the fin- ancial assistance the account of the borrower has been clas- sified as a non-performing asset;
(vi) affirming that the period of sixty days notice as re- quired by the provisions of sub-section (2) of Section 13, de- manding payment of the defaulted financial assistance has been served on the borrower;
(vii) the objection or representation in reply to the notice received from the borrower has been considered by the se- cured creditor and reasons for non-acceptance of such ob- jection or representation had been communicated to the borrower;
(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Au- thorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of Section 13 read with Section 14 of the principal Act;
(ix) that the provisions of this Act and the rules made thereunder had been complied with:
Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Met- ropolitan Magistrate, as the case may be, shall after satisfy- ing the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets:Page 31 of 38 C/SCA/11181/2014 ORDER
Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metro- politan Magistrate, as the case may be, on the date of com- mencement of this Act.
16. The contention raised on behalf of the petitioners is that the provisions of clause (vii) of the first proviso to sub-sec-
tion (1) of section 14 of the Act viz. the objection or represent- ation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non- acceptance of such objection or representation had been com- municated to the borrower have not been complied with. It may, therefore, necessary to examine the contents of the ap- plication made by the respondent Bank under section 14 of the Act. A perusal of the application made by the respondent bank under section 14 of the Act reveals that the averments with re- gard to the response to the notice issued under section 13(2) are made in paragraph 13 thereof. It is stated therein that the petitioners herein by the common letter dated 15th February, 2014 replied to the notice of the bank dated 16 th December, 2013 seeking time up to 30 th April, 2014 for making payment of outstanding dues to the bank. The bank vide its letters dated 11th March, 2014 rejected the said request and called upon the petitioners to make payment of the outstanding dues within three days from receipt of the said letter dated 11 th March, 2014. It is further stated therein that a copy of the courier run sheet showing delivery of the aforesaid letters are annexed. However, there is no averment to the effect that the copy of the letter dated 11th March, 2014 is annexed along with the application. Thus, the said letter does not appear to have been produced on record. On a plain reading of the contents of Page 32 of 38 C/SCA/11181/2014 ORDER the application under section 14 of the Act, it is apparent that there is no averment therein to the effect that the objection/representation in reply to the notice received from the borrower (the petitioners herein) has been considered by the secured creditor (the respondent bank) and reasons for non-acceptance of such objection/representation has been communicated to the borrower. Therefore, the application made by the respondent bank clearly does not meet with the requirements of the proviso to sub-section (1) of section 14 of the Act.
17. The next contention raised on behalf of the petitioners is that the Additional District Magistrate had not recorded satisfaction regarding the contents of the affidavit as required under the second proviso to section 14(1) of the Act before passing the order for the purpose of taking possession of the secured assets. In this regard, a perusal of the impugned order, a copy whereof has been produced on record by the learned counsel for the respondent bank, reveals that all that is stated therein is that the respondent bank has, by a proposal dated 26th June, 2014, asked for security so as to take possession of the properties which have been given by way of security to the respondent bank by the petitioners herein. In the second paragraph, it has been stated that in view of the letter dated 3rd March, 2007 of the Revenue Department of the State Government, as well as under the provisions of section 14 of the Act, it is requested that the concerned police station be instructed to provide necessary police assistance to the respondent bank. Thus, on a plain reading of the above referred order, it is apparent that there is nothing therein to indicate that the Additional District Magistrate has applied his Page 33 of 38 C/SCA/11181/2014 ORDER mind to the factors indicated in the proviso to sub-section (1) of section 14 of the Act. The second proviso to sub-section (1) of section 14 provides that on receipt of the affidavit from the authorised officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit, pass suitable orders for the purpose of taking possession of the secured assets. The Supreme Court in the case of Standard Chartered Bank v. V. Noble Kumar (supra) has observed that the satisfaction of the Magistrate contemplated under the second proviso to section 14(1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in an affidavit but not the legal niceties of the transaction. It is only after recording his satisfaction, that the Magistrate can pass appropriate orders regarding taking possession of the secured assets. In the present case, no satisfaction as required under the second proviso to sub-section (1) of section 14 has been recorded by the learned Additional District Magistrate. Not only has such satisfaction not been recorded but in the light of the facts noted hereinabove, it was not possible for him to record such satisfaction as the necessary averments as required under the first proviso to section 14(1) are clearly missing. As noticed earlier, the letter dated 11th March, 2014 does not appear to have been produced along with the application under section 14 of the Act, and consequently, the Additional District Magistrate, does not appear to have an opportunity to examine the contents of the letter dated 11th March, 2014. Besides, as discussed in the preceding paragraphs, the letter dated 11th March, 2014 has not been issued in response to the objection/representation made by the petitioners against the statutory notice under section 13(2) of the Act and hence, Page 34 of 38 C/SCA/11181/2014 ORDER even if such letter were placed on record it was not possible for the Additional District Magistrate to record such satisfaction.
