M/S Newton Engineering And ... vs Bank Of Baroda Through Its Chief ...
2021 Latest Caselaw 1568 Guj

         C/SCA/1110/2021                                         JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 1110 of 2021


FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
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1     Whether Reporters of Local Papers may be allowed to                  No
      see the judgment ?

2     To be referred to the Reporter or not ?                              No

3     Whether their Lordships wish to see the fair copy of the             No
      judgment ?

4     Whether this case involves a substantial question of law             No
      as to the interpretation of the Constitution of India or any
      order made thereunder ?

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       M/S NEWTON ENGINEERING AND CHEMICALS LTD.
                         Versus
BANK OF BARODA THROUGH ITS CHIEF MANAGER AND AUTHORIZED
                       OFFICER
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Appearance:
MR SHAKTI S JADEJA(5491) for the Petitioner(s) No. 1,2,3,4,5,6,7
MR SP MAJMUDAR(3456) for the Petitioner(s) No. 1,2,3,4,5,6,7
MR BIJU A NAIR(5703) for the Respondent(s) No. 1
MR DEVANG VYAS(2794), ASG for the Respondent(s) No. 2
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    CORAM: HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
                       Date : 03/02/2021
                       ORAL JUDGMENT

1. Rule. Learned advocate Mr.Biju A. Nair waives service of notice of Rule for respondent No.1 and learned ASG Mr.Devang Vyas for respondent No.2.

2. Looking to the issue involved in the present petition, learned advocates appearing for the parties

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jointly requested that the same be disposed of finally at admission stage.

3. This petition is filed under Articles 226 and 227 of the Constitution of India, in which, the petitioners have prayed for the following reliefs:

"(A) YOUR LORDSHIPS may be pleased to issue a writ of mandamus/certiorari, or any other appropriate writ, order or direction quashing and setting aside the impugned order dated 23.12.2020 [in so far as it modified its earlier orders/directions of maintaining status­quo and permitted the respondent­bank to proceed with the auction process] passed by Hon'ble Debts Recovery Tribunal­II, Ahmedabad in S.A./154/2018 (at ANNEXURE­V hereto) and may further be pleased to allow the prayers as prayed for in IA/1816/2020 (at ANNEXURE­L hereto) and IA/2076/2020 (at ANNEXURE­R hereto) by quashing and setting aside E­auction Sale Notices dated 15.10.2020 (at ANNEXURE­K hereto) and 21.11.2020 (at ANNEXURE­Q hereto) issued by respondent­bank and all consequential steps pursuant to the said E­Auction Sale Notices;

(B) Pending hearing and final disposal of the present petition, YOUR LORDSHIPS may be pleased to stay the operation, implementation and execution of impugned order dated 23.12.2020 [in so far as it modified its earlier orders/directions of maintaining status­quo and permitted the respondent­bank to proceed with the auction] passed by Hon'ble Debts Recovery Tribunal­II, Ahmedabad in S.A./154/2018 and may further be pleased to stay all further proceedings/steps pursuant to E­auction Sale Notices dated 15.10.2020 (at ANNEXURE­K hereto) and 21.11.2020 (at ANNEXURE­Q hereto) and be pleased to direct the respondent­bank not to confirm sale in favour of auction purchasers and to maintain status­quo qua auction process;

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(C) Such other and further reliefs as may be deemed just and proper in the facts of and circumstances of the present case may kindly be granted."

4. Heard learned advocate Mr.S.P. Majmudar for the petitioners, learned advocate Mr.Biju A. Nair for respondent No.1 and learned ASG Mr.Devang Vyas for respondent No.2.

