Gujarat High Court
M/S Kinsi Hotels And Management ... vs Bank Of India on 17 November, 2021
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 12619 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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M/S KINSI HOTELS AND MANAGEMENT SERVICES PVT. LTD.
Versus
BANK OF INDIA
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Appearance:
MR DHARMESH R PATEL(5592) for the Petitioner(s) No. 1
DS AFF.NOT FILED (N)(11) for the Respondent(s) No. 2
MR NAGESH C SOOD(1928) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 17/11/2021
ORAL JUDGMENT
1. Heard learned advocate Mr. Dharmesh R. Patel for the petitioner and learned advocate Mr. Nagesh C. Sood for respondent no.1-bank.
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2. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has prayed for the following reliefs :
"A. Admit this petition;
B. Allow this petition and be pleased to issue writ order or direction by quashing and setting aside letter dated 14/07/2021 issued by the respondent Bank and thereby be pleased to quash and set aside Possession notice dated 10/08/2021 (Annexure A & B);
C. Pending admission and final disposal of present petition be pleased to stay the recovery proceeding with regard to the letter dated 14/07/2021 issued by the respondent no.1 Bank and thereby be pleased to stay the proceeding of taking possession scheduled on 05/09/2021 (Annexure A & B);
D. Grant such other and further relief(s) as deemed fit in the interest of the justice."
3. Brief facts of the case are that the petitioner availed financial assistance from the respondent-bank for starting his business of Hotels in the year 2015.
3.1) The petitioner-company failed in repaying the loan amount in time due to various factors like downfall in business, demonitisation, etc. The respondent-bank therefore, started recovery proceedings under Page 2 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (For short "SARFAESI Act") for recovery of outstanding dues of Rs. 1,01,36,315.60 by issuing notice under section 13(2) of the SARFAESI Act on 10th April, 2018.
3.2) The respondent-bank thereafter filed Criminal Misc. Application No.5234/2019 in the Court of Metropolitan Magistrate, Ahmedabad under section 14 of the SARFAESI Act to provide assistance to take the possession of the mortgaged properties of the petitioner.
3.3) It appears that the respondent-bank thereafter offered One Time Settlement (For short "OTS") by letter dated 20th June, 2019 to the petitioner as per the BOI OTS 2019.
3.4) In the meanwhile, the Chief Metropolitan Magistrate passed the order dated 29th August, 2019 under section 14 of the SARFAESI Act by appointing the Court Commissioner under section 14(1-A) of the SARFAESI Act to take possession of the mortgaged properties of the petitioner.
3.5) The respondent bank granted approval by letter dated 7th October,2019 for payment Page 3 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 of Rs.84 Lakh under OTS Scheme 2019. However, the same was not paid by the petitioner. Thereafter, respondent bank by letter dated 15th January, 2021 again approved OTS for compromise offer of Rs. 77 Lakh in the account of the petitioner on various terms and conditions referred therein.
3.6) As per the terms and conditions of the OTS, total OTS amount of Rs. 77 lakhs was to be paid within six months from the date of approval of the offer. The upfront amount of Rs. 10.01 lakhs deposited by the petitioner was to be adjusted against the approved compromise amount of Rs. 77 lakhs and balance amount was to be deposited within six months of the approval i.e. on or before 30th June, 2021.
3.7) It is the case of the petitioner that thereafter due to second wave of Covid- 19 pandemic situation, the petitioner was unable to repay the OTS amount before 30th June, 2021 and therefore, the respondent-bank by letter dated 14th July, 2021 revoked the OTS offer and started the recovery proceedings.
3.8) The respondent-bank initiated the proceedings to take the physical possession of the mortgaged properties of the petitioner Page 4 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 and accordingly, respondent no.2-Court Commissioner appointed as per order dated 29th August, 2019 passed under section 14 of the SARFAESI Act issued notice dated 10th August, 2021 to take physical possession of the mortgaged property on 5th September, 2021.
3.9) The petitioner has therefore, approached this Court by preferring this petition with the aforesaid prayers.
4. Learned advocate Mr. Dharmesh Patel submitted that in view of Covid-19 pandemic situation, the respondent-bank ought to have extended the period for payment of remaining amount of Rs. 63.50 Lakh as per the OTS approval as the petitioner is willing to pay the same and therefore, the recovery proceeding is required to be stopped and the proceedings for taking the possession is also required to be quashed and set aside to save the petitioner from starvation in the interest of justice.
