The Constitution of India – Article 226 - The Securitization and
Reconstruction of Financial Assets and Enforcement of Security Act, 2002 - The
Security Interest (Enforcement) Rules, 2002 - Rule 8 (1) - Section 13 (4) - There may be sometimes
genuine reasons for the borrowers for being late in payments but such issues
can be addressed by the appropriate forum provided for dealing with these
matters. The extraordinary jurisdiction of Court is not to be invoked in such
cases.
It is the
solemn duty of the court to ensure that the trust imposed by the public in dealing
with public money which is being lent by the Financial Institutions is not
mis-utilized or mis-spent. It is not for the Court to distribute largessee or
to show misplaced sympathy with borrowers who had taken the advantage of loan
facility but are tardy in making repayments. There may be sometimes genuine
reasons for the borrowers for being late in payments but such issues can be
addressed by the appropriate forum provided for dealing with these matters. The
extraordinary jurisdiction of Court is not to be invoked in such cases. In view
of the settled legal position, in this case, no justification for invoking
extra ordinary jurisdiction under Article 226 of the Constitution of India. Accordingly,
this writ petition is dismissed on the ground of availability of alternative
remedy.
Facts of the Case
In the
present case, petitioners did not submit any representation or objection in
pursuance to the notice under Section 13(2) of the SARFAESI Act and as such
possession notice dated 31.08.2018 was issued by the respondent-Bank under
Section 13(4) of the SARFAESI Act, 2002 read with Rule 8 of the Security
Interest (Enforcement) Rules, 2002, which has been challenged in the present
writ petition. Petitioners have raised factual dispute with regard to amount
demanded by the respondent-Bank.
IN THE HIGH COURT OF JUDICATURE AT
ALLAHABAD
Hon'ble Bharati Sapru, J. & Hon'ble Vivek Varma,J.
15.05.2019
W.P.
(C) No. 14645 of 2019
Sushma
Yadav v. State of U.P.
Counsel
for Petitioner :- Vikram Yadav,P.K. Upadhyay
Counsel
for Respondent :- C.S.C.,Sanjai Singh
(Per
Hon. Vivek Varma, J.)
1. The present writ petition
has been filed against the notice dated 23.12.2018 (Annexure No. 6), issued
under Rule 8 (1) of Security Interest (Enforcement) Rules, 2002 (hereinafter
referred as Rules, 2002) published in the news paper Rashtriya Sahara, and
notice dated 31.08.2018 (Annexure No. 4) issued under Section 13(4) of the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Act, 2002 (hereinafter referred as SARFAESI Act, 2002) read with Rules
8(1) of the Rules, 2002.
2. Briefly stated facts, as
narrated in the writ petition, are that petitioner nos. 1 & 3 have taken a
housing loan of Rs. 35 Lacs; Rs 18 Lacs as term loan and; Rs 33 Lacs against
Cash Credit account from Bank of Maharashtra. Petitioner no. 2 along with one
P.K. Yadav stood as guarantors. Petitioners No. 1 & 3 failed to adhere to
the terms and conditions of loan and madedefaults and accordingly the loan
accounts were classified by the Bank as 'non performing asset' (NPA) on
9.1.2018 in accordance with the prescribed norms issued by the Reserve Bank of
India.
3. Thereafter, the
Bank-respondent issued a notice dated 19.2.2018 under Section 13(2) of the
SARFAESI Act claiming total dues of Rs.
49,33,525/- plus unapplied interest
w.e.f. 19.2.2018 and penal interest and other charges/expenses against Cash
Credit of Rs. 33 Lacs and Term Loan of Rs. 18 Lacs. Further, by another notice
dated 3.4.2018 under section 13(2) of the SARFAESI Act claimed Rs. 33,01,421/- plus
unapplied interest thereon w.e.f 19.2.2018 and penal interest and other
expenses/charges against Housing Loan was issued to the petitioners in the
capacity of borrowers/guarantors. The borrower failed to make payment of the
outstanding loan amount as demanded in the notice. Again a notice dated
31.08.2018 under Section 13(4) of the said Act read with Rule 8 (1) of the
Rules 2002 was issued to the borrowers/guarantors. Thereafter a notice dated
21.12.2018 was published in newspaper Rashtriya Sahara informing the public in
general, not to deal with the properties described therein as the respondent
bank has taken possession of the property under the provisions of SARFAESI Act
read with Rules. Hence, the present writ petition.
