M/S Haridarshan Jewellers ... vs Authorized Officer, Union Bank Of ...
2021 Latest Caselaw 2643 Guj

         C/SCA/1083/2021                                              IA ORDER




           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

 CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2021
         In R/SPECIAL CIVIL APPLICATION NO. 1083 of 2021
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AUTHORIZED OFFICER, UNION BANK OF INDIA Versus M/S HARIDARSHAN JEWELLERS THROUGH PROPRIETOR KAUSHIKBHAI VRAJLAL PATADIA ========================================================== Appearance:

MR AS PANESAR for the APPLICANT(s) No. MR PM LAKHANI for the RESPONDENT(s) No. ========================================================== CORAM: HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI Date : 19/02/2021 IA ORDER

1. This application is filed by the applicant - original respondent No.2 for vacating ad­interim relief granted by this Court in favour of the original petitioners vide order dated 20.01.2021.

2. Heard learned advocate Mr.A.S. Panesar for the applicant - original respondent No.2 and learned advocate Mr.P.M. Lakhani for opponents - original petitioners.

3. Learned advocate for the applicant - Bank has referred the averments made in the memo of this application and submitted that the original petitioners have challenged the action taken by the applicant Bank under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act" for short). It is submitted that the

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original petitioners have not given the correct facts before this Court. It is submitted that the original petitioners had availed financial assistance to the tune of Rs.10.50 crores for business of original petitioner No.1 and for securing the said financial assistance together with interest and costs, the original petitioners have mortgaged five immovable properties, details of which are provided in the memo of the application. At this stage, it is further submitted that the original petitioners had also availed a housing loan of Rs.4.89 crores from the applicant Bank and for securing the said loan with interest and costs, original petitioner No.3 mortgaged immovable property namely, Bungalow No.34, Swati Cooperative Housing Society Limited, Ishwar Bhuvan, Navjivan Ahmedabad. It is submitted that the original petitioners have committed various defaults of terms and conditions of the sanction and they neglected to repay the dues and, therefore, their accounts were classified as Non­Performing Assets (NPA). It is submitted that when the applicant Bank has initiated action under the provisions of the SARFAESI Act, the original petitioners challenged the same before the Debt Recovery Tribunal­1, Ahmedabad, by filing S.A. No.20 of 2019. However, in the said S.A., the original petitioners filed purshish waiving their all rights of challenges and submitted before the Tribunal that they will handover the possession of all the properties to the applicant Bank except Bungalow No.33, Swati Co­operative Housing Society Limited. It was further agreed that the Bank should

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auction all the properties and upon successful auction of the properties, they will handover the possession of Bungalow No.33 to the purchaser.

3.1 Learned advocate Mr.Panesar would further contend that thereafter, the applicant Bank put the properties to auction for five times. However, the auction failed every time for want of bids. Thereafter, the properties were put to auction on the sixth occasion on 15.10.2020 wherein a bid for Bungalow No.33 was at a reserve price. It is submitted that the original petitioners challenged the said auction by filing SA No.158 of 2020 which came to be allowed by the DRT vide order dated 23.12.2020. It is submitted that in the said proceedings, original petitioners raised contention before the DRT to redeem a property by making a payment of 5% above the reserve price. However, the said contention of the original petitioners is not accepted by the DRT. It is submitted that the original petitioners have accepted the said findings and the order of DRT is not challenged by the original petitioners in the petition. Therefore, it is not open for the original petitioners to contend the said aspects in the petition.

3.2 At this stage, learned advocate Mr.Panesar would submit that as per the provisions contained in Section 13(8) of the SARFAESI Act as well as under the provisions of the Transfer of Properties Act, redemption should be in consonance with the said

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provisions. The original petitioners do not have any legal right to seek release of mortgage properties without making the entire payment of the outstanding dues of the applicant Bank.

3.3 Learned advocate Mr.Panesar would further contend that now, the applicant Bank has issued notice dated 02.01.2021 for auction of the properties situated at Bungalow No.33, Swati Co­operative Housing Society Limited and public E­auction was fixed on 21.01.2021. Reserve price of the property in question is fixed at Rs.3.48 crores. At that stage, now, the original petitioners have challenged the auction process in the present petition and this Court has granted ad­interim relief in their favour.

3.4 At this stage, it is submitted that original petitioners have alternative remedy of filing Securitisation Application. under Section 17 of the SARFAESI Act before the DRT and, therefore, as the alternative remedy is available, this Court may not entertain the petition and the ad­interim relief granted by this Court be vacated.

