Rajubhai Kanubhai Bharwad vs South Indian Bank
2022 Latest Caselaw 1534 Guj

    C/SCA/3215/2022                                     ORDER DATED: 10/02/2022




          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/SPECIAL CIVIL APPLICATION NO. 3215 of 2022

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                       RAJUBHAI KANUBHAI BHARWAD
                                  Versus
                           SOUTH INDIAN BANK
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Appearance:
MR. KIRTAN H MISTRY(10012) for the Petitioner(s) No. 1,2
for the Respondent(s) No. 1,2
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 CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                             Date : 10/02/2022
                              ORAL ORDER

1.Heard learned advocate Mr. Chitrajeet Upadhyay for learned advocate Mr. Kirtan H.Mistry for the petitioner through video conference.

2.By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs:

"(a) Your Lordships may be pleased to admit and allow this petition;

(b) Your Lordship be pleased to quash and set aside impugned order issued by the respondent No.2 Authority or seizing the possession of the residential property under section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 owned by the petitioner herein dated 10/01/2022 at Annexure-A;

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(c) That this Hon'ble Court may kindly be pleased to stay the execution, implementation and other ancillary proceedings qua the impugned order at Annexure-A;

(d) to pass any other such order in the interest of justice."

3.The petitioner has challenged the order passed under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for short 'the SARFESAI Act'].

4.The petitioner availed the financial assistance from respondent No.1-Bank for Rs. 50 lakhs being over draft property in the year 2016. The petitioner could not re-pay over draft and therefore, the account of the petitioner was notified as Non-performing Asset Account (for short 'NPA'). The respondent No.1-Bank under section 13(2) of the SARFESAI Act issued notice on 27.12.2017.

5.Respondent No.1-Bank thereafter made an application under section 14 of the SARFESAI Act, to take the physical possession of the secured assets which was given as security for availing financial assistance by the petitioner.

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6.The order dated 30.12.2022 under section 14 of the SARFESAI Act was passed by the District Magistrate in Securitisation Application No. 53 of 2019/2020.

7.It appears that thereafter, respondent No.2- Mamaltdar and Executive Magistrate has issued a notice dated 10.01.2022 informing the petitioner that the physical possession of the mortgaged property situated at Duplex Bungalow No. 15, Rajeshwar Bungalow, Revenue Survey No. 241, TP Scheme No.2, Final Plot No. 70/1 at Village-Harni, District-Vadodara shall be taken on 11.02.2022.

8.Learned advocate Mr. Upadhyay submitted that the petitioner is ready and willing to deposit Rs. 20 lakhs within 72 hours with respondent No.2-Bank and therefore, the impugned notice dated 10.01.2022 should be stayed by this Court.

9.Section 17 of the SARFESAI Act provides for alternative efficacious remedy against any action taken under section 13(4) of the SARFESAI Act. Section 14 provides for a measure to assist secured creditors in taking possession of the secured assets and accordingly, it is in furtherance of action taken by the secured creditor under sub-

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section (4) of section 13 of the SARFESAI Act. If the petitioner is aggrieved by the action of the respondent No.1-secured creditor, the petitioner has to approach the Debt Recovery Tribunal by preferring an application under section 17 of the SARFESAI Act.

10. In such circumstances, this petition cannot be entertained. The Supreme Court in case of Phoenix ARC Private Limited vs. Vishwa Bharati Vidya Mandir & Ors in the judgement and order dated 12.01.2022 passed in Civil Appeal No. 275-259/2022 has held as under:

"7. At the outset, it is required to be noted that in the present case, the respondents - borrowers whose accounts have been declared as NPA in the year 2013 have filed the writ petitions before the High Court challenging the communication dated 13.08.2015 purporting it to be a notice under Section 13(4) of the SARFAESI Act. It is required to be noted that as per the appellant - assignor approximately Rs.117 crores is due and payable to the Bank. While passing the ex-parte interim order on 26.08.2015 and while entertaining the writ petitions against the communication dated 13.08.2015, the High Court has directed to maintain status quo with respect to the possession of the secured properties on condition that

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the borrowers deposit Rs. 1 crore only. Despite the fact that subsequently an application for vacating the ex- parte ad-interim order has been filed in the year 2016, the application for vacating the interim order has not been decided and disposed of. On the contrary, the High Court thereafter has further extended the ex-parte ad-interim order dated 26.08.2015 on condition that the borrowers should deposit a further sum of Rs. 1 crore. Thus, in all the borrowers are directed to deposit Rs. 3 crores only against the dues of approximately Rs.117 crores.

