Madhya Pradesh High Court
M/S Jayant Vitamins Ltd. (Ratlam) ... vs International Asset Reconstruction ... on 9 February, 2024
Author: Sushrut Arvind Dharmadhikari
Bench: Sushrut Arvind Dharmadhikari
1
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI
&
HON'BLE SHRI JUSTICE DEVNARAYAN MISHRA
ON THE 9 th OF FEBRUARY, 2024
WRIT PETITION No. 21285 of 2023
BETWEEN:-
M/S JAYANT VITAMINS LTD. (RATLAM) THROUGH ITS
DIRECTOR SHRI VINOD MISHRA S/O ANAND MISHRA,
AGED ABOUT 63 YEARS, 19/8 SHUBHAM APARTMENT,
MITRA NIWAS COLONY, DISTRICT RATLAM (MADHYA
PRADESH)
.....PETITIONER
(SHRI SHEKHAR SHARMA, LEARNED COUNSEL FOR THE PETITIONER)
AND
1. INTERNATIONAL ASSET RECONSTRUCTION
COMPANY PVT. LTD. ACTING IN ITS CAPACITY AS
TRUSTEE OF IARC BOB 01/07 TRUST THROUGH
ITS AUTHORIZED SIGNATORY MR. MANOHAR
DATAR OCCUPATION: SERVICE A-601/602/605, 6TH
FLOOR, 215, ATRIUM, KANAKIA SPACE, ANDHERI-
KURLA ROAD, ANDHERI (EAST), MUMBAI
(MAHARASHTRA)
2. BANK OF BARODA A BODY CORPORATE
CONSULTED UNDER THE BANKING
COMPANIES(ACQUISITION AND TRANSFER OF
UNDERTAKINGS) ACT 1970 HAVING ITS HEAD
OFFICE AT MANDVI BARODA AND ITS BRANCH
AMONGST OTHERS AT NARIMAN POINT
MUMBAI - 400021(MAHARASHTRA)
.....RESPONDENTS
(SHRI GAURAV CHHABRA, LEARNED COUNSEL FOR THE RESPONDENT
NO.1).
(SHRI ABHINAV DHANODKAR, LEARNED COUNSEL FOR THE
RESPONDENT [R-2].
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 2/12/2024
6:19:00 PM
2
This petition coming on for admission this day, Justice Sushrut Arvind
Dharmadhikari passed the following:
ORDER
Heard on the question of admission and interim relief.
The present petition under Article 226 of the Constitution of India has
been filed by the petitioner being aggrieved by the action of respondent no.1 for
sale of movable property of the petitioner and further issuance of sale certificate
dated 24.07.2023 in favour of unidentified persons.
2. Brief facts of the case are that petitioner is a company incorporated
under the Companies Act and had availed various loan facilities from the
respondent no.2/bank which were renewed from time to time. Petitioner had
additionally opened a monitoring control account in the respondent no.2 bank
with the objective of reducing 10% of the amount deposited by the company in
the said account by the respondent no.2/ bank. Between the years 1970-1991,
company had taken a loan of Rs. 10 crore from respondent no.2/bank. The
income of the company was deposited in the monitoring and control account
out of which Rs. 9,85,00,000/- was withdrawn by respondent no.2 till 1995. In
the year 1999, respondent no.2 has filed a recovery claim to the tune of Rs. 28
crore before the Bombay High Court where matter was referred to mediator for
settlement. Respondent no.2 /bank without any knowledge of petition and in
contravention of the provisions of Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act(referred to as
SARFAESI Act" hereinafter) has transferred all his rights to IARC for
hypothecated/mortgaged property for loan receipt wherein respondent no.1 was
appointed and has become a dominant party and has taken possession of the
premises of the petitioner by way of proceedings under the SARFAESI Act.