3.5 In support of the aforesaid contentions, learned advocate for the applicant Bank has placed reliance upon the following decisions:

(1) United Bank of India Vs. Satyawati Tondon and others reported in (2010) 8 SCC 110

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(2) Authorized Officer, State Bank of Travancore and Another Vs. Mathew K.C. reported in (2018) 3 SCC 85

(3) ICICI Bank Limited and others Vs. Umakanta Mohapatra and others reported in (2019) 13 SCC

(4) Tamil Nadu Industrial Investment Corporation Ltd. Vs. Mileenium Business Solutions Pvt. Limited reported in AIR 2005 Madras 232

4. On the other hand, learned advocate Mr.P.M. Lakhani appearing for the present opponents - original petitioners opposed this application and submitted that the applicant Bank has put the property in question for auction by fixing base price at Rs.3.48 crores. Said auction was held on 15.10.2020. The bid for the property in question was received at the reserve price and, therefore, the original petitioners challenged the said auction by filing S.A. No.158 of 2020. It is submitted by learned advocate Mr.Lakhani that DRT has quashed and set aside the said auction process by observing that the same is bad in eyes of law. It is submitted that the applicant Bank has not challenged the order of DRT before the higher forum. It is further submitted that now, once again, the applicant Bank has put the property in question for auction for the same base price i.e. Rs.3.48 crores, which is not permissible

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and, therefore, the original petitioners have filed the main petition.

4.1 It is submitted that there is no alternative remedy available with the original petitioners as contended by the learned advocate for the applicant Bank because the DRT has specifically observed in Paragraph­17 of the order that the Tribunal has no jurisdiction or authority to direct the original petitioners to accept the part money to release one or two mortgaged properties. Thus, for the reliefs as prayed for in the petition, it is not open for the original petitioners to once again approach DRT by filing Securitisation Application. It is further submitted that the original petitioners have not suppressed any material facts as alleged by the learned advocate for the applicant and when the original petitioners have given the offer by writing a letter dated 19.10.2020, a copy of which is placed on record at Page­90 of the main petition, the applicant Bank has not given any rely. It is, therefore, urged that the petition is required to be heard on its own merits and the ad­interim relief granted by this Court may not be vacated.

5. Having heard learned advocates appearing for the parties and having gone through the material placed on record, it would emerge that the present opponents

- original petitioners have filed the main petition, in which, they have prayed for the following reliefs:

        C/SCA/1083/2021                                           IA ORDER



     "(a) YOUR LORDSHIPS               BE     PLEASED      to     admit        this
     petition;

(b) YOUR LORDSHIPS BE PLEASED to allow this petition by way issuing appropriate writ, order or direction upon the respondent bank not to violate the fundamental and other statutory rights of the petitioner is unjust and arbitrary manner and not to proceed further with the auction of the petitioner's properties which is scheduled on date 21/01/2021 without following due process of law as observed in the judgment of Ld. DRT dated 23/12/2020 passed in SA No.158 of 2020 and the principle's of law laid down by Hon'ble Apex Court and various Hon'ble High Courts including this Hon'ble High Court in series of judgments.

(c) YOUR LORDSHIPS BE PLEASED To issue appropriate writ, order or direction for quashing and set asiding the auction notice and the auction scheduled on 21­01­2021 for the properties of the petitioner.

(d) Pending the admission, hearing and final disposal of this petition YOUR LORDSHIPS BE PLEASED to stay further implementation, execution and operation of the auction scheduled on 21/01/2021 for auction of the properties of the petitioner and direct the respondents not to proceed further with the auction scheduled on 21/01/2021 and to maintain the status quo of the concern properties;

(e) To pass any other appropriate and just order/s;"

6. It is the specific case of the petitioners that the dispute in the present petition is with regard to Bungalow No.33 which was put for auction by the applicant Bank on 15.10.2020. Reserve price was fixed at Rs.3.48 crores. Bid for the said amount was

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received by the applicant Bank and, therefore, the original petitioners filed S.A. No.158 of 2020 before the DRT. The DRT has set aside the said process vide order dated 23.12.2020. It is pertinent to note at this stage that the applicant Bank has not challenged the said order before the higher forum. Now, once again, the notice for public E­auction is issued by the applicant Bank on 02.01.2021 and the public E­ auction was scheduled on 21.01.2021. Copy of the said document is placed on record at Page­97 of the main petition. Reserve price for the property in question is once again fixed at Rs.3.48 crores. Though the process of E­auction is set aside by the DRT, once again, the same base price is fixed in E­auction in question. Thus, the original petitioners have directly filed this petition before this Court. Thus, in the facts of the present case, it cannot be said that the original petitioners are having any alternative remedy of filing Securitisation Application before the DRT. Thus, on this ground, ad­ interim relief granted by this Court in favour of the original petitioners is not required to be vacated.

