NEUTRAL CITATION
C/LPA/1366/2023 ORDER DATED: 08/11/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 1366 of 2023
In R/SPECIAL CIVIL APPLICATION NO. 16433 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2023
In R/LETTERS PATENT APPEAL NO. 1366 of 2023
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JYOTSNABEN ASHOKBHAI DODIA
Versus
RAJ RADHE FINANCE LTD.
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Appearance:
MR MITUL SHELAT FOR MR NILESH P UDERNANI(9050) for Appellant
No.1
MR SAUMITRA CHATURVEDI(8369) for the Appellant(s) No. 1
for the Respondent(s) No. 1,2
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
Date : 08/11/2023
ORAL ORDER
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. Heard Mr.Mitul Shelat, learned counsel appearing for the appellant and perused the record.
2. The present appeal is directed against the judgment and order dated 06.10.2023 passed by the learned Single Judge whereunder the writ petition filed by the petitioner herein who is the personal guarantor of respondent No.2 (the borrower) has been dismissed with the cost of Rs.5,00,000/- noticing that the writ petition was a result of concealment of Page 1 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined correct facts. It is noted by the learned Single Judge that the writ petition suffers from the suppression of material facts such as filing of O.A. No.396 of 2017 by the original lender, namely the State Bank of India before DRT-I, Ahmedabad and pendency of the said proceeding. It is noted that there is an alternative remedy available to the petitioner and a private entity who is arrayed as respondent in the writ petition, against whom relief is sought does not fall within the meaning of State under Article 12 of the Constitution of India and as such, the writ petition was not maintainable. We may note that the original lender, namely the State Bank of India is not party to the writ proceedings nor it has been impleaded herein. There is no dispute about the fact of pendency of original application filed by the original lender. It seems that during pendency of the said proceedings, the loan/secured asset has been assigned to the respondent No.1 as Asset Reconstruction Company within the meaning of Section 3 read with Section 5 of the Securitization and Reconstruction of Financial Assets and Enforcement of Page 2 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined Security Interest Act, 2002 (in short 'the SARFAESI Act, 2002'). In the instant appeal, an issue has been raised with regard to the jurisdiction of Asset Reconstruction Company, namely respondent No.1 to proceed under the SARFAESI Act, 2002, with the contentions that the respondent No.1 is not registered and does not possess necessary certificate under Section 3 of the SARFAESI Act, 2002. It, thus, cannot be termed as Asset Reconstruction Company and cannot acquire the finance facilities under Section 5(1)(b) of the Act, 2002 and thereby claim the status of Secured Creditor.
3. Shri Mitul Shelat, learned counsel appearing for the appellant argues that a pertinent question with regard to the jurisdiction of the respondent No.1 to take measures under the SARFAESI Act, 2002 was raised before the Debt Recovery Tribunal. The Debt Recovery Tribunal instead of dealing with the said issue has simply proceeded on the premise that the respondent No.1 is a financial institution within the meaning of SARFAESI Act, 2002, and therefore the measures taken by it under the SARFAESI Act, 2002 cannot be said to Page 3 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined be without jurisdiction.
4. The submission is that the learned Single Judge has also failed to appreciate the said issue though raised in the writ petition and proceed on the premise of the respondent No.1 being an Asset Reconstruction Company. The submission, thus, is that the findings returned by the learned Single Judge to dismiss the writ petition that too with cost are liable to be set aside.
5. Testing this submission of the learned counsel for the appellant when we have gone through the original application filed by the appellant under Section 17 of the SARFAESI Act, 2002, before the Debt Recovery Tribunal, relevant is to note that there is no objection in the said application with respect to the registration of the respondent No.1 under Section 3(1) or its jurisdiction to initiate SARFAESI proceedings. The only objection raised by the appellant before the Debt Recovery Tribunal was with regard to assignment by the original lender to the respondent No.1 as an Asset Reconstruction Company by Page 4 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined way of the agreement. It seems that in view of the said objections raised by the appellant with regard to the validity of the agreement, the Debt Recovery Tribunal has framed a question for determination "Whether the Assignment Agreement dated 28.01.2022 executed between the original lender, i.e. State Bank of India and M/s.Raj Radhe Finance Ltd. is legal and valid?". The objections taken by the appellant with regard to assignment of the loan to the respondent No.1 as against the provisions of Section 5(1)(b) of the SARFAESI Act, 2002 was, thus, answered in paragraph 12 as under :-
"12. Ld. Counsel for the Applicant submitted that the Respondent -FI is a Non-Banking Financial Company (NBFC). As per Section 5(1)
(b) of the SARFAESI Act, only the Asset Reconstruction Company may acquired the financial assets of any Bank or Financial Institutions who could be deemed to be the lenders. Therefore, the Assignment Agreement dated 28.01.2022 executed between the original lender i.e. State Bank of India and Respondent NO.1-FI assigning the account of the Applicant is in violation of Section 5(1)
(b). He further referred to the definition of "secured creditor" contained in Section 2(1) (zd) of the SARFAESI Act and submitted that there is no mention about NBFC in the said provision and as such NBFC cannot be treated as "secured creditor" under the provisions of the SARFAESI Act. Therefore, the Respondent- FI, being not a secured creditor on the basis of the alleged assignment of debt, is not Page 5 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined competent to exercise powers under the provisions of the SARFAESI Act and hence, the entire action of the Respondent-FI is invalid and illegal."