18. On behalf of the respondent bank, it has been contended that if the matter were placed before the Debt Recovery Tribunal, the respondent bank would be in a position to lead evidence to show that it has duly complied with the requirements of sub-section (3A) of section 13 of the Act by indicating the nature of the talks which were going on between the parties. In this regard, it may be noted that the second proviso to section 14 of the Act requires the Additional District Magistrate to record satisfaction in respect of the factual correctness of the assertions made in the affidavit. In the present case, not only does the affidavit not contain the requisite assertions as regards compliance of the provisions of sub-section (3A) of section 13 of the Act, even the communication dated 11th March, 2014 whereby the bank contends that it has turned down the request of the petitioners has not been placed on record. Evidently therefore, the Additional District Magistrate could not have recorded any satisfaction as regards due compliance with the said provisions. Besides, as noticed earlier, a perusal of the communication dated 11th March, 2014 clearly shows that the same has been issued in the context of a communication dated 10th March, 2014 of the petitioners and not in the context of the representation/objections raised by the petitioners pursuant to the notice under sub-section (2) of section 13 of the Act. Hence, in the absence of compliance with the provisions of sub-section (3A) of section 13 of the Act, one fails to understand as to what evidence could be led to prove compliance thereof.
Page 35 of 38 C/SCA/11181/2014 ORDER19. In the light of the above discussion, it is apparent that there is a clear breach of the provisions of sub-section (3A) of section 13 of the Act as well as the first and second proviso to section 14 of the Act.
20. Another notable aspect of the matter is that as is apparent from the facts as noted hereinabove, in respect of an outstanding amount of about Rs.8 crores, the respondent bank has taken possession of the property worth about Rs.30 crores. On behalf of the respondents, it has been pointed out that as per the Valuation Report dated 20 th May, 2011, the value of the first property is Rs.20,33,26,350/- whereas the Forced Sale Value of the property is 25% less than the same i.e. Rs.15,24,94,762/- and the Fair Market Value of the second property is Rs.9,89,82,630/- whereas the Forced Sale Value of the property is 35% less i.e. Rs.6,43,38,709/-. Therefore, the value of the secured assets cannot be said to be more than Rs.30 crores. On behalf of the petitioners, it has been contended that such valuation was made in the year 2011 and hence, the value of the properties in question is far more than Rs.30 crores.
21. Thus, the proportionality of the action of the respondents has also been called in question on the ground that in relation to an outstanding amount of about Rs.8 crores and odd, possession of properties worth about Rs.30 crores has been taken over, which properties are in the nature of a running hotel. Thus, a running business has literally been closed down by resorting to the drastic provisions of the Act, by taking over possession in a manner which is in Page 36 of 38 C/SCA/11181/2014 ORDER contravention of the mandatory provisions of the Act. A contention has also been raised with regard to non-compliance of the observations made by a Division Bench of this court in the case of Consumer Protection and Analytic Committee v. State of Gujarat (supra) wherein the court has expressed the view that whenever an application under section 14 of the Securitisation Act is filed, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, should first affix a notice of taking possession on a conspicuous part of the property in question and should also give a notice to the person who is in actual possession thereof indicating its intention of taking possession after a period of a fortnight. In the present case, prima facie, the above referred observations made by the Division Bench have not been complied with.
22. From the above discussion, it is apparent that the petitioners have made out a prima facie case of breach of the provisions of sub-section (3A) of section 13 as well as the first and second provisos to sub-section (1) of section 14 of the Act. The questions of jurisdiction of the Additional District Magistrate to decide an application under section 14 of the Act as also the proportionality of the action of the respondents also arise for consideration. In these circumstances, this court is of the view that the petitioners have made out a prima facie case for grant of the interim relief as prayed for in the petitions. While it is true that ordinarily the court would not grant mandatory interim relief to a party, however, when circumstances are made out for grant of mandatory relief, it is always permissible for the court to grant such relief even at an interim stage.
Page 37 of 38 C/SCA/11181/2014 ORDER23. In the aforesaid premises, issue rule returnable on 8th September, 2014. By way of interim relief, the respondent bank is directed to forthwith restore the physical possession of the land bearing Survey No.572, 577 and 578 paiki admeasuring 5074 square metres (Plot B) and land bearing Survey No.572, 577 and 578 paiki admeasuring 5074 square metres (Plot A) with superstructure thereon situated at Vapi, Taluka Pardi, District Valsad to the petitioners No.1 and 2 respectively. However, with a view to balance equities, it is directed that the symbolic possession shall remain with the respondent bank. Moreover, with a view to secure the interest of the respondent bank, the petitioners shall deposit a sum of Rs.2 crores with the respondent bank on or before 28 th August, 2014 and a further sum of Rs.1 crore on or before 15 th September, 2014 subject to such further orders that may be passed by this court.
24. At this stage, the learned counsel for the respondent bank has requested that this order be stayed for a period of two weeks from today till 30th August, 2014 so as to enable the Bank to approach the higher forum. The learned advocate for the petitioners has strongly opposed such request. Having regard to the averments made in paragraphs 15 and 16 of the petitions, the court is of the view that staying the order would frustrate the very purpose of granting such relief. The request for stay is, therefore, turned down.
( Harsha Devani, J. ) hki Page 38 of 38