M/S Krishna Medical Center And 2 ... vs Punjab National Bank And 3 Others
2021 Latest Caselaw 1 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 


 
Court No. - 39
 
Case :- WRIT - C No. - 24655 of 2020
 
Petitioner :- M/S Krishna Medical Center And 2 Others
 
Respondent :- Punjab National Bank And 3 Others
 
Counsel for Petitioner :- Ashish Agrawal,R. P. Agrawal Sr. Advocate, Shivam Yadav
 
Counsel for Respondent :- C.S.C.,Sanjai Singh
 

 
Hon'ble Naheed Ara Moonis,J.

Hon'ble Dinesh Pathak,J.

Heard Shri R.P. Agrawal, learned Senior Advocate assisted by Shri Shivam Yadav and Shri Ashish Agrawal, learned counsel for the petitioners, Shri Sanjai Singh, learned counsel appearing on behalf of the respondent-Bank and Shri B.P. Singh Kachhawah, learned Standing Counsel representing the State.

The instant writ petition has been filed seeking the following relief:

"1. Issue a writ, order or direction in the nature of certiorari quashing the order dated 14.9.2020 passed by the respondent-bank (Annexure 1) and order/email communication dated 04.9.2020 passed by the respondent-bank (Annexure 2) whereby proposal for restructuring the of the loan accounts of the petitioners have been rejected.

2. Issue a writ, order or direction in the nature of mandamus commanding the respondents to reconsider and decide the proposal dated 18.3.2019 read with proposal dated 28.6.2019 (Annexures No. 10 and 8 in terms of applicable RBI guidelines/circulars.

3. Issue a writ, order or direction in the nature of mandamus restraining the respondents from taking any coercive measures for recover of dues from the petitioners and from interfering in the actual physical possession of the petitioners of the secured assets including hospital which is known as Krishna Medical Centre, situated at Dibiyapur, district Auraiya."

Learned Counsel for the respondent-Bank has raised a preliminary objection with regard to the maintainability of the petition and has contended that the petitioners, who have taken loan from the respondent-Bank for construction of the hospital way back in the year 2014 in three stages, which were repayable within the stipulated period in installments and when the petitioners failed to repay the loan, the loan account of the petitioners was declared Non-Performing Assets (NPA) on 03.4.2018 and the bank has issued demand notice dated 18.4.2018 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for the sake of brevity hereinafter referred to as 'SARFAESI Act) to pay the entire outstanding amount within sixty days. The petitioners neither deposited the amount nor filed any objection within the stipulated period and hence the respondent-Bank issued possession notice on 05.9.2018 under Section 13(4) of the Act and took over the symbolic possession of the secured assets. Thereafter the bank has proceeded to recover the alleged dues under the provisions of the Recovery of Debts and bankruptcy Act, 1993 before the Debts Recovery Tribunal, Allahabad (hereinafter referred to as the "DRT"). However, the petitioners have never challenged the order dated 05.9.2018 passed under Section 13(4) of the SARFAESI Act before the DRT. The respondent-Bank for taking over physical possession of the secured assets moved an application before the District Magistrate under Section 14 of the Act. The said application moved by the bank has been allowed by the District Magistrate by order dated 12.7.2019.

At a very belated stage, the petitioners have challenged the notice issued under Section 13(2) of the SARFAESI Act dated 18.4.2018, the possession notice issued under Section 13(4) dated 05.9.2018 together with the order passed by the District Magistrate under Section 14 of the Act dated 12.7.2019 before the DRT on 26.7.2019 under Section 17(1) of the Act, which was registered as SA No. 449 of 2019.

