Asha Oil Foods Pvt. Ltd. vs The Jalgaon Janta Sahakari Bank ...
2004 Latest Caselaw 1320 Bom

JUDGMENT

A.H. Joshi, J.

1. The petitioner herein has moved this Court for following relief :

"C. By appropriate writ, order or direction the letters dated 20.10.2004 and 8.11.2004 issued by the Respondent Bank may kindly be quashed and set aside.

D.    By appropriate writ, order or direction it be declared that the provisions of the Securitisation Reconstruction of Financial Assets And Enforcement of Security Interests Act cannot be applicable to the petitioner company i.e. M/s. Asha Oil Foods Pvt. Ltd."
 

2. The brief backgrounds and admitted facts leading to the petition can be summarised as hereinafter:
 

The petitioner a limited company is having its industry at Dhule. It had obtained from respondent Nos. 2 and 3 Bank, a loan of the sum of Rs. 38 lacs in 1997. The debt became non performing as on 1.7.1999. The Bank having failed to receive the amount due, approached the competent authority under Maharashtra Co-operative Societies Act (hereinafter referred to as the MCS Act for brevity), for adjudication of dues and issue of recovery certificate under Section 101 of the MCS Act, which upon conclusion of inquiry was issued, which is at Exh. "C" to the petition. The competent authority has thereby certified that the Bank was entitled to recover a sum of Rs. 37.73 lacs with interest and other amounts. The said recovery certificate was challenged by petitioner by invoking revisional jurisdiction under Section 154 of the MCS Act. The challenge failed and ultimately recovery certificate became final.

3. Taking recourse to Section 13 of the Securitisation and Reconstruction of Financial Assets And Enforcement of Security Interests Act, 2002 (hereinafter referred for brevity as the Securitisation Act) the respondent Nos. 1 and 2 had issued notice to the petitioner. This notice was challenged in this Court by the petitioner by filing Writ Petition No. 2,452/2004, which was disposed of with a direction that the petitioner's representation/proposal for settlement of the dues under the scheme floated by Reserve Bank of India for one time settlement be considered. Petitioner's proposal was thereafter considered and declined by the Bank. The reason assigned by the Bank for declining, was that though the petitioner's account was classified as non-performing from 1.7.1999, it had turned a case of doubtful debt after 2000 and, therefore, did not fit into the scheme floated by the Reserve Bank of India.

4. The Bank has then preferred to act upon the notice issued by it. It is at this point of time the petitioner has approached this Court with present petition for the aforesaid prayer Clauses "C" and "D" quoted in 1st paragraph.

5. The present petition contains an averment narrating therein the nature of objection that was raised by petitioner while it represented to the Bank in furtherance to the liberty available to it in view of the order passed by this Court in Writ Petition No. 2452/2004.

The petitioner's plea can be conveniently appreciated by extracting and reproducing it from paragraph 11 of present petition as below:

"11. That, it was further pointed out that, once the recovery certificate was issued under the MCS Act, the Bank has no authority in law to take action under the Securitisation Act because the Securitisation Act does not contemplate that once the order was passed by the Judicial or quasi judicial authority, the Bank can take the action under the Securitisation Act. That, it was also pointed out if the Bank will proceed further, then the provisions of the MCS Rules will become redundant."

6. In order to fortify the submission contained in paragraph 11 quoted above, further submissions have been incorporated in paragraph Nos. 12 to 14 which are again quoted for ready reference:

"12. The petitioner submits that, once the recovery certificate was issued or once the judicial order is passed in respect of the recovery proceedings, the Bank has no authority in law to take action under the Securitisation Act. That, Section 37 is read as under :

'Section 37. Application of other law not barred. The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force'."

That, the petitioner submits that, if the dues of the Bank could not be satisfied as per the notice and in pursuance of Section 13(4) then there is specific provision is mentioned in Section 13(10) of the said Act. The Section 13(10) is read as under:

"13(10). Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower."

