Bombay High Court

Rbl Bank Ltd vs State Of Maharashtra And Ors on 7 August, 2023

Bench: B.P. Colabawalla, M. M. Sathaye

2023:BHC-AS:22594-DB



                                                                                    11-WP-7058-2023.doc



                           IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                         CIVIL APPELLATE JURISDICTION


                                         WRIT PETITION NO.7058 OF 2023

                      RBL Bank Ltd.                                             .. Petitioner

                               Versus

                      State of Maharashtra and Ors.                             .. Respondents
 YUGANDHARA
 SHARAD
 PATIL


 Digitally signed
 by
                          Mr.Sidharth Samantaray a/w Mr. Girish Tanvi i/b Mr.
 YUGANDHARA
 SHARAD PATIL
 Date: 2023.08.09
                          Meghnath Navlani, Advocates for the Petitioner.
 16:46:47 +0530




                          Ms. Nisha Gupta, AGP for the Respondent-State.

                                                    CORAM        : B. P. COLABAWALLA &
                                                                  M.M. SATHAYE, JJ.

                                                    DATE         : AUGUST 07, 2023

                     P. C.

1. The above Writ Petition is filed inter alia for seeking a

direction against Respondent Nos. 8, 9 and 11 to forthwith restore

possession of their secured asset as described in the Petition to the

authorized officer of the Petitioner with the aid and assistance of

Respondent Nos. 2, 3 and 4, if necessary. This relief is sought in the

peculiar facts set out in the Petition.

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2. The facts of this case reveal that one Orix Leasing &

Financial Services India Ltd., had originally advanced credit

facilities to the tune of Rs. 1,25,00,000/- to Respondent Nos. 5 to 11

(for short "the borrowers") on such terms as recorded in the

sanction letter. The aforesaid credit facility was secured, inter alia,

by way of mortgage of an immovable property viz: Plot No.6, totally

adm.157.36 sq.mtrs., consisting of Ground plus first floor, in the

society known as Bhukrupa Co-Operative Housing Society Ltd.,

Sector No.27, Plot F1+F3 situated at Village Akurdi (PCNTDA),

Taluka Haveli, Dist. Pune (for short "the secured asset").

3. After creation of this mortgage, the said Orix Leasing &

Financial Services India Ltd. by a Deed of Assignment dated 12th

February 2019 assigned all their right, title and interest in the

aforesaid credit facility along with its underlying securities in favour

of the Petitioner Bank. Upon the debt being assigned, there were

defaults committed by the borrowers and their account was

classified as a Non-performing Asset ("NPA") on 10th April 2021 in

the books of the Petitioner. This was done in accordance with the

guidelines of the Reserve Bank of India.

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4. The Petitioner Bank issued a Notice dated 1st July 2021

under section 13(2) of the SARFAESI Act, 2002 inter alia calling

upon the borrowers to pay to it a sum of Rs.1,35,17,425.49/- due as

on 30th June 2021 along with further interest as stated therein.

Despite receipt of the said notice, the borrowers failed to comply with

the demand. In these circumstances, the Petitioner Bank took

symbolic possession of the secured asset on 22.10.2021 under section

13(4) of the SARFAESI Act, 2002. After this, the Petitioner also filed

an Application before the District Magistrate, Pune, under section 14

of the SARFAESI Act, 2002 for seeking physical possession of the

secured asset. The said Application was allowed by the District

Magistrate by order dated 27th May 2022 which directed Respondent

No.2 to take physical possession of the secured asset and handover

the same to the Authorised Officer of the Petitioner Bank.

5. Respondent No.2 issued a notice dated 10th August 2022

addressed to the borrowers, informing them that the date for taking

physical possession of the secured asset was fixed for 20 th September

2022. This was duly done, and Respondent No.2 successfully took

physical possession of the secured asset and handed over the same to

the Petitioner on 20th September 2022 itself. On being put into

physical possession of the secured asset, the Petitioner Bank

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appointed a Security Guard to protect and safeguard its possession

over the secured asset.

6. Despite the order passed by the District Magistrate, it is

the case of the Petitioner that on 21 st September, 2022 at 8.00 a.m.,

the borrowers illegally entered the secured asset, abused and

assaulted the security guard, broke opened the lock and seal affixed

on the secured asset, and resumed possession of the said secured

asset. Since the borrowers had illegally trespassed on the secured

asset, a police complaint was filed with Nigadi Police Station against

the borrowers and others on 21st September 2022 which was

subsequently registered as FIR bearing No. 687 of 2022.

Furthermore, the Petitioner filed Miscellaneous Application No.

SECU/SR/4589/2022, before the District Magistrate for re-executing

the order dated 27th May 2022. In other words, the Petitioner once

again approached the District Magistrate to take repossession of the

secured asset and handover the same to the Authorised Officer of the

Petitioner under the provisions of the SARFAESI, Act.

