Ashok Chopra And Anr vs District Magistrate, Panipat And ...
2023 Latest Caselaw 5507 P&H

                                                      Neutral Citation No:=2023:PHHC:061072-DB




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                                                               2023:PHHC:061072-DB

            IN THE HIGH COURT OF PUNJAB AND HARYANA
                     AT CHANDIGARH

                                   CWP-19019-2022 (O&M)
                                   DATE OF DECISION: 27.04.2023

ASHOK CHOPRA AND ANOTHER
                                                       ......PETITIONERS

                     VS.
DISTRICT MAGISTRATE, PANIPAT AND OTHERS

                                                     .........RESPONDENTS

CORAM: HON'BLE MR. JUSTICE G.S. SANDHAWALIA
       HON'BLE MS. JUSTICE HARPREET KAUR JEEWAN

Present:    Mr. Gandharv Malhotra, Advocate, for the petitioners.

            Mr. Aman Bahri, Addl. A.G., Haryana,
            for respondents No. 1 to 3.

       Mr. Vipul Dharmani, Advocate, for respondent No. 4.
            *****
HARPREET KAUR JEEWAN, J.

1. The present writ petition has been filed under Article 226 of

the Constitution of India seeking quashing of the order dated 30.06.2022

(Annexure P-4) passed by the District Magistrate, Panipat, under Section

14 of the Securitization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (for short 'the Act') and to the

E-auction sale notice dated 21.07.2022 (Annexure P-5).

2. Learned counsel for the petitioners has submitted that the

petitioners had availed a loan facility from respondent No. 4 to the tune of

`71,46,566/- and mortgaged their sole residential house. The petitioners

were regular in payment of the loan installment from the year 2015 to

October 2020 but suffered heavy losses due to the COVID-19 pandemic, as

such, was unable to pay the due installment. The account of the petitioners

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was declared as a Non-Performing Asset on 24.03.2021 and a demand

notice under Section 13 (2) of the Act was issued on 08.06.2021.

Petitioners submitted their reply to the said demand notice on 06.07.2021

but without considering the said reply, respondent No. 4-financial

institution issued a notice dated 21.03.2022 under Section 13 (4) of the Act

(Annexure P-2).

3. Learned counsel for the petitioners has further submitted that

the said notice was challenged by way of filing SA-106-2022 before the

Debt Recovery Tribunal-II, at Chandigarh (hereinafter referred to as 'the

Tribunal') (Annexure P-3). After filing of the said SA, the petitioners came

to know that respondent No. 1-District Magistrate, Panipat, passed the

impugned order dated 30.06.2022 (Annexure P-4) under Section 14 of the

Act and respondent No. 4 issued a E-auction sale notice dated 21.07.2022

(Annexure P-5). The petitioners filed IA-979-2022 before the Tribunal

(Annexure P-6) challenging the said orders but the same was dismissed by

the Tribunal, vide order dated 10.08.2022 (Annexure P-7). The petitioners

are ready to settle the matter and want to regularize the loan account even

by way of One Time Settlement (OTS) agreement with the financial

institution (respondent No. 4) and as such, the request letter (Annexure P-

8) was submitted. However, instead of deciding the said request letter,

respondent No. 4 intend to take physical possession of the only residential

house of the petitioners.

4. Learned counsel for the petitioners has submitted that

petitioners had always been willing to pay the outstanding, though they

have challenged the proceedings under the Securitisation Act upon various

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legal grounds.

5. We have considered the aforesaid submissions.

6. Notice of motion was issued vide order dated 29.08.2022,

whereby the following order was passed by a co-ordinate Bench of this

Court:-

"Notice of motion for 06.02.2023.

Mr. Vipul Dharmani, Advocate accepts notice on behalf of respondent No.4 and filed his memorandum of appearance which is taken on record. He prays for time to file reply. May do so, on or before the next date of hearing with a copy in advance to the counsel opposite.