That, the petitioner submits that Rule 11, Security Enforcement Rules, 2002 is also read as under :

11. Procedure for recovery of shortfall of secured debt--(1) An application for recovery of balance amount by any secured creditors pursuant to Sub-section (10) of Section 13 of the Ordinance shall be presented to the Debts Recovery Tribunal in the form annexed as Appendix VI to these rules by the authorised officer or his agent or by a duly authorised legal practitioner, to the Registrar of the Bench within whose jurisdiction his case falls or shall be sent by registered post addressed to the Registrar of Debts Recovery Tribunal.

13. That, from the above said two specific provisions it does indicate that the Act does not provide that the Bank can take action in cases of the claim has already been adjudicated by the judicial/quasi-judicial authorities, so meaning thereby, the Act is applicable to only those cases in which the claim of the Bank is not adjudicated. That, in the present case, the claim of the Bank has already been adjudicated under Section 101 of the MCS Act and, therefore, further action can be taken only in MCS Act, 1960 as well as MCS Rules, 1961. The Sub-section (3) of Section 101 is read as under:

Section 101(3)--A certificate granted by the Registrar under Sub-section (1) or (2) shall be final and a conclusive proof of the arrears stated to be due therein, and the same shall be recoverable according to the law for the time being in force, for the recovery of land revenue.

14. That Section 156 of the MCS Act, 1960 provides a Registrar powers to recover certain sum by attachment and sale of property. That, Rule 107 of the MCS Rules, 1961, also provide procedure for attachment and sale of property under Section 156. The petitioner submits that, the MCS Act and Rules specifically provides how the dues has to be recovered from the borrower after the adjudication of the claim by the Bank. That, far as the dues in a present case is concerned has already been adjudicated under Section 101 rightly or wrongly, there is no any other way but the secured creditor has to follow the provisions of the MCS Act and Rules, otherwise the provisions as contemplated under the MCS Act as well as Rules will become redundant. That, Section 37 specifically says that the provisions of the Securitisation Act is in addition to and not in derogation with any other laws, even the opening words of Section 13 is also postulates that notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882. That, the petitioner submits that the said non obstante clause is applicable only to T.P. Act and not in respect of any other laws, meaning thereby if the MCS Act provides the machinery for recovery and that too by the judicial authority the respondent Bank cannot proceed under the Securitisation Act."

Submissions of petitioner in nutshell.

7. Upon appreciation of the petitioner's pleadings and oral submissions the bone of contention of the petitioner is as follows:

(a) The MCS Act carves out a remedy under Section 101 as a special remedy in addition to the existing remedies under Sections 91,93 and 98 thereof. Therefore, Section 101 has overriding effect on all other provisions in any law whatsoever. If recourse to Section 13 of the Securitisation Act is permitted, the scheme of Section 101 r.w. Rule 107 of MCS Rules providing for separate mechanism of recovery shall be rendered totally redundant and nugatory which cannot be the intent or scheme of the law makers while enacting Section 101.

(b) That Section 37 of Securitisation Act provides that the provisions thereof shall have overriding effect to provisions of Transfer of Property Act, but no such overriding effect is given over provisions of MCS Act.

The learned Advocate has not advanced any submission tending to a say that vis-a-vis Section 101 of MCS Act Section 13 of the Securitisation Act is ultra vires, may be since knowing fully well of his limitation to do so.

No submissions were made nor any contentions apart from the contents of petition were raised for seeking to challenge these two letters.

8. The petition fails upon discreet examination of the submissions. The reasons thereto are as hereinafter:

Analysis and Reasons

9. Insofar as prayer "C" is concerned it is dealt as below:

Referring to the contents of the petition, it is seen that the contents of petition do not disclose any factual and legal foundation on the basis of which petitioner is challenging the Bank's communication dated 20th October, 2004 which is at Exh. "E" at page 53 of the petition and the letter dated 8th November, 2004 which is at Exh. "F' at page 55 of the petition. The averments contained in the body of Writ Petition do not spell out any reason or ground factual or legal to assail these letters. Thus prayer Clause "C" is devoid of any support, substance and foundation and thus calls for rejection at the outset and is hereby rejected.