4. It is contended by learned
counsel for the petitioners that due to illness of the father and mother of the
petitioner no. 2, default in payment of loan amount was made after the notice
dated 19.2.2018 and 3.4.2018. It is further submitted that petitioners are
ready to deposit the entire amount due against them if the Bank-respondent
provides them the actual statement of account. He strongly stressed that the
Bank-respondent is adamant to auction the properties mortgaged. The notice
dated 21.12.2018 published in the newspaper and the notice dated 31.8.2018
issued under Section 13(4) of the Act have been impugned in the present writ
petition.
5. The said contention was
refuted by the counsel for the respondent-bank by contending that the account
was declared as non-performing asset on 09.01.2018 and demand notices under
Section 13(2) of SARFAESI Act was issued on 19.2.2018 and 03.04.2018
respectively to the borrower as well as guarantors but the petitioners ignored
the said notices and did not submit any representation and did not raise any
objection and, therefore, proceedings under Section 13(4) of SARFAESI Act were
initiated on 31.08.2018. It is further submitted that once measures under
Section 13(4) have been taken, the petitioners ought to be relegated to avail
the alternative remedy as provided under the SARFAESI Act and this Court may
not entertain the petition underArticle 226 of the Constitution of India.
6. Heard the learned counsel for
the parties and perused the contents of the writ petition as well as the
relevant provisions of the SARFAESI Act, 2002.
7. The issue that emerges for
consideration of this Court in this writ petition is as to whether this writ
petition is maintainable against possession notice issued under Section 13(4)
of the SARFAESI Act read with Rules 8(1) of the Rules, 2002.
8. The issue is no longer
res-integra. Section 13 of the SARFAESI Act contains detailed mechanism for
enforcement of security interest. Sub-section (1) thereof lays down that
notwithstanding anything contained in Section 69 or 69-A of the Transfer of
Property Act, any security interest created in favour of any secured creditor
may be enforced, without the intervention of the court or tribunal, by such
creditor in accordance with the provisions of this Act. Sub-section (2) of
Section 13 enumerates first of many steps needed to be taken by the secured
creditor for enforcement of security interest. This sub-section provides that
if a borrower, who is under a liability to a secured creditor, makes any
default in repayment of secured debt and his account in respect of such debt is
classified as non-performing asset, then the secured creditor may require the
borrower by notice in writing to discharge his liabilities within sixty days
fromthe date of the notice with an indication that if he fails to do so, the
secured creditor shall be entitled to exercise all or any of its rights in
terms of Section 13(4) of the Act.
9. Sub-section (3) of Section 13
of the Act lays down that notice issued under Section 13 (2) of Act shall
contain details of the amount payable by the borrower as also the details of
the secured assets intended to be enforced by the bank or financial
institution. Sub-section (3-A) of Section 13 lays down that the borrower may
make a representation in response to the notice issued under Section 13(2) and
challenge the classification of his account as non-performing asset as also the
quantum of amount specified in the notice. If the bank or financial institution
comes to the conclusion that the representation/objection of the borrower is
not acceptable, then reasons for non-acceptance are required to be communicated
within one week. Subsection (4) of Section 13 of the Act specifies various
modes which can be adopted by the secured creditor for recovery of secured
debt. The secured creditor can take possession of the secured assets of the
borrower and transfer the same by way of lease, assignment or sale for
realizing the secured assets. This is subject to the condition that the right
to transfer by way of lease, etc. shall be exercised only where substantial
part of the business of the borrower is held as secured debt. If themanagement
of whole or part of the business is severable, then the secured creditor can
take over management only of such business of the borrower which is relatable
to security. The secured creditor can appoint any person to manage the secured
asset, the possession of which has been taken over. The secured creditor can
also, by notice in writing, call upon a person who has acquired any of the
secured assets from the borrower to pay the money, which may be sufficient to
discharge the liability of the borrower. Sub-section (12) of Section 13 lays
down that rights available to the secured creditor under the Act may be
exercised by one or more of its officers authorized in this behalf.
