Gujarat High Court
Unnati Inorganics Private Limited vs Union Of India Through The Secretary on 22 October, 2020
Author: Sangeeta K. Vishen
Bench: Sangeeta K. Vishen
C/SCA/10779/2020 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10779 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Sd/-
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1 Whether Reporters of Local Papers may be allowed to Yes
see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?
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UNNATI INORGANICS PRIVATE LIMITED
Versus
UNION OF INDIA THROUGH THE SECRETARY
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Appearance:
MR ABHISHEK MANU SINGHVI, SENIOR ADVOCATE WITH
MR NACHIKET A DAVE, ADVOCATE AND MR AMIT BHANDARI,
ADVOCATE for the Petitioner(s) No. 1
for the Respondent(s) No. 1
MR SIDDHARTHA SAMAL(3089) for the Respondent(s) No. 2
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CORAM: HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 22/10/2020
CAV JUDGMENT
1. By this petition, inter alia, under Article 226 of the Constitution of India, the petitioner has prayed the following main reliefs:
"a) Issue a Writ of Mandamus or any other Writ, Order or Direction in the nature of Mandamus as this Hon'ble Court may deem fit in the facts and circumstances of the case and direct the Respondent to consider and pass order on the One Time Settlement proposals put forward by the Petitioner in accordance with the norms and procedure Page 1 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT laid down in this regard in a time bound manner.
b) Issue a Writ of Mandamus or any other Writ, Order or Direction in the nature of Mandamus as this Hon'ble Court may deem fit in the facts and circumstances of the case and direct the Respondent Bank act in compliance with the mandate of Circulars dated 04.05.2009 and 17.03.2016 and Rule 9 of the Securitization Interest (Enforcement) Rules 2002 in a time bound and transparent manner;"
2. Facts, being discernible from the petition, are as under.
2.1 The petitioner is a private limited company incorporated as per the Companies Act, 1956 having its registered office Bhavnagar. It is a Micro Small Medium Enterprise (hereinafter referred to as 'MSME') engaged in the production / manufacture of specialised silica in its factory. At the time of formation of the petitioner, one M/s. Madhu Silica Private Limited was the undisputed leader in silica manufacture and trade in India and abroad. However, with the entry of the petitioner, M/s. Madhu Silica Private Limited's standing in the silica market was threatened. The petitioner was approached by Tata Chemicals Limited to develop / produce specialised silica for ultimate sale of its customers. The Tata Chemicals Limited entered into a business transfer agreement for purchase of the petitioner's business with a plan to scale it up through infusion of Rs.292 crore in the business of specialised silica.
2.2 On 2.6.2014, the petitioner availed of a fully secured term loan of Rs.14.5 crore from the respondent Bank for which, the petitioner gave its assets as collateral securities towards the said term loan sanctioned by the respondent Bank wherein the repayment period was 84 months, i.e. 7 years. The petitioner, between April 2014 and September 2017, was making regular payment of its EMI towards the term loan. By 29.9.2017, the petitioner had paid to the respondent Bank an aggregate sum of Rs.5,71,69,465/- (Rs.488 lakh towards interest and Rs.83 lakh towards principal). In August 2017, Tata Chemicals Limited terminated the business transfer agreement with the petitioner. Soon after Page 2 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT termination, the petitioner wrote letters dated 18.8.2017 and 18.9.2017 to the respondent Bank as regards the challenges of dealing with the sudden and unexpected situation.
2.3 The petitioner, vide its detailed note dated 25.10.2017, outlined various aspects including the aspect of last ditch attempts to discharge respondent Bank liabilities. The petitioner, vide the said letter, requested the respondent Bank to release the collateral security immediately in its favour to help to extinguish the bank's dues at the earliest on the ground that early action will help the petitioner to identify buyers at optimum prices, prevent distress sale and to prevent erosion of value that may otherwise happen in delayed action for sale of collateral. It has also been stated that one-time settlement (hereinafter referred to as 'OTS') be sanctioned.
2.4 According to petitioner, the respondent Bank did not respond to the said communication and on 26.10.2017, it declared the account of the petitioner as non-performing assets (hereinafter referred to as 'NPA') even though the sums due to the respondent Bank were being paid on regular basis till September 2017. Owing to lack of response, it kept querying the respondent Bank as to why the communication dated 25.10.2017 was not responded. The respondent Bank reverted saying that the said communication was before the account had turned NPA and the policy of the respondent Bank does not provide for sale of assets of a non-NPA. The petitioner reiterated its request to the respondent Bank to resolve the issue and offered to repay the dues through OTS vide letter dated 3.11.2017.
2.5 On 27.12.2017, the respondent Bank issued a notice under sub- section (2) of Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereinafter referred to as 'the SARFAESI Act'). Vide letter dated Page 3 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT 26.2.2018, the petitioner responded to the notice issued by the respondent Bank, inter alia, requesting that non-use collateral security could be sold by the petitioner with the cooperation of the respondent Bank so as to reduce the debt. Vide letter dated 12.3.2018, the respondent Bank, according to the petitioner, in contravention and blatant disregard of the policies of the government and circulars of Reserve Bank of India and without consideration of the submissions of the petitioner, reiterated its wrongful act of classifying the petitioner's account as NPA on 26.10.2017.
2.6 The petitioner, vide its letter dated 22.9.2018 addressed to the respondent Bank, offered to settle the liabilities by selling of the collateral security to get a good price and also offered various plans for paying of its debt. The respondent Bank, vide its reply dated 11.10.2018, rejected the request of the petitioner for OTS at Rs.9 crore. The petitioner, vide its letters dated 10.10.2018, 22.10.2018 and 26.12.2018, reiterated its request for OTS. The respondent Bank issued a sale notice dated 28.12.2018 for the sale of immovable assets under the SARFAESI Act for recovery of Rs.17,83,69,926.10. According to the petitioner, though the initial liability of sum of Rs.15.17 crore (as on 25.10.2017), of which only a sum of Rs.2.19 crore was shown as overdue, the demand was raised for payment of Rs.17,83,69,926.10 as per two sale notices dated 28.12.2018 issued by the respondent Bank for immovable and movable properties.
2.7 The respondent Bank addressed a letter dated 9.1.2019 to the petitioner rejecting the offer of OTS on the ground of it being very meagre. The petitioner was asked to furnish a workable proposal for consideration of the respondent Bank. The respondent Bank in the interregnum filed an original application being OA No.1477 of 2018 before the Debts Recovery Tribunal-II, Ahmedabad and the Tribunal had issued a notice dated 12.12.2018 of the same to the petitioner. The Page 4 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT respondent Bank continued to harass the petitioner into paying the entire loan with interest instead of OTS; it made an application under Section 14 of the SARFAESI Act to the learned District Magistrate, Bharuch for taking possession of the properties, which came to be allowed.
2.8 Being aggrieved by issuance of the sale notice by the respondent Bank, the petitioner preferred Securitisation Application No.57 of 2019 before the learned Presiding Officer, Debts Recovery Tribunal-II, Ahmedabad on various grounds set out in the said application, including but not limited to the fact that the proposal for OTS was pending before the respondent Bank and under the circumstances it was not legitimate to auction the properties of the petitioner. The learned Presiding Officer, Debts Recovery Tribunal-II, vide an order dated 13.8.2019, disposed of the same with a direction that the OTS put forward by the petitioner ought to be considered sympathetically by the respondent Bank, as per banking norms and procedure.
2.9 In the interregnum, the petitioner liaised with the respondent Bank so as to reduce its liabilities and sold two properties which were charged with the respondent Bank, both sums were credited against the dues of the petitioner with the respondent Bank. Thus, in addition to the sum of Rs.571 lakh (Rs.5.71 crore already paid through EMIs upto September 2017), a further sum of Rs.553 lakh (Rs.5.53 crore) was paid by the petitioner from the sale of two collaterals. Hence, according to the petitioner, more than 80% of the original demand raised by the respondent Bank on the petitioner stood realised.
2.10 Pursuant to the directions contained in the order dated 13.8.2019 passed in Securitisation Application No.57 of 2019, the petitioner once again renewed its effort to arrive at a settlement with the respondent Bank. Vide e-mail dated 27.1.2020, the petitioner gave a detailed Page 5 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT proposal for settlement of outstanding loan to the respondent Bank. It is the case of the petitioner that it outlined in detail its proposal to settle the sums claimed by the respondent Bank in accordance with RBI guidelines for OTS dues. According to the petitioner, it found an investor with a very good credential to settle the balance outstanding dues of the petitioner with the respondent Bank once an amount is finalised by the respondent Bank.
