Madras High Court
K.Rajaputhuran vs Axis Bank Limited on 11 October, 2022
W.P.(MD) No.12216 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 11.10.2022
CORAM:
THE HONOURABLE MR.JUSTICE R.MAHADEVAN
and
THE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD
W.P.(MD) No.12216 of 2022
and
W.M.P.(MD) No.8688 & 14331 of 2022
K.Rajaputhuran ... Petitioner
-vs-
1.Axis Bank Limited
rep.by its Authorized Officer M.Kathik
Loan Centre, 4th Floor
Arcol Plaza
Old No.38, New No.165
Arocot Road, Kodambakkam
Chennai-600 024
2.Axis Bank Limited
rep.by its Authorized Officer
The Branch Manager
Axis Bank Ltd.,
Thallakulam, Madurai District ... Respondents
PRAYER: Petition filed under Article 226 of the Constitution of India, to issue
a writ of certiorari to call for the records pertaining to the impugned order in
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W.P.(MD) No.12216 of 2022
Cr.M.P.No.710 of 2020, dated 08.10.2021, on the file of the Chief Judicial
Magistrate, Madurai and consequently staying all further proceedings taken
by the respondent - Bank under SARFAESI Act.
For Petitioner : Ms.Bharathi.S.
For Respondents : Mr.P.Pethurajesh
Standing Counsel
ORDER
[Order of the Court was made by R.MAHADEVAN, J.]
Challenging the order dated 08.10.2021, passed by the learned
Chief Judicial Magistrate, Madurai, in Cr.M.P.No.710 of 2020, ordering to take
possession of the secured asset, the petitioner has filed this writ petition.
2. Though there is an availability of expeditious and effective
remedies under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (in short, “the SARFAESI Act”), this
writ petition has been filed, since the Debts Recovery Tribunal, Madurai, is not
functional.
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W.P.(MD) No.12216 of 2022
3. Before going into the issue raised in this writ petition, we deem
it fit to consider the relevant provisions under the SARFAESI Act and the
decisions of the Hon'ble Supreme Court as well as this Court in this regard,
which will make one understand about the enforcement of security interest by
the Banks or financial institutions in case of default in repayment of secured
debt, vice versa the rights of the borrower against such enforcement.
4. Section 13 of the SARFAESI Act, which deals with enforcement
of security interest, states that notwithstanding anything contained in
Sections 69 or 69A of the Transfer of Property Act, 1882, any security interest
created in favour of any secured creditor may be enforced, without the court's
intervention, by such creditor in accordance with the provisions of the Act.
5. Section 13(2) of the SARFAESI Act provides that when a
borrower, who is under a liability to a secured creditor, makes any default in
repayment of secured debt, and his account in respect of such debt is
classified as non-performing asset, then the secured creditor may require the
borrower, by notice in writing, to discharge his liabilities within sixty days
from the date of the notice, failing which the secured creditor shall be entitled
to exercise all or any of the rights given in Section 13(4) of the SARFAESI Act.
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W.P.(MD) No.12216 of 2022
6. Section 13(3) of the SARFAESI Act provides that the notice
under Section 13(2) of the SARFAESI Act shall give details of the amount
payable by the borrower as also the details of the secured assets intended to
be enforced by the bank. Section 13(3-A) of the SARFAESI Act was inserted by
Act 30 of 2004 after the decision of this Court in Mardia Chemicals vs.
Union of India reported in (2004) 4 SCC 311 and it provides for a last
opportunity for the borrower to make a representation to the secured creditor
against the classification of his account as a non-performing asset. The
secured creditor is required to consider the representation of the borrowers,
and if the secured creditor comes to the conclusion that the representation is
not tenable or acceptable, then he must communicate, within one week of the
receipt of the communication by the borrower, the reasons for rejecting the
same.
7. Section 13(4) of the SARFAESI Act provides that if the borrower
fails to discharge his liability within the period specified in Section 13(2), then
the secured creditor, may take recourse to any of the following actions, to
recover his debt, namely-
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W.P.(MD) No.12216 of 2022
"(a) take possession of the secured assets of the
borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset;
(b) take over the management of the business of the
borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease,
assignment or sale shall be exercised only where the
substantial part of the business of the borrower is held as
security for the debt:
Provided further that where the management of
whole, of the business or part of the business is severable,
the secured creditor shall take over the management of
such business of the borrower which is relatable to the
security for the debt;
(c) appoint any person (hereafter referred to as the
manager), to manage the secured assets the possession of
which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any
person who has acquired any of the secured assets from
the borrower and from whom any money is due or may
become due to the borrower, to pay the secured creditor, so
much of the money as is sufficient to pay the secured debt."
