M/S North West Sales & Marketing ... vs Ifci Ltd
2016 Latest Caselaw 2587 Del

           *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                             Date of decision: 4th April, 2016

+     W.P.(C) No.5958/2015 & CM No.28489/2015 (of the petitioners
for interim relief), CM.No.10798/2015 & CM.No. 22764/2015 (both for
stay)

       M/S NORTH WEST SALES &
       MARKETING LTD. & ANR.                 ..... Appellnats
                   Through: Mr. Ramesh Singh & Mr. Aniruddha
                             Deshmukh, Advs.

                                     Versus
       IFCI LTD.                                         ..... Respondent

                          Through:      Mr. Atul Sheopuri & Mr. R.K.
                                        Chaudhary, Advs.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1. The petition claiming the reliefs of i) quashing of letter dated 18 th

May, 2015 of the respondent Industrial Finance Corporation of India (IFCI)

Ltd. revoking the settlement earlier arrived at with the petitioners; ii) a

direction to the respondent IFCI Ltd. to forthwith issue "19 No Objection

Certificates (NOCs) in respect of the shops indicated" in the email dated 26th

December, 2014; iii) a direction to the respondent IFCI Ltd. to restructure

the payment schedule of the unpaid installments by extending the time by

the period lost; and, v) prohibiting the respondent IFCI Ltd. from taking any

steps pursuant to the impugned letter dated 18th May, 2015, came up first

before this Court before the Vacation Judge on 10th June, 2015 when

observing that the Court was not inclined to entertain the petition or grant

any relief to the petitioners, the petition was ordered to be posted post

Summer Vacations before the Roster Bench.

2. The petitioners applied for amendment of the petition to also claim the

reliefs of i) impugning the notice dated 28th September, 2015 under Section

13(2) of the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest (SARFAESI) Act, 2002 since then issued

by the respondent IFCI Ltd. to the petitioners; ii) seeking a direction to the

respondent IFCI Ltd. to accept the proposal given by the petitioner on 29 th

September, 2015; and, iii) to restrain the respondent IFCI Ltd. from taking

any coercive steps against the petitioners and / or the guarantors pursuant to

the notice dated 28th September, 2015, and which application was allowed

on 8th October, 2015.

3. On 12th October, 2015, after hearing the counsel for the petitioners,

the following order was passed:

1. The petition impugns the letter dated 18th May, 2015 of the respondent of cancellation of the Settlement Agreement arrived at with the petitioners with respect to the financial assistance rendered to the petitioners. Axiomatically, a mandamus is also sought directing the

respondent to inter alia abide by the Settlement Agreement and the notice dated 28th September, 2015 issued by the respondent under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is also impugned.

2. The counsel for the petitioners has been heard at length. It has been enquired from him as to how this writ petition is maintainable in the face of the controversy being entirely contractual and the alternative remedy under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal being available to the petitioners against the measure even if any taken by the respondent Bank under Section 14 of the Act in pursuance to the notice already issued under Section 13(2) of the SARFAESI Act.

3. In this regard, it may also be noticed that it is the contention of the counsel for the respondent appearing on advance notice that the petitioners have been playing hide and seek and have not even signed the Settlement Agreement and not opened the Escrow Account in terms thereof and not informed the details of the area for the sale of which NOC are being asked purportedly in pursuance of the Settlement Agreement.

4. The counsel for the petitioners at this stage states that the matter be posted to 19th October, 2015 to enable the petitioners to bring the buyers along with purchase consideration for the shops for which NOC is being sought now and / or at least place a concrete proposal before this Court in this regard.

5. Costs earlier imposed is waived.

6. List on 19th October, 2015."

4. The counsel for the petitioners on 19th October, 2015 handed over a

proposal in terms of order dated 12th October, 2015 with copy to the counsel

for the respondent IFCI Ltd. appearing on advance notice and the matter was

adjourned to 29th October, 2015 to enable the counsel for the respondent

IFCI Ltd. to obtain instructions.

