Gujarat High Court
Sangita Wd/O Mukesh Mulchand Sharma vs Reserve Bank Of India (Rbi) & 3 on 4 August, 2015
Author: R.M.Chhaya
Bench: R.M.Chhaya
C/SCA/10726/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 10726 of 2014
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SANGITA WD/O MUKESH MULCHAND SHARMA....Petitioner(s)
Versus
RESERVE BANK OF INDIA (RBI) & 3....Respondent(s)
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Appearance:
MR JITENDRA H SINGH, ADVOCATE for the Petitioner(s) No. 1
MS SM AHUJA, ADVOCATE for the Petitioner(s) No. 1
MR TEJAS P SATTA, ADVOCATE for the Respondent(s) No. 2
MR ANIP A GANDHI, ADVOCATE for the Respondent(s) No. 2
MR DHARMESH V SHAH, ADVOCATE for the Respondent(s) No. 3
MR LALIT M PATEL, ADVOCATE for the Respondent(s) No. 3
MR TIRTHRAJ PANDYA, Assistant Government Pleader for the Respondent(s)
No. 4
NOTICE SERVED BY DS for the Respondent(s) No. 1 , 4
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 04/08/2015
ORAL ORDER
1. Heard Mr. Jitendra H. Singh, learned advocate for the petitioner, Mr. Tejas P. Satta, learned advocate for respondent No.2, Mr. Dharmesh V. Shah, learned advocate for respondent No.3 and Mr. Tirthraj Pandya, learned advocate for respondent No.4. None appears for respondent No.1, though served.
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2. By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs: "(A) Your Lordships may be pleased to admit and allow this petition.
(B) Your Lordships may be pleased to hold and declare that action of the respondents no.2 and 3 in denying the giving of the decision about the written representation submitted by the petitioner about the foreclosure of the loan amount on account of the death of the husband of the petitioner and thereafter filing of the summary suit in the city civil court at Ahmedabad for the recovery of amount and simultaneously taking recourse of section 13 and 14 of the SAFAESI Act as unconstitutional, illegal, improper, arbitrary, unjust harsh and against the provisions of law, just and equity AND After holding and declaring as such, your Lordships will be pleased to quash and set aside the order passed by the District Magistrate, Ahmedabad at Annexure K dated 07072014 in No. DC MAG Securitization/S.R. No.98/13 by issuing suitable writ, order, direction.
(C) Your Lordships will be pleased to direct the respondent No.2 to decide the request representation of the petitioner regarding the foreclosure Page 2 of 41 HC-NIC Page 2 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER of the loan amount on account of the death of the husband of the petitioner (Applicant no.1 in the loan account) who was covered under the personal accident insurance policy by the written assurance of the respondent No.3 itself in the sanction letter at Annexure A. (D) Pending admission and final hearing of the present petition, Your Lordships may be pleased to stay the execution and implementation of the order passed by the District Magistrate on dated 07072014 in No. DC MAG Securitization/S.R. No.98/13 and further Your Lordships may be pleased to restrain the respondent no.2 and 3, their servants, agents by themselves or by engaging unknown persons not to interfere with the occupation and possession of the appellant over the premises being B 44, Utkarsh Bungalows, B/h.
Gangasagar society, I.O.C. Road, Chadkheda, Ahmedabad in the interest of justice."
3. The noteworthy facts which can be culled out from the record of the petition are as under: 3.1 The petitioner and her husband late Shri Mukeshkumar M. Sharma availed home loan of Rs.5,50,000/ from respondent No.3 - Bank and purchased a tenement being B44, Utkarsh Bungalow situated at Chandkheda area of Ahmedabad City. The record indicates that the Page 3 of 41 HC-NIC Page 3 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER said finance facility was accorded by respondent No.3 - Bank on 22.4.2004 and an amount of Rs.5,50,000/ came to be disbursed on 28.4.2004. The record indicates that the husband of the petitioner was working as Assistant Diesel Driver in Western Railways and according to the petitioner, while he was on service Nr. Viramgam in Ahmedabad District, he met with an accident and sustained serious injuries and ultimately, succumbed to those injuries on 31.8.2004. It is the case of the petitioner that after the said incident, the petitioner along with her brothers and father submitted necessary documents as asked for by the Bank authorities, such as FIR, Panchnama etc. and made a request for foreclosure of the loan on the basis of the fact that the husband of the petitioner was extended a personal accident insurance cover. The record indicates that the petitioner has also approached Consumer Dispute Redressal Forum, Ahmedabad by way of Consumer Dispute Complaint No.290 of Page 4 of 41 HC-NIC Page 4 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER 2005 and according to the petitioner, the same is pending. The record of the petition indicates that the respondent - Bank has also filed Summary Suit for recovery of the said amount before the City Civil Court, Ahmedabad being Summary Suit No.1475 of 2006 for recovery of Rs.6,61,667.51 ps. and the said Summary Suit is also pending. The record further indicates that the petitioner has also filed a Regular Civil Suit against the Bank being Regular Civil Suit No.244 of 2013 before the Civil Court at Gandhinagar for permanent injunction against the Bank from dispossessing her from the premises in question. The record indicates that respondent No.3 - Bank has assigned debts including the loan account of the petitioner in favour of respondent No.2. Respondent No.2 has thereafter issued a notice as provided 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") dated Page 5 of 41 HC-NIC Page 5 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER 3.1.2013.
