Delhi High Court
M/S Sigma Generators Pvt. Ltd. & ... vs Oriental Bank Of Commerce & Ors on 9 December, 2014
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 9th December, 2014
+ LPA 784/2014
M/S SIGMA GENERATORS PVT. LTD. & ANR ..... Appellants
Through: Mr. Lalit Kumar, Adv. along with the
Director of appellant No.1.
Versus
ORIENTAL BANK OF COMMERCE & ORS ..... Respondents
Through: Mr. H.D. Talwani for Mr. M.S.
Saluja, Adv. for respondent/Bank.
CORAM:-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
RAJIV SAHAI ENDLAW, J.
CM No.20184/2014 (for exemption)
1. Allowed, subject to all just exceptions.
2. The application is disposed of.
LPA No.784/2014 & CM No.20183/2014 (for stay)
3. This intra court appeal impugns the order dated 2 nd December, 2014
of the learned Single Judge, of dismissal of W.P.(C) No.5716/2014 preferred
by the appellants.
4. The appellants had preferred the said writ petition impugning the
notice dated 26th May, 2014 issued by the respondents Oriental Bank of
Commerce (OBC) / its officers to the appellant under Section 13(2) of the
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (SARFAESI Act) and seeking a mandamus to
the respondents OBC to regularize the cash credit account of the appellants /
petitioners.
5. The learned Single Judge has dismissed the writ petition observing
that the Supreme Court in Mardia Chemicals Limited Vs. Union of India
(2004) 4 SCC 311 has held that the notice under Section 13(2) is a pre-
condition under Section 13(4) of the SARFAESI Act and the remedy
available to a borrower can be availed only after the measures under Section
13(4) of the said Act have been taken.
6. Before dealing with the contentions raised by the appellants /
petitioners before us, we may notice that the appellants / petitioners had
failed to appear before the learned Single Judge on 2nd December, 2014 and
the impugned order though dismissing the writ petition on merits is in the
absence of the appellants / writ petitioners.
7. Ordinarily, in the absence of the petitioner, it is not open to the Court
to dismiss the petition on merits and the dismissal should only be for the
reason of default. Though in the said light of the matter, the remedy of the
appellants / writ petitioners, instead of preferring this appeal, would have
been to prefer an application for setting aside of the impugned order dated
2nd December, 2014 and / or to urge that the dismissal on merits is erroneous
but the counsel for the appellants / writ petitioners has not raised the said
issue and has argued on merits. In that light of the matter, we also deem it
appropriate to consider the merits of the appeal.
8. The counsel for the appellants / writ petitioners has pegged his case on
the judgment of the Division Bench of the Andhra Pradesh High Court in
M/s. Sravan Dall Mill P. Ltd. Vs. Central Bank of India AIR 2010 Andhra
Pradesh 35. The High Court of Andhra Pradesh in the said judgment held
that the remedy of judicial review under Article 226 of Constitution of India
is available with respect to a decision of a creditor declaring the debtor‟s
account as an NPA by issuing a notice under Section 13(2) of the
SARFAESI Act. However the said remedy was held to be available, because
in that case the creditor, after issuing notice under Section 13(2) on 14th
June, 2006 and inspite of the debtor representing / objecting under Section
13(3A) thereagainst, neither passed any order on the said representation /
objection, nor took any measures under Section 13(4) of the SARFAESI
Act. In view thereof, it was held that declaring the account as NPA by itself
leads to serious consequences and when measures under Section 13(4) are
not taken by the creditor, debtor is also deprived of seeking redressal under
Section 17 of the said Act.
9. The respondent OBC, in the present case, issued notice dated 26th
May, 2014 under Section 13(2) of the SARFAESI Act. The appellants/
writ petitioners claim to have submitted representations dated 18 th June,
2014, 16th July, 2014, 22nd July, 2014 and thereafter in or about August,
2014 filed the writ petition from which this appeal arises, as aforesaid,
impugning the notice dated 26th May, 2014 under Section 13(2) and seeking
a mandamus to the respondent OBC to regularize the account. However,
according to the appellants / writ petitioners themselves, the respondent
OBC during the pendency of the writ petition obtained orders from the Court
of the Chief Metropolitan Magistrate under Section 14 of the Act for taking
possession of the secured assets.
