Delhi High Court
Radhika Spinning Mills Ltd. vs Stressed Assets Stablisation ... on 8 April, 2009
Author: S.Ravindra Bhat
28
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Judgment : 08.04.2009
+ W.P.(C) 8048/2009, C.M. No. 4607/2009 (Stay Application)
RADHIKA SPINNING MILLS LTD. ..... Petitioner
Through : Mr. Madan Gera, Advocate.
versus
STRESSED ASSETS STABLISATION FUND & ANR. ..... Respondents
Through : Mr. Sanjay Bhatt, Advocate, for Resp. No.1.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
1. Whether the Reporters of local papers may be
Allowed to see the judgment?
2. To be referred to Reporter or not?
3. Whether the judgment should be reported in
the Digest?
S. RAVINDRA BHAT, J (OPEN COURT)
%
1. Issue notice. Mr. Sanjay Bhatt, Advocate accepts notice. With consent, the matter was
heard finally.
2. The petitioner complains of arbitrariness by the respondents in regard to the notice dated
28.07.2008 issued under Section 13(2) of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interests Act, 2002 (hereafter called "SARFAESI").
3. The petitioner had borrowed sums of money and availed of credit facilities from the
respondents from time to time between 1994 and 2002. It is contended that the respondents
preferred an application before the Debt Recovery Tribunal (DRT) in 2003 claiming
approximately Rs.23 crores as principal amount with interest. The petitioner further submits that
when the application was pending adjudication, the impugned notice calling upon it to pay a sum
in excess of Rs.57 crores was issued.
4. The petitioner‟s contention is two-fold - one, that the properties against which action is
proposed are agricultural land and, therefore, outside the purview of the SARFAESI Act and,
two, that the Board for Industrial and Financial Reconstruction (BIFR), acting under the Sick
Industrial Companies (Special Provisions) Act, 1985 has declared it to be „sick‟ and appointed an
operating agency, for the purpose of examining the proposals of rehabilitation. It is lastly
contended that the representations were made to the bank on 28.08.2008 and after which
reminder was issued on 06.02.2009. Learned counsel contends that the respondents are duty-
bound to consider the representations and submissions made and indicate their reasons to the
petitioner.
5. Learned counsel for the respondents submits that the petitioner borrower had availed of
credit facilities right from 1994. After persistent defaults, the applications were preferred before
the DRT in 2003. Even after pendency of proceedings for more than five years, the petitioner
was unable to discharge its dues. In the circumstances, the respondents were constrained to
invoke provisions of SARFAESI. It is submitted that the respondents, acting in concert with all
institutions have resolved to proceed under Section 13(4). Therefore, any interdiction by this
Court would interfere with the choice of remedy. Learned counsel also relied on Section 41 of
the SARFAESI to say that references in the BIFR would abate in the event action is taken under
Section 13(4) of the SARFAESI since both the respondents together are entitled to 100% of the
outstanding amount, as secured credits.
6. Learned counsel for the respondents further submitted that one Mr. R. Chopra, claiming
to the tenant of the petitioner has filed an injunction suit and obtained status quo till 21.04.2009.
A copy of the said order was shown to the Court.
7. The Court has considered the submissions of the parties. No doubt, Section 13(3)(1) of
SARFAESI, after judgment of the Supreme Court in Mardia Chemicals v. Union of India
(2004) 4 SCC 311 obliges banks or financial institutions, which issue notice under Section 13(2)
to consider the representations of the borrower and indicate its decision or response within a
time-bound manner. Yet, the Court cannot be unmindful to the proviso to that provision itself,
which makes it clear beyond a shadow of doubt that no consequence was indicated by the
Parliament in the event reasons were communicated or the borrower had some grievance against
the reasons so communicated by the bank. The articulation of law in Mardia Chemicals (supra)
which upheld the validity of provisions of SARFAESI were that in the event of a borrower‟s
grievance, he had the right of remedy under Section 17 after action under Section 13(4) was
taken. Having regard to these legal position, the Court is of the opinion that even though the
bank may be under obligation to consider and perhaps communicate its mind to the petitioner, its
failure to do so or its communicating reasons which the petitioner may differ from, itself ipso
facto does not entitle it to approach the Court and seek an extraordinary remedy when the normal
course of appeal under Section 17 is available. Neither the reasoning in Mardia Chemicals
(supra) nor the wording of Section 13, after amendment supports the contention that the Bank‟s
reasons - or inaction can be scrutinized by a separate judicial remedy, or normally, under Article
226. The only remedy is under Section 17, subject to the conditions spelt out in that provision
itself.
8. As far as other contentions are concerned, the facts disclose that the petitioner borrowed
amounts for setting up an industrial unit. No doubt, it contends that the land purchased by it was
agricultural. However, there is no explanation whether all agricultural land was converted for
industrial units; the documents placed on record clearly show that the petitioner has a spinning
mill on the land which is said to be agricultural. This itself discloses a contradictory position. In
these circumstances, the Court is of the opinion that this is not an appropriate case for examining
the legal issues sought to be raised, at this late stage when the respondents have approached the
competent forum under Section 14 as a prelude to action under Section 13(4).
9. The above observations should have been dispositive of the writ petition. However, since
the respondents have stated that a status quo order has been made by a civil court, they may
appropriately consider petitioner‟s representation which are part of the record and indicate their
response within one week. It is open to the petitioner thereafter, in the case of further grievance,
to, in the event of action under Section 13(4) to approach the competent forum under Section 17
and prefer an appeal.
10. Learned counsel for the respondents states that the representation alleged to have been
sent was not received. They are part of the record. The respondents shall not take any action
towards taking-over possession of the petitioner‟s assets or orders under Section 14 of
SARFAESI for a period of two weeks from today. In case of grievance, it is open to the
petitioner to seek recourse to remedies available in SARFAESI, such as an appeal under Section
11. The writ petition and the accompanying application are disposed of in the above terms.
C.M. No. 4608/2009 (Exemption)
Allowed, subject to all just exceptions.
S. RAVINDRA BHAT,J
APRIL 08, 2009
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