2.11 The respondent Bank issued an auction notice dated 22.5.2020 for sale of both movable and immovable assets of the petitioner on 29.6.2020. The reserved price was stipulated to be Rs.11.37 crore. The petitioner once again sent an email dated 22.6.2020 to the General Manager, Recovery Branch of the respondent Bank setting out its proposal for OTS and requesting the respondent Bank to give a figure for the purpose of OTS so that the issue can be closed and moneys paid after putting the payment plan in place. According to petitioner on 24.7.2020 and 27.7.2020, right upto two days before the auction of the petitioner's assets secured with the respondent Bank, the petitioner made last ditch efforts of requesting the respondent Bank for OTS totalling a minimum of Rs.14.53 crore even after excluding Rs.571 lakh (Rs.5.71 crore) as EMIs upto 30.9.2017.
2.12 On 29.7.2020, in the auction of the secured assets of the petitioner, the respondent Bank declared sole intending bidder M/s. Atvantic Finechem Private Limited as a successful bidder for price of Rs.11.37 crore which was admittedly not higher than the reserved price of Rs.13.82 crore as well as Rs.14.53 crore offer made by the petitioner under OTS to the respondent Bank. The petitioner issued a letter dated 28.7.2020 and legal notice dated 29.7.2020 to sole intending bidder M/s. Atvantic Finechem Private Limited, bringing to its notice the fact that its offer was not higher than the reserved price stipulated in the auction notice and hence was vitiated rendering the auction void ab Page 6 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT initio and illegal.
2.13 Being aggrieved by the action of the respondent Bank in not implementing the directives issued by the RBI for OTS and the relief packages being implemented by the Government of India for revival of MSME to boost the economy and that the respondent Bank was bent upon selling the very valuable assets of the petitioner for a throw away price; the petitioner has preferred the present writ petition with the aforementioned prayers.
3. The respondent Bank appeared on caveat and has filed its detailed reply. The respondent Bank has, inter alia, raised a preliminary objection as to the maintainability of the writ petition on the ground that there is an alternative efficacious remedy available to the petitioner under Section 17 of the SARFAESI Act. Reliance is placed on several judgments including the judgment of the Apex Court in the case of United Bank of India vs. Satyawati Tondon and others, reported in (2010) 8 SCC 110. It is urged that in view of the alternative efficacious remedy available to the petitioner under SARFAESI Act, the petition does not deserve to be entertained and the same may be dismissed.
3.1 On merits, it is denied that on 26.10.2017, abruptly the account of the petitioner was declared as NPA even though the sums due were being repaid on a regular basis till September 2017. It is stated that before the account of the petitioner was declared as NPA, letters dated 16.10.2017 and 24.10.2017 were issued requiring the petitioner to clear the overdue amount, but the petitioner did not turn up to save the account from slippage. Since the petitioner did not clear the overdue amount, the account was slipped to NPA on 26.10.2017. It is stated that the petitioner did not serve the interest and clear the overdue amount despite repeated reminders and as a result whereof, the account of the petitioner was qualified as NPA as per the guidelines of the Reserve Page 7 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Bank of India.
3.2 While adverting to the OTS offer of the petitioner, it is stated that the OTS offer was not having any concrete OTS offer inasmuch as, it did not stipulate any clear proposal and hence, the respondent Bank left with no option had to issue the demand notice under sub-section (2) of Section 13 of the Act. The respondent Bank could not have accepted the proposal below the book liability plus MCLR plus 1.5% where security value is sufficient to recover the dues of the respondent Bank. It is stated that the petitioner had submitted an offer for Rs.9 crore and the same was not acceptable as per the recovery policy of the respondent Bank. The petitioner was duly informed vide its letter dated 11.10.2018 to the effect that the proposal was not acceptable to the respondent Bank. In fact, the petitioner, except submitting vague offers, had not given any clear offer or OTS proposal. It is stated that the proposal of petitioner dated 14.1.2020 was received through e-mail dated 17.1.2020, which was not acceptable to the respondent Bank and the same was confirmed to the petitioner vide e-mail dated 24.1.2020.
3.3 It is stated that initially, a sale notice dated 25.5.2020 was issued, since no sale took place, another sale notice was published on 9.7.2020 and auction was conducted on 29.7.2020, wherein the subject sale took place. The prospective bidders were at liberty to participate in the auction. The sale notice was served on all the borrowers / guarantors but the petitioner did not challenge the sale notices and reserved price, but it is only when the petitioner came to know that the property has been sold, it approached this Court with a mala fide intention. It is stated that the petitioner is in the habit of obstructing the sale inasmuch as, it used to restrict the prospective bidders to participate in e-auction by giving legal notices and cautioning them from participating in the auction proceedings.
Page 8 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT3.4 So far as the auction sale is concerned, the successful bidder submitted its bid vide letter dated 24.7.2020 and agreed and accepted the terms and conditions of the auction, followed by letter of confirmation of sale dated 30.7.2020, which was promptly accepted and acknowledged. That the successful bidder M/s. Atvantic Finechem Private Limited subsequently, as against bank's confirmation letter, submitted its request letter dated 6.8.2020 for extension of time for payment of remaining 75% of the sale consideration from the last date. If the successful bidder M/s. Atvantic Finechem Private Limited is aggrieved by any of the action of the respondent Bank as alleged by the petitioner, it would be open for M/s. Atvantic Finechem Private Limited to avail its remedy before appropriate court / forum, the petitioner has no right to argue on behalf of the auction purchaser.
3.5 Lastly, it is stated that the respondent Bank was ready to settle the account, but the petitioner did not approach with clean hands to settle the dues and always created hurdle in recovery of the dues. It is stated that so far as the proposals of the petitioner dated 24.7.2020 and 27.7.2020 are concerned, the respondent Bank, vide its reply dated 28.7.2020, suggested to pay minimum realisable amount of Rs.14.35 crore, but the petitioner as usual did not give any acknowledgment / payment of any amount. The petitioner is in the habit of sending the proposal prior to the date of auction to derail the same. The proposal of the petitioner was placed before the secured creditors and on the basis of the decision of the secured creditors, the petitioner was suggested to give offer for Rs.14.35 crore, but the petitioner did not turn up. It is, thus, urged that the petition be dismissed with costs.
4. Dr. Abhishek Manu Singhvi, learned senior advocate assisted by Mr.Nachiket Dave, and Mr.Amit Bhandari learned advocates for the petitioner, submitted that the petitioner is a MSME and most vulnerable. The petitioner availed of a loan of Rs.16.5 crore from the respondent Page 9 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Bank, vide sanction letter dated 2.6.2014 and has paid an amount of Rs.11.24 crore towards principal and interest. Against the principal amount of Rs.14.53 crore, Rs.9.87 crore remains outstanding and payable as of today. In the instant case, the total amount of EMIs paid in 27 months was to the tune of Rs.5.71 crore (principal Rs.83 lakh and interest Rs.488 lakh). It is submitted that the petitioner addressed a letter dated 25.10.2017, inter alia, offering a pre-payment even before the default and that the respondent Bank has not responded to it with acceptance or rejection or a request seeking modification; however, immediately the next day, i.e. on 26.10.2017, the respondent Bank arbitrarily declared the loan account of the petitioner as NPA without there being any occasion other than a pre-payment OTS offer. It is submitted that the declaration of the loan account as NPA within one month of last payment of EMI smacks of mala fide, unreasonable and in the teeth of RBI circular dated 17.3.2016. The respondent Bank has completely overlooked and ignored the fact that the petitioner has been a borrower that has regularly repaid the loan and faced difficulty post September 2017 only because the business transfer agreement with Tata Chemicals Limited was terminated.
4.1 It is submitted that as is clear from the term loan agreement, the value of the land and building was to the tune of Rs.21.22 crore in 2014, however, the respondent Bank has fixed the price of collateral security at Rs.11.37 crore which is on a lower side and against the interest of the petitioner. It is submitted that various auctions were held by the respondent Bank. In the first auction, the reserved price was fixed at Rs.14.98 crore and in the second, Rs.12.57 crore and in the third, it came to be further reduced to Rs.11.37 crore. All the three auctions could not materialise and the respondent Bank has lastly issued a sale notice dated 9.7.2020 fixing the reserved price of Rs.11.37 crore. Clearly, the respondent Bank has depreciated the price of the collateral Page 10 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT security from Rs.22 crore to Rs.11.37 crore. The respondent Bank has reduced the reserved price from Rs.14.98 crore to Rs.11.37 crore in a span of one year and is ready to dispose of the securities held by it at a price less than the half of the price at which said collateral was valued at the time when the same was mortgaged with the respondent Bank.
4.2 It is submitted that it ought to have been appreciated that in the auction of collateral, the petitioner has proactively helped realised higher price. However, the respondent Bank on 29.7.2020 proceeded to auction when, the intending bidder M/s. Atvantic Finechem Private Limited was without making any bid, declared as a successor bidder at Rs.11.37 crore. The amount of Rs.11.37 crore was not higher than the reserved price of Rs.11.37 crore and therefore, in terms of sub-rule (2) of Rule 9 of the Securitisation Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Enforcement Rules of 2002'), the said auction could not have proceeded without the consent of the borrower, i.e. the petitioner. The petitioner was not even consulted let alone according consent to the said auction sale and therefore, the auction process is bad in law and deserves to be stayed / set aside.