5. On 29th October, 2015, the counsel for the respondent IFCI Ltd.

informed that the said proposal had been rejected by the respondent IFCI

Ltd. However on that date, the counsel for the petitioners handed over an

addendum to the proposal and after further hearing the counsels, order was

reserved. Thereafter, the petitioners had filed CM No.28489/2015 to again

claim the relief of restraining the respondent IFCI Ltd. from taking coercive

steps in pursuance to the letter dated 20th November, 2015 whereby the

respondent IFCI Ltd. had rejected the representation of the petitioner

submitted under Section 13(3A) of the SARFAESI Act and which came up

before this Court on 27th November, 2015 and after hearing the counsel for

the petitioners thereon, the order on the said application was also reserved to

be pronounced along with the order in the writ petition.

6. It is inter alia the case of the petitioners:

(i) that the two petitioners i.e M/s North West Sales & Marketing

Ltd. and M/s ARSS Developers Ltd. had availed two loans, one

for Rs.100 crores and the other for Rs.60 crores from the

respondent IFCI Ltd. for the purpose of constructing a mall i.e.

"The ARSS Felix" over land ad-measuring 2910 sq. mtrs. in

Community Centre, Paschim Vihar, Delhi, having about 120

shops;

(ii) that the respondent IFCI Ltd. recalled the loan and commenced

action under Section 13 of the SARFAESI Act;

(iii) that the petitioners approached the High Court of Orissa by

preferring a writ petition which was disposed of vide order

dated 29th August, 2012 in view of both parties agreeing to

make an effort for compromising the disputes;

(iv) that accordingly the aforesaid two loans were restructured vide

letter dated 23rd December, 2013 of the respondent IFCI Ltd.

and specifically vide Supplementary and Restructuring

Agreement dated 4th February, 2014;

(v) that as per the settlement arrived at by the petitioners with the

respondent IFCI Ltd., the loans were to be serviced from sale

proceeds of the area charged to the respondent and therefore, on

making an upfront payment of Rs.25.30 crores, NOC for the

first set of 30 shops was to be issued - the said 30 shops had

already been sold and required NOC for getting market

confidence;

(vi) that as per the aforesaid settlement, issuance of NOCs was

predicated on one and only one condition, viz., upfront payment

of Rs.25.30 crores and was in no way dependent upon payment

of future installments;

(vii) that though the petitioners fulfilled their obligation of upfront

payment of Rs.25.30 crores by 17th February, 2014 i.e. within

two weeks of the execution of the aforesaid settlement but the

respondent IFCI Ltd. did not issue NOCs;

(viii) that after much cajoling, the respondent IFCI Ltd. issued

conditional NOCs and that too only for 11 shops - the said

conditional NOCs were of no help as it did not serve the

purpose;

(ix) the petitioners again approached the respondent IFCI Ltd. and

made further payment of Rs.5 crores which included the

consideration of the remaining 7 shops out of the aforesaid 30

shops but the respondent IFCI Ltd. in an arbitrary manner and

without any basis and in colourable exercise of power agreed to

merely issue 11 NOCs instead of 30;

(x) that though the petitioners offered to pay another Rs.6.10 crores

as a condition for issuance of the remaining 19 NOCs as well as

additional 8 NOCs but the respondent IFCI Ltd. revoked the

settlement and initiated proceedings under the SARFAESI Act;

(xi) that the respondent IFCI Ltd. in breach of the obligation owed

to the petitioners, inspite of the petitioners having fulfilled their

part of the settlement agreement, stifling the fundamental rights

of the petitioners to carry on their trade and business.

7. As would be obvious from the above, the order dated 12th October,

2015 was in the aforesaid nature of the claim in the writ petition.

8. It is not the case of the petitioners that the respondent IFCI Ltd. is in

breach of any binding guideline of the Reserve Bank of India (RBI). The

petitioners want this Court to, in exercise of extraordinary powers under

Article 226 of the Constitution of India, specifically enforce the settlement

agreement with the respondent IFCI Ltd. and of which settlement agreement

the petitioners claim to have been ready and willing and having fulfilled

their own obligations and allege breach on the part of the respondent IFCI

Ltd. However such a power in my view cannot be exercised under Article

226 of the Constitution of India.

