Madras High Court
A.Sulthan Maideen vs M/S.Aptus Valur Housing Finance ... on 18 October, 2022
W.P.(MD) No.14665 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 18.10.2022
CORAM:
THE HONOURABLE MR.JUSTICE R.MAHADEVAN
AND
THE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD
W.P.(MD)No.14665 of 2022
and
W.M.P.(MD)Nos.10470 & 10471 of 2022
A.Sulthan Maideen ... Petitioner
-Vs-
M/s.Aptus Valur Housing Finance India Ltd.,
256A, Ramesh Murugan Complex,
Subban Street, Theni,
Rep. By its Authorized Officer / General Manager,
Mr.P.Velmurugan. ... Respondent
PRAYER : Petition filed under Article 226 of the Constitution of India, to issue
a Writ of Certiorarified Mandamus calling for the records relating to the order,
dated 19.04.2022 of the learned Chief Judicial Magistrate, Theni in Cr.M.P.No.
96 of 2022 and quash the same as illegal and consequently direct the Respondent
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bank to give breathing time and accept part payment and thereby reclassify the
loan account as performing account.
For Petitioner : Mr.K.K.Samy
For Respondent : Mr.V.Sukumar
Standing Counsel
ORDER
[Order of the Court was made by R.MAHADEVAN, J.]
Challenging the order of the learned Chief Judicial Magistrate, Theni,
dated 19.04.2022, in Cr.M.P.No.96 of 2022 passed under Section 14 of
SARFAESI Act, the petitioner has come forward with this Writ Petition.
2.Heard Mr.K.K.Samy, learned counsel for the petitioner and
Mr.V.Sukumar, learned Standing Counsel for the respondent.
3.Though there is availability of expeditious and effective remedies
under the SARFAESI Act, this writ petition has been filed, since the Debts
Recovery Tribunal, Madurai, is not functional. Before going into the issue raised
in this writ petition, we deem it fit to consider the following sequence of the
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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 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 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
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W.P.(MD) No.14665 of 2022
which the secured creditor shall be entitled to exercise all or any of the rights
given in Section 13(4) of the Act.
6.Section 13(3) of the Act provides that the notice under Section 13(2)
of the 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 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
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 Act provides that if the borrower fails to
discharge his liability within the period specified in Section 13(2), then the
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W.P.(MD) No.14665 of 2022
secured creditor, may take recourse to any of the following actions, to recover
his debt, namely-
"(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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8.Section 14 of the 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 Act.
9.Section 17 of the 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.14665 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 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.
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.
The second proviso to Section 18 of the Act states that no appeal shall
be entertained unless the borrower has deposited with the Appellate Tribunal
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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.
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.
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.
11.As regards the Non-Maintainability of writ petition under Article
226 against proceedings under SARFAESI Act, it is relevant to consider the
following judgments:-
(i) 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.
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(ii) 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 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
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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.''
(iii) 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.
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
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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.''
(iv) In Kanaiyalal Lalchand Sachdev v. State of Maharashtra(2011)
2 SCC 782, the Apex Court has held as follows:-
''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].)"
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(v) 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."
(vi) 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 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
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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."
12.As regards the non-maintainability of the writ petition against
Private financial institutions like assets re-construction companies in respect of
their action under 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
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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 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."
13.Today, when the matter was taken up for hearing, the learned
counsel for the petitioner submitted that the petitioner is ready to pay
the entire outstanding amount as on date within two months.
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14.Since the property is a dwelling house, considering the plight of the
parties, we direct the petitioner to pay the entire outstanding amount as on date
within a period of two months from the date of receipt of a copy of this order.
Till such time, no coercive action shall be taken by the respondent. If the
petitioner fails to make the payment within the stipulated time, the respondent is
entitled to take possession of the secured property immediately after the expiry
of two months.
15.Accordingly, this Writ Petition stands disposed of. No costs.
Consequently, connected miscellaneous petitions are closed.
[R.M.D., J.] & [J.S.N.P., J.]
18.10.2022
Index : Yes / No
Internet : Yes / No
Myr
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W.P.(MD) No.14665 of 2022
R.MAHADEVAN, J.
AND
J.SATHYA NARAYANA PRASAD, J.
Myr
To
1.The Chief Judicial Magistrate,
Theni.
2.The Authorized Officer / General Manager,
M/s.Aptus Valur Housing Finance India Ltd.,
256A, Ramesh Murugan Complex,
Subban Street, Theni.
W.P.(MD)No.14665 of 2022
18.10.2022
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