10. Section 17 of the Act
envisages the remedies available to any person including borrower, who may have
grievance against the action taken by the secured creditor under sub-section
(4) of Section 13. Such an aggrieved person can make an application to the
Tribunal within 45 days from the date on which action is taken under that
sub-section.
11. In United Bank of India Vs. Satyawati Tondon and others, (2010) 8
SCC 110, the Supreme Court observed as under:
“42.
There is another reason why the impugned order should be set aside. If
respondent No.1 had any tangible grievance against the notice issued under
Section 13(4) or action taken under Section14, then she could have availed
remedy by filing an application under Section 17(1). The expression `any
person' used in Section 17(1) is of wide import. It takes within its fold, not
only the borrower but also guarantor or any other person who may be affected by
the action taken under Section 13(4) or Section 14. Both, the Tribunal and the
Appellate Tribunal are empowered to pass interim orders under Sections 17 &
18 and are required to decide the matters within a fixed time schedule. It is
thus evident that the remedies available to an aggrieved person under the
SARFAESI Act are both expeditious and effective.
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 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, 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.
44. While expressing the aforesaid view,
we are conscious that the powers conferred upon the High Court under Article
226 of the Constitution to issue to any person or authority, including in
appropriate cases, any Government, directions, orders or writs including the
five prerogative writs for the enforcement of any of the rights conferred by
Part III or for any other purpose are very wide and there is no express
limitation on exercise of that power but,at the same time, we cannot be
oblivious of the rules of self-imposed restraint evolved by this Court, which
every High Court is bound to keep in view while exercising power under Article
226 of the Constitution.
45. It is true that the rule of exhaustion
of alternative remedy is a rule of discretion and not one of compulsion, but it
is difficult to fathom any reason why the High Court should entertain a
petition filed under Article 226 of the Constitution and pass interim order
ignoring the fact that the petitioner can avail effective alternative remedy by
filing application, appeal, revision, etc. and the particular legislation
contains a detailed mechanism for redressal of his grievance.
XXXX
XXXXX XXXX
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.
56. Insofar as this case is concerned, we
are convinced that the High Court was not at all justified in injuncting the
appellant from taking action in furtherance of notice issued under Section
13(4) of the Act. In the result, the appeal is allowed and the impugned order
is set aside. Since the respondent has not appeared to contest the appeal, the
costs are made easy.”
12. In Kanaiyalal Lalchand Sachdev and others Vs. State of Maharashtra
and others, (2011) 2 SCC 782, the Supreme
Court held as under :
24. In City
and Industrial Development CorporationVs. Dosu Aardeshir Bhiwandiwala &
Ors. (2009) 1 SCC 168, this Court had observed that:
"30.
The Court while exercising its jurisdiction under Article 226 is duty-bound to
consider whether:
(a)
adjudication of writ petition involves any complex and disputed questions of
facts and whether they can be satisfactorily resolved;
(b) the
petition reveals all material facts;
(c) the
petitioner has any alternative or effective remedy for the resolution of the
dispute;
(d) person
invoking the jurisdiction is guilty of unexplained delay and laches;
(e) ex facie
barred by any laws of limitation;
(f) grant of
relief is against public policy or barred by any valid law; and host of other
factors."
25.
In the instant case, apart from the fact that admittedly certain disputed
questions of fact viz. non-receipt of notice under Section 13(2) of the Act,
non-communication of the order of the Chief Judicial Magistrate, etc. are
involved, an efficacious statutory remedy of appeal under Section 17 of the Act
was available to the appellants, who ultimately availed of the same. Therefore,
having regard to the facts obtaining in the case, the High Court was fully
justified in declining to exercise its jurisdiction under Articles 226 and 227
of the Constitution.”
13. Further, in the case of Standard Chartered Bank Vs. Noble Kumar & Ors., reported in
(2013) 9 SCC 620, the Hon'ble Apex Court has
held as under:
"27.
The "appeal" under Section 17 is available to the borrower against
any measure taken underSection 13(4). Taking possession of the secured asset is
only one of the measures that can be taken by the secured creditor. Depending
upon the nature of the secured asset and the terms and conditions of the
security agreement, measures other than taking the possession of the secured
asset are possible under Section 13(4). Alienating the asset either by lease or
sale, etc. and appointing a person to manage the secured asset are some of
those possible measures. On the other hand, Section 14 authorises the
Magistrate only to take possession of the property and forward the asset along
with the connected documents to the borrower (sic the secured creditor).
