Gujarat High Court
Jamnadas Vishnubhai Patel & 3 vs Cosmos Cooperative Bank Ltd on 9 September, 2016
Author: A.J.Desai
Bench: A.J.Desai
C/SCA/10388/2014 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 10388 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE A.J.DESAI sd/-
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1 Whether Reporters of Local Papers may be allowed to see the No
judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law as to No
the interpretation of the Constitution of India or any order made
thereunder ?
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JAMNADAS VISHNUBHAI PATEL & 3....Petitioner(s)
Versus
COSMOS COOPERATIVE BANK LTD....Respondent(s)
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Appearance:
MR.VISHAL J DAVE, ADVOCATE for the Petitioners.
MR JR DAVE, ADVOCATE for the Petitioners.
MR GM JOSHI, ADVOCATE for the Respondent.
RULE SERVED for the Respondent.
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CORAM: HONOURABLE MR.JUSTICE A.J.DESAI
Date : 09/09/2016
CAV JUDGMENT
1. By way of the present writ petition under Articles 14, 21 and 226 of the Constitution of India, the petitioners, who are Managing Directors/ Directors of one Dinesh Pharmaceuticals Pvt. Ltd., have challenged various actions taken by the respondent Bank - a Multistate Schedule Bank under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Page 1 of 29 HC-NIC Page 1 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT Act,2002 (hereinafter referred to as "SARFAESI Act") including the Notice issued by the respondent bank u/s.13(2) of SARFAESI Act; possession taken away of those properties, which were not mortgaged by the petitioners and thereafter purchasing the property by the respondent bank itself.
By raising several contentions, following prayers have been made by the petitioners:
"23(A) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction declaring the action of the respondent bank in initiating the proceedings under the SARFAESI Act, against the petitioner as void abinitio and ultra virus.
(B) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction declaring the action of the respondent bank of executing a Sale Deed with respect to the petitioner's property in its own favor, pursuant to the actions under SARFAESI Act as void ab initio and ultra virus.
(C) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction, directing Page 2 of 29 HC-NIC Page 2 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT the respondent bank to hand over the vacant and peaceful possession of the petitioners property situated at Moje: Babajipura, Rajmahal Road B Tika No.14/4, city survey no.24/4/A known as Mahavir Colony "Yamunakunj" along with the construction over it and also further be pleased to direct the respondentbank to clear all the statutory dues integrated over the said property of the petitioners.
(D) This Hon'ble Court may be pleased to issue a writ of mandamus or certiorari or writ in nature of mandamus or certiorari or any other writ, order or direction to the respondent bank to compensate the petitioners to the breach of their constitutional right as enriched in Article 300A of the Constitution of India for initiating the proceedings under the SARFAESI Act, against the petitioners.
(E) Pending hearing and the final disposal of the present petition this Hon'ble Court may be pleased to restrain the bank from dealing in any manner with the entire property of the petitioner which has been taken over by the bank under the SARFAESI Act.
(E) Pass any such other and further orders that may be deemed just and proper in the facts Page 3 of 29 HC-NIC Page 3 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT and circumstances of the present case.
23(A) This Hon'ble Court may be pleased to issue writ of mandamus or certiorari or a writ in nature of mandamus or certiorari or any other writ, order or direction declaring action of the respondent bank selling the second, third and fourth floor of the property in question as illegal, untenable and arbitrary and be further pleased to declare that the bank has no right whatsoever to deal with the second, third and fourth floor of the property.
(B) This Hon'ble Court may be pleased to declare null and void the portion of the sale deed whereby the second, third and fourth floor of the property have been conveyed by the bank to itself and direct the bank to release the said property to the petitioners.
(C) This Hon'ble Court may be pleased to declare that the property in question was mortgaged only for securing advance of Rs.50,00,000/ and direct the respondent to adjust only such dues and refund the balance amount recovered by it from sale of the property.
