Hotel Private Limited & Anr vs The State Of West Bengal & Ors
2022 Latest Caselaw 5664 Cal

   01
22.08.2022


              IN THE HIGH COURT AT CALCUTTA
             CONSTITUTIONAL WRIT JURISDICTION
                      APPELLATE SIDE

                    W.P.A. No. 12769 of 2022

                   Guha Roy Food Joint And
                  Hotel Private Limited & Anr.
                               Vs.
                 The State of West Bengal & Ors.


                 Mr. Rupak Ghosh,
                 Ms. Sweta Gandhi Murgai
                                ...for the petitioners

                 Mr.   Anirban Ray,
                 Mr.   Suman Sengupta,
                 Mr.   Saikat Chatterjee,
                 Mr.   Prantik Garai
                              ...for the State

                 Mr. Debnath Ghosh,
                 Ms. Ranjabati Ray
                           ...for the respondent nos. 3 and 4

The present writ petition has been preferred

against an order passed by the Magistrate under

Section 14 of the Securitisation and Reconstitution of

Financial Assets and Enforcement of Security Interest

Act, 2002 (hereinafter referred to as 'the 2002 Act').

The matter has come up before this Court for

consideration of the petitioners' prayer for an ad

interim prayer. Learned counsel for the petitioners

cites an unreported judgment of the Supreme Court

delivered in State Bar Council of Madhya Pradesh Vs.

Union of India in Special Leave to Appeal (C) No.

10911/2021, in which the Supreme Court observed

that with a view to resolve the problem being faced by

the parties, that is, dearth of appointees to the Debt

Recovery Tribunals (DRTs) and Debt Recovery

Appellate Tribunals (DRATs), for the time being and

purely as a stop-gap arrangement, the concerned High

Courts were requested to entertain matters falling

within the jurisdiction of DRTs and DRATs under

Article 226 of the Constitution of India till further

orders. It was further observed that once the

Tribunal(s) is/are constituted, the matters can be

relegated to the Tribunal(s) by the High Courts.

Learned counsel then cites a Single Judge

decision reported at AIR 2016 Cal 100 [Dimension

Realtors Private Limited and another Vs. The District

Magistrate, North 24 Parganas and others] in support of

the proposition that a petition under Article 226 of the

Constitution against anything done or not done under

Section 14 of the 2002 Act is maintainable; but such a

petition should, ordinarily, not be received to be

assessed on merits if filed by a person, other than the

secured creditor, who claims to be affected or likely to

be affected thereby. As a corollary, it was held, a

petition under Article 226 of the Constitution can be

entertained on merits against an order passed or any

act done under Section 14 of the Act, if the complaint

pertains to the lack of jurisdiction (primarily, on

territorial considerations) or when the absurdity of that

which is complained against is demonstrable.

Learned counsel next cites Krishna Builders and

Developers Vs. Shriram Housing Finance Limited,

reported at 2019 SCC OnLine Cal 342, where

Dimension Realtors (supra) was followed.

Learned counsel for the petitioners next relies

upon (2014) 6 SCC 1 [Harshad Govardhan Sondagar

Vs. International Assets Reconstruction Company

Limited and others] in support of the proposition that

statutory provisions attaching finality to the decision of

an authority executing the power of any other

authority or court to examine such a decision will not

be a bar for the High Court or the Supreme Court to

exercise jurisdiction vested by the Constitution

because a statutory provision cannot take away a

power vested by the Constitution.