10. Insofar as prayer "D" is concerned, petition consists of certain averments and foundations thereto as well as oral submissions in support thereto have been made. It would be necessary to deal with those.

11. It shall be pertinent to note that in its earlier recourse by way of approach to this Court by filing Writ Petition No. 2452/04 petitioner had placed reliance on judgment in the case of Mardia Chemicals Ltd. and Ors. v. Union of India and Ors., . The prayers contained in said Writ Petition No. 2452/04 were as follows:

"A. The Writ Petition may kindly be allowed.

B.    By way of writ of mandamus or appropriate writ, order or direction the Hon'ble Court may please declare null and void, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002.
 

C.    By way of writ of mandamus or appropriate writ order or direction the Honourable Court may please quash and set aside the notice dated 28.1.2004 issued by the respondent No. 4 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002.
 

D.    Pending hearing and final disposal of this writ petition, the action as contemplated in the notice dated 28.1.2004 (Exh. L) taking over the possession of the petitioner's assets, as mentioned in the said notice, be kindly stayed and suspended."
 

12. During pendency of Writ Petition No. 2452/04, petitioner had also filed Civil
 

Application for seeking relief in relation to the notice Issued by Bank under Section 13(4) of the Securitisation Act.
 

The Writ Petition No. 2452/2004 was heard and this Court dismissed the same by judgment and order dated 29th October, 2004 (Coram : D.S. Zoting and A.P. Deshpande, JJ.), after referring to the law as declared in the case of Mardia Chemicals case (supra). This Court ordered as follows:

"6. We do not find any merit in the petition. If and in case, the petitioner is aggrieved by the ultimate decision of the Bank, it shall be open for the petitioner to approach the appropriate forum under the provisions of the Securitisation Act. Nonetheless, we make it clear that the Bank snail consider the proposal submitted by the petitioner and take a decision on it within a period of four weeks from today.

Till then, the possession of the petitioner over the secured assets stands protested.

7. In the light of the above observations, the writ petition is dismissed in limine."

It shall be pertinent to note that the challenge to the validity of Section 13 of the Securitisation Act was already incorporated in Writ Petition No. 2452/04. The said prayer was wholly misconceived in view of judgment in Mardia Chemicals case. Insofar as other two prayers viz. "C" and "D" therein are concerned, those stood rejected in the aforesaid writ petition.

13. On the face of the aforesaid dismissal of Writ Petition No. 2425/04 as afore-referred and the ruling in the case of Mardia Chemicals in the present petition, the petitioner has prayed for the relief of declaration that the provisions of Securitisation Act do not or cannot apply as against petitioner company due to scheme of Section 101 of MCS Act. This prayer is made in a circuitous manner. The question of constitutional validity and enforceability of Securitisation Act vis-a-vis the Debts Due to Banks & Financial Institutions Act, 1993 is already ruled. The petitioner has tried to raise and reagitate the very contentions which are dealt with and ruled in Mardia Chemicals case and are not res integra, and are no more an unruled field.

14. The learned Advocate for petitioner placed reliance on the reported judgment of this Court reported in the case of Vasundhara Ashokrao Patil v. Rajaram Bapu Sahakari Bank Ltd., 2003(4) Mh.L.J. 315, of the Division Bench of this Court consisting of (A.P. Shah and V.M. Kanade, JJ.). This Court has in this case ruled on the position of Section 101 of MCS Act vis-a-vis provisions contained in Section 91 thereof. This Court then found that Section 101 of the Act has carved out new remedy to certain societies covered therein in order to cater to them with an efficacious remedy and a special forum inter alia in order to help certain societies. This was obviously in order to overcome the problem of non performing assets and amounts overdue.

15. The over riding effect to Section 101 of MCS Act that has been found by this Court in (supra) does not in any manner operate as a precedent to hold that Section 101 of MCS Act shall have over riding effect over the schemes of Section 13 of the Securitisation Act.