(D) Pending hearing and final disposal of the present petition this Hon'ble Court may be Page 4 of 29 HC-NIC Page 4 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT pleased to restrain the bank from dealing in any manner with the second, third and fourth floor of the property in question and also restrain the bank from dealing with the movable property lying in the second, third and fourth floor of the property in question.
(E) Pass any such other and further orders that may be thought just and proper in the facts and circumstances of the present case."
2. Pursuant to the Notice issued by this Court, the respondent-bank through its Chief Manager has filed an Affidavit-in-reply on 29/10/2015 and has raised several questions of law and disputed facts, which have been pleaded by the petitioners. The petitioners have filed an Affidavit-in- rejoinder in response to the Affidavit-in-reply filed by the respondent bank.
3. The coordinate Bench of this Court, after hearing the learned advocates appearing for the respective parties, issued Rule nisi on 09/03/2015 and fixed the matter for hearing.
4. Brief facts, arise from the record, are as under:
That one Dinesh Pharmaceuticals Pvt. Ltd. had availed Term Loan Facility as well as Bill Discounting Facility from the Unnati Cooperative Bank Ltd. in the year 1998. Against the said loan facilities, all the petitioners gave personal security by mortgaging their personal properties, to Page 5 of 29 HC-NIC Page 5 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT the tune of Rs.50,00,000 (Rupees Fifty Lacs). Over and above this, plant and machinery of the petitioner company was also pledged with the said bank.
4.1 In the year 2006, the said Unnati Co-operative Bank Ltd. got merged with the respondent Cosmos Cooperative Bank Ltd., which is Multistate Schedule Bank.
4.2 After taking over Unnati Co-Operative Bank Ltd., the respondent-bank issued a Notice u/s.13(2) of SARFAESI Act to Dinesh Pharmaceuticals Pvt. Ltd. on 2/11/2006 and asked the petitioners to pay in full and discharge their liabilities to the Bank aggregating Rs.361.63 Lacs within 60 days, failing which, proceedings u/s.13(4) of the said Act, shall be undertaken by the respondent Bank.
4.3 The petitioners had sold the property situated at Nandesari Industrial Estate, mortgaged with the respondent Bank and had deposited an amount of Rs.24 Lacs with the respondent Bank towards part payment of its outstanding dues of Rs.88.10 Lacs, as referred in the said Notice.
4.4 The petitioners made an application to the respondent Bank requesting to accept "One Time Settlement Proposal" and further requested to grant some installments for the payment arrived at "One Time Settlement Proposal".
On 24/05/2010, the respondent bank informed the petitioner company that the request made by the petitioners for "One Time Settlement Proposal" has been sanctioned by the Board of Directors and terms & conditions of restructuring / settlement were incorporated in the said communication.
Page 6 of 29HC-NIC Page 6 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT 4.5 Subsequent to such acceptance of "One Time Settlement Proposal", the petitioner company paid around Rs.54 Lacs to the respondent Bank within a period of one year. However, the business did not work as per the calculation of the petitioners and, hence, the petitioners could not fulfill his commitments as per the "One Time Settlement Proposal". Thereafter, the petitioner company requested the respondent bank to continue "One Time Settlement Scheme". The petitioner company requested the Bank to permit the petitioners to sell the residential properties by a communication dated 14/11/2011, which was replied by the respondent bank on 25/11/2011, permitting the petitioners to sell the same, which was one of the mortgaged properties, on condition that entire sale proceeds of the said residential property should be deposited in the loan accounts of the petitioners with the respondent Bank. Certain conditions were imposed by the respondent bank while permitting the petitioners to sell one of the mortgaged properties. Since the said property could not be sold, the respondent bank on 27/12/2012 informed the petitioners that though a symbolic possession of the immovable property situated at Moje Babajipura Rajmahal Road, B-Tika No.14/4, Survey No.24/4/A, known as Mahavir Colony "Yamjunakunj", taken on 19/03/2007, which was handed over to the Bank Agent, has been terminated and restored the possession of the above mentioned immovable property in presence of two panchas. The petitioner company was also directed to repay the entire Bank's dues and interest as per Demand Notice dated 02/11/2006 within a period of 15 days, failing which, necessary recovery action shall be initiated.