3.2 The record indicates that the said notice was followed by another notice for taking possession dated 23.8.2013. It also transpires from the record that thereafter, respondent No.2 herein filed an application under Section 14 of the Act before the District Magistrate, Ahmedabad and the said application is accepted and allowed by the District Magistrate vide order dated 7.7.2014. It is further the case of the petitioner that the petitioner came to know about the said order only on receipt of the intimation by respondent No.2 on 10.7.2014. On this factual matrix, the petitioner has prayed for the reliefs, as noted hereinabove.
4. In response to the notice issued by this Court, respondent No.3 - Bank as well as respondent No.2 have filed their reply. The petitioner has also filed an additional affidavit as well as rejoinder to the affidavit filed by the Page 6 of 41 HC-NIC Page 6 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER respondents and the petitioner has also filed a further additional affidavit dated 18.6.2015.
5. It requires to be noted that as per the order passed by this Court, the petitioner has deposited an amount of Rs.50,000/ with respondent No.2.
6. Mr. Jitendra H. Singh, learned advocate for the petitioner has contended that as per the sanction letter dated 28.4.2004, the petitioner's husband was given the insurance coverage and therefore, the petitioner is entitled for foreclosure as prayed for. It is further contended that which conditions are applicable are not disclosed by the respondent-
Bank in the transactions and its conditions are hidden conditions which has further prejudiced the interest of the petitioner. It is further contended that even though the husband of the petitioner expired on 31.8.2004, the petitioner has paid EMI till October, 2004. It is contended that the learned Magistrate has Page 7 of 41 HC-NIC Page 7 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER passed the order without proper mental exercise and without application of mind in a casual manner and therefore, the impugned order passed by the District Magistrate under Section 14 of the Act is bad and illegal and deserves to be quashed and set aside. It is further submitted that the Summary Suit is already filed by the respondent Bank on the anticipation that the payment is not made that too, against the dead man knowing fully well that the husband of the petitioner has expired. It is further submitted that the Civil Suit for permanent injunction is filed by the petitioner, wherein the concerned respondent has filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 and the said Suit is pending. It is contended that the respondent - ARCIL has wrongly resorted to the provisions of Section 13(2) of the Act and it has not been stated as to how there is a default committed by the petitioner. It is further submitted that as per the sanction letter, the sanction of loan will Page 8 of 41 HC-NIC Page 8 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER be subject to the said conditions which clearly provide that on final disbursement, the first applicant i.e. late husband of the applicant will also get the benefit of personal accident insurance cover to the extent of principal amount outstanding to the term of the loan as per the applicable conditions. It is asserted by Mr. Singh on the basis of the said condition that the case of the husband of the petitioner is covered by the insurance and therefore, the petitioner cannot be made liable to pay the alleged amount due and payable. It is therefore contended that the petitioner is entitled to foreclosure as prayed for. It is further contended that even though the petitioner has filed a representation asking respondent Nos.2 and 3 in particular to look into the same and pass necessary orders, the same is not adhered to at all and for the best reasons known to it, the same is not even replied. On the basis of the aforesaid contentions, it is contended by Mr. Singh that the petition requires to be Page 9 of 41 HC-NIC Page 9 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER admitted/allowed. Mr. Singh has relied upon the following judgments: [i] Mathew Varghese Vs. M. Amritha Kumar & Ors., reported in (2014) 5 SCC 610.
[ii] J. Rajiv Subramaniyan & Anr. Vs. Pandiyas & Ors. reported in (2014) 5 SCC 651.
[iii]Vasu P. Shetty Vs. Hotel Vandana Palace & Ors.
reported in (2014) 5 SCC 660.
[iv] Mardia Chemicals Ltd. & Ors. Vs. Union of India & Ors. reported in (2004) 4 SCC 311.
[v] Apex Electricals Ltd. & Ors. Vs. I.C.I.C.I. Bank Ltd., reported in 2003 (2) GLR 1785.
[vi] ICICI Bank Vs. Shanti Devi Sharma & Ors.
reported in (2008) 7 SCC 532.
7. Per contra, Mr. Tejas Satta, learned advocate for respondent No.2 has relied upon the affidavitinreply filed by respondent No.2. It is submitted that the present petition is not maintainable and the present petition is filed Page 10 of 41 HC-NIC Page 10 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER only with a view to delay the payment. It is submitted that as on 3.1.2013, an amount of Rs.16,69,578.51 ps. was payable. Mr. Satta has drawn attention of this Court that the petitioner is a coapplicant and therefore, she is equally liable for making payment of the dues of the house loan and the loan was sanctioned in the joint name of late Mr. Mukesh M. Sharma, husband of the petitioner and the present petitioner. It is submitted on behalf of respondent No.2 that time and again, the petitioner has approached different forums to delay the recovery proceedings initiated by respondent No.2. It is submitted that though the petitioner was liable to pay the dues, she has not paid the dues and therefore, respondent No.2 has issued a notice under Section 13(2) of the Act in the proceedings under the Act at that stage and therefore, the present petition is not maintainable. It is therefore contended that the petition is meritless and the same deserves to be dismissed.