4.1) Learned advocate Mr. Patel submitted that the respondent-bank has credited the amount of Annual Guarantee Fee (AGF) under the Credit Guarantee Fund Trust for Micro & Small Enterprises (For short "CGTMSE") Scheme as per the master circular dated 7th June, 2018 issued by the respondent-bank and Page 5 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 therefore, the amount which is received by the respondent-bank under the CGTMSE Scheme should have been credited in the account of the petitioner. It was therefore, submitted that the respondent-bank cannot recover again the amount which is received by it under the CGTMSE Scheme.
4.2) Learned advocate Mr. Patel referred to the CGTMSE Scheme to point out that there is a credit guarantee cover of 75% of the amount in default in case of loan credit facility above Rs. 50 lakhs upto Rs. 200 lakhs, subject to maximum of Rs. 150 lakhs and therefore, the respondent-bank is bound to give credit of the amount which is received by it under the CGTMSE Scheme in the account of the petitioner. It was also submitted that the borrower is required to pay the full Annual Guarantee Fees as per clause 9 of the CGTMSE Scheme and accordingly, the bank has debited such amount in the account of the petitioner and therefore, the respondent bank is required to give credit of the amount received under the CGTMSE Scheme in the account of the petitioner. It was submitted that in such circumstances, the respondent-bank cannot initiate any proceedings for taking possession of the mortgaged properties. Learned advocate Mr. Patel also relied upon Page 6 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 the application filed by the petitioner on 26th August, 2021 before the respondent-bank to give the benefit of the CGTMSE Scheme in the loan account.
5. On the other hand, learned advocate Mr. Nagesh Sood appearing for the respondent-bank submitted that the petitioner has an alternative efficacious remedy by preferring application under section 17 of the SARFAESI Act and therefore, the petition should not be entertained and the petitioner should be relegated to approach the Debts Recovery Tribunal.
5.1) It was further submitted that the petitioner has not approached with clean hands as there is suppression of correct and complete facts inasmuch as the petitioner has suppressed the fact that OTS was considered twice on the request of the petitioner. Firstly, in the year 2019, the respondent- bank approved the OTS for payment of Rs. 84 Lakh which was duly intimated to the petitioner on 7th October, 2019 but the petitioner failed to comply with OTS Scheme inspite of repeated reminders and letters written by the respondent-bank on 15th November, 2019, 5th December, 2019 and 3rd January, 2020. It was submitted that thereafter for the second time, a fresh OTS Page 7 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 dated 15th January, 2021 was sanctioned for Rs. 77 Lakh with certain terms and conditions but the petitioner did not comply with the same and therefore, by letter dated 14th July, 2021 the respondent-bank was compelled to revoke the second OTS.
5.2) It was submitted that the contention raised on behalf of the petitioner that on account of Covid-19 pandemic situation, the petitioner could not pay the amount before 30th June, 2021 is also not acceptable as the petitioner was granted the benefit of OTS in the year 2019 but the petitioner failed to comply with the terms and conditions of the OTS sanctioned by the respondent-bank in the year 2019. It was therefore, submitted that the petitioner has suppressed the fact of first OTS of Rs. 84 Lakh which was sanctioned by the respondent-bank on 7th October, 2019.
5.3) Learned advocate Mr. Sood further submitted that as per the CGTMSE Scheme, respondent no.1-bank has to take all recovery measures to realise the outstanding dues. Reliance was placed on clauses 21 to 24 of the CGTMSE Scheme for recovery of dues.
5.4) Learned advocate Mr. Sood relied upon the following averments made in the affidavit in reply filed on behalf of the Page 8 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 respondent-bank :
"21. It is humbly submitted that the interim order dated 02.09.2021 as sought by the petitioner advocate was to show their bonafide by depositing Rs. 10 lakhs and it is submitted that as per settled principle of law, hon'ble Courts cannot grant in writ jurisdiction, direction for one time settlement or granting instalments which are really rescheduling the loan, which can only be done by the bank or financial institution which granted the loan and this Court under Article 226 of the Constitution cannot reschedule a loan. It is submitted that the petitioner failed to fulfil the loan terms and conditions leading to classification of the account as NPA, further failed to honour the 1st OTS and subsequently 2nd OTS& now the petitioner even failed to fulfill their own commitment to deposit Rs. 10 lacs on or before 17.09.2021 but deposited Rs. 8.50 lacs only, therefore, respondent bank herein after careful consideration of the conduct of parties & further considering the policies of the Bank, is not in favour of reviving the 2nd OTS which was already revoked on 14.07.2021, hence, the total contractual dues to be paid by the petitioner as on 31.08.2021 is Rs. 1,11,32,012 plus applicable interest and charges as per agreed terms. It is therefore, humbly prayed that the writ petition may be dismissed with exemplary cost as it has been filed only to stall the SARFAESI Action."