7.1 It is the case on behalf of the appellant that the writ petitions against the communication dated 13.08.2015 proposing to take further action under Section 13(4) of the SARFAESI Act and that too against a private Assets Reconstructing Company (ARC) shall not be maintainable. It is also the case on behalf of the appellant that assuming that the communication dated 13.08.2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in view of the alternative statutory remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions.

7.2 While considering the issue regarding the maintainability of and/or entertainability of the writ petitions by the High Court in the instant case, a few decisions of this Court relied upon by the learned

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Senior Advocate appearing on behalf of the appellant - ARC are required to be referred to.

7.3 In the case of Satyawati Tondon & Ors. (supra), it was observed and held by this Court that the remedies available to an aggrieved person against the action taken under section 13(4) or Section 14 of the SARFAESI Act, by way of appeal under Section 17, can be said to be both expeditious and effective. On maintainability of or entertainability of a writ petition under Article 226 of the Constitution of India, in a case where the effective remedy is available to the aggrieved person, it is observed and held in the said decision in paragraphs 43 to 46 as under:-

"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

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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

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

7.4 In the case of City and Industrial Development Corpn. Vs. Dosu Aardeshir Bhiwandiwala, (2009)

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1 SCC 168, it was observed by this Court in paragraph 30 that the Court while exercising its jurisdiction under Article 226 is duty bound to consider whether ..............."(c) the petitioner has any alternative or effective remedy for the resolution of the dispute."

7.5 In the case of Kanaiyalal Lalchand Sachdev and Ors. (supra) after referring to the earlier decisions of this Court in the cases of Sadhana Lodh Vs. National insurance Co. Ltd. and Anr., (2003) 3 SCC 524; Surya Dev Rai Vs. Ram Chander Rai and Ors., (2003) 6 SCC 675 and State Bank of India Vs. Allied Chemical Laboratories and Anr., (2006) 9 SCC 252 while upholding the order passed by the High Court dismissing the writ petition on the ground that an efficacious remedy is available under Section 17 of the SARFAESI Act, it was observed 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.

7.6 Similar view has been expressed by this Court in subsequent decisions in the case of General Manager, Sri Siddeshwara Cooperative Bank Limited & Anr. (supra) as well as in the case of Agarwal Tracom Private Limited (supra).

8. Applying the law laid down by this court in the aforesaid decisions, it is required to be considered whether,

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in the facts and circumstances of the case, the High Court is justified in entertaining the writ petitions against the communication dated 13.08.2015 and to pass the ex-parte ad interim order virtually stalling/restricting the proceedings under the SARFAESI Act by the creditor.

9. It is required to be noted that it is the case on behalf of the appellant that as such the communication dated 13.08.2015 cannot be said to be a notice under Section 13(4) of the SARFAESI Act at all. According to the appellant, after the notice under Section 13(2) of the SARFAESI Act was issued in the year 2013 and thereafter despite the Letter of Acceptance dated 27.02.2015, no further amount was paid, the appellant called upon the borrowers to make the payment within two weeks failing which a further proceeding under Section 13(4) of the SARFAESI Act was proposed. Thus, according to the appellant, it was a proposed action. Therefore, the writ petitions filed against the proposed action under Section 13(4) of the SARFAESI Act was not maintainable and/or entertainable at all.