4.3 As an extension to the aforesaid submission, it is contended that the respondent Bank gladly accepted a diminished amount of Rs.11.37 crore, whereas on a day just before the auction, i.e. on 28.7.2020, the respondent Bank rejected the OTS offer of Rs.14.53 crore given by the petitioner vide letters dated 24.7.2020 and 27.7.2020. It is, thus, clear that the respondent Bank is not at all interested in securing the debts / dues but is rather, for the reasons best known to it, adamant on selling the collaterals at a devalued price and thereby destroying the petitioner. The conduct of the respondent Bank clearly reflects that the respondent Bank is ready to dispose of the property of the company at a loss of more than Rs.3 crore rather than accept the OTS of the petitioner dated 24.7.2020 and 27.7.2020.
Page 11 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT4.4 Reliance is placed on the judgments in case of Ram Kishun and others vs. State of Uttar Pradesh, reported in (2012) 11 SCC 511 to contend that there must be an application of mind by the authority concerned while approving and accepting the report of the approved valuer and fixing the reserved price, as the failure to do so may cause substantial injury to the borrower / guarantor and that would amount to material irregularity and ultimately vitiate the subsequent proceedings. The Apex Court, while considering its various judgments, declared the auction sale as vitiated on the ground of material irregularity in putting the entire property in auction inasmuch as, the land of the appellant therein was sold for an amount three times the amount which was to be recovered. Reference is made to the judgment in the case of Divya Manufacturing Company (P) Limited vs. Union Bank of India, reported in (2000) 6 SCC 69, to contend that even the confirmed sale on the ground of material irregularity or fraud was set aside.
4.5 Further reliance is placed on the judgment in the case of Vasu P. Setty vs. Hotel Vandana Palace, reported in (2014) 5 SCC 660. It is submitted that the Apex Court was dealing with Rule 8 as well as Rule 9 of the Rules of 2002 and referred to the judgment in the case of Sri Siddheshwara Coop. Bank Ltd. vs. Ikbal, (2013) 10 SCC 83, wherein it has been held that the provision is mandatory in nature. The provision in Rule 9(1) being for the benefit of the borrower and the provision contained in Rule 9(3) and 9(4) being for the benefit of the secured creditor (or for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their rights. Even though the rule is mandatory that provision is for the benefit of the borrower.
4.6 While adverting to the aspect of maintainability of the writ petition, it is submitted that the writ jurisdiction under Article 226 is a plenary and discretionary and there cannot be a blanket embargo of the Page 12 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT constitutional remedy only because a statutory alternative remedy exists. Exhaustion of alternative remedy before invoking writ jurisdiction under Article 226 is not a binding rule of procedure, but merely a rule of policy, convenience and discretion.
4.7 Reliance is placed on the judgment in the case of Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai, reported in (1998) 8 SCC 1, to contend that it has been unequivocally held that power to issue prerogative writs under Article 226 is a plenary in nature and is not limited by any other provisions of the Constitution. The power can be exercised by the High Court not only for issuing various writs but also 'for any other purpose'. The Apex Court, while referring to the constitution bench decision in the case of Calcutta Discount Limited vs. ITO Companies Distt. I, observed in para 20 that much water has since flown under the bridge, but there has been no corrosive effect on the decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining the writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction, without any legal foundation. Pertinently, alternative remedy is not to operate as a bar and exceptions have been carved out for entertaining the writ petition despite the availability of the alternative remedy viz. where the writ petition has been filed for enforcement of any fundamental rights or where there has been a violation of principles of natural justice or where the orders or proceedings are wholly without jurisdiction or a vires of an act is challenged.
4.8 Further reliance is placed on the recent judgment in the case of Embassy Property Development Private Limited vs. State of Karnataka and others, reported in 2019 SCC OnLine SC 1542. The issue before Page 13 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT the Apex Court was as to whether the High Court could have interfered under Articles 226 /227 of the Constitution, with the order passed by the National Company Law Tribunal in a proceeding under the Insolvency and Bankruptcy Code, 2016; ignoring the availability of statutory remedy of appeal to the National Company Law Appellate Tribunal and if so, under what circumstances? The Apex Court in para 14 has held and observed that traditionally, the jurisdiction under Article 226 was considered as limited to ensuring that the judicial or a quasi judicial Tribunals or administrative bodies do not exercise their powers in excess of their statutory limits. But in view of the use of the expression 'any person' in Article 226, courts recognised that the jurisdiction of the High Court extended even over a private individuals provided the nature of the duties performed by such private individuals are in public nature. The Apex Court in para 47, while answering the issue, held that since NCLT chose to exercise the jurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the writ petition, on the basis that NCLT was coram non-juris.
4.9 It is submitted that the petitioner has no other equal or efficacious remedy apart from invoking extraordinary jurisdiction of this Court inasmuch as, the petitioner amongst many offers made to the respondent Bank, made the offer to sell some of the collaterals in open market; however, the said offer was dismissed by the respondent Bank. It is submitted that the instrument of OTS by very definition means that the respondent Bank would forgo part due to enable it to secure the maximum possible. In the instant case, the respondent Bank, while considering the OTS offers of the petitioner, insists on full amount including interest, whereas, while auctioning the securities, settles for an amount lower than the latest OTS amount offered by the petitioner, i.e. of Rs.14.53 crore. It is submitted that the petitioner has till date already paid Rs.11.04 crore against the initial principal amount of Page 14 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Rs.14.5 crore. In case the respondent Bank accepts the OTS, the petitioner would end up paying a total amount of Rs.20 crore in a span of three years. Therefore, the petitioner is not technically asking for waiver of complete interest component, in fact, if the offer of the petitioner is accepted, the petitioner would end up paying around more than Rs.6 crore over and above the principal.
4.10 While adverting to the issue of OTS, it is submitted that the Reserve Bank of India has issued circular dated 7.6.2019 and other banks namely, IDFC; Indian Overseas Bank; wherein, the banks have incorporated necessary financial protection in the cases of MSME, inter alia, (i) waiver of extra / penal interest to be a simple solution and can be termed as good settlement; (ii) realising the full outstanding as per the books of the branches plus reasonable interest with effect from the date of NPA or from the date of filing suit; (iii) fully waiver of the interest from the date of advance.
4.11 Dr. Abhishek Manu Singhvi, learned senior advocate, while concluding, submitted that the petitioner is now ready to make goods on its offer of OTS dated 24.7.2020 / 27.7.2020 and it is urged that the respondent Bank be directed to reconsider the said OTS.
5. On the other hand, Mr.Siddharth Samal, learned advocate for the respondent Bank vehemently contended that the writ petition is not maintainable inasmuch as an efficacious alternative remedy is available to the petitioner by virtue of provisions of Section 17 of the SARFAESI Act. Heavy reliance is placed on the judgment in the case of Punjab National Bank vs. O.C. Krishnan and others, reported in (2001) 6 SCC 569, to contend that the Apex Court, while dealing with the issue of maintainability of writ petition under Articles 226 and 227 of the Constitution of India vis-a-vis the provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, has held that the Act has Page 15 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT been enacted with a view to provide a special procedure for recovery of debts due to the banks and financial institutions, with hierarchy of appeal provided in the Act viz. filing of an appeal under Section 20 and this fast track procedure cannot be allowed to be derailed either by taking recourse to the proceedings under Articles 226 and 227 of the Constitution. When there is an alternative remedy available, judicial prudence demands that the court refrains from exercising its jurisdiction under the said constitutional provisions.
5.1 Further reliance is placed on the judgment in the case of United Bank of India vs. Satyawati Tondon, reported in (2010) 8 SCC 110, wherein the Apex Court, while considering the provisions of the SARFAESI Act vis-a-vis the scope of interference, has held that although powers conferred upon the High Court under Article 226 of the Constitution are very wide and there is no express limitation on exercise of that power but at the same time, one cannot be oblivious of the rules of self-imposed restraint evolved by the Supreme Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution of India. It is submitted that in the said case, the High Court entertained the writ petition of the respondent therein and passed and order restraining the bank from taking action in furtherance of the notice issued under sub-section (4) of section 13 of the SARFAESI Act. The Apex Court, while allowing the appeal of the bank, observed that Court must keep in mind that the 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 grievance. 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 statutes. The Act of Page 16 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT 2002 contains a detailed mechanism for redressal of grievance; ignoring the availability of remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the rights of banks and other financial institutions to recover their dues, the High Court will exercise the discretion in such matters with greater caution, care and circumspection.
