Triton Corporation Limited vs Karnataka Bank Limited
2011 Latest Caselaw 1842 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI

+             LETTERS PATENT APPEAL NO. 814/2010

                                  Reserved on: 31st January, 2011
%                                 Date of Decision:30th March, 2011


TRITON CORPORATION LIMITED             ....Appellant
            Through Mr. Chander Prakash, Advocate.

                     VERSUS

KARNATAKA BANK LIMITED                  .....Respondent
            Through   Mr. V. Sudeer, Advocate.

CORAM:
HON'BLE MR. JUSTICE DIPAK MISRA, THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
1. Whether Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not ?                       Yes.
3. Whether the judgment should be reported in the Digest ?       Yes.

SANJIV KHANNA, J.

In the present Intra Court Appeal, the challenge is to the

order dated 14th September, 2010, dismissing the Writ Petition

(Civil) No. 6206/2010, filed by the appellant M/s Triton

Corporation Limited, against the respondent M/s Karnataka

Bank Limited.

2. The prayers made in the intra-Court appeal read as

under:-

"a) Expunge the remarks/observation of the Ld. Single Judge made on merits

of the matter in the impugned order dated 14.9.2010 passed in W.P. (C) No. 6206 of 2010;

b) Direct the Ld. Debt Recovery Tribunal, New Delhi to hear the appeal without being influenced by the observation of the Ld. Single Judge made in the order dated 14.9.2010;

c) Pass such order or orders as this Hon‟ble Court may deem fit and proper in the interest of justice."

3. The appellant has, however, has filed an additional

affidavit dated 6th January, 2011 in which the appellant has

made the following prayers:-

"a. Allow this appeal and after quashing the judgment and order dated 14.09.2010 recorded by the Hon‟ble Single Judge of this Hon‟ble Court in W.P. (C) No. 6206 of 2010, be pleased to adjudge that the respondent bank is not competent and lacks jurisdiction under the NPA Act to proceed with any recovery measures under section 13(4) of the Act;

b. Furthermore, all acts and commissions, including the notice under section 13(2) and the symbolic possession under section 13(4), thus far taken and pressed be quashed and set aside as without jurisdiction and illegal.

c. Furthermore, be pleased to stay, as an interim measure, all further proceedings by the respondent bank against the appellant company and the

subject property; And be further pleased to pass such other Order as this Hon‟ble Court may deem expedient and proper in the interest of justice.

ALTERNATIVELY and in the event of the expression of view on the various aspects referred to above by the Hon‟ble Single Judge, in his Order dated 14.09.2010, being found to be simply in the nature of simple observations, the relief, herein below, is prayed for- Expunge the observations of the Hon‟ble Single Judge made on the merits of the matter by his Order dated 14.09.2010.

It is therefore most respectfully preyed that the aforementioned facts may be kindly taken on records and be considered during arguments."

4. The respondent bank has initiated proceedings under

Section 13(2) and 13(3) of the Securitization & Reconstruction of

Financial Assets & Enforcement of Security Interest Act, 2002

(SARFAESI Act, for short). The appellant had challenged the

notice dated 19th March, 2010 under Sections 13(2) and 13(3) of

the SARFAESI Act, in respect of the secured asset, property No.

113, Udyog Vihar Phase I, Gurgaon, Haryana.

5. The contentions raised by the appellant before the learned

single Judge and before us are:

(i) Respondent bank is not a secured creditor and,

therefore, the provisions of SARFAESI Act are not

applicable.

(ii) The respondent bank has not classified the appellant‟s

account with them as a non-performing asset in

accordance with the mandate of law and particularly

SARFAESI Act and, therefore, there is lack of

jurisdiction and the proceedings in the SARFAESI Act

are void for want of jurisdiction.

(iii) The notice dated 19th March, 2010 under Section

13(2)/13(3) is defective as necessary details of the

amount demanded have not been placed on record.

(iv) The respondent bank failed to comply with the mandate

as contained in Section 13(3)(a) of the SARFAESI Act

as it failed to furnish requisite details and the reply

given by the respondent bank was evasive.

6. It is clear from the aforesaid facts stated above that the

appellant has been oscillating and vacillating. Before the

learned single Judge, the appellant had pressed the writ petition

and, therefore, the contentions raised were examined on merits

and answered against the appellant in the impugned judgment

dated 14th September, 2010. Thereafter, the appellant filed an

appeal and in the appeal the only prayer made was to expunge

the remarks and observations of the learned single Judge and in

this connection reliance was placed on Tin Plate Company of

India Limited versus State of Bihar and Others, (1998) 8

SCC 272. It is stated in the grounds of appeal that as the writ

petition was dismissed on the ground of alternative forum,

learned single Judge should not have expressed his opinion on

the merits of the pleas raised. At the same time, in the

additional affidavit the appellant wants the appellate court to

examine the merits and in the alternative it is submitted that the

observations of the learned single Judge on merits should be

expunged. The appellant wants to sail in two different boats

and, therefore, should be ready for the consequences when a

matter is decided. Reasons have to be given by the Court for

their decision. The appellant cannot insist that the Court should

decide the appeal on merits at the same time not make

observations or give findings.