5.5) Learned advocate Mr. Sood relied upon the following decisions of the Supreme Page 9 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 Court in support of his submissions that when the borrower failed to abide by the terms of OTS, the High Court cannot entertain the writ petition ignoring the fact that the statutory alternative remedy is available under section 17 of the SARFAESI Act; that the respondent- bank is bound by the guidelines issued by the Reserve Bank of India by various circulars and that the Supreme Court has held that in financial matters granting of ex-parte interim order can have deleterious effect :
i) Union of India v. Panchanan Subudhi reported in (2010) 15 SCC 552.
ii) Sardar Associates v. Punjab & Sind Bank reported in (2009) 8 SCC 257.
iii) Authorized Officer, State Bank of Travancore and another v. Mathew K C reported in (2018) 3 SCC 85.
6. In rejoinder, learned advocate Mr. Patel relied upon the orders passed by this Court in Special Civil Application No. 8726/2021 to point out that this Court can interfere under Article 226 of the Constitution of India in the matters pertaining to SARFAESI Act and the petitioner should not be relegated for availing the alternative efficacious remedy. With regard to the suppression of facts, it Page 10 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 was submitted that in paragraph no.6 of the petition, the petitioner has disclosed the fact of One Time Settlement granted by respondent-bank on 7th October, 2019 and therefore, there is no suppression.
6.1) It was further reiterated that the petitioner is ready and willing to pay the balance amount of the OTS within a short time and therefore, the respondent-bank should be restrained from taking physical possession of the mortgaged properties of the petitioner.
7. Considering the submissions made by the learned advocates for the respective parties, it is apparent that the petitioner has approached directly under Articles 226 and 227 of the Constitution of India without challenging the order of revocation of OTS benefit granted to the petitioner as well as the order dated 10th August, 2021 passed by the Court Commissioner appointed under order dated 29th August, 2019 passed under section 14 of the SARFAESI Act.
8. It is pertinent to note that the petitioner has not challenged the order dated 29th August, 2019 passed under section 14 of the SARFAESI Act. The petitioner therefore, ought to have challenged the order passed under section 14 of the SARFAESI Act by preferring Page 11 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 an application under section 17 of the SARFAESI Act before the Debts Recovery Tribunal. The petitioner has thus alternative efficacious remedy under the SARFAESI Act.
9. It also emerges from the record that the petitioner failed to abide by the terms and conditions of the OTS approved by the respondent-bank in the year 2019 and when the respondent-bank for the second time approved the OTS on 15th January, 2021, the petitioner has shown the willingness to pay the balance amount of OTS of Rs. 63.50 Lakh when the notice for taking the possession was issued by the Court Commissioner appointed under the order passed under section 14 of the SARFAESI Act. The petitioner has not taken any action to challenge the order dated 14th July, 2021 issued by the respondent-bank revoking the OTS till the notice for taking possession was received by the petitioner.
10. Reliance placed by the petitioner upon the CGTMSE Scheme to give the credit of the amount received by the respondent-bank under the CGTMSE Scheme is also not tenable. Clause 21(d) of the CGTMSE Scheme provides that amount to be realised by the lending institution has first to be remitted in full to the trust. Clause 22 of the CGTMSE Scheme refers to recovery by lending institution Page 12 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 after settlement of the claim and clause 24 provides for right of subrogation and recovery in claim paid accounts. Clauses 21 to 24 of the CGTMSE Scheme read as under :
"21. Claim Settlement
(a) CGTMSE shall pay 75% of the guaranteed amount on preferring of eligible claim, within 30 days, subject to claim being otherwise found in order and complete in all respects. If 75% of the guaranteed amount is not paid within 30 days, CGTMSE shall pay interest on the eligible claim amount at the prevailing Bank Rate for the period of delay beyond 30 days.