6. Taking note of the above decision, it is more than evident that the issue with regard to the registration of the respondent No.1 under Section 3 to have a legal status of an Asset Reconstruction Company within the meaning of the SARFAESI Act, 2002 has been raised for the first time before the Writ Court. According to us, the said issue was required to be raised at the very first movement in the application under Section 17 filed by the appellant as it would require a factual inquiry into the matter of registration and the status of respondent No.1 as Asset Reconstruction Company within the meaning of SARFAESI Act, 2002.
7. In support of his submissions, the learned counsel for the appellant has placed reliance on the judgment of the Apex Court in M/s.Godrej Sara Lee Ltd. vs. The Excise and Taxation Officer-cum-Assessing Authority and others, being Civil Appeal No.5393 of 2010 dated 01.02.2023, more particularly paragraph 8 Page 6 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined thereof, wherein it has been held that when the issue raised by the appellant is purely legal then the same was required to be determined instead of dismissing the writ petition on the ground of alternative remedy being available. In the said judgment the Apex Court has held thus as it had come across certain orders passed by the High Courts holding the writ petitions as not maintainable merely because the alternative remedy provided by the relevant statute has not been pursued by the parties desirous of invoking the writ jurisdiction. The said judgment is not at all applicable in the facts and circumstances of the present case since the present writ petition has not been dismissed only as not maintainable.
8. He has further relied upon the judgment of the Bombay High Court in Shivabassappa I. Kankanwadi and another vs. Mapusa Urban Cooperative Bank of Goa Ltd. Through its Branch Manager and others - 2016 SCC Online Bom. 2574, paragraph 11 thereof, wherein it has been held that where a citizen has been harassed and was dispossessed from his lawful property at an instance of a financial institution who had acquired Page 7 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined no interest over the property in question, then such a citizen is not required to go to the alternative remedy provided under Section 17 of the SARFAESI Act, 2002. The said case is also not applicable in the facts and circumstances since in the said case the property in question was never secured in favour of the financial institution which is not so in the present case.
9. He has further relied upon the judgment in Virender Nath Gautam vs. Satpal Singh and others - (2007) 3 SCC 617, whereunder it has been held that it is settled law that the pleadings must contain only facta probanda and not facta probantia. The material facts on which the party relies for his claim are called facta probanda and they must be stated in the pleadings. The facts which are in the nature of facta probantia need not be set out in the pleadings as they are not facts in issue. The said observations have been made in an election dispute and therefore also the said ratio will not be applicable in the facts and circumstances of the present case. Page 8 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023
NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined
10. For the aforesaid, we do not find any good ground to sustain the challenge to the order passed by the learned Single Judge which primarily proceeded on the ground that the appellant herein has an alternative remedy to challenge the order passed by the Debt Recovery Tribunal in dismissing the application under Section 17 by filing an appeal under Section 18 of the SARFAESI Act, 2002.
11. We may further record that for the concealment about the proceedings initiated by the original lender and the fact that the original lender has not been impleaded before the Writ Court, we do not find any good ground to sustain the challenge to the decision of the learned Single Judge in imposing cost upon the petitioner. The findings returned by the learned Single Judge that the present petition is a frivolous petition though the remedy before the petitioner lies else and it is an effort made on the part of the appellant to stall the proceedings of recovery of loan under the SARFAESI Act, 2002 is found to be justified in the facts and circumstances of the instant case. For the aforesaid, we dismiss Page 9 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023 NEUTRAL CITATION C/LPA/1366/2023 ORDER DATED: 08/11/2023 undefined the present appeal as being devoid of merits. Consequently, connected Civil Application also stands dismissed.
12. However, liberty is with the appellant to approach the Debt Recovery Appellate Tribunal by invoking the provisions of Section 18 of the SARFAESI Act, 2002. It is clarified that in case the appellant approaches the appellate tribunal, the findings returned by the learned Single Judge in the order impugned or the observations made hereinabove will not come in the way of the appellant. The appellate tribunal shall be under obligation to deal with the issues raised by the appellant independently.
13. Lastly, the observations made by the learned Single Judge casting aspersions on the conduct of the learned counsel appearing for the petitioner are expunged. Time period for deposit of cost is extended till 31.12.2023.
(SUNITA AGARWAL, CJ ) (ANIRUDDHA P. MAYEE, J.) GAURAV J THAKER Page 10 of 10 Downloaded on : Thu Nov 09 20:41:46 IST 2023