IN THE HIGH COURT FOR THE STATE OF TELANGANA, HYDERABAD
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W.P.No.14020 of 2019 Between:
Smt. Vemula Jayanthi & Another Petitioners VERSUS The Authorised Officer, State Bank of India, Nizamabad Main Branch, Nizamabad & Another.
Respondents JUDGMENT PRONOUNCED ON: 09.11.2021 HON'BLE SRI JUSTICE UJJAL BHUYAN AND HON'BLE DR.JUSTICE CHILLAKUR SUMALATHA
1. Whether Reporters of Local newspapers may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be Marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to see the fair copy of the Judgment? : Yes ____________________ UJJAL BHUYAN, J 2 * HON'BLE SRI JUSTICE UJJAL BHUYAN AND HON'BLE DR.JUSTICE CHILLAKUR SUMALATHA + W.P.No.14020 of 2019 % 09.11.2021 # Between:
Smt. Vemula Jayanthi & Another Petitioners VERSUS The Authorised Officer, State Bank of India, Nizamabad Main Branch, Nizamabad & Another.
Respondents ! Counsel for Petitioners : Sri G.K. Deshpande ^ Counsel for the respondents : M/s. Podila Hari Prasad <GIST:
> HEAD NOTE:
? Cases referred 1 2018 (4) ALD 322 (DB) 2 (2009) 8 SCC 366 3 (1998) 8 SCC 1 3 THE HON'BLE SRI JUSTICE UJJAL BHUYAN AND THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA W.P.No.14020 OF 2019 Order:
(Per Hon'ble Sri Justice Ujjal Bhuyan) By filing this writ petition under Article 226 of the Constitution of India, petitioners seek quashing of order dated 09.01.2019 passed by the Debts Recovery Tribunal - I, Hyderabad, in S.A.No.190 of 2016 and consequently to allow the said securitization application of the petitioners.
2 Petitioners are mother and son respectively. Petitioner No.1 is the wife of late Rajeshwar Reddy, whereas petitioner No.2 is the son of late Rajeshwar Reddy.
3 From the materials on record, it appears that State Bank of India, Nizamabad Main Branch, Nizamabad, had sanctioned loan of Rs.25,92,500-00 to the petitioners against security provided by the petitioners by way of equitable mortgage over the schedule property. It further appears that petitioners defaulted in repayment of loan on account of various reasons for which petitioners requested respondent State Bank of India for settlement of the liabilities under one time settlement (OTS) scheme. During the course of negotiations respondent Bank had issued notice to the petitioners for regularization of the loan account, pursuant to which petitioners had paid certain amounts on five different occasions towards regularization of the loan account. Notwithstanding the same, respondent State Bank of India had quantified the total dues of the petitioners at Rs.44,75,000-00. Without following the due procedure, respondent State Bank of India forcibly took physical possession of 4 the schedule property on 19.4.2016 whereafter e-auction sale notice was published in the newspapers on 04.5.2016 for auction sale of the schedule property.
4 Petitioners challenged the legality and validity of the e-auction sale notice dated 04.5.2016 before the Debts Recovery Tribunal-I at Hyderabad (briefly, 'the Tribunal' hereinafter) by filing a securitisation application under Section 17 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly referred to hereinafter as 'SARFAESI Act'), which was registered as S.A.No.190 of 2016. It appears that petitioners had filed an interlocutory application before the Tribunal for stay of the auction sale proceedings. Tribunal, by order dated 09.6.2016, took the view that there was no merit in the application for stay. Accordingly respondent State Bank of India was granted liberty to go ahead with the sale, but it was clarified that the sale would be subject to final outcome of the proceedings in S.A.No.190 of 2016. 5 Following the aforesaid order of the Tribunal dated 09.6.2016, respondent State Bank of India obtained fresh valuation of the schedule property on 23.01.2017 and issued notice dated 10.5.2017 under Rule 8 (6) of the Security Interest (Enforcement) Rules, 2002 (briefly, the 'SARFAESI Rules' hereinafter) fixing auction sale on 12.6.2017. It is stated that in the auction sale, respondent No.2 was the highest bidder for Rs.48,00,000-00, which bid was accepted; accordingly sale certificate was issued on 22.6.2017. 6 At that stage, petitioners preferred a writ petition before this Court assailing the sale e-auction, which was registered as Writ Petition No.35574 of 2017. By the order dated 06.11.2017, this Court 5 observed that S.A.No.190 of 2016 was pending before the Tribunal for consideration, with the Tribunal permitting the respondent State Bank of India to go ahead with the auction sale but making the same subject to final outcome of the proceedings. In such circumstances, this Court took the view that petitioners should prosecute the pending S.A.No.190 of 2016 before the Tribunal and that no case was made out for interference at that stage. Consequently the writ petition was dismissed as being devoid of merit.