Subject to the petitioners making payment of `10,00,000/- to the 4th respondent within 03 days, and making a further payment of `10,00,000/- by 29.09.2022, without prejudice to the rights of the petitioners, no coercive action shall be taken against the petitioners by respondents No.1 to 4.

In default of compliance of this order, this order shall stands vacated."

7. Vide order dated 21.11.2022, counsel for the petitioners

informed that payment of `11,00,000/- in pursuance of the order dated

29.08.2022 has been made. As per the order dated 29.11.2022, the counsel

for the petitioners submitted that a request for OTS has been made and a

copy of the same was attached with the petition as Annexure P-8.

Respondent No. 4 was directed to take a decision on the said application

with one week and petitioners were further directed to pay a sum of

`5,00,000/- to respondent No. 4 by 29.12.2022.

8. Today, two demand drafts of ` 4,00,000/- and `1,00,000/-

have been handed over to Mr. Vipul Dharmani, Advocate, who is

appearing on behalf of respondent No. 4-financial institution and it has

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been noticed that the petitioners have paid a sum of `20,00,000/- against

the outstanding of Rs. 72,75,502.51/- as on 07.06.2021 as per the notice

dated 21.03.2022 issued under Section 13 (2) of the Act (Annexure P-2).

9. The petitioners have thus been able to show their bona fide by

way of making a payment of `20,00,000/- out of the outstanding. Even

vide the request of petitioner No. 1 (Annexure P-8), he has admitted the

factum of availing the loan and submitted to respondent No. 4 that he has

been able to pay a sum of `48,00,000/- within a period of four years but

due to the COVID-19 pandemic, he suffered huge losses but showed his

willingness to pay the balance amount in installments and further showed

his willingness to pay a sum of `22-23 lakhs in a single installment as

OTS.

10. After issuing of the notice dated 21.03.2022 (Annexure P-2)

under Section 13 (4) of the Act, the petitioners have availed their remedy

by way of filing a petition under Section 17 of the Act before the Tribunal

at Chandigarh. They have also perused their legal remedy by way of filing

IA. However, during the pendency of the said SA, the District Magistrate

has passed the order dated 30.06.2022 (Anenxure P-4) under Section 18 of

the Act and further e-auction sale notice dated 21.07.2022 (Annexure P-5)

was issued by respondent No. 4-financial institution. The application, i.e.

IA-979-2022 filed by the petitioners seeking an interim stay of operation of

the sale fixed for 02.09.2022 was dismissed by the Tribunal, vide order

dated 10.08.2022 (Annexure P-7), merely on the ground that by way of

filing an IA, the scope of SA cannot be allowed to be enlarged.

11. Keeping in view the aforesaid facts, we are of the considered

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opinion that the said observations made by the Tribunal are contradictory

to the scope of the Tribunal under Section 17 of the Act. As per the

provisions of Section 17 of the Act any person (including a borrower) who

is aggrieved of any measures taken by the secured creditor referred to in

sub-section (4) of Section 13 can challenge the same before the Debt

Recovery Tribunal having jurisdiction in the matter.

12. Section 13 (4) of the Act provides various measures which can

be taken by the secured creditor after issuance of a demand notice under

Section 13 (2) of the Act and after considering the representation, if any,

filed by the borrower under sub-section 3-A of Section 13 of the Act. Such

actions which can be taken by a secured creditor under Section 13 (4) of

the Act include the right to transfer by way of sale apart from the other

measures, i.e. taking possession and taking over the management of the

business etc. As such, the action of the secured creditor in pursuance to the

proceedings under Section 13 (4) of the Act for issuance of the notice of

sale is within the purview of challenge before the Tribunal under Section

17 of the Act. The scope of the Tribunal under sub-sections (2) and (3) of

Section 17 of the Act is very wide and after examining the facts and

circumstances of the case and evidence produced by the parties it has

ample power to resort possession also as provided under Section 17 (3) of

the Act, if the Tribunal comes to the conclusion that the secured creditors

have not acted in accordance with the provisions of the Act and the Rules

made thereunder. The Tribunal has wide powers to pass such orders as it

may considered appropriate and necessary in relation to any of the recourse

taken by the secured creditors under sub Section (3) of the Act. The

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relevant portion of sub-section (4) of Section 13 reads as under:-