Page 7 of 29HC-NIC Page 7 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT 4.6 Since the dues were not paid, the respondent bank issued a Possession Intimation Notice on 15/01/2013 and thereafter Notice under Rule 8(1) of the Security Interest (Enforcement) Rules,2002 was issued on 28/01/2013. A Notice of Sale of Immovable Property was also issued to the petitioner company on 01/03/2013, wherein details of Immovable property was referred.
4.7 The petitioner company submitted their written objections against the sale of Immovable property, by communication dated 15/03/2013 and informed the respondent Bank that the respondent Bank had illegally taken possession of second, third and fourth floor of the said property, which was never mortgaged with the respondent Bank.
4.8 The respondent Bank thereafter issued a Public Advertisement with regard to sell the property in dispute and tenders/ offerers were invited in sealed cover. Off set price of the said property was decided at Rs.268.43 Lacs. The said advertisement was published in the local daily on 21/02/2013.
Since the respondent did not receive any response from the public with regard to purchase of the disputed property, finally the property was purchased by the respondent bank itself under Rule 9(6) of the said Rules, at the price of Rs.255.00 Lacs.
4.9 Subsequent to the aforesaid purchase by the respondent bank itself, the petitioner company issued certain Page 8 of 29 HC-NIC Page 8 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT Notices. Being aggrieved by and dissatisfied with the aforesaid actions by the respondent bank, the present petition has been filed and above referred prayers have been made by the petitioners.
5. Mr.Vishal J. Dave, learned advocate appearing for the petitioners, has raised following legal contentions:
(1) That the respondent bank is a Multistate Co-
operative Bank, which was not a "Bank" as per the definition of Section 2(c) of the SARFAESI Act, When the Notice u/s.13(2) of the SARFAESI Act was issued by the respondent bank. The Multistate Co-operative Bank is being treated as a "Bank" within the said definition only w.e.f. 15/01/2013, and, therefore, all the actions undertaken by the respondent bank are illegal, null and void and are required to be quashed and set aside.
(2) The petitioners have availed the Term Loan Facility from Unnati Co-operative Bank (a registered "Co- operative Society" under the provisions of Gujarat Co-operative Societies Act,1961). The said Bank was merged with The Cosmos Co-operative Bank Ltd. on 18/06/2006. The said merger has been declared as "illegal" by Division Bench of this Court in the case of Jagdishbhai Ishwarbhai Rochani V/s. Cosmos Co-operative Bank Ltd. and others reported in 2013(1) GLH 477, in which, Division Bench of this Court has relied upon a Circular issued by the Reserve Bank of Page 9 of 29 HC-NIC Page 9 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT India in February,2005 and has held that the Bank has no locus to initiate the proceedings under the SARFAESI Act.
(3) Though the property document submitted by the petitioner company discloses that the ground floor and first floor are being mortgaged, the bank took possession of second, third and fourth floor and sold the entire property including those floors, which were never mortgaged with the respondent bank.
(4) The respondent bank has committed a breach of Rules 8 and 9 of the said Rules and, therefore, entire proceedings undertaken by the respondent bank are required to be declared as null and void and accordingly be quashed and set aside.
6. On the other hand, Mr.G.M.Joshi, learned advocate appearing for the respondent bank raised a preliminary objection that Whether a High Court would be justified in entertaining a writ petition when several question of law and disputed facts have been raised by the petitioners as well as respondent and more particularly when statutory alternative efficacious remedy is available under section 17 of the SARFAESI Act.