7 Thereafter petitioners proceeded with the securitisation application, which was heard and decided by the Tribunal, vide, the impugned order dated 09.01.2019. As per the impugned order, Tribunal dismissed the securitisation application filed by the petitioners.
8 Contending that the procedure prescribed under Rule 8(6) and Rule 9(1) of the SARFAESI Rules r/w Section 13 (8) of the SARFAESI Act were violated by the respondent State Bank of India which vitiated the auction sale notice, petitioners have filed the present writ petition challenging the aforesaid order of the Tribunal dated 09.01.2019. 9 Respondent No.1 i.e. State Bank of India has filed counter affidavit. Stand taken in the counter affidavit is that the writ petition should not be entertained in view of the fact that petitioners have adequate and efficacious alternative remedy in the form of filing appeal under Section 18 of the SARFAESI Act. Since the petitioners have not availed the remedy of appeal, the writ petition should not be entertained.
610 On merits it is contended that principle of Rule 9(1) of the SARFAESI Rules is applicable in the instant case as the present auction notice dated 10.5.2017 was a subsequent notice to earlier e- auction sale notice dated 08.5.2016 which did not materialize in auction. Referring to the proviso to Rule 9(1) it is contended that if sale of immovable property by any one of the methods specified by sub-rule (5) of Rule 8 fails and the sale is required to be conducted again, then notice of sale has to be given with 15 days time to the borrower for the subsequent sale. In the instant case respondent State Bank of India had published e-auction notice dated 10.5.2017 in two leading newspapers of the State on 12.5.2017 fixing auction sale on 12.6.2017 which shows that the auction was conducted 31 days after publication of auction sale notice, though under the law only 15 days notice for subsequent sale was adequate. In the circumstances respondent State Bank of India seeks dismissal of the writ petition.
11 Respondent No.2 i.e. auction purchaser has also filed counter affidavit. In addition to the contentions already made by respondent No.1 to oppose the writ petition, respondent No.2 has stated that the writ petition was filed after inordinate delay raising technical pleas. Respondent No.2 is a bona fide purchaser having paid the total sale consideration following the auction sale. Writ petition should, therefore, be dismissed.
12 Learned counsel for the petitioners submits that the sale notice dated 10.5.2017 was issued under Rule 8(6) of the SARFAESI Rules, calling upon the petitioners to discharge the liabilities in full within 30 days of the notice. But on the same day e-auction sale notice was 7 issued fixing date / time of e-auction on 12.6.2017 from 2.00 PM to 3.00 PM. This he contends has jeopardized the rights of the petitioners for redemption of the schedule property by discharging the liability. According to him, the e-auction sale notice could not have been issued till completion of 30 days period provided under the sale notice. In support of his contention, learned counsel for the petitioners has placed reliance on a Division Bench judgment of this Court in M/s. Venshiv Pharma Chem (P) Ltd. Vs. State Bank of India, Stressed Assets Recovery Branch, Koti, Hyderabad1. 13 On the other hand, learned counsel for respondents asserts that there has been no violation of the procedure laid down under the SARFAESI Rules. Besides the e-auction, sale has taken place, sale of the schedule property in favour of the highest bidder i.e. respondent No.2 has been confirmed, whereafter sale certificate has also been issued. Impugned order of the Tribunal dated 09.01.2019 is correct and no interference is called for.