9. Supreme Court in Joshi Technologies International Inc. Vs. Union

of India (2015) 7 SCC 728, after analyzing a host of earlier judgments

particularly in ABL International Limited Vs. Export Credit Guarantee

Corporation of India (2004) 3 SCC 553 has held i) that though there is no

absolute bar to the maintainability of a writ petition even in contractual

matters or where there are disputed questions of fact or even when monetary

claim is raised but discretion lies with the High Court which under certain

circumstances can refuse to exercise; ii) the High Court will normally not

exercise such discretion unless the action has some public law character

attached to it; iii) whenever a particular mode of settlement of dispute is

provided in the contract, the High Court would refuse to exercise its

discretion under Article 226 and would relegate the parties to the said mode

of settlement; iv) if there are very serious disputed questions of fact which

are of complex nature and require oral evidence for their determination,

again the High Court in its discretion would not entertain a writ petition; v)

money claims, particularly arising out of the contractual obligations, are

normally not to be entertained except in exceptional circumstances; vi)

ordinarily where a breach of contract is complained of, the party

complaining of such breach may sue for specific performance of the

contract, if contract is capable of being specifically performed and otherwise

may sue for damages; vii) if the contract between the private party and the

State / its instrumentality and / or agency of the State is under the realm of a

private law and there is no element of public law, the normal course for the

aggrieved party is to invoke the remedies provided under the ordinary civil

law rather than approaching the High Court under Article 226 of the

Constitution of India and invoking its extraordinary jurisdiction and only if

the nature of the activity or controversy involves public law element can the

matter be examined by the High Court in a writ petition under Article 226 to

see whether action of the State and / or instrumentality or agency of the State

is fair, just and equitable.

10. Supreme Court, again in order dated 18th March, 2015 in Civil Appeal

No.3053/2015 arising out of SLP(C) No.15689/2011 titled National

Highways Authority of India Vs. MEIL-EDB LLC (JV) held that in pure

contractual matters extraordinary remedy of writ under Article 226 or under

Article 32 of the Constitution of India cannot be invoked and that the writ

Court should abjure from going into the minute calculations and controversy

should be left to the Civil Court to decide.

11. In the present case, not only is there no public law element in the

controversy but also alternative remedy under Section 17 of the SARFAESI

Act is available to the petitioners.

12. The counsel for the respondent IFCI Ltd. appearing on advance notice

also disputed that the petitioners were in compliance of their part of the

Supplementary & Restructuring Agreement. He contended that in fact no

such agreement even had come into being because the same was not signed,

no Escrow Account as agreed was opened, no post dated cheques as agreed

handed over and affirmation of the guarantors thereto not received. It was

also informed that the respondent IFCI Ltd. has already in the past waived

overdue interest of Rs.20 crores and given other discounts to the petitioners.

Reliance was also placed on the judgment of the Division Bench of this

Court in M/s Sigma Generators Pvt. Ltd. Vs. Oriental Bank of Commerce

2015 (217) DLT 622 holding that the borrowers of banks / financial

institutions cannot interfere with the Scheme of SARFAESI Act whereunder

the banks / financial institutions after considering the representation against

the notice under Section 13(2) and after rejecting the same are entitled to

take action under Section 13(4) and that where 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 exercise of jurisdiction under

Article 226 cannot be defeated by approaching the High Court against an

intermediary step and by contending that thereagainst no alternative remedy

is provided.

13. Though the counsel for the petitioners contended that since the

respondent IFCI Ltd. is a State / instrumentality of State within the meaning

of Article 12 of the Constitution of India and is acting in breach of its

contract, a writ petition would be maintainable but in the light of the settled

position of law, I am unable to agree. I may in this regard refer to CCPL

Developers Pvt. Ltd. Vs. Gail (India) Ltd. MANU/DE/4361/2015, Playwell

Impex (P) Ltd. Vs. United India Insurance Co. Ltd. MANU/DE/3098/2015

[LPA No.892/2015 preferred thereagainst is found to have been withdrawn

on 17th December, 2015], Hejian Solidkey Petroleum Machinery Co.

Ltd. Vs. Indian Oil Corporation Ltd. MANU/DE/2818/2015,

Chakradar Auto Udyog Pvt. Ltd. Vs. Engineering Export Promotion

Council MANU/DE/4248/2012 (DB) and Govt. of NCT of Delhi Vs. New

Variety Tent House 189 (2012) DLT 65 (DB) [SLP(C) No.23577/2012

preferred thereagainst is found to have been dismissed on 3rd August, 2012].

14. There is thus no merit in the petition.

Dismissed.

No costs.

RAJIV SAHAI ENDLAW, J.

APRIL 04, 2016 „gsr‟..