7. Mr.Vishal Dave, learned advocate appearing for the petitioners as well as Mr.G.M.Joshi, learned advocate appearing for the respondent bank, have taken me through Page 10 of 29 HC-NIC Page 10 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT various documents produced on the record of the case and several contentions raised either in the petition, Affidavit-in- reply as well as in Affidavit-in-Rejoinder, which in my view can be examined by such authority, which is a statutory one and can go in detailed into all these aspects. Mr.G.M.Joshi, learned advocate in support of his above contention, has taken me through the provisions of SARFAESI Act and particularly provisions of sections 13 and 17 of the SARFAESI Act.
7.1 Mr.Joshi, learned advocate would submit that it is an undisputed fact that the Notice issued by the respondent bank in the year 2006 u/s.13(2) of the Act, has been indirectly challenged in the present petition, which has been filed in the year 2014.
7.2 He would submit that all the proceedings including the proceeding u/s.13(4) of the SARFAESI Act, have been concluded and after taking possession of the property in question as secured creditor and the respondent bank has undertaken recourse available u/s.13(4) of the Act, the petitioners have remedy to file an appeal u/s.17 of the SARFAESI Act.
7.3 He would submit that Debts Recovery Tribunal, which is empowered to hear the appeal, has jurisdiction to consider whether any of the measurements of sub-section (4) of section 13 taken by the secured creditor for enforcement of the security, are in accordance with the provisions of the SARFAESI Act and the Rules made thereunder. He would submit that all the contentions with regard to power of Multi- state cooperative society to issue Notice u/s.13(2) of the Page 11 of 29 HC-NIC Page 11 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT SARFAESI Act, allegedly in breach of Rules 8 and 9, etc. can be examined by the Appellate Authority i.e. Debts Recovery Tribunal and, therefore, when alternative efficacious remedy is available under the statute itself, the court would be slow in entertaining such petition.
He would further submit that even though the matter is admitted and even if Rule nisi is issued, the High Court can ask the petitioner to avail alternative efficacious remedy. In support of his submissions, he has relied upon the decision of the Hon'ble Apex Court rendered in the case of State of Uttar Pradesh and another V/s. Uttar Pradesh Rajya Khanij Vikas Nigam Sangharsh Samiti and others, reported in (2008)12 SCC 675.
7.4 By relying upon a decision rendered by the Hon'ble Apex Court in the case of Kanaiyalal Lalchand Sachdev V/s. State of Maharashtra and others reported in (2011)2 SCC 782, Mr.G.M.Joshi, learned advocate appearing for the respondent would submit that Hon'ble Apex Court has held that when there are disputed facts and when alternative efficacious remedy of appeal u/s.17 of the SARFAESI Act is available, the aggrieved party must avail such remedy and High Court can dismiss such petition by declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution of India. He, therefore, would submit that the petition deserves dismissal on this sole ground.
7.5 Mr.G.M.Joshi, learned advocate appearing for the respondent bank has also raised contention with regard to maintainability of writ petition against the respondent, which Page 12 of 29 HC-NIC Page 12 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT is Multistate Cooperative Society. He would submit that the respondent bank is not a "State" within the meaning of Article 12 of the Constitution of India since there is no control of any Government either financially or administrative and is not dominated by any action of the government.
He would further submit that the dispute between the parties are purely of civil nature and no fundamental rights of the petitioners is breached at the instance of the respondent bank. In support of his submission, he has relied upon the decision rendered in the case of K.K.Saksena V/s. International Commission on Irrigation and Drainage and others reported in (2015)4 SCC 670 and submitted that the petition also deserves dismissal on this ground alone.
8. On the other hand, Mr.Vishal Dave, learned advocate appearing for the petitioners would submit that in numerous decisions, Hon'ble Apex Court has held that when High Court finds palpable injustice is being done, it can exercise the powers under Articles 226 and 227 of the Constitution of India and issue appropriate writ, order or direction to any individuals.
9. Since preliminary objection with regard to availability of alternative efficacious remedy has been raised by the respondent authority, I would like to deal with the same before examining the merits and demerits of the case of either parties.