However, the DRT after considering the case of the petitioners on merits, rejected the said application vide order dated 05.8.2019, yet the petitioners have not filed any appeal before the Debts Recovery Appellate Tribunal under Section 18 of the Act instead made a request before the DRT, who has rejected the application moved by the petitioner under Section 17(1) of the Act, for restructuring of the loan account. Thus, the petitioners, only in order to prolong the proceeding and to evade repayment of the loan have asked for the restructuring of the loan account. The petitioners have no legal right to compel the bank to accept the plea of restructuring of loan according to their wishes when the District Magistrate has already passed the order on 21.8.2020 directing the Sub-Divisional Magistrate for getting physical possession of the property in favour of the bank as such the petitioners are not entitled to get any indulgence at this stage. The order passed by the District Magistrate does not suffer from any error or vulnerability nor the action taken by the bank suffers from any illegality after the account of the petitioners was declared NPA and bank proceeded to initiate proceeding under Section 13(2) and 13(4) of the Act. The Punjab National Bank, Circle Office at Kanpur in its meeting held on 14.6.2019 had mentioned the account of the petitioners as doubtful and in the said meeting the bank had directed the petitioners to deposit Rs. 500,000/- (rupees five lac) as monthly interest from July, 2019 onwards, but the petitioners did not even deposit a single penny in pursuance thereof. Hence, the writ petition is liable to be dismissed.

Learned Senior Counsel appearing on behalf of the petitioners have submitted that while dismissing the application of the petitioners under Section 17(1) of the Act, the claim of the petitioners was accepted to the effect that in case the petitioners approach the Bank and if the Bank is agreed to restructure the loan account, the bank shall take up the matter for restructuring, if permissible, as per law.

Since, the application was already pending for restructuring of the loan account, the petitioners moved an application before the Circle Officer, Punjab National Bank Etawah, which was duly received 08.9.2020 requesting the bank to approve the restructuring plan as per RBI guidelines, but in a very cryptic order, the petitioners were informed that their proposal is ineligible and their loan cannot be restructured as their loan accounts are under "Doubtful Category". Hence, the request of the petitioners for restructuring of the loan accounts was rejected and intimation was sent to the petitioners vide letter dated 14.9.2020 (Annexure 1 to the writ petition) that their request for restructuring is not covered under the Bank's Policy. Thus, the letter is absolutely against the RBI guidelines, which clearly indicates about the consideration of restructuring of debts and while there is mechanism in the guidelines of the RBI with regard to Debts Restructuring Scheme.

Learned Senior Counsel further submits that refusal for restructuring of the loan by the bank is against the RBI guidelines. The application moved by the petitioners has been rejected in a cursory manner without disclosing any reason. The District Magistrate after passing the order under Section 14 of the Act becomes functus officio, yet he has directed the Sub-Divisional Magistrate vide order dated 21.8.2020 (Annexure 16 to the writ petition )to hand over the possession of the property to the Bank immediately. The District Magistrate had no jurisdiction to pass any such order.

Learned Senior Advocate also submitted that action of the District Magistrate exerting pressure smacks of mala fide and political pressure. The petitioners account cannot be classified under the RBI guidelines as "doubtful account". The petitioners have again moved a representation dated 23.10.2020 for restructuring of the loan account in accordance with law and to differ the proceeding for taking over physical possession of the hospital. The petitioners had been advised not to admit new patients in the hospital with immediate effect and also arrange for discharge/shifting of already admitted patients, if any, and in case the petitioners fail to shift/discharge the patients, they shall be personally responsible for any untoward incident for which Bank and its officers shall not be responsible.

Learned Counsel for the petitioners submits that it is not possible for the petitioners to refuse admission of new patients or discharge/shift already admitted patients in view of the facts that in the pandemic, petitioner No. 1 is treating Covid-19 patients and hospital has been declared number one hospital for treatment of such patients in whole of Uttar Pradesh by the State of U.P.

In view of the above background, it is prayed that appropriate order be passed restraining the respondent-bank from taking possession of the hospital in pursuance of the directions of the District Magistrate. Hence, the petitioners had no other efficacious and alternative remedy, but to approach this Court under Article 226 of the Constitution of India for redressal of their grievance.

We have given our anxious consideration to the submissions advanced by the learned counsel for the parties.