14 Submissions made by learned counsel for the parties have been duly considered.
15 We have already noted the factual aspect of the dispute leading to passing of the impugned order dated 09.01.2019 by the Tribunal. The above order was passed by the Tribunal on a securitisation application filed by the petitioners under Section 17 (1) of the SARFAESI Act. As per the aforesaid provision any person (including borrower) if aggrieved by any of the measures taken under sub- section (4) of Section 13 by the secured creditor or by his authorised 1 2018 (4) ALD 322 (DB) 8 officer, may make an application to the jurisdictional Tribunal within 45 days from the date on which such measures were taken. The contours of the power of the Tribunal while dealing with such an application are provided in sub-sections 2 to 7 of Section 17 of the SARFAESI Act. Supreme Court in Authorised Officer, Indian Overseas Bank Vs. Ashok Saw Mill2, had examined in detail the provisions of Section 17 of the SARFAESI Act as it stood then and discussed the wide powers of the Tribunal. It has been held that action taken by a secured creditor in terms of Section 13 (4) is open to scrutiny by the Tribunal and the same can not only be set aside but even status quo ante can be restored by the Tribunal. In the process Tribunal can undo an auction sale if the same is in contravention of the law.
16 Once an order is passed under Section 17 of the SARFAESI Act, any person aggrieved by the same may prefer an appeal to the Appellate Tribunal within 30 days from the date of receipt of such order under Section 18 of the SARFAESI Act. As per the second proviso, no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount of debt due from him as claimed by the secured creditor or determined by the Tribunal, whichever is less. The third proviso confers discretion on the Appellate Tribunal for reduction of such deposit which should not be less than 25% of the debt referred to in the second proviso. Under sub-section (2) of Section 18, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Rules framed thereunder.
2 (2009) 8 SCC 366 9 17 Supreme Court has clarified that even though Section 5 of the Limitation Act, 1963 may impliedly be inapplicable, delay in filing an appeal under Section 18 (1) of the SARFAESI Act can be condoned by the Appellate Tribunal under Section 18 (2) of the SARFAESI Act r/w the proviso to Section 20 (3) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
18 Thus, it is seen that the statute itself has provided for the remedy of appeal if a person is aggrieved by an order of the Tribunal passed under Section 17 of the SARFAESI Act. 19 While the power of the High Court to issue a high prerogative writ under Article 226 of the Constitution of India is plenary in nature and is not limited by any other provision of the Constitution, not to speak of any statutory limitation, however, the High Court has the discretion to entertain or not to entertain a writ petition. This position of law has been beautifully summarized by the Supreme Court in Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai3. It is held as follows:
"15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field."
20 Thus from the above, we find that the High Court has imposed upon itself certain restrictions before invoking its extra-ordinary jurisdiction under Article 226 of the Constitution of India, one of 3 (1998) 8 SCC 1 10 which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. However, this self imposed restriction would not operate as a bar in at least three contingencies:
1. where the writ petition has been filed for the enforcement of any of the fundamental rights;
2. where there has been a violation of the principles of natural justice; or
3. where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.
21 In a recent decision of the Supreme Court in Assistant Commissioner of State Tax Vs. M/s. Commercial Steel Limited, Civil Appeal No.5121 of 2021, decided on 03.9.2021, it has been held that though existence of an alternative remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution, but a writ petition can be entertained in exceptional circumstances where there is-
1. a breach of fundamental rights;
2. violation of the principles of natural justice;
3. excess of jurisdiction; or
4. a challenge to the vires of the statute or delegated legislation.
22 In the instant case, we find that none of the above exceptions have been made out by the petitioners. Petitioners have challenged the impugned order of the Tribunal on the ground that the procedural requirements under the SARFAESI Act have not been followed causing prejudice to the petitioners which however has been disputed and denied by the respondents. This is a matter which can certainly be agitated and gone into by the appellate forum. Therefore, we are of 11 the firm opinion that petitioners should be relegated to the forum of Appellate Tribunal under Section 18 of the SARFAESI Act. 23 In so far the decision of this Court in M/s.Venshiv Pharma Chem (P) Ltd (supra) is concerned, we find that the said decision has been stayed by the Supreme Court, vide order dated 24.8.2018 passed in SLP (C) No.18906 of 2018 (State Bank of India Vs. M/s.Venshiv Pharma Chem (P) Ltd).
24 For the aforesaid reasons, the writ petition fails and is accordingly dismissed. However, dismissal of the writ petition would not preclude the petitioners from availing the remedy of appeal under Section 18 of the SARFAESI Act subject to limitation. However, there shall be no order as to costs.
25. Miscellaneous petitions, if any pending in this writ petition, shall also stand dismissed.
___________________ UJJAL BHUYAN, J _________________________________ Dr.CHILLAKUR SUMALATHA, J Date: 09.11.2021.
L.R. Copy be marked B/o Kvsn