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8. Mr. Dharmesh Shah, learned advocate for respondent No.3 has relied upon the affidavit inreply filed in this petition. Relying upon the judgment of the Apex Court in the case of United Bank of India Vs. Satyawati Tondon & Ors.
reported in (2010) 8 SCC 110, it is contended by Mr. Shah that the present petition is not maintainable. It is contended that conditions of personal insurance which are relied upon by the petitioner depended on the conditions as it is clearly provided that the conditions would apply. It is submitted that the said offer was subject to applicable conditions, legal and technical clearance and preinsurance formalities to be complied with by the borrower for issuing a personal accident insurance also and in absence of any such formalities having been undergone, the petitioner cannot contend that the claim of the late husband of the petitioner as applicant No.1 was covered by the personal insurance. It is therefore contended that the impugned order is legal and proper and Page 12 of 41 HC-NIC Page 12 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER no interference is called for by this Court in its extraordinarily jurisdiction under Article 226 of the Constitution of India.
9. It is submitted that as such the petitioner is not entitled for any of the reliefs as prayed for and is not entitled for any foreclosure as prayed for. The petition is thoroughly misconceived and is filed only to delay the proceedings initiated by respondent No.2 under Section 13(2) of the Act. It is contended that the petition deserves to be dismissed with costs.
10. Mr. Tirthraj Pandya, learned Assistant Government Pleader has supported the impugned order and has contended that no interference is called for by this Court in exercise of jurisdiction under Article 226 of the Constitution of India.
11. The contentions raised by the learned advocate for the petitioner that the first applicant i.e. late Shri Mukeshkumar M. Sharma being Page 13 of 41 HC-NIC Page 13 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER first applicant shall get benefit of a free personal accident insurance cover to the extent of principal amount, at the first blush appears to be attractive, but the same is without any basis and substance. The communication dated 22.4.2004, whereby the loan came to be sanctioned provides for the following: "Further, on final disbursement the first applicant of this loan will also benefit from a free personal accident insurance cover, to the extent of principal amount outstanding to the terms of the loan as per the applicable conditions."
12. It is no doubt true that such provision is made in the offer/sanction letter of the Bank.
However, the petitioner has not been able to show that any premium was either paid by the Bank or any amount of premium was debited to the account of the petitioner or of late Shri Mukeshkumar M. Sharma. The said condition of the offer letter is to be read in toto which recites that the said offer is attached with conditions. It is also not the case of the Page 14 of 41 HC-NIC Page 14 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER petitioner that any personal accident insurance policy was issued and therefore, merely because in the offer letter, it is provided that the first applicant will have benefit of personal accident insurance coverage that itself is not an insurance policy and in light of this, therefore, the petitioner cannot claim any foreclosure on such basis. On the contrary, the record of this petition indicates that all conditions were made known to the petitioner as well as the first applicant - her late husband and therefore, the contention raised by the petitioner that the conduct of the Bank is not transparent and that there are hidden conditions deserve to be negatived outright.
This very said offer letter of the Bank clearly exhibits that the home loan facility was granted in joint name of Shri Mukeshkumar M. Sharma as well as the present petitioner - Smt. Sangeeta M. Sharma and hence, the contention raised in the petition that the petitioner is not liable to pay the house loan is contrary to Page 15 of 41 HC-NIC Page 15 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER record and in light of the fact that except the bare recital, there is nothing to show that there was free personal insurance cover. The prayers prayed for in the petition qua foreclosure deserves to be negatived outright and insurance coverage is always by a policy or a declaration and nothing has come on record.
On the contrary, respondent No.3 - Bank has categorically stated that no such coverage was given and the petitioner has not raised any claim for the insurance coverage and therefore, there cannot be any automatic foreclosure because such a provision is made. As far as representation is concerned considering the conduct of the petitioner, it appears that having obtained house loan, no EMI is paid since October, 2004. The record indicates and as pointed out by the learned advocates appearing for the respective parties including the petitioner, that respondent No.2 as a creditor having been assignee of respondent No.3 - Bank has issued notice under Section Page 16 of 41 HC-NIC Page 16 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER 13(2) of the Act and therefore, the petitioner is not entitled to even a discretionary relief in form of a direction to respondent No.3 to consider such representation. It deserves to be noted that respondent Nos.2 and 3 are duty bound to act in accordance with the provisions of the Act. As noted hereinabove, as such no specific contentions are raised challenging the order dated 7.7.2014 passed by the District Magistrate, Ahmedabad under Section 14 of the Act which is also impugned in this petition.
