M/S Delux Plywood Pvt. Ltd vs Piramal Capital And Housing ...
2023 Latest Caselaw 106 Guj

     C/SCA/219/2023                               ORDER DATED: 05/01/2023




           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 219 of 2023

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                   M/S DELUX PLYWOOD PVT. LTD.
                              Versus
           PIRAMAL CAPITAL AND HOUSING FINANCE LIMITED
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Appearance:
MR RUSI B TRIVEDI(11227) for the Petitioner(s) No. 1
for the Respondent(s) No. 1,2,3,4,5,6,7
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 CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                            Date : 05/01/2023

                             ORAL ORDER

1. Heard learned advocate Mr.Rusi B. Trivedi for the petitioner.

2. By this petition under Article 226 and 227 of the Constitution of India the petitioner has prayed for the following reliefs:-

(a) To quash and set aside the order dated 13/12/2022 passed by the learned Chief Judicial Magistrate, Kadi and further quash and set aside the undated execution notice issued by the court commissioner pursuant to the order dated 13/12/2022 in the interest of justice;

(b) To stay implementation, operation and execution of order dated 13/12/2022 passed by the learned Chief Judicial Magistrate, Kadi.

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3. It is the case of the petitioner that the petitioner company and the mortgager of the land in question upon which the petitioner has made construction with the respondent no.1 -Financial Institution are neighbouring businesses to each other sharing part of the secured land. It is the further case of the petitioner that the co- borrower of the amount who has mortgage the land agreed to sell the land to the petitioner in the year 1995 for Rs.1,00,000/-, however, no sale deed was executed and therefore the petitioner has preferred Civil Suit bearing No.41 of 2011 before the Court of Civil Judge, Kadi for permanent injunction.

4. Learned advocate Mr. Trivedi for the petitioner submitted that the Civil Court at Kadi passed an order on 06.11.2011 to maintain the status quo till the final disposal of the suit which is in operation.

5. It was submitted that respondent nos.2 to 8 obtained the financial assistance from the respondent no.1 by mortgaging the property though there was a status quo order granted by the Court in the year 2011. As the respondent nos. 2 to 11 could not repay the loan, the respondent no.1 declared the account of the borrowers as non performing assets (NPA) and initiated proceedings under the provisions of Securitisation And Reconstruction of Financial Assets And Enforcement of

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Security Interest Act, 2002 (for short "SARFAESI Act") under Section An application under Section 14 of the Sarfaesi Act is also preferred before the Chief Judicial Magistrate, Kadi being SARFAESI Application No.597 of 2022.

6. Learned advocate Mr. Trivedi submitted that the Chief Judicial Magistrate, Kadi passed an order under Section 14 of the SARFAESI Act to provide an assistance to respondent no.1 to take the physical possession of the property in question and accordingly the notice is issued for taking the possession on 08.01.2023 at 09.30 hrs. or any time thereafter by the Court Commissioner.

7. It was also pointed out that the petitioner issued a legal notice upon the M/s Divine Veneer and Plywood Pvt. Ltd. as well as respondent nos.2 and the directors of the said company including respondent no.1 on 09.05.2022.

8. It was therefore submitted by the learned advocate for the petitioner that the impugned order passed by the Chief Judicial Magistrate, Kadi under Section 14 of the SARFAESI Act, is without issuing any notice to the petitioner as well as to the M/s Divine Veneer Pvt. Ltd., but it was issued in the name of Decent Laminate Pvt. Ltd. who is a co-borrower.

9. It was submitted that in view of the above facts, the impugned order as well as the possession notice is

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required to be quashed and set aside and the respondent no.1 be restrained from taking the possession of the land which is in possession of the petitioner company.

10. Having heard the learned advocate for the petitioner, it appears that the petitioner is aggrieved by the action taken by the respondent no.1 under the provisions of Section 13 of the SARFAESI Act. Section 17(1) of the SARFAESI Act reads as under:-

"17. [Application against measures to recover secured debts].--(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed,]to the Debts Recovery Tribunal having jurisdiction in the matter within forty- five days from the date on which such measure had been taken:

(1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction--

(a) the cause of action, wholly or in part, arises;

(b) where the secured asset is located; or

(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being."

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11. In view of the above, it is clear from provisions of Section 17(1) the petitioner being an "ANY AGGRIEVED PERSON" is required to prefer an application before the Debt Recovery Tribunal. In view of such alternative efficacious remedy being available, this petition is not entertained by this Court.

12. The above proposition is supported by the decision of the Apex Court in case of Phoenix ARC Private Limited Vs. Vishwa Bharati Vidya Mandir & Ors. reported in (2022) 5 SCC 345 , Wherein the Apex Court has held in para no.7.1 onwards as under:-

"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 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

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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 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

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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 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

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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) 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

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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).

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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

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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.

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:-

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"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 indispute. 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 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

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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 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,

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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 exparte 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 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."

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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 adinterim 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."

13. In view of the above settled legal position, the petition is not entertained. The petitioner is relegated to avail alternative efficacious remedy under Section 17 of the SARFAESI Act. The petition is accordingly dismissed.

14. In view of the dismissal of the petition, there is no question of granting interim relief at this stage and therefore the request made by the learned advocate for the petitioner at this stage is also rejected.

(BHARGAV D. KARIA, J) URIL RANA