(b) The balance 25% of the guaranteed amount will be paid by CGTMSE on conclusion of recovery proceedings.
(c) On a claim being paid, the CGTMSE shall be deemed to have been discharged from all its liabilities on account of the guarantee in force in respect of the borrower concerned.
(d) In the event of default, the lending institution shall exercise its rights, if any, to take over the assets of the borrowers and the amount realized, if any, from the sale of such assets or otherwise shall first be remitted in full after adjusting the cost incurred by the Bank for recovery of the amount.
CGTMSE shall appropriate the same towards the pending service fee, penal interest and other charges due to CGTMSE, if any, in respect of the concerned credit facility. Only Page 13 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 thereafter claim for the remaining 25% of the guaranteed amount may be made.
(e} The Bank shall be liable to refund the claim released by the CGTMSE together with penal interest at the rate of 4% above the prevailing Bank Rate, if such a recall is made by the Trust in the event of serious deficiencies having existed in the matter of appraisal / renewal / follow-up / conduct of the credit facility or where lodgment of the claim was more than once or where there existed suppression of any material information on part of the lending institutions for the settlement of claims. Bank shall pay such penal interest, when demanded by the Trust, from the date of the initial release of the claim by the Trust to the date of refund of the claim.
Finally, loss will be shared by CGTMSE and Bank in the proportion of 75% / 80% / 85% / and 25% / 20% / 15% / respectively i.e. based on extent of guarantee cover obtained.
CGTMSE has started making all claims/refund payments through RTGS/NEFT system w.e.f. October 15, 2012.
22. Recovery by MLIs after settlement of CGTMSE claim The recoveries made by MLIs from the defaulting borrowers post settlement of 1st / 2nd claim by CGTMSE are required to be passed on to CGTMSE in full after netting off the legal expenses.|Please note that the payment of guarantee claim by the trust to the lending institution does not in any way take away responsibility of the lending Page 14 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 institution to recover the entire outstanding amount of the credit from the borrower. The lending institution shall exercise all the necessary precautions and maintain its recourse to the borrower for entire amount of credit facility owed by it and initiate such necessary actions for recovery of the entire Outstanding amount. Upon receipt of such recovery, CGTMSE works out the net loss and shares the recovery so passed on by the MLIs, with the respective MLI in the given proportion.
23. Payout cap on Claim Settlement:
CGTMSE has introduced a cap on total claim settlement (i.e. settlement of 1 st and 2" installments of claim), based on the fee and recovery remitted during the previous financial year. Any claim lodged/received exceeding 2 times of the total fee including recovery remitted by MLI will be suspended till such time the position is remedied i.e. payout is brought well within the payout cap limit.
24. Right of subrogation and recoveries in claim paid accounts
(a) The branches shall furnish to CGTMSE, the details of efforts for recovery, realizations and such other information as may be demanded or required from time to time. Lien on assets created out of credit facility in respect of eligible accounts shall be held on behalf of the Bank and on behalf of CGTMSE. The CGTMSE shall not exercise any subrogation rights and the responsibility of recovery of dues including takeover of assets, sale of Page 15 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 assets, etc. shall rest with the Bank.
(b). In the event of a borrower owing several distinct and separate debts to the Bank and making payments towards any or more of the same, whether the account towards which the payment is made is covered by the guarantee of CGTMSE or not, such payments shall be deemed to have been appropriated by the Bank to the debt covered by the Guarantee and in respect of which a claim has been preferred and paid, irrespective of the manner of appropriation indicated by the borrower concerned or the manner in which such payments are actually appropriated.
(c) All amounts recovered and due to be paid to CGTMSE are required to be paid without delay. !f any amount due to CGTMSE remains unpaid beyond a period of 30 days from the date on which it was first recovered, interest will have to be paid at the rate of 4%above Bank Rate for the period for which payment remains outstanding after expiry of the said period of 30 days."
11. In view of above, the contention raised on behalf of the petitioner is not tenable in law as the claim received by the respondent- bank under the CGTMSE Scheme does not debar the bank from recovery of the dues of the borrower. Moreover, the respondent-bank is also entitled to recover the Annual Guarantee Fees from the borrower as per clause 9 of the CGTMSE Scheme. In such circumstances, the petitioner being a borrower is not entitled Page 16 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 to get credit of any amount received by the respondent-bank towards its claim under the CGTMSE Scheme.