Considering the judgment of the Division Bench of this Court in the case of I.D.B.I. Bank Ltd.
through Authorized Signatory Vs. District Magistrate & Anr., reported in 2011 (2) GLH 12, wherein it has been held that the jurisdiction of the District Magistrate under Section 14 of the Act is very limited and that the District Magistrate is not empowered to decide the question of genuinity and propriety of the documents agreed between the borrower and the secured creditor. Even considering the ratio Page 17 of 41 HC-NIC Page 17 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER laid down by the Apex Court in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited & Ors., reported in (2014) 6 SCC 1, the provision of Section 14 of the Act is only an enabling provision to take measure as provided under Section 13(4) of the Act. The contention that the impugned order dated 7.7.2014 passed by the District Magistrate in a casual manner and without any mental exercise is misconceived contention. Considering the facts of this case, the home loan came to be sanctioned on 22.4.2004 and since October, 2004, nothing is paid which shows that EMI only for 7 months have been paid by the petitioner who also happens to be a joint applicant. Filing of a Summary Suit or filing of a Suit by the petitioner would in no manner eclipse the jurisdiction of the District Magistrate under Section 14 of the Act and the facts which are on record of this case cumulatively exhibit that the loan which was sanctioned in 2004, has Page 18 of 41 HC-NIC Page 18 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER remained unpaid for 11 years and when the principal creditor and/or its assignee has initiated proceedings of recovery in a legal manner, the same is attempted to be throttled under one pretext or the other. Considering the fact that it is a residential property, this Court also thought it fit to give an opportunity to the petitioner to repay the same and at least show her intention to pay.
However, with pains, this Court records that even such attempt made by this Court has failed and the conduct of the petitioner clearly exhibits that the petitioner does not intend to repay the same. Considering the ratio laid down by the Apex Court in the case of Indian Bank Vs. Blue Jaggers Estates Limited & Ors., reported in (2010) 8 SCC 129, respondent No.3 and its assignee respondent No.2 are in a way trustees of the public fund and are therefore duty bound to initiate recovery proceedings in accordance with law. The petitioner has not been able to point out anything that the impugned order Page 19 of 41 HC-NIC Page 19 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER passed under Section 14 of the Act is in no way erroneous. The contentions raised deserve to be negatived outright. Even at the cost of repetition, it is appropriate to note that the proceedings of recovery has reached at the stage of notice under Section 13(2) of the Act or an order under Section 14 of the Act which is impugned in this petition. Respondent No.2 as assignee of respondent No.3 the principal creditor is yet to take any further measure as provided under subsection (4) of Section 13 of the Act.
13. The petitioner has relied upon the observations made by the Apex Court in the case of Mathew Varghese (supra), wherein the Apex Court has observed thus: "29.2 When we analyse in depth the stipulations contained in the said subsection (8), we find that there is a valuable right recognised and asserted in favour of the borrower, who is the owner of the secured asset and who is extended an opportunity to take all efforts to stop the sale or transfer till the last minute before which the said sale or transfer is to Page 20 of 41 HC-NIC Page 20 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER be effected. Having regard to such a valuable right of a debtor having been embedded in the said sub section, it will have to be stated in uncontroverted terms that the said provision has been engrafted in the SARFAESI Act primarily with a view to protect the rights of a borrower, inasmuch as, such an ownership right is a constitutional right protected under Article 300A of the Constitution, which mandates that no person shall be deprived of his property save by authority of law."
With respect, the said stage has not reached as far as the recovery proceedings are concerned and therefore, the same is not applicable in the present case.
14. Similarly, the petitioner has relied upon the case of J. Rajiv Subramaniyan (supra) and more particularly Paragraph 18, wherein the Apex Court has observed thus: "18. It must be emphasised that generally proceedings under the SARFAESI Act, 2002 against the borrowers are initiated only when the borrower is in dire straits. The provisions of the SARFAESI Act, 2002 and the 2002 Rules have been enacted to ensure that the secured asset is not sold for a song. It is expected that all the banks and financial Page 21 of 41 HC-NIC Page 21 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER institutions which resort to the extreme measures under the SARFAESI Act, 2002 for sale of the secured assets to ensure that such sale of the asset provides maximum benefit to the borrower by the sale of such asset. Therefore, the secured creditors are expected to take bona fide measures to ensure that there is maximum yield from such secured assets for the borrowers. In the present case, Mr Dhruv Mehta has pointed out that sale consideration is only Rs.10,000 over the reserve price whereas the property was worth much more. It is not necessary for us to go into this question as, in our opinion, the sale is null and void being in violation of the provision of Section 13 of the SARFAESI Act, 2002 and Rules 8 and 9 of the 2002 Rules."
The said stage has not reached and therefore, there is no question that the secured asset is attempted to be sold for a song by the principal creditor or its assignee.
