Punjab-Haryana High Court
M/S Autonation Pvt. Ltd vs South Indian Bankltd. And Ors on 29 April, 2024
Author: Lisa Gill
Bench: Lisa Gill
Neutral Citation No:=2024:PHHC:058588-DB
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CWP-27677-2022 (O&M)
2024:PHHC:058588-DB
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CWP-27677-2022 (O&M)
Date of Decision: April 29, 2024
M/S AUTONATION PVT. LTD. ..... Petitioner
Versus
SOUTH INDIAN BANK LTD. AND OTHERS ..... Respondents
CORAM:- HON'BLE MRS. JUSTICE LISA GILL
HON'BLE MS. JUSTICE AMARJOT BHATTI
Present: Mr. Rajiv Kataria, Advocate for the petitioner.
Mr. C.S. Pasricha, Advocate for the respondents.
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LISA GILL, J.
1. Prayer in this writ petition is for setting aside notice dated
11.05.2022 (Annexure P18) and quashing proceedings under Section 14 of
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (for short - 'SARFAESI Act').
2. Learned counsel for petitioner submitted that petitioner - Company,
which is in business of sale of machinery of small industrial cranes is registered
as MSME under the Micro, Small and Medium Enterprises Development Act,
2006. Financial facility to the extent of Rs. 2 crores (Cash Credit limit) was
availed of by petitioner from respondent - Bank in April 2016. Thereafter,
housing loan was also taken by Directors of petitioner - company to the tune of
Rs.17.71 lakhs on 29.01.2018. Cash Credit facility was renewed lastly on
04.07.2018. Property, as detailed in para 7 of writ petition, was mortgaged to
secure both the loans. It was submitted that due to medical problem of a family
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member of the Director of petitioner, certain irregularities crept in Cash Credit
facility. Subsequently, due to outbreak of pandemic COVID-19, there was
greater financial indiscipline on the part of petitioner leading to declaration of
accounts as Non Performing Asset (NPA) on 30.04.2021. Housing loan account
of petitioner was declared NPA on 06.05.2021. Notice under Section 13(2) of
SARFAESI Act was issued on 18.05.2021 and 10.06.2021 in respect to housing
loan and Cash Credit facility respectively for recoveries of Rs.18,59,662.58 and
Rs.2,17,04,202.87 as on 08.05.2021 and 09.06.2021, respectively. Petitioner
submitted objections, which were rejected by respondent - bank, statedly in an
illegal fashion vide communication dated 28.07.2021 and 23.08.2021 (Annexure
P10 and P11) respectively. Petitioner, however, approached the bank with
proposal for One Time Settlement (OTS) and for dropping of proceedings under
SARFAESI Act.
3. OTS was approved in favour of the petitioner vide sanction letter
dated 08.10.2021 (Annexure P13) for a sum of Rs.2.25 crores against total
outstanding of Rs.2,35,63,865.45 as per both notices. Amount was to be
deposited on or before 31.10.2021 thereby affording only a period of 23 days to
the petitioner. Petitioner deposited sum of Rs.3,15,483.73 on 08.10.2021 and
Rs.16,64,229.45 pursuant to sanction of OTS. Amount was not deposited in any
specific account as OTS scheme was a consolidated one. However, respondent -
bank without any intimation to petitioner deposited this entire amount in housing
loan account and account was declared to be clear on 08.10.2021. Petitioner had
intended to deposit entire OTS amount by selling property mortgaged with bank
but on 03.03.2021 notification under Section 7A of Haryana Development and
Regulation of Urban Areas Act, 1975 by State of Haryana, Town and Country
Planning Department, was issued with area in question being included therein.
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Therefore, said property could not be disposed of without No Objection
Certificate from the Director of Town and Country Planning, due to which
buyers at hand, backed out. Request for extension of time was made by petitioner
while depositing certain more amounts in loan account as detailed in para 16 of
writ petition. It was submitted that possession notice dated 11.05.2022 was
illegal issued in an arbitrary manner. Complete violation of applicable provisions
of law in proceedings undertaken under SARFAESI Act is alleged by the
petitioner. It is submitted that once consolidated OTS scheme was sanctioned,
both accounts should have been clubbed together and amount be deposited qua
both and, in any case, if housing loan account was settled, documents of secured
assets should have been returned. As substantial payment has been deposited by
petitioner in terms of OTS sanctioned in its favour, period for deposit of
complete amount should have been extended by respondent - bank, especially
keeping in view the effect of notification dated 03.03.2021 issued by Department
of Town and Country Planning.