Therefore, the borrower is always entitled to prefer an "appeal"
under Section 17 after the possession of the secured asset is handed over to
the secured creditor. Section 13(4)(a) declares that the secured creditor may
take possession of the secured assets. It does not specify whether such a
possession is to be obtained directly by the secured creditor or by resorting
to the procedure under Section 14. We are of the opinion that by whatever
manner the secured creditor obtains possession either through the process
contemplated under Section 14 or without resorting to such a process obtaining
of the possession of a secured asset is always a measure against which a remedy
under Section 17 is available."
14. The Hon'ble Apex Court in
the cases of United Bank of India (Supra.) and Standard Chartered Bank (Supra.)
has held that the proceeding under Section 14 is consequential action of
Section 13(4) of the SARFAESI Act, 2002. Thus, the efficacious and effective
remedy is available to the aggrieved person under Section 17 & 18 of the
SARFAESI Act, 2002.
15. In GM, Sri Siddeshwara Co-operative Bank Limited and another Vs Sri
Ikbal and others, (2013)10 SCC 83, the Apex
Court went on to observe that although alternative remedy is not an absolute
bar to the exercise of extraordinary jurisdiction under Article 226, yet, 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 consideration, statutory procedures cannot be allowed to be
circumvented.
16. So far as invoking of writ
jurisdiction in the matters of realization of loan by the financial institutions
are concerned, the Hon'ble Apex Court in the case of Authorized Officer, State Bank of Travancore & Anr. Vs.
Mathew K.C., reported in (2018)3 SCC 85, while
considering the earlier judicial pronouncements made in this regard, has held
thus:
16.
It is the solemn duty of the Court to apply the correct law without waiting for
an objection to be raised by a party, especially when the law stands well
settled. Any departure, if permissible, has to be for reasons discussed, of the
case falling under a defined exception, duly discussed after noticing the
relevant law. In financial matters grant of ex-parte interim orders can have a
deleterious effect and it is not sufficient to say that the aggrieved has the
remedy to move for vacating the interim order. Loans by financial institutions
are granted from public money generated at the tax payers expense. Such loan
does not become the property of the person taking the loan, but retains its
character of public money given in a fiduciary capacity as entrustment by the public.
Timely repayment also ensures liquidity to facilitate loan to another in need,
by circulation of the money and cannot be permitted to be blocked by frivolous
litigation by those who canafford 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 Vs
Antarim Zila Parishad, AIR
1969 SC 556; Whirlpool
Corporation VS Registrar of Trade Marks, (1998) 8 SCC 1; and Harbanslal Sahnia
Vs Indian Oil Corporation Ltd., (2003) 2 SCC 107 and some other judgments, then the High Court may, after
considering all the relevant parameters and public interest, pass an
appropriate interim order.”
17.
The writ petition ought not to have been entertained and the interim order
granted for the mere asking without assigning special reasons, and that too
without even granting opportunity to the Appellant to contest the
maintainability of the writ petition and failure to notice the subsequent
developments in the interregnum. The opinion of the Division Bench that the
counter affidavit having subsequently been filed, stay/modification could be
sought of the interim order cannot be consideredsufficient justification to
have declined interference.
18. We cannot help but disapprove the
approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd Vs Prem
Heavy Engineering Works (P) Ltd and another, 1997 (6) SCC 450, observing :-
“32.
When a position, in law, is well settled as a result of judicial pronouncement
of this Court, it would amount to judicial impropriety to say the least, for
the subordinate courts including the High Courts to ignore the settled
decisions and then to pass a judicial order which is clearly contrary to the
settled legal position. Such judicial adventurism cannot be permitted and we
strongly deprecate the tendency of the subordinate courts in not applying the
settled principles and in passing whimsical orders which necessarily has the
effect of granting wrongful and unwarranted relief to one of the parties. It is
time that this tendency stops.”
19.
The impugned orders are therefore contrary to the law laid down by this Court
under Article 141 of the Constitution and unsustainable. They are therefore set
aside and the appeal is allowed.