5. Learned advocate Mr.S.P. Majmudar referred the averments made in this petition and, thereafter, submitted that it is a case of the respondent Bank that financial facilities were provided to the petitioner No.1 Company. At the time of availing said facilities, Title Deeds of various properties were deposited with the respondent Bank. It is submitted that the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 ("SARFAESI Act" for short) were initiated against the petitioners and the respondent Bank took symbolic possession of the secured assets on 06.04.2018. The petitioners challenged the entire action taken by the respondent Bank by preferring Securitisation Application being SA/154/2018 under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal­II, Ahmedabad. It is submitted that in the present petition, dispute is with regard to the property bearing Block Nos.342, 424, 425 and 428 situated near Sterling Gelatin, Village Dudhwada, Taluka Padra, District Vadodara. It is further submitted that the respondent Bank has

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filed an application under Section 14 of the SARFAESI Act for taking illegal possession of the alleged secured assets before the District Magistrate, Vadodara, which was allowed vide order dated 03.03.2020. The petitioner challenged the said order by preferring amendment application being IA/1133/2020 in pending SA/154/2018. Thereafter, the Mamlatdar has taken physical possession of the property. It is submitted that thereafter, the respondent Bank has published E­auction Sale Notice dated 15.10.2020 in the concerned newspaper whereby the date of auction was fixed on 10.11.2020 with regard to the property situated at Village Dudhwada, Taluka Padra, District Vadodara.

5.1 Learned advocate for the petitioner has further submitted that the respondent Tribunal passed an interim order on 11.11.2020 whereby the Tribunal has directed the respondent Bank to maintain status­quo with regard to the auction held on 10.11.2020. It is submitted that thereafter, the matter was adjourned on 13.11.2020. Copy of the said order is placed on record at Page­167 of the compilation. At this stage, it is further submitted that on 13.11.2020, the Tribunal once again extended the status­quo granted vide order dated 11.11.2020 upto 15.12.2020. Copy of the said order is placed on record at Page­168. Thereafter, learned advocate Mr.Majmudar has referred the order dated 23.12.2020, a copy of which is placed on record at Page­185. It is submitted that the order of status­quo passed by the respondent Tribunal was

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once again extended upto 23.12.2020. Now, the grievance of the learned advocate for the petitioners is that on 23.12.2020, the Tribunal passed the impugned order whereby without assigning any reason, the status­quo granted vide order dated 11.11.2020 is vacated and the matter was adjourned for final hearing on 12.01.2021. It is submitted that the petitioners have challenged the aforesaid order passed by the Tribunal in the present petition.

5.2 Learned advocate Mr.Majmudar for the petitioners mainly assailed the aforesaid order on the ground that while vacating the order of status­quo, the Tribunal has not assigned any reason and, therefore, it is a non­speaking order. It is submitted that when the Tribunal has fixed the Securitisation Application for final hearing on 12.01.2021, it ought to have extended the order of status­quo, till the final disposal of the said application.

5.3 In support of the said contentions, learned advocate for the petitioners has placed reliance upon the decision rendered by this Court in the case of Keshubhai Mohanbhai Patel Vs. State of Gujarat reported in 2011(3) GLR 2548. More particularly, learned advocate has referred Para­16 of the said decision. He has also placed reliance upon the decision rendered by the Honourable Supreme Court in the case of Jagtamba Devi Vs. Hem Ram reported in 2008(3) SCC 509. He has referred Paragraphs­6 and 7 of the said decision. After referring to the same, it

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is submitted that an order that discloses no reasons in support of the conclusions arrived at, cannot be sustained and the existence of an alternative remedy would not operate as a bar in exercising jurisdiction under Article 226 of the Constitution of India. It is, therefore, urged that the impugned order be set aside and status­quo granted by the Tribunal be extended till the final disposal of S.A. No.154 of 2018.

6. On the other hand, learned advocate Mr.Biju A. Nair for respondent No.1 has vehemently opposed this petition and referred the conduct of the petitioners from the affidavit­in­reply filed on behalf of the Bank. He has opposed this petition mainly on the ground that the petitioners are having alternative remedy of filing an appeal before the Debt Recovery Appellate Tribunal under Section 18 of the SARFAESI Act. It is also contended that the petitioners have not come before this Court with clean hands and, therefore, this Court may not entertain the present petition.

