Gujarat High Court
M/S Naitik Gems vs Authorised Officer, Religare Finvest ... on 17 September, 2020
Equivalent citations: AIR 2021 (NOC) 109 (GUJ.), AIRONLINE 2020 GUJ 760
Author: A. C. Rao
Bench: A.C. Rao
C/SCA/9326/2020 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9326 of 2020
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M/S NAITIK GEMS
Versus
AUTHORISED OFFICER, RELIGARE FINVEST LTD.
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Appearance:
Mr. S.S.Paneshara, ld. Advocate for Mr. DHRUVKUMAR S CHAUHAN(8138)
for the Petitioner(s) No. 1,2,3,4
Mr. Vishwas Shah, ld. Advocate (3) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE A.C. RAO
Date : 17/09/2020
ORAL ORDER
1. By way of present petition, the petitioners have challenged the order dated 16.7.2020 passed by the learned Presiding Officer of the Debt Recovery Tribunal -2, (hereinafter referred to as "DRT") Ahmedabad in Securitisation Application No. 200 of 2020. By the said order interim relief was refused by the DRT.
2. It is the case of the petitioners that interim relief is refused without recording any reason. It is contended that action taken under the provisions of Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act 2002 (hereinafter referred to as "SARFESI Act") is ex- facie without jurisdiction and completely illegal. It is contended that the District Magistrate, Botad has ordered for physical possession of the properties of Page 1 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER the petitioners de hors the provisions of the Act and without recording any satisfaction. The main contention of the petitioner is that the Notification dated 5/8/2016 issued by Ministry of Finance, Government of India does not empower respondent to initiate any action under the provision of SARFESI Act.
3. At the time of arguments, learned advocate for the petitioners has drawn the attention of this Court towards 5 different agreements.
4. It is contended that in one of the account the outstanding amount is only Rs. 78,02,000/-. It is vehemently contended that the respondent has clubbed separate loan amount and thereby they enforced unsecured dues against the properties of the petitioners and therefore action is illegal. It is contended that they have not provided any necessary details under Section 13(3) of the SARFESI Act. It is vehemently contended that Tribunal has no jurisdiction and therefore, the respondent is not entitled to take any action under Chapter 3 of the SARFESI Act for enforcement of its alleged security interest over the properties in question and the action of the respondent directly hit by Section 26(D) of the SARFESI Act.
5. In support of his submission, learned advocate for the petitioners has relied upon the judgment in case of Embassy Property Developments Private Limited Page 2 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER Vs. State of Karnataka & others [Civil Appeal No. 9170 of 2019] wherein Hon'ble Apex Court has held that even though there is an alternative remedy while exercising the power under Article 226 of Constitution of India, the High Court can certainly look into that order is passed without jurisdiction. He has also relied upon the judgment of this Court passed by the single judge in Special Civil Application No. 6305 of 2020 wherein, this Court has taken a view that there is no satisfaction recorded by the District Magistrate under the provisions of Section 14 of SARFESI Act and the Tribunal has not discussed about anything. Though the contention was raised before DRT, Notice was issued and ad-interim relief was granted. He has also relied upon the judgment of the Division Bench of this Court in Letters Patent Appeal No. 159 of 2020 and allied matters. While confirming the judgment of the single judge, the Hon'ble Division Bench has observed that :-
"28. The words used in Section 13(3) of the SARFAESI Act are "details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the Secured Creditor." So, the notice under Section 13(2) of the SARFAESI Act has to necessarily contain the details on the above two counts.
29. Insofar as the first part is concerned i.e. regarding the amount payable by the borrowers, if Page 3 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER the intention of the Legislature was only to provide the total outstanding amount or the aggregate amount outstanding and payable by the borrowers, the language would have been different. It would not have been necessary to incorporate Sub-Section (3) in Section 13 of the SARFAESI Act. In Sub-Section (2) of Section 13 of the SARFAESI Act, it is also mentioned that the Secured Creditor may require the borrower by notice in writing to discharge in full his liabilities to the Secured Creditor. The said liabilities would be mentioned in view of the provisions of Sub-Section (2) itself. But, consciously, Sub-Section (3) was incorporated so as to ensure that the details of the amount payable are provided in the notice. Such details would include the relevant calculations made by the Bank under different heads which had become due and payable at the end of the borrower. 30. There is another reason for incorporating Sub- Section (3). Sub-Section 3(A) gives right to the borrower to make a representation or raise an objection against the notice under Sub-Section (2). Unless the borrower has the details of the amounts found due and payable by the Secured Creditor and being demanded as such under a notice under Sub-Section (2), the borrower would not be in a position to make any representation or raise any objection. It is only when the amounts under different heads are provided to the borrower that it could raise objection under any Page 4 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER of the heads where the borrower finds that the amount quantified is not correct. Without there being any details mentioned in the notice, the very purpose of Sub-Section 3(A) would also be lost to a large extent.