20. All questions of law and fact remain
open for consideration in any application by the aggrieved before the statutory
forum under the SARFAESI Act.
17. In a recent judgment of Apex
Court in Civil Appeal Nos. 10243-10250
of 2018 titled as “ICICI Bank Ltd Vs Umakanta Mohapatra” decided on 5.10.2018, the Apex Court has not approved the practice of granting interim order
in reference to the matters arising out of the SARFAESI Act, and held as
under:-
“Despite
several judgments of this Court, including ajudgment by Hon'ble Mr.Justice
Navin Sinha, as recently as on 30.01.2018, in Authorized Officer, State Bank of
Travancore and Another VS Mathew KC., (2018) 3 SCC 85, the High Courts continue
to entertain matters which arise under Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), and
keep granting interim orders in favour of persons who are Non-Performing Assets
(NPAs).
The
writ petition itself was not maintainable, as a result of which, in view of our
recent judgment, which has followed earlier judgments of this Court, held as
follows:-.
18. We cannot help but disapprove the approach
of the High Court for reasons already noticed in Dwarikesh Sugar Industries
Ltd. Vs Prem Heavy Engineering Works (P) Ltd and another, (1997) 6 SCC 450,
observing:-
“32.
When a position, in law, is well settled as a result of judicial pronouncement
of this Court, it would amount to judicial impropriety to say the least, for
the subordinate courts including the High Courts to ignore the settled
decisions and then to pass a judicial order which is clearly contrary to the
settled legal position. Such judicial adventurism cannot be permitted and we
strongly deprecate the tendency of the subordinate courts in not applying the
settled principles and in passing whimsical orders which necessarily has the
effect of granting wrongful and unwarranted relief to one of the parties. It is
time that this tendency stops.” The writ petition, in this case, being not
maintainable, obviously, all orders passed must perish, including the impugned
order, which is set aside.”
18. Recently, the Supreme Court
in Civil Appeal No. 10873 of 2018, titled as,
"M/s Hindon Forge Pvt. Ltd.& another Vs. The State of Uttar Pradesh
through District Magistrate, Ghaziabad & another", decided on 01st
November, 2018, while setting aside the
judgment of the Full Bench of this High Court in 'M/s Hindon Forge Pvt. Ltd. and another Vs. State of U.P. Through
D.M. Ghaziabad and others' had held that the the
borrower/debtor would be entitled to invoke the jurisdiction of the DRT under
Section 17(1) of the SARFAESI Act, on issuance of notice under Section 13 (4)
of the said Act. The law laid down by the Apex Court is as under:-
“We
are, therefore, of the view that the Full Bench judgment is erroneous and is
set aside. The appeals are accordingly allowed, and it is hereby declared that
the borrower/debtor can approach the Debts Recovery Tribunal under Section 17
of the Act at the stage of the possession notice referred to in Rule 8(1) and
8(2) of the 2002 Rules.”
19. In the present case,
petitioners did not submit any representation or objection in pursuance to the
notice under Section 13(2) of the SARFAESI Act and as such possession notice
dated 31.08.2018 was issued by the respondent-Bank under Section 13(4) of the
SARFAESI Act, 2002 read with Rule 8 of the Security Interest (Enforcement)
Rules, 2002, which has been challenged in the present writ petition.
Petitioners have raised factual dispute with regard to amount demanded by the
respondent-Bank.
20. It is the solemn duty of the
court to ensure that the trust imposed by the public in dealing with public
money which is being lent by the Financial Institutions is not mis-utilized or
mis-spent. It is not for the Court to distribute largessee or to show misplaced
sympathy with borrowers who had taken the advantage of loan facility but are
tardy in making repayments. There may be sometimes genuine reasons for the
borrowers for being late in payments but such issues can be addressed by the
appropriate forum provided for dealing with these matters. The extraordinary
jurisdiction of Court is not to be invoked in such cases.
21. In view of the settled legal
position, we find, in this case, no justification for invoking extra ordinary
jurisdiction under Article 226 of the Constitution of India.
22. Accordingly, this writ
petition is dismissed on the ground of availability of alternative remedy. No
order as to costs. All the question of facts and law remain open for
consideration in any application to be filed by the petitioners before the
Tribunal under the provisions of SARFAESI Act.
Comments
Post a Comment