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W.P.(MD) No.12216 of 2022
8. Section 14 of the SARFAESI Act provides that the secured
creditor can file an application before the Chief Metropolitan Magistrate or the
District Magistrate, within whose jurisdiction, the secured asset or other
documents relating thereto, are found for taking possession thereof. If any
such request is made, the Chief Metropolitan Magistrate or the District
Magistrate, as the case may be, is obliged to take possession of such asset or
document and forward the same to the secured creditor. Therefore, it follows
that a secured creditor may, in order to enforce his rights under Section 13(4),
in particular Section 13(4)(a), may take recourse to Section 14 of the
SARFAESI Act.
9. Section 17 of the SARFAESI Act which provides for an appeal to
the Debts Recovery Tribunal, reads as follows:-
"17. Right to appeal.--(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
measures had been taken:
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W.P.(MD) No.12216 of 2022
Provided that different fees may be prescribed for
making the application by the borrower and the person
other than the borrower.
Explanation.--For the removal of doubts it is hereby
declared that the communication of the reasons to the
borrower by the secured creditor for not having accepted
his representation or objection or the likely action of the
secured creditor at the stage of communication of reasons
to the borrower shall not entitle the person (including
borrower) to make an application to the Debts Recovery
Tribunal under sub-section (1) of Section 17.
(2) The Debts Recovery Tribunal shall consider
whether any of the measures referred to in sub-section (4)
of Section 13 taken by the secured creditor for enforcement
of security are in accordance with the provisions of this Act
and the rules made thereunder."
10. As per Section 18(1) of the SARFAESI Act, any person
aggrieved, by any order made by the Debts Recovery Tribunal under Section
17, may prefer an appeal along with such fee, as may be prescribed, to an
Appellate Tribunal within thirty days from the date of receipt of the order of
Debts Recovery Tribunal.
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W.P.(MD) No.12216 of 2022
11. The first proviso states that different fees may be prescribed
for filing an appeal by the borrower or by the person other than the borrower.
12. The second proviso to Section 18 of the SARFAESI Act states
that no appeal shall be entertained unless the borrower has deposited with the
Appellate Tribunal fifty per cent of the amount of debt due from him, as
claimed by the secured creditors or determined by the Debts Recovery
Tribunal, whichever is less.
13. The third proviso states that the Appellate Tribunal may, for
the reasons to be recorded in writing, reduce the amount to not less than
twenty five per cent of debt referred to in the second proviso.
14. As per Section 18(2) of the Act, save as otherwise provided in
this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal
in accordance with the provisions of the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.
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W.P.(MD) No.12216 of 2022
15. As regards the Non-Maintainability of a writ petition under
Article 226 of the Constitution of India against the proceedings under the
SARFAESI Act, it is relevant to consider the following judgments:-
(i) In United Bank of India v. Satyawati Tondon
[(2010) 8 SCC 110], the Hon'ble Supreme Court has held
as follows:-
"42. There is another reason why the
impugned order should be set aside. If Respondent
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 the 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.
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W.P.(MD) No.12216 of 2022
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 giievance 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.''
(ii) In Kanaiyalal Lalchand Sachdev v. State of
Maharashtra [2011) 2 SCC 782], the Apex Court has
held as follows:-
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W.P.(MD) No.12216 of 2022
''23. In our opinion, therefore, the High Court
rightly dismissed the petition on the ground that an
efficacious remedy was available to the appellants
under Section 17 of the Act. It is well settled 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. (See Sadhana Lodh v. National
Insurance Co. Ltd. [(2003) 3 SCC 524 : 2003 SCC
(Cri) 762] , Surya Dev Rai v. Ram Chander Rai
[(2003) 6 SCC 675] and SBI v. Allied Chemical
Laboratories [(2006) 9 SCC 252].)"
(iii) In ICICI Bank Ltd. v. Umakanta Mohapatra,
[(2019) 13 SCC 497 : (2018) 5 SCC (Civ) 812: 2018
SCC OnLine SC 2349], the Hon'ble Supreme Court 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
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W.P.(MD) No.12216 of 2022
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: (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
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W.P.(MD) No.12216 of 2022
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.''
(iv) In Agarwal Tracom (P) Ltd. v. Punjab
National Bank [(2018) 1 SCC 626], the Apex Court has
held as follows:-
"33. In the light of the foregoing discussion,
we are of the considered opinion that the writ court
as also the appellate court were justified in
dismissing the appellant's writ petition on the
ground of availability of alternative statutory
remedy of filing an application under Section 17(1)
of the SARFAESI Act before the Tribunal concerned
to challenge the action of PNB in forfeiting the
appellant's deposit under Rule 9(5). We find no
ground to interfere with the impugned judgment."