10. Chapter-III of SARFAESI Act, deals with Enforcement of security interest, creating certain rights in favour of secured creditor as defined in section 2(z d) of the Page 13 of 29 HC-NIC Page 13 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT SARFAESI Act. Section 13(2) empowers a secured creditor to issue a Notice to the borrower to discharge in full his liabilities to the secured creditor. Sub-section (4) of section 13 of the SARFAESI Act describes the measures to recover his secured debt if the borrower fails to discharge his liability in full within the period specified in sub-section (2) of section 13 in response to notice issued under the said provisions.
11. As per section 13(4) of the SARFAESI Act, a secured creditor may take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset and also empowered 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 the secured asset. Certain more provisions have been made in section 13 of the SARFAESI Act the method of adjusting the sale consideration received of an immovable property.
Section 14 of Chapter-III of the SARFAESI Act, empowers a Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. Section 15 of Chapter-III of the SARFAESI Act deals with manner and effect of takeover of management.
12. Section 17 of Chapter-III of the SARFAESI Act, provides Right to appeal to any person (including borrower), if aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, and can make an application to the Debts Recovery Tribunal. Debts Recovery Tribunal has all power to examine the facts and circumstances Page 14 of 29 HC-NIC Page 14 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub- section (4) of section 13 of the SARFAESI Act. For ready reference, Sections 13 and 17 are reproduced hereinbelow:
13. Enforcement of security interest. (1) Notwithstanding anything contained in section 69 or 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 installment thereof, and his account in respect of such debt is classified by the secured creditor as nonperforming 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 subsection (4).
(3) The notice referred to in subsection(2) Page 15 of 29 HC-NIC Page 15 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT 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 nonpayment 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 come to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate [within fifteen days] of receipt of such representation or objection the reasons for nonacceptance 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].
(4) In case the borrower fails to discharge his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more Page 16 of 29 HC-NIC Page 16 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT of the following measures to recover his secured debt, namely;
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;]
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any Page 17 of 29 HC-NIC Page 17 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT of the secured assets from the borrower and from whom any money is due or many become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.
(5) Any payment made by any person referred to in clause (d) of subsection (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.
(5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale.] (5B) Where the secured creditor, referred to in subsection (5A), is declared to be the purchase of the immovable property at any subsequent sale, the amount of purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, Page 18 of 29 HC-NIC Page 18 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT under subsection (4) of section 13.] (6) Any transfer of secured asset after taking possession thereof or take over of management under subsection (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.
(7) Where any action has been taken against a borrower under the provisions of sub section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.
(8) If the dues of the secured creditor Page 19 of 29 HC-NIC Page 19 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.
(9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to subsection (4) unless exercise of such right is agreed upon by the secured creditors representing not less than [sixty per cent.] in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors.
Provided that in the case of company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with th provisions of section 529A of the Companies Act,1956 (1 of 1956):
Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to Page 20 of 29 HC-NIC Page 20 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT realise his security instead of relinquishing his security and proving his debt under proviso to subsection (1) of section 529 of the Companies Act,1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of section 529A of that Act:
Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen's dues in accordance with the provisions of section 529A of the Companies Act,1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with th liquidator:
Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator:
Provided also that the secured creditor shall furnish an undertaking to the Page 21 of 29 HC-NIC Page 21 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT liquidator to pay the balance of the workmen's dues, if any.
Explanation. For the purposes of this sub section,
(a) "record date" means the date agreed upon by the secured creditors representing not less than [sixty per cent.] in value of the amount outstanding on such date;
(b) "amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.
(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.
(11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures Page 22 of 29 HC-NIC Page 22 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT specified in clauses (a) to (d) of sub section (4) in relation to the secured assets under this Act.
(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.
(13) No borrower shall, after receipt of notice referred to in subsection (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.
Right to appeal .(1) Any person (including borrower), aggrieved by any of the measures referred to in sub section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within fortyfive days from the date on which such measures had been taken:
[Provided that different fees may be prescribed for making the application by the borrower and the person other than the Page 23 of 29 HC-NIC Page 23 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT borrower.] [Explanation. For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under subsection (1) of section 17.] (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in subsection (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in subsection (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or Page 24 of 29 HC-NIC Page 24 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in subsection (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under subsection (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under subsection (4) of section 13 to recover his secured debt.