10. It is therefore evident that the facts of the present case are materially
different from that before the Andhra Pradesh High Court in the judgment
supra. In that case, a notice dated 14th June, 2006 under Section 13(2) of the
Act was issued and till the judgment in 2009, no action under Section 13(4)
had been taken. It was in that context that it was held that a challenge to the
notice under Section 13(2) was maintainable, as the creditor Bank having
not taken action under Section 13(4), the remedy under Section 17 was not
available. However here, the respondent OBC has admittedly taken action
under Section 13(4) of the Act, though after filing of the writ petition and
thus the remedy under Section 17 is available to the appellants / writ
petitioners. The appellants / writ petitioners by rushing to this Court,
immediately after the notice under Section 13(2) and challenging the same,
cannot interfere with the scheme of the SARFAESI Act, whereunder the
respondent OBC after considering the representation against the notice under
Section 13(2) and after rejecting the same, is entitled to take action under
Section 13(4) of the Act. It may be mentioned that no time for taking action
under Section 13(4), after issuance of the notice under Section 13(2) has
been specified and the action under Section 13(4) in the present case has
been taken within reasonable time.
11. The Supreme Court recently in Devi Ispat Ltd. Vs. State Bank of
India (2014) 5 SCC 762 was also concerned with a case where immediately
after receipt of notice under Section 13(2), a writ petition impugning the
same was filed before the Calcutta High Court. A Single Judge of that Court
dismissed the same observing that the statutory remedy under Section
13(3A) was available against the notice under Section 13(2). The debtor in
that case availed of the remedy under Section 13(3A) as well as of preferring
an appeal to the Division Bench of that Court. During the pendency of the
appeal, the creditor rejected the representation of the debtor under Section
13(3A). The Division Bench dismissed the appeal, relying on Mardia
Chemicals Limited supra. The Supreme Court held that the remedy of a writ
petition under Article 226 is not available against a notice under Section
13(2) owing to the alternative remedy of making a representation under
Section 13(3A) being available. It was further held that upon the debtor
availing of the remedy under Section 13(3A), nothing survived in the dispute
raised in the writ petition and the appeal to the Division Bench was
misconceived. It was yet further held that since in the interregnum the
creditor had also taken steps under Section 13(4), there was no need to
interfere with the judgment of the Division Bench.
12. It would thus be seen that the facts of the present case are identical to
that before the Supreme Court in the judgment supra.
13. Mention may also be made of Punjab National Bank Vs. Imperial
Gift House (2013) 14 SCC 622 where the High Court had quashed the
notice issued by the Bank under Section 13(2) of the SARFAESI Act.
Finding that the debtor had filed a representation under Section 13(3A) and
which was rejected and that the writ petition was filed immediately
thereafter, the Supreme Court held that the High Court was not justified in
entertaining the writ petition against the notice under Section 13(2) of the
Act and in quashing the proceedings initiated by the Bank.
14. Faced therewith, the counsel for the appellants / writ petitioners
contends that the respondent OBC has not complied with its obligation under
Section 13(3A) of the Act and has not communicated to the appellants / writ
petitioners the reasons for rejecting the representation of the appellants / writ
petitioners.
15. The counsel for the respondent OBC appearing on advance notice
states that in fact no representation / objection was made by the appellants /
writ petitioners.
16. We are of the opinion that the respondent OBC having taken steps
under Section13(4) and the remedy under Section 17 having thus become
available to the appellants / writ petitioners, the said grievance can also be
made by the appellants / writ petitioners in the proceeding under Section 17
of the Act.
17. We may record that a Division Bench of the High Court of Madras in
N.A.K.G. Cotfibres Private Ltd. Vs. Zonal Manager MANU/TN/0854/2012
also has taken the view that if the Bank has not followed the procedures
contemplated under Section 13(2) or under Section 13(3A) or Section 14,
the proper course open to the petitioner is to approach the DRT under
Section 17 and not to rush to the Court with a writ petition. The view of the
Madras High Court thus appears to be that even if the creditor Bank, after
issuing notice under Section 13(2) does not take further steps, the remedy
available to the aggrieved debtor is under Section 17 only. However the
view of the High Court of Orissa in Krushna Chandra Sahoo Vs. Bank of
India AIR 2009 Orissa 35 (DB) and of the High Court f Jharkhand in Jayant
Agencies Vs. Canara Bank AIR 2011 Jharkhand 68 (after noticing United
Bank of India Vs. Satyawati Tandon (2010) 8 SCC 110), is otherwise.