5.2 While relying upon the judgment in the case of Mukesh Bhavarlal Bhandari vs. UCO Bank, reported in 2016 (2) GLR 1576, it is submitted that the contention raised before the Division Bench of this Court was that an alternative remedy is no bar if the authority had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. The Hon'ble Division Bench, while dismissing the writ petition, has observed and held that statutory alternative efficacious remedy, if seen in the context of objects and reasons and the scheme of RDDB Act, 1993; nothing restricts the appellate Tribunal to consider the ground of lack of jurisdiction or absence of jurisdiction with the DRT and appeal can also be heard on the other issues on merit. While accepting the preliminary objection raised by the bank, the Division Bench did not entertain the writ petition.
5.3 Further reliance is placed on the order in the case of Kankeshwari Agro Private Limited vs. Authorised Officer, Cosmos Cooperative Bank, rendered in Special Civil Application No.14114 of 2017 to contend that this Court, while noting the fact of taking over of possession as well as considering the ratio laid down by the Apex Court in the case of Authorised Officer, State Bank of Travancore vs. Mathew K.C., reported in (2018) 3 SCC 85, did not entertain the writ petition on the ground that the petitioner has an alternative remedy available. Further reliance is placed on the orders in the cases of (i) M/s. Pooja Selection vs. Canara Bank, rendered in Special Civil Application No.13122 of 2018; (ii) Page 17 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Kamal M. Morarka vs. Central Bank of India rendered in Special Civil Application No.11106 of 2018; (iii) Unnati Inorganics Private Limited vs. Canara Bank, rendered in Special Civil Application No.10907 of 2019, to contend that the coordinate benches of this Court, while not entertaining the writ petitions, have relegated the petitioners to avail of the efficacious alternative remedy available to the petitioners therein. Besides, in past, the petitioner itself had filed a Special Civil Application No.10907 of 2019 which was disposed of by this Court vide order dated 25.6.2019 on the ground of availing the alternative remedy, and the petitioner being aware of such remedy available to it, ought not to have preferred the captioned writ petition and therefore, it is urged that the petition be dismissed in limine with heavy costs considering the fact that filing of the writ petition is nothing but gross abuse of process of law. The cost is required to be imposed as the same would work as a deterrent factor.
6. Dr. Abhishek Manu Singhvi, learned senior advocate, in rejoinder, while dealing with the aspect of availability of alternative remedy, submitted that maintainability per se is not a bar and the lack of per se maintainability means that it is a matter of discretion. According to him, there may be the cases of lack of pecuniary jurisdiction and lack of territorial jurisdiction, which are the cases of inherent lack of jurisdiction and the contention of the other side is that of a discretionary non- maintainability as if it is a per se non-maintainability, which is not permissible. Thus it is submitted that firstly, maintainability here is not a per se maintainability. Secondly, lack of per se maintainability means that it is a matter of discretion. Thirdly, it is not a jurisdictional non- maintainability, but it is a discretionary non-maintainability. Fourthly, well-known exception to the maintainability are many. One of the exceptions is that when a person is able to invoke Articles 14 and 19(1)
(g) or for that matter any applicable constitutional article will never be Page 18 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT non-maintainable and that it is difficult to fathom of statutory bar of Article 226, if the violation of Articles 14 and 19(1)(g) is complained of. Next it is contended that there are many facets viz. legal malice, statutory violation, want of jurisdiction etc., if shown, it cannot be said that the petition under Article 226 is not maintainable. In all such eventualities, the writ petition is maintainable and it is impermissible to curtail, inhibit or restrict, directly or indirectly, wide powers of this Hon'ble Court under Article 226 of the Constitution of India. Discretion in a particular case may or may not be exercised. Article 226 is a writ for an exercise of power of extraordinary nature for, the Court possesses an extraordinary power for the reason that it is truly extraordinary and that there cannot be any bar under any statute. Therefore, according to the learned senior counsel, the context of the case is important and is required to be considered and that other side is completely wrong when it raises a preliminary objection as regards maintainability of the writ petition. Counter is filed in the sense of bar under pecuniary jurisdiction and territorial jurisdiction which bars the Civil Court, none of that is relevant for the present purpose. Article 226 maintainability by its very nature is inherently discretionary.
6.1 The case of the petitioner is not that the respondent Bank did not apply Section 13 procedure and the petitioner has not approached this court for such purpose. The principal ground raised by the petitioner is that the respondent Bank should alteast inform the reasons for rejecting the OTS. The rejection or otherwise of OTS will not be able to be appreciated by the appellate authority and it will not hear the petitioner for the same. Non-considering of OTS purely falls within the realm of public remedy for which, only writ petition lies. The issue of non- consideration of OTS touches the question of reasonableness and for which, prayer would lie before this court. The petitioner, has been continuously following up the matter with the respondent Bank with a Page 19 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT request to it to provide the reasons; however, the respondent Bank unequivocally says 'no'. It is submitted that the petitioner approached the respondent Bank on 25.10.2017 and on 26.10.2017, the account of the petitioner was rendered NPA. The respondent Bank required the petitioner to pay the outstanding amount immediately otherwise it cautioned the petitioner that the account will become NPA. The action of the respondent Bank does not pass the test of Article 14 inasmuch as, reasonableness and fairness were lacking in the action of the respondent Bank. Such issues cannot be determined by the appellate authority and it is only this Court which under Article 226 can test the action of the respondent Bank.
6.2 Adverting to latter portion of prayer clause (b) of para 42 of the petition memo it is submitted that if this Court were to come to the conclusion that the action of the respondent Bank is arbitrary, then the petitioner is very much entitled to stay of auction proceedings conducted by the respondent Bank under the provisions of Enforcement Rules of 2002.
6.3 While reiterating the principle laid down in the case of Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors. (supra), it is contented that the Apex Court, has in paragraph 14 observed that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. It is further reiterated that the Apex Court has used the word "plenary" and qualified by the expression "not limited by any other provisions of the Constitution". That the Apex Court has categorically held that alternative remedy has been consistently held not to operate as a bar in at least three contingencies viz. where the writ petition has been filed for enforcement of any fundamental rights or where there has been a violation of principles of natural justice or where the orders or proceedings are wholly without jurisdiction or a vires of an act is Page 20 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT challenged.
6.4 It is submitted that the petitioner would fall in the category of enforcement of the fundamental rights inasmuch as, the petitioner has complained of Article 14. The writ petitions, some may be maintainable and some may not be maintainable and that is how the discretion comes into picture. Under Article 226 of the Constitution, the High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition exercising the extraordinary powers. While further reiterating, emphasis is laid on paragraph 19, to submit that the Apex Court while referring to the case of Calcutta Discount Company Limited vs. Income-Tax Officer, Companies District & Anr. reported in AIR 1961 SC 372 has observed that after the judgment in the case of Calcutta Discount Company Limited vs. Income-Tax Officer, much water has since flown under the bridge, but there has been no corrosive effect on the decisions which, though old continue to hold the field, with the result, that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution of India, in spite of the alternative statutory remedy, is not affected, especially in a case where the authority against whom writ is filed is shown to have had no jurisdiction or it purported to usurp the jurisdiction without any legal foundation.
6.5 Reiterating the submission, it is contended that the judgment in the case of Ram Kishun & Ors. vs. State of U.P. (supra), the Apex Court was dealing with the Debt Recovery law. The Apex Court while dealing with the aspect of valuation and reserve price held that there must be an application of mind by the authority concerned while approving/accepting the report of the approved valuer and fixing the reserve price, as failure to do so may cause substantial injury to the borrower/guarantor and that would amount to material irregularity and ultimately vitiate the subsequent proceedings. It is submitted that Page 21 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT another aspect which was dealt with by the Apex Court was setting aside auction sale after confirmation. The Apex Court while referring to its earlier judgments in the case of (i) Divya Manufacturing Co. (P) Ltd. & Anr. v. Union Bank of India & Ors., AIR 2000 SC 2346; and (ii) FCS Software Solutions Ltd. v. La Medical Devices Ltd. & Ors., (2008) 10 SCC 440 observed that the law as can be summarized, is to the effect that recovery of the public dues must be made strictly in accordance with the procedure prescribed by law. The Apex Court quashed auction sale and all the consequential proceedings on the ground of commission of material irregularity in conducting auction sale.