12. The Apex Court in case of Union of India v. Panchanan Subudhi(supra) has held as under :
"4. A perusal of the record shows that the appellant-bank extended financial facility to the respondent to an extent of Rs.10 lakhs. The respondent deposited the title deeds of land and building as security. On 31.12.2000, the account of the respondent was declared as non- performing asset and O.A. No.70 of 2002 was filed before Debts Recovery Tribunal, Cuttack (for short, `the Tribunal'). During the pendency of the O.A., the appellant-bank issued notice dated 3.9.2004 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `the Act'). This was followed by notice dated 4.12.2004 issued under Section 13(4) of the Act. By an order dated 30.5.2005, the Tribunal passed decree in favour of the appellant for a sum of Rs.16,10,957/- along with pendent elite and future interest @ 12% per annum from the date of application. The respondent challenged the proceedings initiated under the Act in Writ Petition No.7435 of 2005. The High Court stayed the proceeding subject to the respondent depositing a sum of Rs.10 lakhs, which the latter never deposited. In the interregnum, the respondent approached the bank for one time settlement. The Page 17 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 bank agreed for settlement, but the respondent failed to abide by the conditions of settlement. Consequently, bank issued notice dated 12.2.2007 for possession of the secured assets. The respondent challenged the said action in W.P. No.2322 of 2007, which has been disposed of by the High Court in the manner indicated hereinabove.
5. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act."
13. In case of Sardar Associates v. Punjab & Sind Bank(supra), the Supreme Court while considering the source of power on the part of the Reserve Bank of India to issue circulars and guidelines as regards One Time Settlement has held as under:
"(40.) If in terms of the guidelines issued by the Reserve Bank of India a right is created in a borrower, we see no reason as to why a writ of mandamus could not be issued. We would assume, as has been contended by Mr. Singh, that while exercising its power under Article 226 of the Constitution of India, the High Courts may or may not issue such a direction but the same, in our opinion, by itself, would not mean that the High Court would be correct in interfering with an order passed by the Appellate Page 18 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 Tribunal which was entitled to consider the effect of such one time settlement. (41.) The question pertaining to the present matter is regarding whether or not a circular issued by a statutory body for the governance and regulation of certain agreements confers a legal right upon the aggrieved party in case of non-compliance or complete and absolute deviation from the said guidelines by the body formulating such circulars. Alternately, can the aggrieved party, then, claim its right of judicial review under Article 32 or 226 to quash the said circular in case of discriminatory application of such rules/guidelines so mentioned in the circular.
(42.) In Union of India and Anr. V/s. Azadi Bachao Andolan and Anr [(2004) 10 SCC 1], it was held that a circular issued by the Central Board of Direct Taxes(CBDT) was not inconsistent with the provisions of the Income-Tax Act and was valid and efficacious. The assessing officers chose to ignore the guidelines and hence the CBDT was justified in issuing "appropriate guidelines" under Circular No. 789. The said Circular does not in any way crib, confine or cabin the powers of the assessing officers with regard to any particular assessment. It merely formulates broad guidelines to be applied in the matter of assessment of the assesses covered by the provisions of the Indo - Mauritius Double Taxation Avoidance Convention, 1983.
(43.) In Commissioner of Income Tax V/s. Anjum M.H. Ghaswala and Ors. [(2002) 1 SCC 633], it was pointed out that the Page 19 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 circulars issued by CBDT under Section 119 of the Income Tax Act have statutory force and would be binding on every income-tax authority although such may not be the case with regard to press releases issue by the CBDT for information of the public.
(44.) In UCO Bank V/s. CIT [(1999) 4 SCC 599], this Court opined that "the circulars as contemplated therein cannot be adverse to the assessee." Thus, the authority which wields the power for its own advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in Section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. (45.) In BSNL & anr. V/s. BPL Mobile Cellur Ltd. & ors. [2008 (8) SCALE 106], it was held that "the direction contained in the said circular letters are relevant for the officers who are authorised not only to grant licenses but also enter into contracts and prepare bills. The circular letters having no statutory force undoubtedly would not govern the contract". A distinction, thus, must be made between statutory and non-statutory guidelines. A distinction must also be made between the circular which are relevant but not binding on the third parties and which are imperative in character. (46.) As regards the Reserve Bank of India guidelines, it was the direction of the Appellate Tribunal that the Respondent-Bank should settle the case of the appellants under the RBI guidelines through a One Time Settlement Page 20 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 and should invite a proposal for settlement and recovery of the agreed amount.