15. The petitioner has also relied upon the observations made by the Apex Court in the case of Vasu p. Shetty (supra), wherein in Paragraph 24, the Hon'ble Supreme Court has observed thus: Page 22 of 41 HC-NIC Page 22 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER "24. The moot question is, even if there were delaying tactics adopted by the borrower in respect of the first two auctions, whether that conduct of the borrower would amount to waiving the mandatory requirement of publishing subsequent notice dated 27.4.2006 fixing the date of auction as 8.5.2006? Our answer has to be in the negative. The aforesaid conduct cannot be taken as waiver of the mandatory condition of 30 days' notice for auction as well as other requirements. For examining the plea of waiver, we will have to see as to whether by implied or express actions, the borrower has waived the aforesaid mandatory requirement when the property was put to sale. We do not find, nor is it suggested, even the slightest move on the part of the borrower in this regard which may amount to waiver either express or implied. On the contrary, when notice dated 27.4.2006 was published, the borrower immediately filed Writ Petition No.6471 of 2006 challenging the auctionnotice. Thus, its conduct, far from waiving the aforesaid requirement, was to confront the Bank by questioning its validity. It is a different matter that it had to withdraw the said writ petition in view of availability of alternate remedy. Immediately, it filed an application under Section 18 of the SARFAESI Act. There is, thus, not even an iota of material suggesting any waiver on the part of the borrower."
The aforesaid judgment is not applicable in the Page 23 of 41 HC-NIC Page 23 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER facts of this case as the said stage has not been reached.
16. The petitioner has relied upon the case of Mardia Chemicals Ltd. (supra), reported in (2004) 4 SCC 311 = LAWS (SC) 2004460. It may be noted that the petitioner has relied upon Paragraphs 21 and 22 of the judgment reported in LAWS (SC) 2004460 which are equivalent to Paragraphs 46 to 49, as reported in (2004) 4 SCC 311, wherein the Apex Court has observed thus: "46. We are holding that it is necessary to communicate the reasons for not accepting the objections raised by the borrower in reply to notice under Section 13(2) of the Act more particularly for the reason that normally in the event of noncompliance with notice, the party giving notice approaches the court to seek redressal but in the present case, in view of Section 13 (1) of the Act the creditor is empowered to enforce the security himself without intervention of the Court. Therefore, it goes with logic and reason that he may be checked to communicate the reason for not accepting the objections, if raised and before he takes the measures like taking over possession of the secured assets etc. Page 24 of 41 HC-NIC Page 24 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER
47. This will also be in keeping with the concept of right to know and lender's liability of fairness to keep the borrower informed particularly the developments immediately before taking measures under subsection (4) of Section 13 of the Act. It will also cater the cause of transparency and not secrecy and shall be conducive in building an atmosphere of confidence and healthy commercial practice. Such a duty, in the circumstances of the case and the provisions is inherent under Section 13(2) of the Act.
48. The next safeguard available to a secured borrower within the framework of the Act is to approach the Debt Recovery Tribunal under Section 17 of the Act. Such a right accrues only after measures are taken under sub section (1) of Section 13 of the Act.
49. On behalf of one of the respondents Shri Andhyarujina submitted that as a matter of fact Section 13 of the Act leaves more scope and provides wider protection to the borrower as compared to in the case of English mortgage and in connection with the above submission it has been pointed out that in case of an English mortgage there is no scope of intervention of the court unless a case is made out before the court that action of the mortgagee is fraudulent or it is a case of the like nature. Otherwise as provided under subsection (3) of Section 69 a mortgagor shall only be entitled to the damages for the wrongful or irregular sale of the property.
Page 25 of 41HC-NIC Page 25 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER Whereas, it is submitted, under the Securitisation rules it is provided that before putting the property on sale the authorized officer has to obtain the valuation of immovable property, a reserved price is to be fixed and a notice of 30 days before sale is to be served on the borrower. In this connection, Rule 9, the relevant rule, of the Security Interest (Enforcement) Rules, 2002 is quoted :
"9. Time of sale, issues of sale certificate and delivery of possession, etc. (1) No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to subrule (6) or notice of sale has been served to the borrower.
(2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor:
xxx xxx xxx (3) to 10) xxx xxx xxx"
Therefore, during this period which would be in all more than 60 days it would be open for a borrower to approach the Debt Recovery Tribunal and file a petition for any appropriate relief and if a case is so made out, he can even get a relief of stay, in exercise of ancillary Page 26 of 41 HC-NIC Page 26 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER power which vest in the Tribunal as per decisions referred and reported in 1969 (2) SCR p.65, in terms of vs. Mohd.Kunhi and 1999 (6) SCC p.755, Allahabad Bank, Calcutta Vs. Radha Krishna Maity & Ors. Again referring to Section 19 of the Act it is pointed out that in case in the end the Tribunal finds that the secured assets have been wrongfully transferred or taken possession of an order for return of such assets can be passed and the borrower in that even shall also be entitled to compensation."