(5) Any application made under subsection (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application;
Page 25 of 29HC-NIC Page 25 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application within the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under subsection (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act,1993 and the rules made thereunder.]"
Page 26 of 29HC-NIC Page 26 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT As per section 17(2) of the SARFAESI Act, the Debts Recovery Tribunal is bound to consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act as well as the Rules made thereunder.
13. In view of above provisions, when the petitioners have raised several legal contentions, in my opinion, all these questions, can be considered by the Tribunal if such application/ appeal is filed by the respondent-borrower. Hon'ble Apex Court in the case of Kanaiyalal Lalchand Sachdev (supra), by relying upon several decisions, dismissed the appeal challenging the judments and orders of the Hon'ble Single Judge as well as Division Bench, refusing to entertain a writ petition on the ground of availability of alternative efficacious remedy u/s.17 of the SARFAESI Act.
14. If the chronology of the events are seen, prima facie, it appears that subsequent to notice issued by the respondent bank in the year 2006, the petitioners deposited an amount in part by selling one of the properties mortgaged with the respondent bank. The petitioner company also agreed for "One Time Settlement Proposal", pursuant to which some amount was paid to the respondent bank.
15. As far as selling the second, third and fourth floor of the property in question is concerned, the respondent bank has raised a contention that the petitioners had deliberately did not submit the correct documents while availing the Term Loan Facility though entire building was in existence and is Page 27 of 29 HC-NIC Page 27 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT being mortgaged including second, third and fourth floor. It is alleged that though 'Raja Chiththi' issued by competent authority to construct all the floors was in existence, the same was not produced by the borrower. Therefore, in my opinion, all these questions can be decided by the Tribunal, which is empowered u/s.17(2) of the SARFAESI Act.
16. As far as alleged breach of rules are concerned, as per section 17(2) of the SARFAESI Act, the Tribunal is bound to deal with all the contentions, which have been raised before this Court and may be raised before Tribunal.
Considering the above aspect, in my opinion, the petitioners have alternative efficacious statutory remedy u/s.17 of the Act and the Tribunal has vast power to deal with all the contentions raised by the petitioner, therefore, in my opinion, the matter deserves dismissal.
It is hereby made clear that this Court has not opined with regard to contentions raised by the petitioners and, therefore, the same would be available with the petitioners if the petitioners file an appeal and challenge the same before the Tribunal.
17. As held by Hon'ble Apex Court in the case of Uttar Pradesh Rajya Khanij Vikas Nigam Sangharsh Samiti and others (supra), though rule nisi is issued, the Court has thought it fit to dismiss the petition on the ground of availability of alternative efficacious remedy.
18. Considering the overall facts and circumstances of the case and considering the ratio laid down by the Hon'ble Apex Court as well as Division Bench of this Court, in my Page 28 of 29 HC-NIC Page 28 of 29 Created On Sat Sep 10 03:07:43 IST 2016 C/SCA/10388/2014 CAV JUDGMENT opinion, this petition deserves to be dismissed and is accordingly dismissed. Since the petition is dismissed on the ground of availability of alternative efficacious remedy, this Court has not dealt with the contention of maintainability of the writ petition against a co-operative bank. Rule is discharged. Ad-interim relief, if any, stands vacated. No order as to costs.
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[A.J.DESAI,J.]
19. On pronouncement of the above judgement, Mr.Vishal J. Dave, learned advocate appearing for the petitioners, requests to extend ad-interim relief, granted earlier, by this Court.
Considering the facts and circumstances of the case, ad-interim relief, granted earlier, is hereby extended for a period of eight weeks from today. Direct service is permitted.
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[A.J.DESAI,J.] *dipti Page 29 of 29 HC-NIC Page 29 of 29 Created On Sat Sep 10 03:07:43 IST 2016