7. The first contention of the appellant is based on the

contention that there was no equitable mortgage by deposit of

title deed, but the mortgage was as a result of the document

dated 25th July, 2007 written by the respondent bank in

response to the proposal given by the appellant for finance

facilities. Learned single Judge in this regard has held that the

letter was a mere precursor and did not create mortgage. We

have also examined the letter and the judgments relied upon by

the counsel for the parties, viz., Rachpal Maharaj versus

Bhagwandas Daruka and Others, AIR 1950 SC 272 and

United Bank of India Limited versus Lekhram Sonaram and

Company and Others, AIR 1965 SC 1591. It has been held by

the Supreme Court that Section 58(f) of the Transfer of Property

Act, 1882 permits mortgage by deposit of title deeds and in such

cases there is no requirement for registration under the

Registration Act, 1908. However, if parties choose to reduce

the contract in writing, then the document will be the sole

evidence of terms and should be registered under Section 17 of

the Indian Registration Act, 1908. The contention of the

respondent bank is that the letter dated 27th July, 2007 is merely

a precursor and did not create any mortgage and at best it can

be regarded as an agreement that in future, the parties would

enter into an equitable mortgage. It will not be appropriate and

proper for the writ court to go into the said aspects while

exercising writ jurisdiction under Article 226 of the Constitution of

India. This is a matter which can be gone into and examined

under Section 14 of the SARFAESI Act. Ordinarily, a writ

petition under Article 226 of the Constitution is not entertained if

an effective remedy is available to an aggrieved person. This

principle applies with greater vigour in matters relating to

recovery of taxes, cess, fees and dues of the banks and

financial institutions. The contention raised and the reply given

by the respondent bank clearly shows that this is not a fit case

which falls under one of the exceptions carved out in the cases

of Baburam Prakash Chandra Maheshwari versus Antarim

Zila Parishad, AIR 1969 SC 556, Whirlpool Corporation

versus Registrar of Trade Marks, (1998) 8 SCC 1 and

Harbanslal Sahnia versus Indian Oil Corporation Limited

(2003) 2 SCC 107 and some other judgments.

8. The exceptions pointed out in the aforesaid cases are

when there is inherent lack of jurisdiction or vires of

enactment is challenged, principles of natural justice are

violated and where the writ petitioner seeks enforcement of

fundamental rights. None of the exceptions are applicable to

the facts of the present case. It is not possible to accept

that the contentions raised by the appellant relate to inherent

lack of jurisdiction. The aforesaid contention fails to notice the

distinction between a „jurisdictional fact‟ and an „adjudicatory

fact‟. A jurisdictional fact is a primary fact and is a condition

precedent for exercise of jurisdiction by a particular authority

under the statute. It relates to existence of pre-conditions before

a court, tribunal or authority can exercise jurisdiction.

„Adjudicatory facts‟ cannot be equated with „jurisdictional facts‟.

They relate to exercise of jurisdiction on merits. Error or a

mistake on „adjudicatory fact‟ can make the decision vulnerable

to challenge on the ground of error in exercise of jurisdiction but

it is not an error of lack of jurisdiction. The aforesaid distinction

has been clearly brought out in the case of Ramesh Chandra

Sankla versus Vikram Cement, (2008) 14 SCC 58. It has

been observed:

"68. A "jurisdictional fact" is one on the existence of which depends the jurisdiction of a court, tribunal or an authority. If the jurisdictional fact does not exist, the court or tribunal cannot act. If an inferior court or tribunal wrongly assumes the existence of such fact, a writ of certiorari lies. The underlying principle is that by erroneously assuming existence of jurisdictional fact, a subordinate court or an inferior tribunal cannot

confer upon itself jurisdiction which it otherwise does not possess.

69. The counsel referred to a recent decision of this Court in Arun Kumar v. Union of India. Speaking for the Court, one of us (C.K. Thakker, J.) observed:

"74. A „jurisdictional fact‟ is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency‟s power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess."

It was further observed:

"76. The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction."

70. Drawing the distinction between "jurisdictional fact" and "adjudicatory fact", the Court stated: (Arun Kumar case)

"84. ... it is clear that existence of „jurisdictional fact‟ is sine qua non for the exercise of power. If the

jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of „jurisdictional fact‟, it can decide the „fact in issue‟ or „adjudicatory fact‟. A wrong decision on „fact in issue‟ or on „adjudicatory fact‟ would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present."