In facts of the present case, respondent No.2 as assignee of respondent No.3 - principal creditor has given a notice under Section 13(2) of the Act on 3.1.2013. As such there is nothing on record to show that the petitioner has filed any objection to the notice under Section 13(2) of the Act and therefore, in absence of any objection, the principles enunciated by the Apex Court in the case of Mardia Chemicals Ltd. (supra) will have no application.
17. The petitioner has also relied upon the case of Shanti Devi Sharma (supra), reported in (2008) Page 27 of 41 HC-NIC Page 27 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER 7 SCC 532 = LAWS (SC) 20085197. The petitioner has relied upon Paragraphs 6 and 7 of LAWS (SC) 20085197 which are Paragraphs 12 to 17 of (2008) 7 SCC 532, wherein the Apex Court has observed thus: "12. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI") and the Security Interest (Enforcement) Rules, 2002 ("SIER") framed thereunder provide some of the procedures by which security interests may be recovered. In addition to SARFAESI and SIER, the Reserve Bank of India ("RBI") has promulgated Guidelines on the subject. The RBI Guidelines on Fair Practices Code for Lenders dated 5.5.2003 provides at (v)(c) that: "In the matter of recovery of loans, the lenders should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc."
13. A more comprehensive version of these Guidelines was recently released on April 24, 2008. The Guidelines expressly reference the 5.5.2003 Guidelines at (i)(x) with regard to the methods by which recovery agents collect on security interests. In addition, the April 24, 2008 Guidelines further referred paragraph 6 of the "Code of Bank's Commitment to Customers" (BCSBI Code) pertaining to collection of dues. The BCSBI Code Page 28 of 41 HC-NIC Page 28 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER at para 6 inter alia provides:
"6. All the members of the staff or any person authorized to represent our bank in collection or/and security repossession would follow the guidelines set out below:
1. You would be contacted ordinarily at the place of your choice and in the absence of any specified place at the place of your residence and if unavailable at your residence, at the place of business/occupation.
2.Identity and authority to represent would be made known to you at the first instance.
3. Your privacy would be respected.
4. Interaction with you would be in a civil manner.
5. Normally our representatives will contact you between 0700 hours and 1900 hrs, unless the special circumstances of your business or occupation require otherwise.
6. Your requests to avoid calls at a particular time or at a particular place would be honored as far as possible.
7. Time and number of calls and contents of conversation would be documented.
8. All assistance would be given to resolve disputes or differences regarding dues in a mutually acceptable and in an orderly manner.Page 29 of 41
HC-NIC Page 29 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER
9. During visits to your place for dues collection, decency and decorum would be maintained.
10. Inappropriate occasions such as bereavement in the family or such other calamitous occasions would be avoided for making calls/visits to collect dues.
14. As noted above, this Code as well as others has been incorporated into the April 24, 2008 Guidelines:
"(ix) A reference is invited to (a) Circular DBOD.Leg.No.BC.104/ 09.07.007 /200203 dated May 5, 2003 regarding Guidelines on Fair Practices Code for Lenders (b) Circular DBOD.No.BP. 40/ 21.04.158/ 200607 dated November 3, 2006 regarding outsourcing of financial services and (c) Master Circular DBOD.FSD.BC.17/ 24.01.011/2007 08 dated July 2, 2007 on Credit Card Operations. Further, a reference is also invited to paragraph 6 of the 'Code of Bank's Commitment to Customers' (BCSBI Code) pertaining to collection of dues. Banks are advised to strictly adhere to the guidelines / code mentioned above during the loan recovery process."
[emphasis supplied].
15. RBI has expressed its concern about the number of litigations filed against the banks in the recent past for engaging recovery agents who have purportedly violated the law. In the letter accompanying its April 24th, 2008 Guidelines on Engagement of Recovery Agents, RBI stated:
Page 30 of 41HC-NIC Page 30 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER "In view of the rise in the number of disputes and litigations against banks for engaging recovery agents in the recent past, it is felt that the adverse publicity would result in serious reputational risk for the banking sector as a whole."
RBI has taken this issue seriously, as evidenced by the penalty that banks could face if they fail to comply with the Guidelines.
16. The relevant portion of the Guidelines formulated by RBI is set out as under:
"3. Banks, as principals, are responsible for the actions of their agents. Hence, they should ensure that their agents engaged for recovery of their dues should strictly adhere to the above guidelines and instructions, including the BCSBI Code, while engaged in the process of recovery of dues.
4. Complaints received by Reserve Bank regarding violation of the above guidelines and adoption of abusive practices followed by banks' recovery agents would be viewed seriously. Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of above guidelines, Reserve Bank may consider extending the period of ban or the area of ban. Similar supervisory action could be attracted when the High Courts or the Supreme Court pass strictures or impose penalties against any bank or its Page 31 of 41 HC-NIC Page 31 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER Directors/ Officers/ agents with regard to policy, practice and procedure related to the recovery process.
5. It is expected that banks would, in the normal course ensure that their employees or agents also adhere to the above guidelines during the loan recovery process."
17. We deem it appropriate to remind the banks and other financial institutions that we live in a civilised country and are governed by the rule of law."