Respondent no.1 concealing the fact of monitoring control account after 17
years has initiated action against the petitioner by claiming Rs. 70 crore against a
loan of Rs. 10 crore by filing a recovery proceeding before the NCLT which
was dismissed. Against the said dismissal, the respondent no.1 had approached
the NCLAT which was also dismissed. The said order was challenged before
the Apex Court which also stood dismissed. Thereafter, without disclosing the
said order to the petitioner, respondent no.1 without following the Rule 6 of the
SARFAESI Act and without initiating auction proceedings had dismantled the
movable properties and took away the same from the factory premises in the
absence of petitioner and sold the same to unidentified persons. Hence, the
present petition is filed.
3. Learned counsel for the petitioners submits that entire proceedings
initiated by the respondent no.1 are illegal, bad in law and are in gross violation
of the principle of natural justice. Respondent No.1 has caused financial loss to
the petitioner without resorting to any rule or procedure in selling out the
property of petitioner. Despite the fact that appeal filed by the respondent no.2
before the Apex Court was dismissed and the effect of the said order is that
whatever proceedings were instituted by respondents, the same are barred by
limitation. Further in contravention of the Rule 5 and Rule 6 of the SARFAESI
Act , respondent no.1 has undervalued the property of petitioner in as much as
without initiating auction proceedings under the provisions of SARFAESI Act,
he had sold the properties of petitioner after dismantling the same. Hence, the
petition may be allowed and necessary directions be issued to the respondent
no.1 to provide all documents pursuant to a sale conducted under the
SARFEASI Act and the said sale be declared as null and void.
4. Learned counsel for the respondent no.1/IARC has raised a
preliminary objection as to the maintainability of petition, in as much as that this
Court lacks jurisdiction to hear the petition filed under Article 226 of the
Constitution, as respondent no.1 being a private entity is not amenable to writ
jurisdiction. He further submitted that even otherwise, petitioner is having
efficacious remedy and he can very well approach the Debt Recovery Tribunal
against the measures taken by the respondents under the provisions of
SARFAESI Act in the light of various pronouncements of Apex Court which
are as follows:
(i) South Indian Bank Ltd. & Ors. Vs. Naveen Mathew Philip &
Anor. (SLP (Civil) Nos. 22021-22 of 2022.
(ii) United Bank of India Vs. Satyawati Tondon and Others reported
in (2010) 8 SCC 110.
(iii) The Assistant Commissioner of State Tax and Ors. Vs. M/S
Commercial Steel Limited Civil Appeal No. 5121 of 2021.
(iv) ICICI Bank Limited Vs. Umakanta Mohaptara & Ors reported
in (2019) 13 SCC 497.
5 . Learned counsel further submitted that since petitioner has already
filed a suit with respect to issue of Monitoring Control Account in the Bombay
High Court and the same is pending and the respondent no.1 has filed an
application under Order 7 Rule 11 CPC for dismissal of the said suit, applying
the principle of res judicata, the petitioner is barred from approaching this
Court reiterating the same issue which is pending adjudication before the
Bombay High Court. Moreso, the petition is not maintainable on the ground of
non-joinder of buyer who is a necessary party. Hence, on all these grounds, the
same is liable to be dismissed in limine.
6. We have heard learned counsel for parties and perused the record.
7. This Court finds force in the submission made by learned counsel
for the respondent no.1.that respondent no.1/IARC, being an asset
reconstruction company is a private entity and is not a party as described under
Article 12 of the Constitution, therefore, writ petition is not maintainable against
a private financial institution. This Court is supported in its view by the
judgment rendered by Apex Court in the case of Phoenix ARC Private Ltd.