The principle was reiterated in Carona Ltd. v. Parvathy Swaminathan & Sons."

9. The contention No. (i) of the appellant mentioned in

paragraph 5 has been discussed above. Contention Nos. (ii) to

(iv) mentioned in paragraph 5 in the present case cannot be

classified as jurisdictional but fall in the category of adjudicatory

facts. These relate to the merits. These contentions have been

specifically dealt with and rejected by the learned single Judge

in the impugned order dated 14th September, 2010. Merits of

these contentions can be examined in accordance with the

procedure and the provisions under the SARFAESI Act, which

have been discussed below. Further, tribunal or an authority of

limited jurisdiction can be given power and authority to

determine existence of conditions precedent or existence of a

particular fact on which its jurisdiction at the inception depends

and the tribunal is entitled to make up its mind and decide the

said question.

10. As far as the provisions of SARFAESI Act are concerned,

two decisions of the Supreme Court in Mardia Chemicals

Limited and Others versus Union of India and Others, (2004)

4 SCC 311 and Transcore versus Union of India and

Another, (2008) 1 SCC 125 are apposite. The provisions of

SARFAESI Act have been examined threadbare and have been

interpreted. After the decision in Mardia Chemicals (supra),

Section 13(3-A) was inserted in the SARFAESI Act. The said

Section provides for a last opportunity to the borrower to make a

representation to the secured creditor against classification of

his account as a non-performing asset. The secured creditor is

required to consider the representation and if the secured

creditor comes to the conclusion that the representation does

not merit acceptance and should be rejected, then within a week

of the receipt of the communication, the reasons for rejecting the

same have to be communicated.

11. Section 13(4) of the SARFAESI Act postulates the

remedies available to a secured creditor when the borrower fails

to discharge his liability within the periods specified under

Section 13(2). Section 14 of the SARFAESI Act provides that the

secured creditor can file an application before the Chief

Metropolitan Magistrate or the District Magistrate having

jurisdiction and the said authority is then obliged to proceed (see

United Bank of India versus Satyawati Tandon and Others,

(2010) 8 SCC 110). A secured creditor in order to enforce his

right under Section 13(4) and in particular Section 13(4) sub-

section (a) is to take recourse to Section 14 of SARFAESI Act.

Section 17 of the SARFAESI Act provides for an appeal to a

Debt Recovery Tribunal. In view of the said provisions, in

Indian Overseas Bank versus Ashok Saw Mill, (2009) 8 SCC

366, it has been held in paragraphs 35, 36 and 39 as under:-

"35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof.

36. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with

stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.

37. XXXXX

38. XXXXX

39. We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT."

12. In United Bank of India (supra), the appellant bank had

challenged the interim order and the interdiction to the

proceedings under the SARFAESI Act. The Supreme Court set

aside the interim order and held that the writ petition should not

have been entertained. It has been observed:-

"42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The

expression "any person" used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section

14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.

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 legislations 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.

44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or

authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.

46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. 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 (sic 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. Of course, if the petitioner is able to show that its case falls

within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order."

13. Several judgments of the Supreme Court on the question

of alternative remedy and when it is desirable not to exercise

discretionary jurisdiction under Article 226 of the Constitution

have been highlighted.

14. Recently, again the Supreme Court in Kanaiyalal

Lalchand Sachdev versus State of Maharashtra, (2011) 2

SCC 782 had the occasion to examine the provisions of

SARFAESI Act and whether in spite of alternative remedy, a writ

court should interfere. It was opined as under:-

"22. We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT.

23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd., Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)

24. In City and Industrial Development Corpn. v. Dosu Aardeshir Bhiwandiwala this Court had observed that:

"30. The Court while exercising its jurisdiction under Article 226 is duty- bound to consider whether:

(a) adjudication of the writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;

(b) the petition reveals all material facts;

(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;

(d) the person invoking the jurisdiction is guilty of unexplained delay and laches;

(e) ex facie barred by any laws of limitation;

(f) grant of relief is against public policy or barred by any valid law; and host of other factors."

25. In the instant case, apart from the fact that admittedly certain disputed questions of fact viz. non-receipt of notice under Section 13(2)

of the Act, non-communication of the order of the Chief Judicial Magistrate, etc. are involved, an efficacious statutory remedy of appeal under Section 17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution."

15. Accordingly, we do not find any merit in the present appeal

and the same is dismissed. It is, however, clarified that the

observations made by the learned single Judge and in this order

are for the purpose of disposal of the writ petition and the

appeal. The authorities under the Act will independently apply

their mind without being bound by the observations. There will

be no order as to costs.

(SANJIV KHANNA) JUDGE

( DIPAK MISRA ) CHIEF JUSTICE

MARCH 30th, 2011 VKR