7. It is further pertinent to note that the original petitioners have shown willingness to redeem the mortgage property in question with additional 5% amount of total bid amount received i.e. Rs.3,48,00,000/­ + 5% (Rs.17,40,000) = Rs.3,65,40,000/­. The request was made by the petitioners vide communication dated 19.10.2020, a copy of which is placed on record at Page­90 of the

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main petition. However, it is the specific case of the original petitioners that no reply is given by the applicant Bank.

8. Thus, the issue involved in the present petition is required to be decided at the time of hearing of the main petition and the petition cannot be rejected at the threshold.

9. The applicant - Bank has filed the present application for vacating ad­interim relief mainly on the ground that the original petitioners are having alternative remedy. However, as observed hereinabove, in the facts of the present case, it cannot be said that the original petitioners are having alternative remedy to challenge the auction process initiated by the Bank for the property in question by filing Securitisation Application before DRT.

10. It is also pertinent to note that vide order dated 23.12.2020, the DRT has also observed that for redemption of the property as requested by the original petitioners before the DRT, the DRT has no jurisdiction. Thus, when the aforesaid finding is recorded by the DRT, the original petitioners cannot be asked to go again before the DRT for the same reliefs.

11. At this stage, this Court would like to refer the decisions, upon which reliance is placed by the learned advocate for the applicant. In the case of

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United Bank of India Vs. Satyawati Tondon and others, the Honourable Supreme Court has observed in Paragraphs­42, 43 and 55 as under:

"17. There is another reason why the impugned order should be set aside. If respondent No.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 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 19 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 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, High Court must insist that before availing remedy under

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Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

xxx xxx xxx

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 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. In the case of Authorized Officer, State Bank of Travancore and Another Vs. Mathew K.C.(supra), the Honourable Supreme Court has observed in Paragraphs­ 9, 15 and 16 as under:

"9. Even prior to the SARFAESI Act, considering the alternate remedy available under the DRT Act it was held in Punjab National Bank vs. O.C.

Krishnan and others, (2001) 6 SCC 569, that :­ "6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast­track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under

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Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act."

xxx xxx xxx

15. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex­parte interim orders can have a deleterious effect and it is not sufficient to 14 say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:­

"46. It must be remembered that stay of an action initiated by the State and/or its

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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."

16. The writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference."

13. The Honourable Supreme Court in the case of ICICI Bank Limited and others Vs. Umakanta Mohapatra and others has observed in Paragraphs­2 to 4 as

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under:

"2. Despite several judgments of this Court, including a judgment by Hon'ble Mr. Justice Navin Sinha, as recently as on 30.01.2018, in Authorized Officer, State Bank of Travancore and Anr. vs. Mathew K.C., (2018)3 SCC 85, the High Courts continue to entertain matters which arise under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), and keep granting interim orders in favour of persons who are Non­ Performing Assets (NPAs).

3. The writ petition itself was not maintainable, as a result of which,in view of our recent judgment, which has followed earlier judgments of this Court, held as follows:­

"17. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd. and Another, (1997) 6 SCC 450, observing:­

"32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.""

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14. In the case of Tamil Nadu Industrial Investment Corporation Ltd. Vs. Mileenium Business Solutions Pvt. Limited, the High Court of Judicature at Madras has observed in paragraph­7 as under:

"7. In out considered opinion it is not proper for the Court to interfere in such matters relating to recovery of loans. Such matters are contractual in nature and writ jurisdiction is not the proper remedy for this. A writ lies when here is an error for law apparent on the face of the record, or there is violation of law. No writ lies merely for directing one time settlement or for directing re­scheduling of the loan or for fixing instalments in connection with the loan. It is only the bank or the financial institution which granted the loan which can re­schedule it or fix one time settlement or grant instalments. The Court has no right under Article 226 of the Constitution to direct grant of one time settlement or for re­scheduling of the loan, or to fix instalments."

15. This Court cannot dispute the proposition of law laid down by the Honourable Supreme Court in the aforesaid decisions. However, as observed hereinabove, in the facts of the present case, the aforesaid decisions would not render any assistance to the applicant ­ Bank. Once again it is to be noted that in the facts of the present case, the original petitioners are not having alternative remedy of filing Securitisation Application before the DRT.

Thus, the issue involved in the petition is required to be heard in detail.

16. In       view          of    the     above,          the    application               is





           C/SCA/1083/2021                                   IA ORDER



dismissed.

Registry to list the main petition being Special Civil Application No.1083 of 2021 on Board for hearing on 05.03.2021, as the issue involved in the petition requires urgent hearing.

(VIPUL M. PANCHOLI, J) piyush