Learned counsel next cites another Single Judge

decision of this Court reported at AIR 2015 Cal 306 [Sri

Jawahar Singh Vs. The United Bank of India and others]

where it was held, inter alia, that statutory provisions

attaching finality to the decision of an authority

executing power of any other authority or court will not

be a bar for the High Court to exercise jurisdiction

vested by the Constitution. It was further held that the

decision of the Chief Metropolitan Magistrate or

District Magistrate under Section 14 of the 2002 Act

can be challenged before the High Court under Articles

226 and 227 of the Constitution by any aggrieved party

and if such a challenge is made, the High Court can

examine the decision of the Chief Metropolitan

Magistrate or the District Magistrate, as the case may

be, in accordance with the settled principles of law. It

was further reiterated that the remedy available under

Section 17 of the 2002 Act has to be regarded illusory

for pre-mortgage lessees for the reason that even

though sufficient ground may have been made out for

the Tribunal to direct restoration of possession with

the secured asset, such restoration could only be in

favour of the borrower and not anyone else.

Learned counsel for the petitioners further

contends that the petitioners were entitled to loans and

reliefs under different schemes floated by the

Government of India during the relevant period, that is,

the pandemic period. As, for instance, the Emergency

Credit Line Guarantee Scheme (ECLGS) floated by the

National Credit Guarantee Trustee Company Limited

(NCGTCL) of the Ministry of Finance, Government of

India. It was provided therein that the eligible

institutions have to register themselves for the scheme

with NCGTCL as a Member Lending Institution (MLI)

by submitting an undertaking on stamp paper of the

requisite value, on the form as specified therein.

Learned counsel also relies on the Resolution

Framework for COVID-19 Related Stress floated by the

Reserve Bank of India on August 6, 2020. Under the

said Scheme, provided in paragraph 13 of the

"Prudential Framework", except compromise

settlements which shall continue to be governed by the

provisions of the Prudential Framework or relevant

instructions applicable to specific category of lending

institutions where the Prudential Framework is not

applicable, the Resolution Plan may also include

sanctioning of additional credit facilities addressed to

financial stress of the borrower on account of COVID-

19 if there is no re-negotiation of existing debt. Learned

counsel places further reliance on the Resolution

Framework for COVID-19 Related Stress where the

financial parameters dated September 7, 2020 issued

by the Reserve Bank of India, included "hotels,

restaurants and tourism" (the petitioners are in the

hospitality industry) as one of the sectors coming

within the purview of the said Framework.

Learned counsel next submits that the relevant

provisions of Section 14(1)(b) of the 2002 Act was not

complied with by the District Magistrate, South 24-

Parganas while passing the impugned order under

Section 14 of the 2002 Act. It is contended by placing

reliance on the said provision that nine points are to be

considered while passing such an order. In the case of

the petitioners, the repayments made by the

petitioners, which had to be mandatorily considered,

were not considered by the Magistrate.

By placing reliance on the Notice under Section

13(2) of the 2002 Act issued to the petitioners, annexed

to the writ petition, learned counsel for the petitioners

contends that it was mentioned therein that as the

interest and/or instalment of principle had remained

overdue for a period of more than 90 days, the loan

accounts of the petitioners were to be classified as

Non-Performing Asset (NPA), on December 15, 2020.

Subsequently, there were orders passed by the

Supreme Court which extended such time. Moreover,

the subject loan accounts, admittedly, were not

classified as NPA on December 15, 2020 in view of the

benefit of moratorium period being extended by the RBI

in aggregate for six months on payment of all

instalments falling due between March, 2022 to August

31, 2020 vide Circulars of the RBI as per interim order

dated September 3, 2020 passed by the Hon'ble

Supreme Court, whereby it was directed that the loan

accounts which were not declared till August 31, 2020

shall not be declared NPA till further orders.

As such, it is submitted, in the absence of the

aforesaid factors being considered by the Magistrate,

the impugned order was vitiated in law.

Learned counsel appearing for the respondent nos.

3 and 4 places reliance on an unreported judgment of

the Supreme Court in Phoenix ARC Private Limited Vs.

Vishwa Bharati Vidya Mandir and others in Civil Appeal

Nos. 257-259 of 2022 where it was held, applying the

law laid down by the Supreme Court in the case of

Mathew K.C., that filing of the writ petitions by the

borrowers before the High Court under Article 226 of

the Constitution is an abuse of the process of Court.