6.6 Further reliance is placed in the case of ABL International Limited vs. Export Credit Guarantee Corporation of India Limited, reported in (2004) 3 SCC 553 to contend that despite three bars viz. (i) disputed question of facts; (ii) availability of arbitration clause; and (iii) claim being a money decree, the Apex Court entertained the civil appeal. The Apex Court in para 23 has observed and held that once the State or an instrumentality of the State is a party to the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India and if the State or its instrumentality has acted in contravention of the requirement of Article 14, there can be no hesitation in holding that the writ court can issue suitable directions to stay right the arbitrary actions of the authorities. In the present case as the action of the respondent Bank suffers from the vice of reasonableness and fairness, the present writ petition is very much maintainable. In view of the infraction of Article 14, this Court may exercise discretion by quashing and setting aside the action of the respondent Bank. Reference is made to the judgment in the case of A.V. Venketeswaran, Collector of Custom Bombay vs. Ramchand Sobhraj Wadhwani, reported in (1962) 1 SCC 753 as well as the judgment in the case of Calcutta Discount Co. Ltd. vs. Income Tax Page 22 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Officers, Companies District (supra).
6.7 Reliance is placed on the judgment of the Apex Court in the case of Balkrishna Ram vs. Union of India, reported in (2020) 2 SCC 442. It is submitted that the Apex Court in para 14 has observed that the existence of alternative remedy, however, does not mean that the jurisdiction of the High Court is ousted. At the same time, it is a well settled principle that such jurisdiction should not be exercised when there is an alternative remedy available. The rule of alternative remedy is a rule of discretion and not a rule of jurisdiction. Merely because the Court may not exercise its discretion, is not a ground to hold that it has no jurisdiction. There cannot be a blanket ban on the exercise of such jurisdiction because that would effectively mean that the writ court is denuded of its jurisdiction to entertain such a writ petition which is not the law.
6.8 Reliance is also placed on the judgment in the case of Union of India vs. Tantia Construction Private Limited, reported in (2011) 5 SCC
697. It is submitted that the Apex Court in para 33 while describing the width of principle, on the question of maintainability of the writ petition on account of the arbitration clause included in the agreement between the parties, held that there is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court. The Apex Court has observed that injustice whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution. The Apex Court while allowing the appeal in para 7, reiterated the principle laid down by the Apex Court in the case of Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai (supra), wherein it has been held that in spite of availability of alternative remedy, the High Court may still exercise its jurisdiction in at least three contingencies viz. where the writ petition seeks enforcement of any fundamental rights or where there is a violation of principles of natural Page 23 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT justice or where the orders or proceedings are wholly without jurisdiction or a vires of an act is challenged.
6.9 Further reliance is placed on the judgment in the case of State of H.P. & Ors. vs. Gujarat Ambuja Cement Ltd. & Anr. reported in (2005) 6 SCC 499. Strong reliance is placed on para 17 to contend that alternative remedy is a discretionary and never a rule of law inasmuch as, it is contextual and cannot be abstract. The Apex Court has held that availability of alternative remedy has been considered to be a rule of self-imposed limitation and is essentially a rule of policy, convenience and discretion and never a rule of law.
6.10 The judgment in the case of United Bank of India vs. Satyavati Tandon & Ors. (supra) has been distinguished by submitting that the issue before the Apex Court was that the respondents filed a writ petition seeking restraint order against the bank from taking coercive action in pursuance of the notices issued under Section 13(2) and (4) of the SARFAESI Act and the case was neither for the consideration of OTS nor Article 14. The proceedings were taken out by the guarantor, the Apex Court observed that if the issue is with regard to the challenge to sub-section (2) of Section 13 and is of restoration of possession, the same has to be by way of an appeal. It is vehemently submitted that the Apex Court in para 46 has categorically observed that if the petitioner is able to show that its case falls within any of the exceptions carved out in various judgments, then the High Court may after considering all the relevant parameters and public interest pass an appropriate interim order.
6.11 It is submitted that if the petitioner files an appeal and prays for implementing OTS, the appellate court will not hear on the aspect of OTS; it is only the writ court which can hear on OTS inasmuch as, it is a public law remedy. OTS forms general public duty to act fairly under Page 24 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Article 226. The appellate authority will ask the petitioner to point out the error of various sub-sections of section 13. It is submitted that so far as the jurisdiction of the appellate authority is concerned, the aspects, viz. non-service of notice, non-following of the proceedings under the SARFAESI Act etc. would be considered. However, the aspect having an element of Article 14 of the Constitution of India, will not be decided by the appellate authority. Further, the appellate authority cannot even consider the grievance of the petitioner as contained in prayer 42(a) because it is a question of reasonableness in public law remedy. Act does not bother about OTS or no OTS.
6.12 Further distinguishing the judgment in the case of Shree Kankeshwari Agro Pvt. Ltd. vs. Authorised Officer, Cosmos Co- operative Bank Ltd. rendered in Special Civil Application No.14114 of 2017, it is submitted that the prayer was for restoration of the possession. Precisely the challenge before this court was the proceedings under sub-section (2) of Section 13. Accordingly, this court, while referring to the judgment in the case of Authorised Officer, State Bank of Travancore & Ors. vs. Mathew K.C. (supra) did not entertain the writ petition on the ground of alternative remedy available to the petitioner therein.
6.13 While distinguishing the judgments viz. (i) in the case of M/s. Pooja Selection vs. Canara Bank rendered in Special Civil Application No.13122 of 2018; (ii) in the case of Shree Kankeshwari Agro Pvt. Ltd. vs. Authorised Officer, Cosmos Co-operative Bank Ltd. rendered in Special Civil Application No.14114 of 2017; (iii) in the case of Kamal M. Morarka vs. Central Bank of India & Ors. rendered in Special Civil Application No.11106 of 2018; and (iv) Unnati Inorganics Private Limited vs. Canara Bank, rendered in Special Civil Application No.10907 of 2019, cited by learned advocate for the respondent bank, it is contended that in all the orders of this Court, the grievance was of Page 25 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT infraction of the proceedings under section 13 of the SARFAESI Act, so is not the position, in the present case. In the present case, the challenge is to the action of the respondent Bank on the anvil of Article 14, involving the facets of reasonableness and fairness.
6.14 While distinguishing the judgment of this court in the case of Mukesh Bhavarlal Bhandari & Anr. vs. UCO Bank & Anr. (supra) it is submitted that this court in paragraph 7.1 has recorded that the petitioner was not having any immovable or any other properties or assets by which interest of the respondent Bank could have been safeguarded. Further, the petitioner's conduct was not bona fide and a huge outstanding dues to the banks and financial institutions were there. So far as the petitioner is concerned, the petitioner has not defrauded the respondent Bank. It is submitted that it is not fair on the part of the respondent Bank by relying upon this judgment and to paint the petitioner therein and the present petitioner with the same brush.
6.15 Accordingly, it is urged that the judgments cited by the petitioners are the judgments of eastern tributaries of Ganges involving the aspects of public law element i.e. Article 14 of the Constitution of India etc.; whereas, the judgments cited by the learned counsel for the respondent Bank are the judgments covering western tributaries of Ganges for, it covers the aspects of violation of Section 13 of the SARFAESI Act and the same cannot be made applicable to the facts of the present case.
6.16 While adverting to the second limb of argument, while referring to a tabular chart titled 'drop in reserved prices in repeated auctions' it is submitted that in the first auction dated 30.8.2019, the reserved price was Rs.14.98 crore and nobody came followed by the second auction on 26.3.2020 with a reserved price of Rs.12.57 crore, nobody came further followed by third auction on 29.6.2020 fixing the reserved price at Rs.11.37 crore and lastly the auction was held on 29.7.2020 fixing Page 26 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT the reserved price of Rs.11.37 crore. It is submitted that three diminishing auctions were conducted in last two years whereby the reserved price was lower down by two and half crore. It is well known that auction is for value maximisation and not for value minimisation. The respondent Bank here has proved how to minimise the value instead of maximising the value. It is submitted that during this unprecedented situation of Covid-19, the respondent Bank showing undue haste had an audacity to conduct the auction. It is difficult to understand that what was the hurry in disposing of the property by minimising the value and not giving any reasons. Thus, the action of the respondent Bank is suffered by legal malice and which is an exception carved out by the Apex Court for maintainability of the writ petition. It is further submitted that the respondent bank has laid a trap suppressing the correct facts and luring the bidder i.e. the auction purchaser. The letters addressed by the auction purchaser show a cry of anguish inasmuch as, though the auction purchaser is not inclined to purchase the property, the property is being imposed upon it. The auction in question is a distress sale to unwilling buyer. It is undisputed that the petitioner by now has already paid Rs.11.24 crore and is further ready to pay another Rs.9 crore which will make the total of Rs.20.24 crore that is well beyond the principal. It is submitted that for the period from 2.6.2014 to 29.9.2017 the petitioner has paid regular installment and there was no default. Clearly it is not a case of default and a case of Article 14, raising the ground of legal malice. On 25.10.2017 the petitioner addressed a letter offering to settle all dues through OTS i.e. before the respondent bank invoked section 13(2) and 13(4) of the SARFAESI Act. The petitioner addressed the letter to consider the OTS, however, immediately the next date i.e. 26.10.2017 the respondent Bank has addressed an amazing letter asking the petitioner to pay on that very day or else the account will slipped into NPA.