It is an admitted fact that the petitioner had taken loan from the bank. Demand notice was issued on 18.4.2018 under Section 13(2) of the SARFAESI Act, 2002 and when neither any reply nor any objection was filed by the petitioners, symbolic possession under Section 13(4) of the Act was taken on 05.9.2018. Despite lapse of considerable period of time, as the amount due to the bank was not paid, hence the bank approached the District Magistrate under Section 14 of the Act for taking physical possession of the secured assets. A detailed order was passed by the District Magistrate allowing the application of the Bank by order dated 12.7.2019 (Annexure 11 to the writ petition). The petitioners failed to hand over the physical possession of the secured assets within the time frame, hence the Authorised Officer of the Bank was directed to take possession of the secured assets on or before 30.10.2020. It is not the case of the petitioners that they were never informed about the demand notice or possession notice under Section 13(2) and 13(4) of the Act.

The petitioners were allowed sufficient opportunity to pay the balance loan amount and were also given ample opportunity to redeem the secured assets in accordance with the provision of Section 13(8) of the Act, but the petitioners have failed to repay the loan amount as such possession notice was issued under Section 13 (4) read with Rule 8 of the SARFAESI Act/Rules, 2002. The petitioners were under legal obligation to pay the outstanding dues even otherwise had an alternative remedy to approach the DRT under Section 17 of the Act against the action of the respondent-bank.

At a very belated stage, after the order was passed by the District Magistrate on 12.7.2019 under Section 14 of the Act, an application was filed before the DRT under Section 17(1) of the Act by the petitioners on 26.7.2019 consolidating and challenging the orders simultaneously, i.e. the order dated 18.4.2018, under Section 13(2) of the Act, 05.9.2018 under Section 13(4) of the Act and 12.7.2019 under Section 14 of the Act, which came to be rejected by the DRT vide order dated 05.8.2019. Even then, no appeal was preferred under Section 18 of the Act against the order dated 05.8.2019. Thus, the order dated 05.8.2019 attained finality.

So far as the liability criteria is concerned that the petitioners are entitled to get their loan restructured, in our considered opinion RBI had permitted those borrowers, who are eligible for the loan restructure facility if the loan was outstanding for not more than 30 days. Therefore, the petitioners have rightly not been extended the benefit of restructuring of the loan account.

There is no reason put forth by the petitioners as to why the remedy available under Section 17 of the Act before the Debt Recovery Tribunal was not efficacious and compelled them for by-passing the same. Now the petitioners have challenged the order by which the Bank had refused the request of the petitioners for restructuring of the loan on the ground that the loan account of the petitioners is under "doubtful category". The petitioners had again requested the bank for reconsideration, which was also rejected by the bank by order dated 14.9.2020. When the order has also been passed for taking over possession by publication in the newspapers by the bank, the technicalities of the RBI guidelines qua the eligibility criteria for restructuring of advance have been raised by the petitioners for the first time in the instant writ petition of which there is no whisper about non-compliance of the RBI guidelines by the bank in their representation moved before the Bank.

In this view of the matter, it clearly shows the conduct of the petitioners, who are not interested in making payment and merely raising technical objections in order to compel the bank to accept the plea of restructuring of loan according to their need and desire.

In the case of State of Maharashtra Vs. Digambar, 1995(4) SCC 683, Hon'ble Supreme Court held as under:

"Powers of the High Court to be exercised under Article 226 of the Constitution, if is discretionary, its exercise must be judicious and reasonable, admits of no controversy. It is for that reason, a person's entitlement for relief from a High Court under Article 226 of the Constitution, be it against the State or anybody else, even if is founded on the allegation of infringement of his legal right, has to necessarily depend upon unblameworthy conduct of the person seeking relief, and the Court refused to grant the discretionary relief to such person in exercise of such power, when he approaches it with unclean hands or blameworthy conduct."

It is also evident from the perusal of the record that the petitioners had entered into settlement with the bank for restructuring of non-performing asset and had agreed to deposit Rs. 500,000/- (rupees five lac ) as monthly interest in the meeting with the members of the bank on 14.6.2019, but as pointed out by the learned counsel for the Bank, even then not a single penny had been paid by the petitioners.