The petitioner's submission that the provision contained in the Maharashtra Co-operative Societies Act and of Section 101 r.w. Rule 107, etc. shall be rendered redundant if respondent Nos. 1 and 2 are permitted to take recourse to Section 13, is thus illusory and with total inadvertence to what has been held by their Lordships of Supreme Court in case of Mardia Chemicals (supra).

16. Petitioner's submission that Section 37 of the Securitisation Act creats a non obstante clause only qua the provisions of Transfer of Property Act and not as against any other law, is not based on any foundation whatsoever. Section 37 is amply clear while it says that the provisions of this Act (Securitisation Act) or the Rules made therein shall be in addition and not in derogation to various laws named therein as well "any other law for the time being in force". The phraseology "any other law for the time being in force" renders the interpretation of various provisions of the Securitisation Act to have overriding effect over the Debt Recovery Act as well as MCS Act. The term "any other law for the time being in force" appearing in Section 37 of Securitisation Act essentially comprehends numerous statutes one amongst which has to be the Maharashtra Co-operative Societies Act, 1960 along with Section 91 or Section 101 thereof or other provisions whatsoever contained therein.

17. In order to find support to the interpretation of Section 37 the findings and observations contained in the judgment in Mardia Chemicals case in various paragraphs can be usefully referred and relied upon with specific reference to the Debts Due to Banks and Financial Institutions Act as well the matter was examined and after report of Second Narasimhan Committee, headed by Mr. Andhyarujina was appointed. Their Lordships of Supreme Court referred to in this behalf at page 340 of the report which runs as follows:

"One of the measures recommended in the circumstances was to vest the financial institutions through special statutes, the power of sale of the assets without intervention of the Court and for reconstruction of assets. It is thus to be seen that the question of non-recoverable or delayed recovery of debts advanced by the Banks or financial institutions has been attracting attention and the matter was considered in depth by the Committees specially constituted consisting of the experts in the field. In the prevalent situation where the amounts of dues are huge and hope of early recovery is less, it cannot be said that a more effective legislation for the purpose was uncalled for or that it could not be resorted to. It is again to be noted that after the Report of the Narasimhan Committee, yet another Committee was constituted headed by Mr. Andhyarujina for bringing about the needed steps within the legal framework. We arc, therefore, unable to find much substance in the submission made on behalf of the petitioners that while the Recovery of Debts Due to Banks and Financial Institutions Act was in operation it was uncalled for to have yet another legislation for the recovery of the mounting dues. Considering the totality of circumstances and the financial climate world over, if it was thought as a matter of policy to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor is it a matter to be gone into by the Courts to test the legitimacy of such a measure relating to financial policy."

It has to be noted from what is observed by Their Lordships of Supreme Court while appreciating the scheme of the Securitisation Act viz. that the powers with which the financial institutions have been equipped in order to mitigate the extraordinary situation of non-performing assets is sufficiently guarded with appellate Forum vesting the powers of appeal with the Debts Recovery Tribunal.

18. In the present set of facts it may have to be noted that in contrast with what has been provided under Section 101, since the financial institution is permitted to take recourse to Section 13, any grievances in that regard as to the liabilities of financial institutions (as held by Their Lordships of Apex Court) in paragraph Nos. 70 and 71 of the Mardia Chemicals case is now available with larger safe-guards which otherwise would not be so available in the scheme of Rule 107 of the Act and, therefore. Therefore, there are no reasons available for any borrower to have any grievance in law due to recourse to Section 13 of Securitisation Act being allowed and preferred, on the face of existing certificate under Section 101 of MCS Act.

19. The contention raised by the petitioner expressing that it ought to be held that the Bank does not have the remedy available under Section 13 of the Securitisation Act since recourse will render the scheme of the recovery of dues under Section 101 of the Act redundant, is a submission which is based on total illusion. No question of such nature is now left open for any further adjudication in view of Mardia Chemicals case.

20. In View of this position, no interference is called for and the petition is liable to be dismissed at the threshold in limine.