4. Learned counsel for petitioner also submitted that petitioner being
MSME, it was incumbent upon respondent - Bank to have referred its case
before Designated Committee prior to declaration of its account NPA. Thus,
once declaration of account to be NPA is illegal, further proceedings should be
quashed. It was submitted by learned counsel for petitioner that fresh proposal
for OTS had also been submitted alongwith upfront amount of Rs.20 lakhs but
same has not been decided by respondent - Bank. It was, thus, prayed that this
petition be allowed.
5. Learned counsel for respondent - bank while raising objection qua
entertainability of writ petition itself vehemently argued that proceedings
undertaken against petitioner under SARFAESI Act are in complete consonance
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with applicable provisions. It was contended that OTS was sanctioned qua both
the accounts for a sum of Rs.2,25,00,000/- to be paid on or before 31.10.2021,
however, only a sum of Rs.65 lakhs was remitted as on 27.01.2022. Bank while
taking a lenient view extended OTS till 15.03.2022, as per communication dated
25.02.2022 (Annexure R1). While referring to written statement filed on behalf
of respondents No. 1 and 2, learned counsel submits that no payment was made
by petitioner after 27.01.2022 despite extension being granted till 15.03.2022,
therefore, argument that hardly any time was afforded to make the deposit is
incorrect. It is denied that OTS dated 03.08.2021 was sanctioned on the basis of
contingent sale of secured asset. It was further submitted that Section 7A of
Haryana Development and Regulation of Urban Areas Act, 1975 is applicable to
vacant land and assets secured whereas petitioner's land is not covered
thereunder. Moreover, petitioner at no point approached respondent - bank with
any buyer for tripartite sale. Be that as it may, it was contended that said grounds
are, in any case, not sufficient for stalling proceedings under SARFAESI Act.
Last One Time Settlement offer of Rs.1.49 crores submitted by petitioner on
12.02.2024, was declined on the same date itself taking into consideration that
balance outstanding as on 11.02.2024 was Rs.270.13 lakhs and value of secured
asset was higher than OTS amount offered by petitioner. Said rejection letter was
duly received by petitioner on 12.02.2024 itself. Photocopy of rejection letter
furnished in Court with copy thereof to learned counsel for petitioner was taken
on record subject to just exceptions. In view of above, dismissal of writ petition
was sought.
6. We heard learned counsel for parties at length and have perused the
file. However, we do not find any ground whatsoever to interfere in this writ
petition in exercise of jurisdiction under Article 226 of Constitution of India.
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This is so for the reason that SARFAESI Act is a complete code in itself
providing for specific remedies for any grievances which may arise in respect to
proceedings taken thereunder. Reference in this regard can be made to judgments
of Hon'ble the Supreme Court in Union Bank of India v. Satyawati Tandon
and others, 2010(8) SCC 110; Varimadugu Obi Reddy v. B. Sreenivasulu
and others, 2023(1) R.C.R.(Civil) 34,M/s South Indian bank Ltd. and others
v. Naveen Mathew Philip and another, 2023(2) RCR (Civil) 771. Hon'ble the
Supreme Court in the case of M/s South Indian Bank (supra) held as under:-
"13. ...... We may, however, reiterate the settled position of law on
the interference of the High Court invoking Article 226 of the
Constitution of India in commercial matters, where an effective and
efficacious alternative forum has been constituted through a statute.
xxx xxx xxx
14. A writ of certiorari is to be issued over a decision when the
Court finds that the process does not conform to the law or statute.
In other words, courts are not expected to substitute themselves with
the decision-making authority while finding fault with the process
along with the reasons assigned. Such a writ is not expected to be
issued to remedy all violations.
xxx xxx xxx xxx
15. The object and reasons behind the Act 54 of 2002 are very
clear as observed by this Court in Mardia Chemicals Ltd. v.
Union of India, (2004) 4 SCC 311. While it facilitates a faster and
smoother mode of recovery sans any interference from the Court, it
does provide a fair mechanism in the form of the Tribunal being
manned by a legally trained mind. The Tribunal is clothed with a
wide range or powers to set aside an illegal order and thereafter,
grant consequential reliefs, including re-possession and payment of
compensation and costs. Section 17(1) of the SARFAESI Act gives
an expansive meaning to the expression "any person", who could
approach the Tribunal.
xxx xxx xxx
18. While doing so, we are conscious of the fact that the powers
conferred under Article 226 of the Constitution of India are rather
wide but are required to be exercised only in extraordinary
circumstances in matters pertaining to proceedings and adjudicatory
scheme qua a statute, more so in commercial matters involving a
lender and a borrower, when the legislature has provided for a
specific mechanism for appropriate redressal."