"13. Enforcement of security interest.-

                             xxxx           xxxx          xxxx           xxxx
            (4).             In case the borrower fails to discharge         his

liability in full within the period specified in sub- section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured 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 secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset:

Provided that the right to transfer by way of lease 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 or 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.

(Emphasis applied by this Court)

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13. The relevant portion of Section 17 of the 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, 1[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:

[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.

[(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.]

(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.

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(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties,comes to the conclusion that any of the measures referred to in sub- section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order,

(a) declare the recourse to any one or more measures referred to in-sub-section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower and

(b) restore the management of the secured assets to the borrower, as the case may be, and

(c) pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub- section (4) of section 13.

(Emphasis applied by this Court)

xxxx xxxx xxxx xxxx xxxx

14. The Hon'ble Supreme Court of India in M/s Hindon Forge

Pvt. Ltd. and another vs. State of Uttar Pradesh Through District

Magistrate Ghaziabad & another 2018 (4) RCR (Civil) 948 dealt with

the provisions of Section 13 (4), Section 17 of the Act and Rule 8 of the

Security Interest (Enforcement) Rules 2002 (for short 'the Rules') and the

procedure to be followed for sale of immovable property after the

procedure under Section 13 (4) of the Act has been initiated. The Hon'ble

Apex Court held that the borrower/debtor can approach the Debt Recovery

Tribunal under Section 17 of the Act at the stage of possession notice

referred to in Rule 8 (1) and 8(2) of the Rules.

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15. The Tribunal while dismissing the IA challenging the

e-auction sale notice dated 21.07.2022 (Annexure P-5) has observed that by

way of IA, the scope of SA cannot be held to be enlarged. The application

has not been disposed of on merits. Ubi jus ibi remedium is a well-known

concept. A person who comes with a genuine grievance in an arguable case

should be given a hearing before refusing to grant a relief. The Tribunal

thus has failed to exercise jurisdiction vested in it by law forcing us to

exercise extra-ordinary writ jurisdiction.

16. In such circumstances, the order passed by the Tribunal dated

10.08.2022 (Annexure P-7) is contrary to the provisions of the Act where

the jurisdiction has not been exercised under Section 17 of the Act by the

Tribunal.

17. In a recent judgment of the Hon'ble Apex Court in SLP-

22021-22022 of 2022, M/s South Indian Bank Ltd. and others vs.

Naveen Mathew Philip and another decided on 17.04.2023, while

dealing with the demand notice issued under Section 13 (2) and 13 (4) of

the Act which were assailed by invoking writ jurisdiction by the borrower,

observed that in commercial matters involving a lender and a borrower,

where the legislature provide for a specific mechanism for appropriate

redressal, the exercise of the powers conferred under Section 226 of the

Constitution of India are required to be exercised only in extra-ordinary

circumstances.

18. Keeping in view the fact that the petitioners have shown their

bona fides, the interim protection granted is likely to be continued. The

petitioners are relegated to the remedy before the Tribunal which has been

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availed of by filing of SA No. 106 of 2022. It will be open to the petitioners

to file an appropriate application for stay as well as payment of requisite

amounts in installments before the Tribunal. The Tribunal shall then fix the

terms, accordingly.

19. The petition stands disposed of, accordingly.

20. Pending miscellaneous application (s), if any, also stand

disposed of.

(G.S. SANDHAWALIA)              (HARPREET KAUR JEEWAN)
        JUDGE                            JUDGE
April 27, 2023
nitin          Whether Speaking        Yes
               Whether Reportable      Yes

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