Page 27 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT6.17 It is submitted that the dates of offering OTS by the petitioner are required to be taken note of. On five occasions the petitioner offered its OTS, however, the respondent bank rejected the OTS in succession. Reliance is placed on the documents viz. (i) OTS scheme of NPA for micro, small and medium enterprises (MSME) sector - IDFC Bank; (ii) Reserve Bank of India (prudential framework for resolution of stress assets) directions 2019; (iii) OTS policy - Indian Overseas Bank, NPA Management Policy 2020 of Bank of India to contend that there is a consistent paradigm of OTS. The bank has adopted a hostile attitude while considering the OTS inasmuch as, OTS has been rejected without giving any reasons.
6.18 It is urged that the judgments cited by the respondent bank in support of the preliminary objection of availability of alternative remedy, are not applicable to the facts of the present case inasmuch as, the challenge in the present petition is inaction of the respondent bank with respect to the consideration of OTS. Hence, the present petition deserves to be allowed.
7. Heard the learned counsel for the respective parties, considered the material available on the record.
8. Before proceeding further, the observations of the Apex Court in the case of State Bank of Travancore vs. Mathew K.C. (supra) in para 15 are very much apt and to be kept in mind while exercising the powers under Article 226 of the Constitution of India which read thus:
"15. 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."Page 28 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT
Keeping in mind, the aforesaid observations in forefront along with other aspects as discussed hereinafter, the present controversy is required to be adjudicated.
9. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for direction in the nature of mandamus, directing the respondent to consider and pass an order on the OTS proposals put forward by the petitioner in accordance with the norms and procedures laid down in this regard in a time bound manner.
10. To consider this prayer of the petitioner, it is necessary to see whether there are any provisions of law or any policies of the bank which obligates the bank to perform the same. Though, the petitioner is seeking direction to the respondent bank to consider the OTS proposal in accordance with the norms and procedure laid down in this regard, it has not produced or placed on record any such provision or policy entitling it to claim such a relief. It is well settled proposition of law that the powers of the High Courts under Article 226 though are discretionary and no limit can be placed upon the discretion, the same must be exercised along the recognised lines and subject to certain self-imposed limitation. The expression 'for any other purpose' in Article 226 makes the jurisdiction of the High Court more extensive, but yet the courts must exercise the same with certain restraints and with some caution. One of the conditions for exercising power under Article 226 for issuance of mandamus is that the court must come to the conclusion that aggrieved person has a legal right and that such right has been infringed. In other words, as has been held by the Apex Court in numerous judgment that sine qua non for obtaining a writ or order in the nature of mandamus, is that the applicant has to satisfy that he has a legal right to the performance of the legal duty by the party against whom the mandamus is sought. The duty that may be enjoined by mandamus may be one imposed by the constitution, a statute, or by Page 29 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT rules or orders having the force of law. So far as the prayer (a) of para 42 is concerned, the petitioner has not pointed out or placed on record any material to substantiate that it has any legal right in its favour to the performance of a legal duty by the respondent Bank, against whom mandamus is sought. Though not forming part of the captioned petition, during the course of hearing, reliance is placed on the documents viz. (i) OTS scheme of NPA's for Micro, Small and Medium Enterprises (MSME) sector - IDFC Bank; (ii) Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019; (iii) OTS policy - Indian Overseas Bank; and (iv) NPA Management Policy 2020 of Bank of India, all such policies are of no help to the petitioner inasmuch as, they do not pertain to the respondent Bank and therefore not applicable to the facts of the present case. Hence, the aforesaid prayer cannot be acceded to.
11. The relief claimed by the petitioner in clause (b) of para 42 of the petition memo, is in two parts. Firstly, it has prayed for a direction to the respondent Bank to act in compliance with the mandate of circular dated 4.5.2009 and 17.3.2016 and secondly, the petitioner has prayed for further direction to the respondent bank to act as per rule 9 of the Enforcement Rules of 2002.
12. Before proceeding to deal with first part of the prayer contained in clause (b) of para 42 of the petition memo, it is necessary to take note of the averments made in the petition memo in connection with the aforesaid prayers.
"16. That vide letter dated 03.11.2017 the petitioner company has again set out the correct and true facts and requested the respondsent Canara bank to resolve the issue and offered to repay the dues through One Time Settlement (OTS) Scheme.
17. That on 27.12.2017 even as the respondent Bank was seized of the offer for One Time Settlement (OTS) from the Petitioner Company, it issued notice under 13(2) of the SARFAESI Act.Page 30 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT
18. That vide letter dated 26.02.2018, the petitioner responded to the Section 13 (2) Notice issued by the Respondent Canara Bank. The petitioner specifically requested that non-use collaterals could be sold by the petitioner with the co-operation of the Respondent Canara Bank, so as to reduce the debt. The Petitioner reiterated its commitment towards resolution of the debt on terms which could be worked out by the Petitioner and the Respondent.
19. That the economic and banking policies of the Government and RBI have long recognized the role MSMEs play in economic growth, job creation and exports. The Government keeps on prodding the banks to be proactive in their support to MSMEs in lending as well as in tiding over pressures of business cycles, slowdowns, recession etc. RBI vide its Circular dated as long as 04.05.2009 advised Scheduled commercial banks to put in place a non-discretionary One Time Settlement scheme duly approved by their Boards for dealing with stressed assets. The banks have also been advised to give adequate publicity to their OTS policies so that all MSMEs in need for compromise settlement may take benefit of these policies. Further vide RBI circular dated 17.03.2016 has directed that before a loan account of a Micro, Small and Medium Enterprise turns into a Non- Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in the Table below:
SMA Sub-categories Basis for classification
SMA-0 Principal or interest payment not overdue
for more than 30 days but account
showing signs of incipient stress
SMA-1 Principal or interest payment overdue
between 31-60 days
SMA-2 Principal or interest payment overdue
between 61-90 days
The salient features of the Framework are as under:
i) Before a loan account of an MSME turns into a Non-
Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in the Framework.
ii) Any MSME borrower may also voluntarily initiate proceedings under this Framework.
iii) Committee approach to be adopted for deciding corrective action plan (CAP)
iv) Time lines have been fixed for taking various decisions under the Framework.
The provisions made in this framework shall be applicable to MSMEs having loan limits up to Rs.25 crore, including accounts under consortium or multiple banking arrangement (MBA).
The Committee may explore various options to resolve the stress in the account. The Committee shall not endeavour to encourage a Page 31 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT particular resolution option and may decide the Corrective Action Plan (CAP) as per the specific requirements and position of each case. The option under CAP by the Committee may include:
i) Rectification;
ii) Restructuring;
iii) Recovery
20. The OTS policies in place by the bank provide for supportive guidelines such as (1) It is recognized that amicable settlements are possible only in a win-win situation and sacrifice by the bank is a part of settlement process.
(2) In cases of loss of security value due to circumstances beyond the control of the borrower, competent authority can entertain / approve compromise proposals with a reasonable sacrifice.
(3) Terms of compromise may include waiver of part or whole interest from the date of advance.
21. That vide letter dated 12.03.2018, in contravention and blatant disregard of the policies of the Govt and RBI Circulars, and without consideration of the submissions of the petitioner company, the respondent Canara bank reiterated it s wrongful act of classifying the petitioner's account as NPA on 26.10.2017 and stated that it would enforce its securities unless full payment of the loan amount and interest is made. The respondent has not acted in accordance with law and RBI guidelines but taken a contrary stand and demanded full payment, completely ignored the offer of the respondent to settle the account by selling off its non-use assets and to work out a settlement in the matter.
The respondent Canara bank has deliberately overlooked the One Time Settlement (OTS) request/ offer made by the petitioner company to repay the outstanding loan, acted in undue haste in classifying the account o as NPA and not constituted any Committee to decide on the Corrective Action Plan (CAP) for repayment of loan."
13. From the above quoted averments it clearly appears that on 27.12.2017 even as the respondent Bank was seized of the offer for OTS from the petitioner, it issued notice under sub-section (2) of section 13 of the SARFAESI Act. It further states that vide letter dated 26.2.2018, the petitioner responded to the notice dated 27.12.2017, specifically requesting that non-use collaterals could be sold by the petitioner with the cooperation of the respondent Bank so as to reduce the debt. It further states that the economic and banking policies of the Page 32 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT government and RBI have long recognised the role MSMSe play in the economic growth, job creation and exports this contribution to the growth of the economic. The petitioner further states that RBI vide its circular dated 4.5.2009 has advised Scheduled Commercial Banks to put in a place a non-discretionary One-Time Settlement Scheme duly approved by their Boards for dealing with stressed assets. The banks have also been advised to give adequate publicity to their OTS policies so that all MSMEs in need for compromise / settlement can avail of the benefit of these policies. Further the RBI circular dated 17.03.2016 directed banks to identify incipient stress in the creditors account, before a loan account of a MSMEs turns into a non-performing asset by creating three sub-categories under the Special Mention Account (SMA).