7. As the District Magistrate was not taking any steps to

pass an order in the aforementioned Miscellaneous Application filed,

the Petitioner filed Writ Petition No.920 of 2023 before this Hon'ble

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Court for seeking necessary directions/ orders as prayed therein. By

an order dated 17th February, 2023 this Court directed the District

Magistrate to take a decision on the Petitioner's Miscellaneous

Application as to whether the District Magistrate would have

jurisdiction to proceed qua the secured asset within a period of four

weeks.

8. By order dated 19th May 2023, the District Magistrate

disposed off the Miscellaneous Application, inter alia, holding that

once the section 14 order under the SARFAESI Act, 2002 has been

successfully implemented and the physical possession of the secured

asset has been handed over to the secured creditor, then no

subsequent application filed would be maintainable under section 14

of the SARFAESI Act, 2002 as there is no provision in the SARFAESI

Act to once again take possession and handover re-possession to the

Authorised Officer of the Petitioner. It is under these circumstances,

the Petitioner has approached this Court under Article 226 of the

Constitution of India, seeking the reliefs more particularly set out in

the writ petition.

9. In this factual backdrop, Mr. Samantaray, the learned

counsel appearing on behalf of the Petitioner submitted that after

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possession was taken under section 14 of the SARFAESI Act, 2002,

by the Magistrate and the same was handed over to the Petitioner,

the borrowers, on 21st September, 2022 at 8.00 a.m., illegally entered

the secured asset, abused and assaulted the security guard, broke

opened the lock and seal affixed on the secured asset, and resumed

possession thereof. He submitted that in such circumstances, the

District Magistrate was wholly unjustified in not entertaining the

Miscellaneous Application filed by the Petitioner for re-executing his

own order dated 27th May 2022. Mr Samantaray, in support of his

submission, relied upon a decision of this Court in the case of Kotak

Mahindra Bank Ltd. & Anr v. State of Maharashtra & Ors.

[Civil Writ Petition No. 6805 of 2023 decided on 30th June

2023]. Relying upon this decision, Mr. Samantaray submitted that

this Court has clearly held that there is no prohibition for the District

Magistrate or his delegate to re-exercise the powers to execute the

order passed under section 14 of the SARFAESI Act, 2002. He

therefore submitted that the Writ Petition be allowed in terms of

prayer clauses set out therein.

10. On the other hand, the learned AGP appearing on behalf

of the Respondents, submitted that the order passed by the District

Magistrate under section 14 of the SARFAESI Act, 2002 was already

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executed and actual possession of the secured was delivered to the

Petitioner on 20th September 2022. He submitted that once this was

done, the District Magistrate was rendered, functus officio, and

could not once again exercise powers under section 14 of the

SARFAESI Act, 2002. He submitted that there was no provision

under the said Act that provides for restoration of possession of the

secured asset of the same secured creditor to the secured creditor

that has been lost by him after the execution of the order passed

under section 14 of the SARFAESI Act, 2002. Consequently, he

submitted that there is no merit in the above Writ Petition and it be

dismissed with liberty to the Petitioner to adopt appropriate legal

remedies that may be available in law.

11. We have heard the learned counsels for the parties at

length. We have also perused the papers and proceedings in the

above Writ Petition. The issue raised in this Writ Petition lies in a

very narrow compass. In the facts of the present case, it is not in

dispute that an order dated 27th May 2022 has been passed under

section 14 of the SARFAESI Act under which possession of the

secured asset was given to the Authorised Officer of the Petitioner

Bank. Once this was done, the borrowers on 21 st September 2022 at 8

a.m. have entered the secured asset and abused and assaulted the

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security guard and have broken upon the lock and seal affixed on the

secured asset and resumed possession thereof. The question

therefore that arises in this Writ Petition is whether any direction can

be given to the District Magistrate and/ or the Tehsildar to re-execute

the order passed under section 14 and handover the possession of the

secured asset to the secured creditor.

12. We find that this issue is no longer res-integral and is

covered by a decision of this Court in the case of Kotak Mahindra

Bank Ltd. (supra). In fact, the decision of this Court in of Kotak

Mahindra Bank Ltd. (supra) follows an earlier decision of a

Division Bench of this Court (Aurangabad Bench) in the case of The

Nashik Merchant Co-operative Bank v/s. The District

Collector, Jalna & Ors. [Writ Petition No. 10069/2022

decided on 28th February 2023]. The argument canvassed by

the learned AGP before us was identical to the argument canvassed

before the Division Bench in the case of The Nashik Merchant

Co-operative Bank (supra). The Division Bench after considering

the aforesaid submissions, came to the conclusion that they did not

find any prohibition under the scheme of the SARFAESI Act, 2002

that came in the way of the District Magistrate or his delegate to re-

exercise his powers to execute the order passed by him under section

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14 of the SARFAESI Act, 2002. Accordingly, the Division Bench

directed the Tehsildar to re-execute the order passed by the District

Collector and restitute the possession of the secured asset to the

Petitioner within 30 days from the date of the said order. For the

sake of convenience, the relevant portions of this decision is

reproduced herein below.