6.1 Learned advocate Mr.Nair for the respondent Bank has mainly relied on the following decisions:

(1) United Bank of India Vs. Satyawati Tondon and Ors. reported in AIR 2020 SC 3413

(2) Order dated 08.09.2020 passed by this Court in Special Civil Application No.9496 of 2020

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6.2 After referring to the aforesaid decisions, it is contended that the petitioners have an alternative remedy of filing an appeal before the appellate Tribunal under Section 18 of the SARFAESI Act and, therefore, this Court may not entertain the present petition.

7. Having heard learned advocates appearing for the parties and having gone through the material placed on record, the dispute raised in the present petition is in very narrow compass. The only grievance raised by the present petitions in the present petition is that the respondent Tribunal passed an order, by which, the respondent Bank was directed to maintain status­quo with regard to the auctions held on 10.11.2020 and 11.12.2020. Now, the grievance of the petitioners is that by way of the impugned order dated 23.12.2020, the Tribunal has modified the said order and permitted the respondent Bank to proceed with the auction in accordance with the provisions of the SARFAESI Act and the Rules framed thereunder. It is fairly submitted by the learned advocate for the petitioners that so far as the auction held on 11.12.2020 is concerned, the sale certificate is already issued and the sale is finalised. Therefore, the petitioners will file an appropriate application before the Tribunal and in the present petition, this Court may not consider the said aspect. However, so far as the auction held on 10.11.2020 is concerned, though the Tribunal

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permitted the respondent Bank to proceed with the auction in accordance with law, till today, sale is not finalised and sale certificate is not issued in favour of the auction purchaser. Thus, this Court is considering the aforesaid aspects only in the present matter.

8. It is pertinent to note that while directing the respondent Bank to maintain status­quo with regard to the auction held on 10.11.2020, the Tribunal has not assigned any reason but the fact remains that the said order was continued from time to time and it was operative upto 23.12.2020. Learned advocates appearing for the parties jointly submitted that till today, though the order of status­quo is modified by the concerned Tribunal, sale in favour of the auction purchaser is not finalised. In this background, if the impugned order is examined, it is revealed that while modifying the order dated 11.11.2020, the Tribunal has not assigned any reason. Though it is contended by the learned advocate for the respondent Bank that the conduct of the petitioners are required to be examined, the Tribunal has not observed anything about the conduct of the petitioners while passing the impugned order. It is not in dispute that the matter was fixed for final hearing on 12.01.2021 by the Tribunal and now, the matter is kept on 08.02.2021 for final hearing. Learned advocates appearing for the parties jointly submitted that the parties will co­operate with the Tribunal on 08.02.2021 and they will not ask for any unnecessary

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adjournment. At this stage, this Court would like to refer the decision rendered in the case of Keshubhai Mohanbhai Patel Vs. State of Gujarat (supra), wherein this Court has observed in Paragraph­16 as under:

"16. In addition to being violative of the principles of natural justice, the impugned order is a non­speaking and unreasoned one. Time and again, the Supreme Court, and this Court, have emphasized upon the importance of giving reasons in support of an order made by a Court, judicial forum or a quasi­judicial authority. The person against whom an order is made should at least know and understand the grounds that weighed with the Court or authority, as the case may be, for making the order. An order that discloses no reasons in support of the conclusions arrived at, cannot be sustained. In the above circumstances, in the considered view of this Court, the existence of an alternative remedy would not operate as a bar in exercising jurisdiction under Article 226 of the Constitution of India.:"

9. In the case of Jagtamba Devi Vs. Hem Ram (supra), the Honourable Supreme Court has observed in Paragraphs­6 and 7 as under:

"6. The order of the High Court reads as follows:

It is absolutely non­reasoned. Reasons introduce clarity in an order. On plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in its order indicative of an application of its mind. The absence of reasons has rendered the High Court's judgment unsustainable.

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7. Even in respect of administrative orders Lord Denning M.R. In Breen V/s. Amalgamated Engineering Union, 1971 1 AIIER 1148 observed "The giving of reasons is one of the fundamental of good administration". In Alexander Machinery (Dudley) Ltd. V/s. Crabtree, 1974 0 LCR 120 it was observed: "Failure to give reasons amounts to denial of justice". Reasons are live links between the mind of the decision taker to the controversy in question and the decision or conclusion arrived at". Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi­judicial performance."