14. To consider the aforesaid contention, one needs to see the provisions of the circular dated 17.3.2016 of the Reserve Bank of India, so as to ascertain whether it applies to the facts of the present case. The said circular is titled "Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) providing for simpler and faster mechanism to addresses the stress in the accounts of MSMEs and to facilitates their promotion and development. Condition no.1 therein provides for eligibility. It contemplates that the provisions made in the framework shall be applicable to MSMEs having loan limit up to Rs.25,00,00,000, including accounts under consortium or multiple banking arrangement (MBA). Condition no.2 and 2.1 are relevant for the present purpose and read thus:
"2. Identification of incipient stress.
2.1 Identification of banks or creditors- Before a loan account of a Micro, Small and Medium Enterprise turns into a Non-Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the special mentioned account (SMA category) as given in the table below... .Page 33 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT
The said clause is available to the MSMEs at the point before the loan account of MSMEs turns into a non-performing asset."
Clearly, the said condition is available to the MSMEs at the point before a loan account of MSMEs turns into a non-performing asset.
15. Perceptibly, the account of the petitioner has been rendered NPA on 26.10.2017 and therefore, the circular dated 17.3.2016 cannot have any application to the facts of the present case. Besides, after the account of the company slipped to NPA, much water has since flown under the bridge inasmuch as, the respondent Bank issued a notice under sub-section (2) of section 13 of the SARFAESI Act on 27.12.2017, inter alia, requiring the petitioner to discharge its liabilities in full as stated in Schedule C within 60 days from the date of receipt of the notice. Additionally, it was intimated by the bank that if the petitioner fails to repay the sum of Rs.15,50,43,589.10 together with further interest and incidental expenses, the bank will exercise all or any of the rights detailed under sub-section (4) of section 13 namely taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realising the secured assets; 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 assets. Thereafter the respondent Bank filed an application being Original Application no.1477 of 2018 before the learned Debts Recovery Tribunal-II, Ahmedabad and it issued a notice dated 12.12.2018 to the petitioner. An application under section 14 of SARFAESI Act also came to be filed to the learned District Magistrate Bharuch for taking possession of the properties claimed by the respondent Bank. The said application was disposed of by the learned district magistrate allowing the possession to be taken over by the respondent Bank.
16. Aggrieved by issuance of sale notice by the respondent Bank, the Page 34 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT petitioner preferred a Securitisation Application no.57 of 2019 before the learned presiding officer, Debt Recovery Tribunal-III, Ahmedabad on various grounds set out in the said application, including but not limited to the fact that the proposal for OTS was pending before the respondent Bank. The learned presiding officer, considered the request of the petitioner for OTS in Securitisation Application no.57 of 2019 and passed the order dated 13.8.2019, which reads:
"Counsel for the applicant submitted that he does not want to argue on merits and he submitted that the applicant has already submitted one compromise proposal on 18 April 2019 and respondent bank may be directed to consider their proposal. He made endorsement on the S.A.not to press relief sought for.
As the counsel for the applicant does not want to press this case on merits, so this securitisation application is dismissed being not pressed. The grounds taken in this securitisation application stand waived off.
The respondent bank may consider the proposal submitted by the applicant sympathetically as per its banking norms and procedure but it is made clear that this order would not be treated as a direction to the bank either to accept or reject the compromise proposal. The bank will be able to take a decision in its own discretion as per the law.
As applicant has not opted to argue on , so the bank will be able to proceed as per law on the process already initiated.
This securitisation application is accordingly disposed of."
17. The learned presiding officer disposed of the application as the counsel for the applicant that is the petitioner did not opt to argue on merits and allowed the bank to proceed as per law on the process already initiated. Therefore, when the petitioner challenged the action of the respondent Bank of issuing the notice under sub-section (2) of section 13 of the SARFAESI Act followed by taking over the possession under section 14 of the Act, the question is, as to whether it is permissible in law for the petitioner at this distance of time to seek direction to the respondent Bank to accept the OTS of the petitioner. Even otherwise, the petitioner has placed a strong reliance on circular dated 17.9.2016 in support of its prayer seeking direction to the Page 35 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT respondent Bank (the circular does not form part of the captioned proceedings and the same was tendered during the course of oral hearing without amending the petition, making it part of the record). However, the said circular is not applicable to the petitioner considering the fact that the loan account of the petitioner had already slipped to NPA. The policy, more particularly, condition no.2.1 clearly provides that the same will be applicable before the loan account of MSMEs turns into a NPA. At the cost of repetition it is required to be noted that the account of the petitioner has slipped into NPA way back in the year 2017 and much water has since flown under the bridge.
18. Therefore, the prayer of the petitioner seeking direction to the respondent Bank to consider the OTS cannot be accepted for the reasons that firstly, the petitioner has not been able to point out any provisions in law or otherwise conferring any right in its favour and corresponding duty on the part of the respondent Bank to perform the same; Secondly, the policy on which heavy reliance is placed, that is circular dated 17.3.2016 is applicable only before the accounts of micro small and medium enterprise are rendered non-performing asset as per condition no.2.1. Thirdly, after the loan account of the petitioner turned into NPA the respondent Bank proceeded further with issuance of notice under sub-section (2) of section 13 followed by action under section 14 of taking over possession and further action under rule 9 of the Enforcement of Rules, 2002. Fourthly the petitioner approached the learned presiding officer DRT-II, Ahmedabad and did not press the Securitisation Application no.57 of 2019 on merits and was satisfied with the observation of the learned presiding officer leaving it to the respondent Bank to sympathetically decide the OTS of the petitioner as per its banking norms and procedure and the respondent Bank decided not to accept the OTS as the offer of the petitioner was not as per guidelines inasmuch as, the proposal was below the book liability + Page 36 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT MCLR + 1.5%.
19. So far as reliance placed on the circular dated 4.5.2009 of the RBI is concerned, it is not clear as to whether the circular still holds the field or not. Furthermore, clause 8 of the said circular is to the effect that, the Group has recommended RBI to announce the OTS for the MSME sector; however any policy on settlement of non-performing loans is essentially a management function to be exercised by individual banks, based on their commercial judgment and it is vital that the banks have their own non-discretionary OTS policy which enables their officials to make quick and judicious decision on OTS. Hence, all that the circular provides is requiring the banks to have their own non- discretionary OTS. It is difficult to fathom as to how this policy helps the case of the petitioner and that too of the year 2009. Evidently, the contents of the circulars dated 4.5.2009 as well as 17.3.2016 do not confer any right in favour of the petitioner and corresponding duty on the part of the respondent Bank to perform the same and therefore, in absence of any provisions, the prayer of the petitioner seeking direction to the respondent Bank to consider the OTS of the petitioner do not deserve to be considered.
20. It is the case of the petitioner that it addressed a letter dated 25.10.2017 and immediately on the next day i.e. 26.10.2017, the account of the petitioner was rendered NPA. However, the said communication though is claimed of 25.10.2017, the same does not bear any date except in the contents, indicating the liability as on 15.10.2017. Thus, the contention of the petitioner that it addressed a letter dated 25.10.2017 and immediately on the next date i.e. on 26.10.2017, the respondent Bank rendered the account of the petitioner as NPA on 26.10.2017, cannot be accepted. Assuming that the letter is dated 25.10.2017, which according to the petitioner came to be rejected on 9.1.2019 and despite the said fact, the petitioner had not taken any Page 37 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT trouble for redressal of the grievance by filing any proceedings. However, the communication dated 9.1.2019 by the respondent Bank to the petitioner clearly states that in the meeting of 29.11.2018, the bank has expressly rejected the offer of the petitioner for Rs.9 crore within a shorter span and for Rs.10 crore in a longer time frame. Then comes a communication dated 17.1.2020 which was supposedly rejected by the bank on 24.1.2020. Therafter comes another communication dated 28.3.2020 (not on record) followed by the communication dated 22.6.2020 of the petitioner not responded by the bank; further followed by the communication dated 23.7.2020, wherein further effort has been suggested by the petitioner. It reads "...here is our further efforts that xxxx - to close the OTS amidst our most severe constraints. Today morning we could connect our partner. The bank guarantees that he had offered in support of our OTS proposal last month have got committed by him for supporting some Rs.25 crore OTS proposal of another large parties with party banker (SBI)."