(v) In C. Bright v. Distt. Collector [(2021) 2 SCC
392[, the Hon'ble Supreme Court has held as follows:-
"22. Even though, this Court in United Bank
of India v. Satyawati Tondon [United Bank of India
v. Satyawati Tondon, (2010) 8 SCC 110 (2010) 3
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W.P.(MD) No.12216 of 2022
SCC (Civ) 260] held that 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
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. Hindon
Forge (P) Ltd. [Hindon Forge (P) Ltd. v. State of U.P.,
(2019) 2 SCC 198 : (2019) 1 SCC (Civ) 551] has
held that the remedy of an aggrieved person by a
secured creditor under the Act is by way of an
application before the Debts Recovery Tribunal,
however, borrowers and other aggrieved persons
are invoking the jurisdiction of the High Court
under Articles 226 or 227 of the Constitution of
India without availing the alternative statutory
remedy. The Hon'ble High Courts are well aware of
the limitations in exercising their jurisdiction when
effective alternative remedies are available, but a
word of caution would be still necessary for the
High Courts that interim orders should generally
not be passed without hearing the secured creditor
as interim orders defeat the very purpose of
expeditious recovery of public money."
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W.P.(MD) No.12216 of 2022
(vi) In S.Ganesamoorthi Vs. The Branch Manager
& Ors., W.P.(MD).No.22536 of 2021, dated 20.12.2021,
the Hon'ble First Bench of this Court has held that
though Presiding officer is not available in DRT, Madurai,
incharge is given to Coimbatore and therefore, liberty is
given to writ petitioner to move DRT, Coimbatore.
16. As regards the non-maintainability of the writ petition against
Private financial institutions like assets re-construction companies in respect
of their action under the SARFAESI Act, it is relevant to consider the decision
of the Hon'ble Supreme Court in Phoenix ARC (P) Ltd. v. Vishwa Bharati
Vidya Mandir, [(2022) 5 SCC 345 : 2022 SCC OnLine SC 44[, wherein, it
has been held as follows:-
''18. Even otherwise, it is required to be noted that a
writ petition against the private financial institution — ARC
— the 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
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W.P.(MD) No.12216 of 2022
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 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 SARFAESI Act and no writ petition would lie and/or
is maintainable and/or entertainable. Therefore, decisions
of this Court in Praga Tools Corpn. [Praga Tools Corpn. v.
C.A. Manual, (1969) 1 SCC 585] and Ramesh Ahiuwalia
[Ramesh Ahluwalia v. State of Punjab, (2012; 12 SCC 331 :
(2013) 3 SCC (L&S) 456: 4 SCEC 715] relied upon by the
learned counsel appearing on behalf of the borrowers are
not of any assistance to the borrowers."
17. According to the learned counsel for the respondent – Bank,
the petitioner has complied with only the first condition and not complied with
the second condition of the conditional interim order dated 20.06.2022.
Further, the total outstanding amount as on date is approximately at
Rs.8,50,000/-.
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W.P.(MD) No.12216 of 2022
18. Today, when the matter was taken up for hearing, the learned
counsel for the petitioner submitted that the petitioner is ready to pay
Rs.1,00,000/- (Rupees one lakhs only) on or before 25.10.2022 and the
remaining outstanding amount within four months, for which, the learned
counsel for the respondent – Bank has agreed.
19. Recording the above submissions, the writ petition is disposed
of directing the petitioner to pay a sum of Rs.1,00,000/- (Rupees one lakh
only) on or before 25.10.2022 and to pay the remaining outstanding amount,
in four consecutive equal monthly installments, which shall be paid on or
before 25th day of every English Calendar month, failing which, the respondent
– Bank shall proceed further in the manner known to law. No costs.
Connected miscellaneous petitions are closed.
[R.M.D., J.] [J.S.N.P., J.]
11.10.2022
Index : Yes / No
Internet : Yes / No
krk
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W.P.(MD) No.12216 of 2022
To:
The Chief Judicial Magistrate,
Madurai.
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W.P.(MD) No.12216 of 2022
R.MAHADEVAN, J.
and
J.SATHYA NARAYANA PRASAD, J.
krk
W.P.(MD) No.12216 of 2022
and
W.M.P.(MD) No.8688 & 14331 of 2022
11.10.2022
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