(47.) The Appellate Tribunal in passing its order followed the dicta laid down in Constitution Bench judgment in Central Bank of India (supra), wherein it was held that:
".....RBI directive have not only statutory flavour, any contravention thereof or any default in compliance therewith is punishable under sub- section (4) of S. 46 of the Banking Regulation Act, 1949"."
14. In case of Authorized Officer, State Bank of Travancore and another v. Mathew K C(supra), the Apex Court with regard to grant of interim relief in the financial matters has held as under :
"(8.) The Section 13(4) notice along with possession notice under Rule 8 was issued on 21.04.2015. The remedy under Section 17 of the SARFAESI Act was now available to the Respondent if aggrieved. These developments were not brought on record or placed before the Court when the impugned interim order came to be passed on 24.04.2015. The writ petition was clearly not instituted bonafide, but patently to stall further action for recovery. There is no pleading why the remedy available under Section 17 of the Act before the Debt Recovery Tribunal was not efficacious and the compelling reasons for by- passing the same. Unfortunately, the High Court also did not dwell upon the same or record any special reasons for Page 21 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 grant of interim relief by direction to deposit.
(9.) The statement of objects and reasons of the SARFAESI Act states that the banking and financial sector in the country was felt not to have a level playing field in comparison to other participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of securities and sell them. The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of banks and financial institutions. The Narasimhan Committee I and II as also the Andhyarujina Committee constituted by the Central Government Act had suggested enactment of new legislation for securitisation and empowering banks and financial institutions to take possession of securities and sell them without court intervention which would enable them to realise long term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as `the DRT Act') with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order. (10.) Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank v. O.C. Krishnan Page 22 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 and others, (2001) 6 SCC 569, that :-
"6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."
(11.) In Satyawati Tandon (supra), the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in Page 23 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 view of the alternate statutory remedy available holding :-
"43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the 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.
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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 Page 24 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."
(12.) In Union Bank of India and another v. Panchanan Subudhi, 2010 (15) SCC 552, further proceedings under Section 13(4) were stayed in the writ jurisdiction subject to deposit of Rs. 10,00,000/- leading this Court to observe as follows :
"7. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one-time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act."
(13.) The same view was reiterated in Kanaiyalal Lalchand Sachdev and others v. State of Maharashtra and others, 2011 (2) SCC 782 observing:
"23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Page 25 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 Lodh v. National Insurance Co. Ltd.; Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)"
(14.) In Ikbal (supra), it was observed that the action of the Bank under Section 13(4) of the `SARFAESI Act' available to challenge by the aggrieved under Section 17 was an efficacious remedy and the institution directly under Article 226 was not sustainable, relying upon Satyawati Tandon (Supra), observing :
"27. No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is well settled that where a statute provides efficacious and adequate remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented.
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28.......In our view, there was no justification whatsoever for the learned Single Judge to allow the borrower to bypass the efficacious remedy provided to him under Section 17 and invoke the extraordinary jurisdiction in his favour when he had disentitled himself for such relief by his conduct. The Single Judge was clearly in error in invoking his extraordinary jurisdiction under Article 226 in light of the peculiar facts indicated above. The Division Bench also erred in affirming the erroneous order of the Single Page 26 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 Judge."
(15.) A similar view was taken in Punjab National Bank and another v. Imperial Gift House and others, (2013) 14 SCC 622, observing:-
"3. Upon receipt of notice, the respondents filed representation under Section 13(3-A) of the Act, which was rejected. Thereafter, before any further action could be taken under Section 13(4) of the Act by the Bank, the writ petition was filed before the High Court.
4. In our view, the High Court was not justified in entertaining the writ petition against the notice issued under Section 13(2) of the Act and quashing the proceedings initiated by the Bank."
(16.) It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by Page 27 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022 C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:-
"46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order."Page 28 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022
C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021 (17.) The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference.
(18.) We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and Another, 1997 (6) SCC 450, observing :-
"32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.""Page 29 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022
C/SCA/12619/2021 JUDGMENT DATED: 17/11/2021
15. In view of above, conspectus of law and for the foregoing reasons, this petition is not required to be entertained and is accordingly dismissed. Notice is discharged.
(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 30 of 30 Downloaded on : Wed Jan 12 01:28:23 IST 2022