10. Assuming that the communication dated 13.08.2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in that case also, in view of the statutory remedy available under Section 17 of the SARFAESI Act and in view of the law laid down by this Court in the cases referred to

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hereinabove, the writ petitions against the notice under Section 13(4) of the SARFAESI Act was not required to be entertained by the High Court. Therefore, the High Court has erred in entertaining the writ petitions against the communication dated 13.08.2015 and also passing the ex-parte ad-interim orders directing to maintain the status quo with respect to possession of secured properties on the condition directing the borrowers to pay Rs. 1 crore only (in all Rs.3 crores in view of the subsequent orders passed by the High Court extending the ex- parte ad- interim order dated 26.08.2015) against the total dues of approximate Rs.117 crores. Even the High Court ought to have considered and disposed of the application for vacating the ex-parte ad- interim relief, which was filed in the year 2016 at the earliest considering the fact that a large sum of Rs.117 crores was involved.

11. Now, in so far as the reliance placed upon the decision of this Court in the case of J. Rajiv Subramaniyan and Anr. (supra) by the learned senior counsel appearing on behalf of the borrowers in support of his submission that writ petition would be maintainable, it is to be noted that in the aforesaid case, the learned counsel appearing on behalf of the Bank did not press the maintainability and/or entertainability of the writ petition under Article 226 and therefore, this Court had no occasion to consider the entertainability and/or maintainability of the writ petition. Therefore, the aforesaid

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decision is not of any assistance to the respondents - borrowers.

12. Even otherwise, it is required to be noted that a writ petition against the private financial institution - ARC - appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in the cases of Praga Tools Corporation (supra) and Ramesh Ahluwalia (supra) relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers.

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13. Now, so far as the submission on behalf of the borrowers that in exercise of the powers under Article 226 of the Constitution, this Court may not interfere with the interim / interlocutory orders is concerned, the decision of this Court in the case of Mathew K.C. (supra) is required to be referred to.

13.1 In the case of Mathew K.C. (supra) after referring to and/or considering the decision of this Court in the case of Chhabil Dass Agarwal (supra), it was observed and held in paragraph 5 as under:-

"5. We have considered the submissions on behalf of the parties. Normally this Court in exercise of jurisdiction under Article 136 of the Constitution is loath to interfere with an interim order passed in a pending proceeding before the High Court, except in special circumstances, to prevent manifest injustice or abuse of the process of the court. In the present case, the facts are not in dispute. The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in CIT v. Chhabil Dass Agarwal [CIT v. Chhabil

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Dass Agarwal, (2014) 1 SCC 603], as follows: (SCC p. 611, para 15)

"15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case [Thansingh Nathmal v. Supt. of Taxes, AIR 1964 SC 1419] , Titaghur Paper Mills case [Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433] and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."

13.2 Applying the law laid down by this Court in the case of Mathew K.C. (supra) to the facts on hand, we are

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of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs.1 crore only (in all Rs.3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs.117 crores. The ad-interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of Court. It appears that the High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court

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would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed.

14. In view of the above and for the reasons stated above, present appeals succeed. The Writ Petition Nos. 35564 to 35566 of 2015 before the High Court are dismissed. Consequently, the ex- parte ad-interim order dated 26.08.2015 further extended by orders dated 28.02.2017 and 27.03.2018 stand vacated.

Present appeals are accordingly allowed with costs to the appellants to be paid by the original writ petitioners quantified at Rs.1 lakh in both the cases to be directly paid to the appellant within a period of four weeks from today. Pending application(s), if any, also stand disposed of."

11. In view of the above settled legal position, filing of writ petition by the petitioner- borrower before this Court under Article 226 of the Constitution of India is nothing but an abuse of process of Court. The petition is filed against the action taken under section 13(4) read with section 14 of the SARFESAI Act. In view of the statutory efficacious remedy available by way

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of appeal under section 17 of the SARFESAI Act, this Court is not inclined to entertain the writ petition. In such circumstances, the petition is dismissed. The petitioner can avail the alternative efficacious remedy under section 17 of the SARFESAI Act for redressal of the grievance raised in this petition.

(BHARGAV D. KARIA, J) JYOTI V. JANI