6. Per contra, Mr. Vishwas Shah, learned advocate for the respondent has contended that this writ petition is not maintainable. He has contended that the writ petition is barred because there is an alternative remedy available to the present petitioners. He has also contended that the judgment of the Division Bench relied on by the petitioners would not applicable to the facts of the present case, because the case before the Division Bench was after the judgment of the exhausting remedy of the appeal while in present petition, the petitioners have not exhausted remedy of the appeal. He has also contended that the judgment of the Apex Court would not applicable to the facts of the present case because in the said case, the question was of jurisdiction of the NCRT under the Companies Act.
7. He has also relied upon the judgment of the Apex Court in case of Authorized Officer, State Bank of Travancore reported in 2018 (3) SCC 85 wherein, Hon'ble Apex Court has categorically held that:-
"10. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank vs. O.C. Page 5 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER Krishnan and others, (2001) 6 SCC 569, that :-
"6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."
11. In Satyawati Tandon (supra), the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding :-
"43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the Page 6 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
***
55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
12. In Union Bank of India and another vs. Panchanan Subudhi, 2010 (15) SCC 552, further proceedings under Section 13(4) were stayed in the writ jurisdiction subject to deposit of Rs.10,00,000/- leading this Court to observe as follows :
"7. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one-time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act."
13. The same view was reiterated in Kanaiyalal Lalchand Sachdev and others vs. State of Maharashtra and others, 2011 (2) SCC 782 observing:
"23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the Page 7 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER appellants under Section 17 of the Act. 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 any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd.; Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)"
14. In Ikbal (supra), it was observed that the action of the Bank under Section 13(4) of the 'SARFAESI Act' available to challenge by the aggrieved under Section 17 was an efficacious remedy and the institution directly under Article 226 was not sustainable, relying upon Satyawati Tandon (Supra), observing :
"27. No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is 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.
*** 28.......In our view, there was no justification whatsoever for the learned Single Judge to allow the borrower to bypass the efficacious remedy provided to him under Section 17 and invoke the extraordinary jurisdiction in his favour when he had dis-entitled himself for such relief by his conduct. The Single Judge was clearly in error in invoking his extraordinary jurisdiction under Article 226 in light of the peculiar facts indicated above. The Division Bench also erred in affirming the erroneous order of the Single Judge."
15. A similar view was taken in Punjab National Bank and another vs. Imperial Gift House and others, (2013) 14 SCC 622, observing:-
"3. Upon receipt of notice, the respondents filed representation under Section 13(3-A) of the Act, which was rejected. Thereafter, before any further action could be taken under Section 13(4) Page 8 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER of the Act by the Bank, the writ petition was filed before the High Court.
4. In our view, the High Court was not justified in entertaining the writ petition against the notice issued under Section 13(2)of the Act and quashing the proceedings initiated by the Bank."
16. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:-
"46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, 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 (sic will) ultimately prove detrimental to the economy of the Page 9 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER nation.Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, 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, Whirlpool Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order."
17. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference.
18. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd. and Another, 1997 (6) SCC 450, observing :-
"32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops."Page 10 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020 C/SCA/9326/2020 ORDER
19. The impugned orders are therefore contrary to the law laid down by this Court under Article 141 of the Constitution and unsustainable. They are therefore set aside and the appeal is allowed.
8. After considering the rival submissions by both sides and considering the fact that out of 5 agreements with the bank, there is an outstanding amount of more than Rs. 1.00 Crore, the contention raised by the petitioners that outstanding amount is less than Rs. 1.00 Crore and therefore DRT has no jurisdiction, does not find impressive.
9. I am in total agreement with the contention raised by learned advocate for the respondent that there is alternative remedy available to the petitioners and without preferring appeal as provided under the Act, the petitioners cannot directly rush to the High Court. This question is squarely covered in the above referred judgment of Authorized Officer, State Bank of Travancore (supra) of Apex Court.
10. Under the circumstances, I am of the view that this petition is not maintainable and is required to be dismissed.
Hence, the petition stands dismissed. Notice is discharged. Interim relief granted earlier stands vacated forthwith.
(A. C. RAO, J) DIPTI PATEL/SURESH/BINA Page 11 of 11 Downloaded on : Fri Sep 18 23:11:03 IST 2020