In this view of the matter, if the petitioners have failed to abide by the terms of the settlement, there is no justification for this Court to entertain the writ petition, that's too by ignoring the facts that the statutory remedy available to the petitioners against the proceeding under Section 13(4) of the Act, under Section 17 which had been taken by the petitioners at a very belated stage on 26.7.2019 and that too no appeal was preferred against the said order dated 05.8.2019 when efficacious remedy was available to the petitioners as such the institution of the present writ petition under Article 226 of the Constitution of India is utterly misconceived and is not sustainable.

The object and purpose of legislation under the SARFAESI 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 18 of the Act 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 be expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, it is now well settled that where the statutes provided efficacious and adequate remedy, the statutory procedure cannot be allowed to be circumvented by exercising jurisdiction under Article 226 of the Constitution for passing order like in the present case, which shall have serious adverse impact on the right of bank and other financial institutions to recover their dues ignoring the availability of statutory remedy and exercising powers under Article 226 of Constitution which have adverse impact on the financial health, which shall ultimately prove detrimental to the economy of the nation.

"In Satyawati Tandon Vs. United Bank of India, 2010(8) SCC 110, the High Court had restrained further proceeding 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 dealing with the object and purpose of the legislation in extenso it was observed by Hon'ble the Apex Court that a writ petition ought not to be entertained in view of the alternative 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 legislation's 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 of 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."

The Hon'ble Supreme Court in the case of ICICI Bank Ltd. v. Umakanta Mohapatra, 2019(13) SCC 497, has held as under:

"Delay condoned.

Leave granted.

Despite several judgments of this Court, including a judgment 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.

The appeals are allowed in the aforesaid terms.

Pending applications, if any, shall stand disposed of."

Similarly in C. Bright Vs. District Collector and others, Civil Appeal No. 3441 of 2020, decided on 05.11.2020, Hon'ble Supreme Court has held as under:

"21. Even though, this Court in United Bank of India v. Satyawati Tondon & Ors.21 held that 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 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. Hindon Forge Private Limited has held that the remedy of an aggrieved person by a secured creditor under the Act is by way of an application before the Debts Recovery Tribunal, however, borrowers and other aggrieved persons are invoking the jurisdiction of the High Court under Articles 226 or 227 of the Constitution of India without availing the alternative statutory remedy. The Hon'ble High Courts are well aware of the limitations in exercising their jurisdiction when affective alternative remedies are available, but a word of caution would be still necessary for the High Courts that interim orders should generally not be passed without hearing the secured creditor as interim orders defeat the very purpose of expeditious recovery of public money. Thus, in view of the settled legal position, we find, in this case, no justification for invoking our extraordinary jurisdiction under Article 226 of the Constitution of India."

Now, the petitioners have approached this Court at the eleventh hour. In such circumstances fervent plea of the learned Senior Counsel for the petitioner is not applicable to differ the further action of the bank on the ground that the decision/communication dated 14.9.2020 (Annexure 1 to the writ petition) is the decision of an individual officer of the Bank and not by the committee constituted under clause 3 of the Micro, Small and Medium Enterprises. The petitioners account was declared as non-performing asset on 08.4.2018 and now entertaining the writ petition granting interim relief have serious adverse impact on the right of the bank to recover the dues. It is also a misconceived notion that once an order was passed by the District Magistrate under Section 14 of the Act on 12.7.2019 again the District Magistrate asking the respondent-bank to take physical possession vide letter dated 21.8.2020 (Annexure 16 to the writ petition) is politically motivated. In fact, the said direction was made to the sub-Divisional Magistrate to facilitate the bank to take physical possession of the secured assets immediately.

The writ petition is manifestly not instituted to show any bona fide from any remote corner but only to somehow stall further action of the respondent-bank showing a bald desire to repay loan after restructure of the loan. The petitioners cannot be allowed to sit on the fence and wait and thereafter coming to the writ court for the redressal of their grievance.

In view of what has been indicated herein above, we do not find any merit in the writ petition requiring interference by this Court under Article 226 of the Constitution of India.

The writ petition is accordingly dismissed.

Dated: 04.1.2021

Ishrat