The writ petitions, it was held, had been filed against

the action taken under Section 13(4) which ought not

to have been entertained by the High Court in view of

the statutory, efficacious remedy available by way of

appeal under Section 17 of the 2002 Act.

Learned counsel next places reliance on a Division

Bench judgment of this Court in FMAT No.75 of 2022

[Aditya Birla Finance Limited Vs. Aniruddha Guharoy],

to contend that a similar prayer had been sought by

way of a restraint order on the respondents from

dealing with immovable property, which is the subject-

matter of the present litigation, in any way. Such

order had been granted under Section 9 of the

Arbitration and Conciliation Act, 1996 by the District

Court, against which the appeal had been preferred

before this Court. Vide order dated March 17, 2022,

the said order of the District Court dated February 22,

2022 was set aside, directing the court below to

consider the interim application afresh. As such, a

similar relief having been refused by a Division Bench

of this Court in connection with the proceeding under

Section 9 of the Arbitration and Conciliation Act, 1996,

this Court ought not to pass a contrary order by

granting an interim order of stay/status quo.

Learned counsel for the respondent nos.3 and 4

further contends that the ingredients of Section 14

were considered by the Magistrate in passing the

impugned order. By placing reliance on the tabular

statement filed before the District Magistrate in the

application under Section 14 of the 2002 Act, it is

submitted that the relevant considerations under

Section 14 were fully adverted to by the Magistrate.

It was categorically pleaded in the application

under Section 14 as to the details of the properties

involved and that in view of the successive non-

payment of the equated monthly instalments and

interest, the loan account of the borrowers/petitioners

was declared NPA on May 5, 2021 itself. In support of

such statement, the position of the borrowers in

respect of the loan accounts, as evident from the

statement of account, copies of which were annexed to

the said application, were relied upon.

It is, thus, submitted that in view of the DRT,

Kolkata functioning with one Bench only and having

not come to a total stand-still, this Court ought not to

grant interim order at this stage.

Upon hearing learned counsel for the parties, it

transpires that the Supreme Court, in Phoenix ARC

Private Limited (supra), categorically relied upon on

Mathew K.C.'s judgment and came to the conclusion

that petitions by borrowers before the High Court

under Article 226 is an abuse of process of Court. The

writ petition filed against proposed action to be taken

under Section 13(4) of the 2002 Act was amenable to a

statutory and efficacious alternative remedy available

by way of an appeal under Section 17 of the 2002 Act.

Although the petitioners claim that the DRT is

functioning with truncated strength at present, it has

not come to a total stand-still and it was well within

the means of the petitioners to approach the concerned

Bench of the DRT with the prayer of assigning their

matter before the said functioning Bench. The said

course of action would also be in consonance with the

opinion of the Supreme Court in State Bar Council of

Madhya Pradesh (supra), cited by the petitioners

themselves. The Supreme Court clearly permitted the

interference under Article 226 of the Constitution as a

"stop-gap arrangement" and made it clear that once

the Tribunals were constituted, the matters could be

relegated to the Tribunals. In the present case,

temporary absence of some Benches cannot be

sufficient justification for granting an ad interim order

at the outset, thereby granting the relief prayed in the

writ petition itself.

The provisions of Section 14 of the 2002 Act have

been substantially complied with by the District

Magistrate while passing the impugned order by taking

into consideration all the relevant factors under the

said provision, which is reflected from the impugned

order itself, thus, leaving little scope of interference at

lease at the ad interim stage by granting an interim

order in writ jurisdiction which lies within the purview

of Section 17 of the 2002 Act.

In fact, Dimension Realtors Private Limited (supra)

and Krishna Builders and Developers (supra) clearly

provided that an application under Article 226 of the

Constitution is maintainable against an action taken

under Section 14 of the 2002 Act on the limited

grounds of lack of jurisdiction (primarily territorial) and

demonstrable absurdity. In the present case, no

demonstrable absurdity has been shown by the

petitioners on such a high footing that an ad interim

order must be granted at this stage.