"7. The respondent No.2 in his reply affidavit states that the order passed under Section 14 of the SARFAESI Act by the respondent No.1/District Collector, was already executed. The actual possession of the secured assets was delivered to the petitioner on 06-08- 2022. The respondent Nos. 1 and 2 stood discharged from their obligation under the statutory scheme prescribed under the SARFAESI Act. No provision under the Act provides for restoration of the possession to secured creditor that has been lost by him after execution of orders U/S 14 of SARFAESI Act.

10. Mr. S.B. Yawalkar, learned AGP would submit that the scheme under the SARFAESI Act provides for action in terms of section 14 regarding handing over possession to the secured creditors. Once the execution of order under section 14(2) is undertaken by the District Collector or his delegate and possession of the secured asset is handed over to the secured creditors, the District Magistrate becomes functus officio and no further indulgence would be expected to him. He would further submit that after receiving the possession as per panchanama dated 06-08-2022, it was the petitioner's responsibility to secure and protect his possession by taking necessary measures. The statutory obligation on the State machinery cannot be

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enlarged with further duty to protect the possession of secured creditors.

15. The petitioner bank had exercised its right under the SARFAESI Act and took recourse to the procedure prescribed under section 13(2), 13(4) and section 14 of the Act while taking possession of the secured assets under the order dated 21-11-2020 passed by the District Collector, Jalna. The petitioner bank was put into the possession under panchanama dated 06-08-2022. It appears that the petitioner bank had taken sufficient care to protect the secured property by

overpowered the guards by taking law in their hands, forcibly broke open the shutter lock of the shop, entered into the secured property and took forcible possession. The bank officers took immediate steps to prevent unlawful act of respondent Nos.5 and 6. They had rightly approached the Police authorities. The FIR was lodged promptly against respondent Nos. 5 and 6 for offences punishable under sections 447, 506 read with 34 of the IPC. They have approached respondent No.2/ Tahsildar for protection/ preservation of their possession of the secured assets.

16. At this stage, a reference can be made to the order passed by Division Bench of this Court in Writ Petition No.8674/2021 in the matter of Bank of Baroda Vs. The State of Maharashtra and Ors. dated 24-02-2022 wherein, in similar set of facts, the directions were given against the District Magistrate to entertain the second application of the petitioner filed under section 14 of the SARFAESI Act.

17. Mr. S.V. Adwant, learned advocate appearing for the petitioner also places reliance on the Judgment delivered by the Division Bench of High Court of Andhra Pradesh in case of M/s. Sri.Balaji Centrifugal Castings Vs. M/s

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ICICI Bank Limited. reported in (2018) SCC Online Hyd 368, wherein, it is held that there is no bar to secured creditor maintaining more than single application under section 14(1) of the SARFAESI Act for securing the possession of the very same secured assets.

18. The similar view has been reiterated by the High Court of Kerala in the matter of A.A. Kumaran v. Superintendent of Police, Thissur and Ors. In WP (C) No. 5875 of 2022 dated 18-5-2022 wherein the Court observed thus:

21. Further, the present case reveals an instance where a person has taken the law into his hands by force and thereafter seeks the benefit of legal principles. If such actions are permitted to be perpetrated, rule of law will suffer immeasurably. The purport of the Act is to divest the owner of a property in the enforcement of security interest and initiate measures to wipe off the liability by resorting to measures including sale. If measures taken for dispossession and consequent sale are inter-meddled by persons like respondents 4 and 5, it would result in a mockery of the rule of law. The will of the people reflected through the legislation will be seriously infringed, if the court remains a mute spectator.

20. The uncontroverted factual aspects in present matter depict that the respondent Nos.5 and 6 have devised novel, unimaginable and unsustainable modus operandi to defeat ends of justice and fair play. It is not only the matter of physical altercation, but would tantamount to assault on the law and statute. They have the audacity to overrule the law. The growing tendency of overpowering the law cannot be

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tolerated. In peculiar facts and circumstances of this case, we are inclined to exercise powers under Article 226 of the Constitution of India to protect the rule of law and deprecate rising tendency of using criminal force against recovery proceeding undertaken by the financial institutions in terms of SARFAESI Act. We do not find any prohibition under the scheme of the SARFAESI Act that comes in the way of District Magistrate or his delegate to re-exercise the powers to execute the orders passed under section 14.'