10. In the order dated 08.09.2020 passed by this Court in Special Civil Application No.9496 of 2020, this Court has observed in Paragraphs­3.4, 4.4 and 5 as under:

"3.4 At the time of arguments, learned advocate for the petitioners has vehemently contended that such non­speaking and non­reasoned order passed by the respondent No.1 cannot sustained in the eye of law and requires to be quashed and set aside and he may be directed to decide those applications of interim relief in accordance with law within a period of two weeks from the

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disposal of this petition.

Xxx xxx xxx

4.4 Learned advocate for the respondent No.1 has contended that the conduct of the petitioners is such that they have unnecessarily prolonged the case in view to avoid their financial liabilities. He has vehemently contended that as per the judgment of the Apex Court reported in case of Standard Chartered Bank Vs. V. Noble Kumar reported in 2013 (9) SCC 620, the Apex Court has held that the Magistrate has to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transactions. He has submitted that in the said judgment the Apex Court has categorically held that if the petitioner is not satisfied with the order of DRT u/s. 17, the petitioner has a remedy u/s. 18 of the Act and for that he had relied upon the judgment of the Apex Court in case of State Bank of Trivancore (Supra) wherein in para 10 it is observed as under :­

10. In Satyawati Tandon (supra), the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding :­

"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

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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 quasi­judicial 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.

***

55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."

xxx xxx xxx

5. After considering the rival submissions and on perusal of record, it is no more res integra that the petitioners have an alternative remedy available to approach the Appellate Authority u/s. 18 of the Act. If such types of petitions are entertained by the High Courts, Section 18 of the Act would be merely a provision in the

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statute book. There are catena of the judgments of the Apex Court that such types of petitions should not be entertained by the High Courts."

11. In the case of United Bank of India Vs. Satyawati Tondon and Ors. (supra), the Honourable Supreme Court has observed in Paragraphs­18 and 27 as under:

"18. 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 self­imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. It is true that the rule of 20 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. 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,

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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 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 AIR 1969 SC 556, Whirlpool Corporation v. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1 and Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and others (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order."

xxx xxx xxx

27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."

12. Keeping in view the aforesaid decisions rendered by this Court as well as the Honourable Supreme Court, if the facts of the present case as discussed hereinabove are carefully examined, it can be said that the Tribunal has not assigned any reason while passing the impugned order, by which, the order of

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status­quo granted earlier is modified and the respondent Bank is permitted to proceed further as per the provisions contained in the SARFAESI Act and the Rules framed thereunder. Thus, this is a non­ speaking order. Thus, this Court is of the view that though alternative remedy is available to the petitioners under Section 18 of the SARFAESI Act, in the facts of the present case, when the order of status­quo was operating and once the Tribunal has fixed the matter for final hearing on a particular date, the order of status­quo granted was required to be extended, till the final disposal of S.A. No.154 of 2018.

13. Thus, in the aforesaid facts and circumstances of the present case, this Court is of the view that the impugned order, by which, the order directing the respondent Bank to maintain status­quo was withdrawn and the Bank was permitted to proceed further, is required to be set aside. It is accordingly set aside. The Tribunal is directed to finally decide SA/ 154/2018 within a period of four weeks from the date of receipt of a copy of this order. Till the aforesaid Securitisation Application is decided by the Tribunal, the respondent Bank is directed to maintain status­quo as on today. Learned advocates appearing for the parties shall communicate this order to the Tribunal. The parties are directed to co­operate with the Tribunal in the final hearing of the aforesaid matter. If the Tribunal is of the view that the petitioners are unnecessarily trying to

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delay the proceedings, it is open for the respondent Tribunal to pass appropriate order.

14. The petition is partly­allowed. Rule is made absolute to the aforesaid extent. It is clarified that this Court has not examined any other contentions of the learned advocates appearing for the parties as the limited issue is raised before this Court in the present petition. Hence, the Tribunal shall decide the matter in accordance with law.

Direct Service is permitted.

(VIPUL M. PANCHOLI, J) piyush