While in the former, finding that the notice under Section 13(4) was issued
without deciding the representation / objections under Section 13(3A), writ
petition was entertained and the notice under Section 13(4) quashed, in the
latter, though the Bank denied receipt of representation / objection under
Section 13(3A) but upon being satisfied that such representation / objections
was preferred, the writ petition was entertained and the proceedings under
Section 13(4) quashed. The same learned Single Judge of the Jharkhand
High Court earlier, in Stan Commodities Pvt. Ltd. Vs. Punjab & Sind Bank
AIR 2009 Jharkhand 14 also, held that since the "RBI‟s Prudential Norms of
Income Asset Classification & Provisioning - Pertaining to Advances"
issued by Circular dated 30th August, 2001 required that before classifying
the account as NPA, there should be a settlement of the controversy / doubt
regarding classification of the asset and intimation to the borrower, the
borrower is entitled to be informed and be given an opportunity against the
intended classification of the account as NPA; accordingly, it was held that a
borrower is entitled to be informed and given an opportunity of settlement
before declaration of its account as NPA; also finding that the decision if any
on the representation / objection under Section 13(3A) had not been
communicated to the borrower, the notice issued under Section 13(4) was
quashed. However another Single Judge of the Jharkhand High Court in
Paritran Trust Vs. Punjab National Bank MANU/JH/1372/2014, though
noticing Stan Commodities Pvt. Ltd. (supra) but without noticing Jayant
Agencies (supra), dismissed the challenge, to the notice under Section 13(2)
on the ground that no opportunity of hearing had been afforded to the
borrower before declaring the account as NPA, and held that in the scheme
of the SARFAESI Act, no opportunity of hearing is to be afforded to the
borrower before declaring the account as NPA and further held that there is
no prohibition in Section 13 against issuing a composite order declaring the
account of the borrower as NPA and simultaneously requiring the borrower
to discharge its liability.
18. The petitioners in the present case have also pleaded that the
respondent OBC, before the notice dated 26th May, 2014 also had issued
notices under Section 13(2). Mention in this context may be made of a
judgment of the Division Bench of the High Court of Madras in Precision
Fastenings Vs. State Bank of Mysore MANU/TN/3778/2010 holding that
there is no statutory prohibition in law from issuing a second notice under
Section 13(2) of the Act. S.L.P.(C) No.5391/2010 preferred thereagainst is
found to have been withdrawn on 8th March, 2010 with liberty to urge all
grounds in proceeding under Section 17.
19. We however do not deem it necessary in the present case to comment
on the views taken by the other High Courts in the judgments aforesaid
inasmuch as in the facts of the present case the need therefor does not arise
as the respondent OBC has already taken steps under Section 13(4) of the
Act. We may however state that even in a situation where the creditor bank,
after declaring an account as NPA, does not take steps under Section 13(4),
the same will not be a ground for quashing the notice under Section 13(2) of
the Act but would only invite a direction for taking further steps within a
reasonable time.
20. We may add, that where the statute lays down a procedure comprising
of successive steps for action thereunder and has also provided a remedy
against such action, after the final step is taken, the rule of availability of
such remedy being a bar to the exercise of jurisdiction under Article 226
cannot ordinarily be defeated by invoking the remedy under Article 226
against the intermediary step and by contending that thereagainst no
alternative remedy is provided. The Supreme Court in Avtar Singh Hit Vs.
Delhi Sikh Gurdwara Committee (2006) 8 SCC 487, in the context of the
procedure prescribed in the Delhi Municipal Corporation Act, 1957
reiterated:-
"The law of elections in India does not contemplate that there
should be two attacks on matters connected with election
proceedings, one while they are going on by invoking the
extraordinary jurisdiction of the High Court under Article 226 of
the Constitution (the ordinary jurisdiction of the Courts having
been expressly excluded), and another after they have been
completed by means of an election petition. Any matter which
has the effect of vitiating an election should be brought up only
at the appropriate stage in an appropriate manner before a special
tribunal and should not be brought up at an intermediate stage
before any Court....
Where a right or liability is created by a statute which gives a
special remedy for enforcing it, the remedy provided by that
statute only must be availed of.
It will be a fair inference from the provisions of the
Representation of the People Act to draw that the Act provides
for only one remedy, that remedy being by an election petition to
be presented after the election is over, and there is no remedy
provided at any intermediate stage."
A Single Judge of this Court also in Cadre Estate Pvt. Ltd. Vs. Salochana
Goyal MANU/DE/2597/2010 echoed the same thought in the context of
Section 16 of the Arbitration and Conciliation Act, 1996. It was held that
the legislative scheme having provided for the remedy against the dismissal
of an application under Section 16 only at the stage of challenge if any
required to the arbitral award, the mere fact that this may cause
inconvenience of having to await the conclusion of arbitral proceedings is no
ground to entertain a writ petition at an intermediate stage violating and
defeating the legislative scheme.
21. In the light of the aforesaid, there is no merit in the appeal.
Dismissed. No costs.
RAJIV SAHAI ENDLAW, J
CHIEF JUSTICE
DECEMBER 9, 2014
„bs‟..