21. After considering the factual and legal aspects of the matter, we are of the considered view that this is a fit case to exercise of our jurisdiction under Article 226 of the Constitution of India and allow the writ petition in terms of prayer clause (B) of the writ petition and award cost against respondent No 5 & 6. Accordingly, we pass the following order:-

ORDER

(A) The Writ Petition is partly allowed. (B) The Respondent No.2/The Tahsildar, Jalna is directed to execute the order passed by the respondent No.1/The District Collector, Jalna and restitute the possession of the secured assets to the petitioner within a period of thirty (30) days from the date of this order.

( C ) The Respondent Nos. 5 & 6 shall deposit the cost of Rs.25000/- within 30 days of this order in this Court failing which those shall be recovered as land revenue."

13. Considering the law laid down by the Division Bench of

this Court and referred to by us above in Kotak Mahindra Bank

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Ltd. (supra), we are unable to agree with the submission made by

the learned AGP that the District Magistrate does not have the power

to re-exercise his own order or that he has become functus officio. If

we were to take the view as propounded by the learned AGP it would

lead to a complete chaos. We have no hesitation in stating that the

borrowers have devised a novel, unimaginable and unsustainable

modus operandi to defeat the ends of justice. It is not only the matter

of physical altercation by assaulting the security guard appointed by

the Petitioner Bank and breaking open the lock and seal affixed on

the secured asset which is wholly illegal, but the same would also

tantamount to an assault on the law and the statute itself. If, after

orders are passed under section 14 of the SARFAESI Act, 2002, for

dispossession of the borrower, and the same are inter-meddled with

by any person including the borrower, the same would result in a

mockery of the rule of law. In such a situation the Court cannot and

should not remain a mute spectator and allow the illegality to

continue. The tendency of trying to overreach the law as well as the

orders passed by Judicial Authorities has to be nipped in the bud

right away, lest the rule of law shall suffer.

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14. Be that as it may, the Petitioner has served all the

Respondents including Respondent Nos. 8 to 11 which is evident

from Affidavit of Service dated 17 th June 2023, 7th July 2023 and 2nd

August 2023 filed by the Petitioner. The borrowers were also

informed that the matter shall be listed before this Court on 3 rd

August, 2023 at 10:30 a.m. or soon thereafter for disposal of above

Writ Petition at the admission stage itself. However inspite of service

of notice, the borrowers have failed to appear in the matter either on

3rd August 2023 or thereafter till today. The Petitioner has also filed

an Additional Affidavit dated 4th August 2023 informing this Court

that Respondent No.9 issued a reply letter dated 30 th June 2023

addressed to the Petitioner's advocate ( albeit served upon

Petitioner's Registered Office at Kolhapur on 07.07.2023), in which

the Respondent has stated that the Petitioner was never put in

possession of the secured asset and that Respondent No. 9 has

always been in continuous and uninterrupted possession of the

secured asset.

15. Thus, considering the facts and circumstances of the

case as well as the law on the subject as held in the case of Nashik

Merchant Cooperative Bank (supra) and Kotak Mahindra

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Bank Ltd. (supra), we are of the considered view that this is a fit

case to exercise our extraordinary equitable jurisdiction under Article

226 of the Constitution of India and allow the Writ Petition.

16. In these circumstances, the following order is

passed:-

ORDER

(i) Considering the findings that we have given above,

the order passed by the District Magistrate on 19th May

2023 is hereby quashed and set aside.

(ii) The writ petition is allowed in terms of prayer clause (a) which

reads thus:-

"(a) That, this Hon'ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India and direct Respondent No.1 to 4 to take appropriate steps for taking physical possession of subject property i.e. "Plot No.6, totally adm.157.36sq.Mtrs., Consisting Ground+ First Floor, in the society known as Bhukrupa Co-Operative Housing Society Ltd., Sector No.27, Plot F1+F3 situated at Village Akurdi (PCNTDA), Taluka Haveli, Dist. Pune"

within a stipulated time period as may be fixed by this Hon'ble Court and further direct them to hand over the physical possession thereof to the Petitioner as expeditiously as possible".

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(iii) Respondent No.2 shall take physical possession of the secured

asset on 21st August 2023 at 12.00 p.m. and dispossess and/or

vacate any person found therein and thereafter handover the

same to the Authorized Officer of the Petitioner Bank. The

Authorized Officer of the Bank shall remain present on 21 st

August 2023 at 12.00 p.m. to take physical possession of the

secured asset from Respondent No.2.

(iv) The local Police Station (Nigadi Police Station) shall give all

necessary assistance to Respondent No.2 (including deputing

adequate number of police personnel including female police