V. Vishwa Bharati Vidya Mandir & Ors. reported in (2022) 5 SCC 345,
wherein it has been held that the action of secured creditor under the
SARFAESI Act is not maintainable against a private financial institution, such
as the respondent no.1 in the present case. Relevant extracts of the judgement
are reproduced below for convenience and ready reference:
"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
21 2022 LiveLaw (SC) 45 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"
8. On careful perusal of the pleadings as well as the arguments , it
appears that the instant petition has been filed only seeking protection against
sale of property. However,the sale proceedings had already taken place and the
entire movable property of the petitioner company was sold. It is the
submission of the petitioner that Rule 5 and 6 of the SARFAESI Act has not
been followed before initiating the sale proceedings. Since the same falls within
the scope and ambit of SARFAESI Act, petitioner can very well avail the
alternative remedy and raise all the grounds before the DRT and DRAT in place
of approaching this Court. Hence, we find no reason to entertain this petition in
view of various enunciation of law by the Apex Court from time to time in this
regard, which are as follows:
9. The Apex Court in the case of ICICI Bank Limited and others
Vs. Umakanta Mohapatra and others[(2019) 13 SCC 497] has held as
follows:
"2. Despite several judgments of this Court, including a judgment
by Hon'ble Navin Sinha, J., as recently as on 30- 1-2018, in State Bank
of Travancore v. Mathew K.C. [State Bank of Travancore v. Mathew K.C.,
(2018) 3 SCC 85 : (2018) 2 SCC (Civ) 41] , 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 nonperforming 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: (SCC p. 94, para 17)
17. We cannot help but disapprove the approach of the High
Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. v.
Prem Heavy Engineering Works (P) Ltd. [Dwarikesh Sugar Industries
Ltd. v. Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450] ,
observing: (SCC p. 463, para 32)
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.'
4. The writ petition, in this case, being not maintainable,
obviously, all orders passed must perish, including the impugned order,
which is set aside. 5. The appeals are allowed in the aforesaid terms.
Pending applications, if any shall stand disposed
of."
(Emphasis supplied)
10. Apart from this, the Apex Court in the case of Kalabharti
Advertising V. Hemant Vimalnath Narichania and Others (2010) 9 SCC
437 has poignantly held as under:
22. It is a settled legal proposition that the forum of the writ court
cannot be used for the purpose of giving interim relief as the only and
the final relief to any litigant. If the Court comes to the conclusion that
the matter requires adjudication by some other appropriate forum and
relegates the said party to that forum, it should not grant any interim
relief in favour of such a litigant for an interregnum period till the said
party approaches the alternative forum and obtains interim relief. (vide:
State of Orissa v. Madan Gopal Rungta, AIR 1952 SC 12; Amarsarjit
Singh v. State of Punjab, AIR 1962 SC 1305; State of Orissa v. Ram
Chandra Dev, AIR 1964 SC 685; State of Bihar v. Rambalak Singh
"Balak" & Ors., AIR 1966 SC 1441; and Premier Automobiles Ltd. v.
Kamlakar Shantaram Wadke & Ors., AIR 1975 SC 2238).
11. Recently, the Apex Court in the case of M/S South Indian Bank
Ltd. & Ors. Vs. Naveen Mathew Philip & Anr. Etc Etc [2023 Livelaw
(SC) 320 has deprecated the practice adopted by the High Courts whereby the
writ petitions are being entertained in SARFAESI Act matters, especially against
the private banks when the statute prescribes a particular mode, an attempt to
circumvent shall not be encouraged by the writ Court. The litigant cannot avoid
the noncompliance of approaching the Tribunal which requires the prescription
of fee and use of constitutional remedy as an alternative. The Apex Court has
also deprecated the practice of approaching the High Court for consideration of
an offer by the borrower.
12. The contention of the learned counsel for the petitioner that the
judgment of the Apex Court in the case of Phoenix ARC Private Ltd(supra)
is distinguishable since the bank in that case was a private bank whereas in the
instant case, Bank of Baroda is a Public Sector Undertaking Bank cannot be
countenanced, in as much as , the Apex Court in the case of Phoenix ARC
Private Ltd(supra)has categorically held that if any proceedings are
initiated under the SARFAESI Act and/or any proposed action is to be
taken and the borrower is aggrieved by the action 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.
13. The Apex Court in the case of M/S South Indian Bank Ltd.
(supra)further went on to hold that "we deprecate such practice of entertaining
the writ petitions by the High Court in exercise of power u/S 226 of the
Constitution of India without exhausting the alternative remedy available under
the law."
14. In the light of the aforesaid pronouncements of the Apex Court, this
Court is not inclined to entertain the writ petition.
15. Accordingly, the petition is hereby dismissed. No order as to cost.
(S. A. DHARMADHIKARI) (DEVNARAYAN MISHRA)
JUDGE JUDGE
sh