In the facts of this case, it cannot be said that respondent No.2 or respondent No.3 Bank has not adhered to the guidelines of Reserve Bank of India as observed by the Apex Court. On the contrary, the conduct of the petitioner exhibits that every stage, the petitioner has attempted to stall the recovery of public funds which is attempted to be made by the concerned respondents in accordance with law.
18. Similarly, the petitioner has also relied upon the judgment of this Court in the case of Apex Electricals Ltd. reported in 2003 (2) GLR 1785 = LAWS (GJH) 200372. The petitioner has Page 32 of 41 HC-NIC Page 32 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER relied upon Paragraph 24, 26 and 27 of the said judgment as reported in LAWS (GJH) 200372 which are Paragraphs 55 to 60 as reported in 2003 (2) GLR 1785, wherein this Court has observed thus:
55. Further the rights of the bank under Subsections (1), (2), (3), and (4) of Section 13 cannot be read as creating lawlessness situation, but should and must be preserved by maintaining rule of law and not allowing the disturbances of law and order situation. In a given case, the borrower may respect the right of the bank/secured creditor and may also allow the secured creditor or authorised person as per the rules to take possession of secured assets, but such rights of secured creditors cannot be read as giving authority or power to the bank or secured creditor to apply force of muscle power for taking measures under Section 13(4) of the Act. In such circumstances, in a given case, where the secured creditor finds it difficult to take measures under Section 13(4) of the Act against the secured assets, it would be for the secured creditors to resort to the provisions of Section 14 of the present Act by making request in writing to the Chief Metropolitan Magistrate or District Magistrate within whose jurisdiction any such secured assets or such documents relating thereto may be situated or are found to be in possession thereof and the mandate of Section 14 thus Page 33 of 41 HC-NIC Page 33 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER provides that the Chief Metropolitan Magistrate or District Magistrate shall upon such request to take possession of such assets and documents relating thereto and forward such assets and documents to secured creditors and it is only at the stage where the Chief Metropolitan Magistrate or the District Magistrate has to take possession, use of force for getting possession as per Section 14(2), as may be required can be applied.
56. Therefore, the above minimum observance of fair play action and some element of natural justice would be required to be followed on the part of the secured creditor resorting to the remedies provided under Section 13 of the Act for enforcement of the security interest qua secured assets prior to measures under Section 13(4) of the Act and not fullfledged observance of principles of natural justice as sought to be canvassed on behalf of the petitioners as that of giving opportunity of hearing to the borrower by the Bank in every case and as that of passing a speaking order by dealing with each and every aspect of the case or contentions raised by the borrower in reply to the notice.
Reliance was placed by the learned Counsel appearing for the petitioners upon the decision of the Apex Court in the case of "S.K.Bargava v. Collector, Chandigarh and Others" reported in 1998(5) SCC, 170 for contending that principles of natural justice with its full span should be read before the Bank takes action under Section 13(4)_ of the Act. In the case of Page 34 of 41 HC-NIC Page 34 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER "S.K.Bargava"(supra) the Apex Court, in view of the language of Section 3 providing for the words "sum due"
interpreted that no such determination of the "sum dues" cannot be taken place without the notice of the defaulter, whereas such is not the case, nor such language is used by the legislature in the present Act under Subsection (1), (2), (3) and (4) of Section 13 of the Act and, therefore, the reliance placed is illfounded.
57. In any case, what shall be the scope and ambit of the observance of the principles of natural justice would vary from case to case and would depend upon the inbuilt scheme and mechanism under a particular statute. As such, the judicial review of the action of the bank is otherwise provided by the legislature after the measures taken under Section 13(4) of the Act by providing appeal to the DRT and thereafter second appeal to Appellate Tribunal. Such provisions of post action remedy under the law provided by the statute is not unknown to law. Further, as observed earlier, remedy provided under Section 17 of the Act is wide and efficacious, not only for restoration of the possession, but also for awarding compensation and the costs as may be determined by the Tribunal or Appellate Tribunal. When the Act itself provides for inbuilt mechanism for measures to be taken by the secured creditor for enforcement of the security interest and for protecting the rights of the borrower in case the borrower is wrongfully dispossessed, such remedy as provided under the Act as per Section 17, 18, Page 35 of 41 HC-NIC Page 35 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER and 19 of the Act can be said to be an efficacious alternative remedy under the present Act. It is also well settled that normally this Court, while exercising power under Article 226 of the Constitution of India would not entertain a petition by way of selfimposed restriction if there is already an alternative efficacious remedy available to the petitioners.
58. The attempt was made to submit that there is no remedy provided under the Act before bank takes action under Section 13(4) of the Act and, therefore, the petitioners have no option, but to approach this Court by preferring a petition under Article 226 of the Constitution of India. It was also submitted on behalf of the petitioners that in view of Section 34 of the Act, Civil Court has no jurisdiction to entertain any suit and the proceedings in respect to the matter which is empowered under the Act to DRT or Appellate Tribunal and no injunction shall be granted by any Court or authority in respect of any action taken or to be taken in pursuance of power conferred by or under this Act or under the Act of 1993.