21. The contents of the aforesaid communication clearly reveal that the petitioner except offering high sounding claims, did not offer any concrete proposal, so was the position, while addressing the e-mail dated 24.7.2020 by the petitioner. The said approach of the petitioner as can be discerned out, is like 'head I win tail you lose'. Besides, had the petitioner been genuinely interested in settling the dues, it would have offered a concrete proposal. Thus, the submissions of the learned senior advocate about offering as many as five OTS proposals is nothing but an attempt on the part of the petitioner to derail the recovery of the dues. So far as the fixing of the reserved price is concerned, the said issue would require adjudication only if the first issue raised by the petitioner about challenge to the action of the respondent Bank of not accepting the OTS succeeds. Since this Court has held that the respondent Bank was not obligated to accept the proposal owing to the reasons recorded hereinabove, the action of the respondent Bank fixing Page 38 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT the reserved price cannot be gone into. Further, the petitioner had sufficient opportunity at the stage of section 13 proceedings of SARFAESI Act, however, the petitioner has missed the same. The auction has been conducted concluded and the property has been sold in favour of the auction purchaser M/s. Atvantic Finechem Ltd., this Court would not like to exercise its extraordinary jurisdiction entertaining the writ petition of the petitioner.
22. Quite apart, the petitioner has put all attempts to stall the auction proceedings by making a show of offering the OTS. Further, the petitioner has also tried to obstruct the last auction which fact is strengthened by the contents of the communication dated 28.7.2020 of the petitioner to the Director of Atvantic Finechem Ltd. i.e. the auction purchaser, relevant extract of which reads as under:
"We hereby caution you and call upon you to desist from taking any steps which can impact our rights on our assets. If you take any steps impacting our rights it will be at your costs and consequences."
23. As if this was not sufficient, a legal notice dated 29.7.2020 was issued by the learned advocate on behalf of the petitioner, reiterating about the caution requiring the auction purchaser to desist from taking any steps at its costs, risk and consequences. The aforementioned contents of the letter dated 28.7.2020 as well as the contents of the legal notice dated 29.7.2020 are nothing but an attempt on the part of the petitioner to thwart the auction proceedings. In other words, the said conduct of the petitioner goes against the spirit of the provisions of the SARFAESI Act.
24. Material on record does not lead to any conclusion other than the above. In view of the aforementioned discussion, so far as the first part of the prayer contained in clause (b) of para 42 of the petition memo is concerned, the same cannot be granted.
Page 39 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT25. In view of the aforementioned discussion the prayer which now requires to be considered is about rule 9 of the Enforcement Rules of 2002. It is difficult to understand as to how the petitioner has clubbed the two prayers, namely direction to the respondent Bank to act in compliance with the mandate of circular so also rule 9 of the Enforcement Rules of 2002. Be that as it may. However for the sake of completeness, let me deal with the said prayer considering that the petitioner has alleged the infraction of rule 9 of the rules of 2002.
26. While referring to prayers in clause (a) and clause (b) of para 42, it has been contended that principal challenge in the writ petition is the action of the respondent Bank of not offering the reasons for not accepting the OTS on the anvil of Article 14 of the Constitution of India and if the petitioner succeeds, then the auction conducted by the respondent Bank is required to be stayed. The prayers read in juxtaposition with the averments made in the writ petition clearly suggest that there is an element of tacit challenge to the proceedings initiated by the respondent Bank under provisions of the SARFAESI Act read with Rule 9 of the Enforcement Rules of 2002. Therefore, this partial challenge is required to be dealt with on the anvil of availability alternative remedy. The petitioner has placed reliance on the judgments, wherein it has been consistently held that alternative remedy is not to operate as a bar in at least three contingencies viz. where the writ petition has been filed for the enforcement of any of the fundamental rights or where there has been a violation of principles of natural justice or where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged.
27. Learned senior advocate, distinguished the judgments cited by learned advocate for the respondent Bank on the ground that in all the judgments, the challenges were to the action initiated under provisions Page 40 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT of the SARFAESI Act, whereas the petitioner, in the present case, is challenging the action of the respondent Bank on the ground of violation of Article 14 of the Constitution of India. It is also contended that in those judgments, no issue of fairness or unfairness was available and so far as the jurisdiction of the appellate court is concerned, the aspect viz. non-service of notice, non-observance under the SARFAESI Act, etc. would be considered, however, the aspect having the element of Article 14 of the Constitution of India cannot be decided by the appellate court. It is, therefore, submitted that the said contention raised by the respondent Bank as regards maintainability of the writ petition is misplaced and deserves to be rejected at the threshold. This Court has, in detail, dealt with the first limb of the arguments of the learned senior advocate and the same has been rejected, as discussed hereinabove.
28. Learned senior advocate has contended that the value of the collateral security at the time of mortgage was of Rs.21 crore and it is well known that the value of the land does not depreciate; the respondent Bank could not have fixed the reserved price at Rs.11.37 crore. Moreover, the auction was conducted by the respondent Bank and the bid has been accepted for the reserved price of Rs.11.37 crore. In support of the said contention, reliance was placed on the judgment in case of Ram Kishun vs. State of Uttar Pradesh (supra) and there has to be an application of mind by the authority concerned while approving / accepting the report of the approved valuer and fixing the reserved price, as the failure to do so may cause substantial injury to the borrower / guarantor and that would amount to material irregularity and ultimately vitiate the subsequent proceedings. Similarly, the reference is made to the judgment in the case of Divya Manufacturing Company (P) Limited vs. Union Bank of India (supra) to contend that confirmed sale was set aside, inter alia, on the ground of material irregularity. Further reliance is placed on the judgment in the case of Page 41 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT Vasu P. Setty vs. Hotel Vandana Palace (supra). It is submitted that the Apex Court, while considering the Rules 8 and 9 of the Rules of 2002 and referred to the judgment in the case of Sri Siddheshwara Coop. Bank Ltd. vs. Ikbal (supra), wherein it has been held that even if a provision is mandatory, it can always be waived by a party (or parties) for whose benefit such provision is made. The provision in Rule 9(1) being for the benefit of the borrower and the provision contained in Rule 9(3) and 9(4) being for the benefit of the secured creditor (or for the benefit of the borrower), the secured creditor and the borrower can lawfully waive their rights.
29. Therefore, there is a challenge to the procedure adopted by the respondent Bank of conducting the auction. Since there is a challenge to the procedure under the Rules of 2002, it is required to be noted that as to whether the petitioner on the facts of the case has carved out an exception for the entertainment of the writ petition, for seeking direction to the respondent Bank to act in compliance with the Rule of the Enforcement Rule 2002. Pertinently, there is nothing available on record to suggest that there was any infraction of any of the provisions of the Enforcement Rules of 2002. Even otherwise, the said argument is not available to the petitioner in view of the fact that the petitioner when had filed a Securitisation Application no.57 of 2019 before the learned Debts Recovery Tribunal, it had given up its right on merits with a limited exception of approaching the bank for considering OTS.
30. Furthermore, the Apex Court in the case of Punjab National Bank vs. O.C. Krishnan (supra), in the context of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, has observed in para 6 that even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution of India, nevertheless, when there is an alternative remedy available, judicial prudence demands that the court refrains from exercising its Page 42 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT jurisdiction under the said constitutional provisions. Para 6 relevant extracts whereof read thus:
"6. The Act has been enacted with a view to provide the special procedure for recovery of debts due to the banks and 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 proceeding 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, the judicial prudence demands that the court refrains from exercising its jurisdiction under the said constitutional provisions...."
31. The Apex Court in the case of United Bank of India vs. Satyawati Tondon (supra) in para 43, has observed and held that the Court must keep in mind that the 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 the 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. The Apex Court in paras 43 and 55 has observed thus:
"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 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.Page 43 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT
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."
32. The Apex Court in the case of Authorised Officer, State Bank of Travancore vs. Mathew K.C. (supra), has observed in para 15 that 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 taxpayer's 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 coordinate benches of this Court, while not entertaining the writ petitions under Article 226 of the Constitution of India, have time and again relegated the parties concerned to avail of the alternative remedy.
33. In view of the aforementioned discussion, so also the principle enunciated by the Apex Court, this Court is of the opinion that no case is made out for exercising the extraordinary power under Article 226 of the Constitution of India. Accordingly, the petition fails and is dismissed. In view of the dismissal of the writ petition, the status quo granted by this Court vide order dated 1.10.2020 stands vacated. No order as to costs.
Sd/-
(SANGEETA K. VISHEN,J) Page 44 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020 C/SCA/10779/2020 CAV JUDGMENT FURTHER ORDER After the pronouncement of the judgment, Mr. Amit Bhandari, learned advocate for Mr. Nachiket A. Dave, learned advocate for the petitioner, requested to stay the judgment for a period of 10 days.
The request is not acceded to.
Sd/-
(SANGEETA K. VISHEN, J) BHARAT/MARY VADAKKAN Page 45 of 45 Downloaded on : Fri Oct 23 04:31:52 IST 2020