It may be noted that the matter had come up for

hearing before the regular Bench of this Court on

certain occasions but there is no reflection in the

order-sheet to indicate that the petitioners urged

pressing urgency for an ad interim order. The regular

Bench, it is evident, intended to hear out the main writ

petition itself. Hence, it would not be proper, all on a

sudden, to grant an interim order despite the matter

being fixed for hearing before the regular Bench after

only two weeks, thereby virtually pre-judging the

merits of the writ petition itself.

Even on a prima facie view, no jurisdictional error

or absurdity has been made out on the face of the

records by the petitioners. Even apart from the similar

Section 9 prayer having been refused by a Division

Bench of this Court at the behest of the petitioners

themselves, the arguments advanced by the petitioners

touch upon the merits of the actions taken by the

respondent-authorities under Section 13(2) and

Section 13(4) of the 2002 Act. In the absence of any

challenge to such action, in an application under

Article 226 preferred against an order passed by the

Magistrate under Section 14, which is a mere

consequence of the measures taken under Sections

13(2) and 13(4), the petitioners cannot be permitted to

have an ad interim order of status quo/stay at this

premature stage.

I do not find any palpable absurdity having been

established by the petitioners on such an urgent war

footing that the petitioners should be granted a blanket

ad interim stay/status quo prior to final hearing of the

writ petition which is soon due before the regular

Bench.

That apart, as rightly submitted by learned

counsel for the respondent nos.3 and 4, there is no

pleading in the writ petition worth the name to the

effect that the DRT is not functioning at present.

Insofar as the entitlement of the petitioners to the

Pandemic loans/schemes is concerned, there is

nothing on record to show that the petitioner had ever

applied for such loans or taken steps to get coverage of

the relief schemes. Such consideration is also not

germane in an action under Section 14 of the 2002 Act.

The criterion of repayment was duly considered by

the Magistrate in the impugned order and it was found,

inter alia, that the secured creditor observed all

formalities as laid down in the SARFEASI Act, 2002 for

realization of the outstanding amount from the secured

debtor. All the necessary ingredients of Section 14 find

place in the impugned order and were substantially

complied with by the Magistrate.

That apart, as held in Dimension Realtors Private

Limited (supra) itself, which is referred to by the

petitioners, the process under Section 14 of the 2002

Act is non-adjudicatory and administrative in nature.

The Magistrate has only to ascertain whether the nine

aspects referred to in the first proviso to Section 14(1)

of the 2002 Act are covered by the declaration

furnished in the affidavit filed by the authorized officer

of the secured creditor.

The Magistrate, it was held, cannot make any

enquiry into the truth of the contents of the affidavit.

Thus, at this stage, it is beyond the jurisdiction of the

writ court to explore and examine the veracity of the

averments made in connection with the application

under Section 14 of the Act on merits and/or to reopen

the merits of the measure taken under Section 13(2)

and/or Section 13(4) of the 2002 Act, more so, in the

absence of any substantive challenge against the said

measures.

As such, I do not find that a strong prima facie

case has been made out by the petitioners for the

purpose of granting ad interim order in the nature of

stay and/or status quo at this stage, prior to the

hearing of the writ petition itself.

However, it is made clear that the merits of the

writ petition have not been gone into by this Court and

the above observations are only the result of an

examination of the prima facie case of the petitioners

for the purpose of passing an ad interim order and

shall not prejudice the rights and contentions of the

parties at the final hearing of the writ petition.

In the light of the above observations, the interim

order prayed for by the petitioners is refused at this

stage.

The matter is released from this list with liberty to

the parties to mentions for enlistment before the

regular Bench having determination for hearing of the

writ petition, of course, subject to the convenience of

the said Bench.

(Sabyasachi Bhattacharyya, J.)