59. On behalf of the respondent Banks, more particularly those banks which are not nationalized banks, it was also contended that they are not the instrumentality of the State within the meaning of Article 12 of the Constitution of India and, therefore, the petition under Article 226 of the Constitution of India against such banks which are not nationalized banks cannot be maintained.
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60. It is true that the jurisdiction of Civil Court is expressly ousted by Section 34 of the Act and it is also construed that the legislature has given mandate to any Court or authority not to give injunction in respect of any action to be taken or to be taken in pursuance of the power conferred by or under this Act or under the Act of 1993, but as per the settled legal position, if there is inherent lack of right or power with the bank or secured creditor the action for resorting to the remedy under the alleged right or power under those circumstances can be said to be ultra vires the provisions of the Act. As observed earlier, even if the rights of the secured creditors are read as power conferred by or under this Act, then also what is expected for the secured creditor is only minimum fair play action and not the principles of natural justice as sought to be canvassed on behalf of the petitioners. The scope of Article 226 is wider than that of Article 32 of the Constitution of India. The jurisdiction of Supreme Court under Article 32 can be invoked only if there is a breach of fundamental rights and fundamental rights can only be enforced on those bodies which are covered by Article 12 of the Constitution of India. So far as Article 226 is concerned, the writ can be issued even for the purpose of rights which are not fundamental. As provided under Article 226, writ can be issued to any person and for any other purpose. Therefore, the language Article 226 is in larger and wider terminology. In the case of "Anadi Page 37 of 41 HC-NIC Page 37 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER Mukta Sadguru Shree Muktajeevandas Swami Suvarna Jayanti Mahotsav Smarak Trust & Ors. v. V.R.Rudani & Ors." reported in 1989(2) GLR, 1357 (SC), the Apex Court has held that writ of mandamus under Article 226 of Constitution is not confined to statutory authorities and instrumentalities of the State only, but it can also be issued to any other persons or authority performing public duty and that such duty need not be imposed by the State Government. At para 20, the Apex Court has, in "Anadi Mukta Sadguru"(supra), observed as under:
"20. The term "authority" used in Art. 226, in the context must receive a liberal meaning unlike the term in Art. 12. Article 12 is relevant only for the purpose of enforcement of fundamental rights under Art. 32. Article 226 confers power on the High Courts to issue writs or enforcement of the fundamental rights as well as nonfundamental rights. The words "any person or authority" used in Art. 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body covered is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation owned by the person or authority to the affected party. No matter by what means the duty is imposed, if a positive obligation exists mandamus cannot be denied."Page 38 of 41
HC-NIC Page 38 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER
19. Considering the impugned order passed under Section 14 of the Act and considering the ratio laid down by this Court in the case of I.D.B.I. Bank Ltd. (supra), the District Magistrate, while passing the impugned order, has acted in accordance with law and has passed order as per the provisions of Section 14 of the Act. The facts of the case clearly exhibit that at every stage, there is fair play action and the petitioner is also given an opportunity and in the facts of the case, the petitioner has not been able to establish any case for a writ of mandamus by this Court. In facts of this case therefore, the said judgment of the Apex Electricals Ltd. (supra) is also not applicable.
20. Considering the aforesaid judgments and the reliance placed by the learned advocate for the petitioner, none of the judgments apply to the facts of this case and the petitioner cannot apprehend that while dealing with the recovery proceedings, respondent Nos.2 and 3 shall not Page 39 of 41 HC-NIC Page 39 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER adhere to the binding decisions of the Hon'ble Supreme Court and this Court. It is nothing but an attempt on the part of the petitioner to throw a spanner in the recovery proceedings which are initiated by respondent Nos.2 and 3 in accordance with law.
21. As held by the Apex Court in the case of Harshad Govardhan Sondagar (supra) as per the provisions of Section 34 of the Act, no injunction can be granted by a Civil Court when the secured creditor takes action under Section 13 of the Act or the learned Chief Metropolitan Magistrate or the District Magistrate takes action under Section 14 of the Act.
22. Considering the aforesaid observations and also considering the provisions of Section 34 of the Act, the pendency of the Suit shall have no bearing on the proceedings of recovery. Even otherwise, the Civil Court has not granted any interim relief. The petition therefore is nothing but one more attempt to delay the Page 40 of 41 HC-NIC Page 40 of 41 Created On Tue Aug 11 00:24:45 IST 2015 C/SCA/10726/2014 ORDER recovery proceedings and the same is misconceived and deserves to be dismissed in limine. This Court restrains itself from imposing any cost upon the petitioner considering the facts especially that it is a home loan.
23. Resultantly, the petition is dismissed. Rule discharged. There shall be no order as to costs.
(R.M.CHHAYA, J.) mrp Page 41 of 41 HC-NIC Page 41 of 41 Created On Tue Aug 11 00:24:45 IST 2015