7. Learned counsel for petitioner is unable to point out any
extraordinary and exceptional circumstance which calls for interference by this
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Court. All pleas, as raised before us, are very well within the realm of
consideration by learned Tribunal.
8. In respect to argument raised qua illegal rejection of petitioner's
request for OTS, we again do not find any ground for interference. It is a settled
position that borrower or guarantor does not have a vested right for OTS. It has
been held by Hon'ble the Supreme Court in judgment of The Bijnor Urban
Cooperative Bank Limited, Bijnor and others vs. Meenal Aggarwal and
others, 2022 AIR (SC) 56 as under:-
"9. Even otherwise, as observed hereinabove, no borrower can, as
a matter of right, pray for grant of benefit of One Time Settlement
Scheme. In a given case, it may happen that a person would
borrow a huge amount, for example Rs.100 crores. After availing
the loan, he may deliberately not pay any amount towards
installments, though able to make the payment. He would wait for
the OTS Scheme and then pray for grant of benefit under the OTS
Scheme under which, always a lesser amount than the amount
due and payable under the loan account will have to be paid. This,
despite there being all possibility for recovery of the entire loan
amount which can be realised by selling the mortgaged/secured
properties. If it is held that the borrower can still, as a matter of
right, pray for benefit under the OTS Scheme, in that case, it
would be giving a premium to a dishonest borrower, who, despite
the fact that he is able to make the payment and the fact that the
Bank is able to recover the entire loan amount even by selling the
mortgaged/secured properties, either from the borrower and/or
guarantor. This is because under the OTS Scheme a debtor has to
pay a lesser amount than the actual amount due and payable
under the loan account. Such cannot be the intention of the Bank
while offering OTS Scheme and that cannot be purpose of the
Scheme which may encourage such a dishonesty.
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11. The sum and substance of the aforesaid discussion would be
that no writ of mandamus can be issued by the High Court in
exercise of powers under Article 226 of the Constitution of India,
directing a financial institution/Bank to positively grant the
benefit of OTS to a borrower. The grant of benefit under the OTS
is always subject to the eligibility criteria mentioned under the
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OTS Scheme and the guidelines issued from time to time. If the
Bank/financial institution is of the opinion that the loanee has the
capacity to make the payment and/or that the Bank/financial
institution is able to recover the entire loan amount even by
auctioning the mortgaged property/secured property, either from
the loanee and/or guarantor, the Bank would be justified in
refusing to grant the benefit under the OTS Scheme. Ultimately,
such a decision should be left to the commercial wisdom of the
Bank whose amount is involved and it is always to be presumed
that the financial institution/Bank shall take a prudent decision
whether to grant the benefit or not under the OTS Scheme, having
regard to the public interest involved and having regard to the
factors which are narrated hereinabove."
9. In the case of State Bank of India Vs. Arvindra Electronics Pvt.
Ltd., 2023(1) SCC 540, Hon'ble the Supreme Court has categorically held that
guarantor/borrower is not entitled to seek extension of period of OTS as a matter
of right. In the present case, extension of OTS had been granted once by
respondent - bank and petitioner's subsequent offer for a sum of Rs. 149 lakhs
qua outstanding amount of Rs. 225 lakhs has been rejected. It is undeniable that
a positive direction for extension of period of OTS or for a fresh OTS is not to be
issued, though it is always open to parties to arrive at any mutually acceptable
settlement at any point of time.
10. Another argument raised by learned counsel for petitioner was that
petitioner was MSME, therefore, its case should have been placed before
Designated Committee before declaration of its account as NPA. This aspect is
squarely covered against petitioner in terms of order dated 18.12.2023 in CWP-
21657-2022 (M/s Technico Strips and Tubes Pvt. Ltd. and another vs.
Deutsche Bank AG and another) and connected writ petitions.
11. Keeping in view the facts and circumstances as above, this writ
petition is dismissed with liberty to petitioner to avail statutory remedy(ies)
available to it in accordance with law. However, keeping in view the fact that
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interim order in favour of petitioner was granted on 02.12.2022 to the extent that
there would be stay of dispossession of petitioner from secured asset, same shall
continue for fifteen (15) working days to enable petitioner to avail remedy as
may be available to it. Question of continuance or otherwise of interim order in
petitioner's favour shall necessarily be within the realm of consideration by the
appropriate Forum which will be considered in accordance with law, without
being influenced by any order, which may have been passed in this writ petition.
12. It is clarified that interim protection afforded to petitioner shall
automatically stand vacated in the absence of any order by the appropriate
authority.
13. Pending application(s), if any, stand(s) disposed of.
(LISA GILL)
JUDGE
(AMARJOT BHATTI)
April 29, 2024 JUDGE
rts
Whether speaking/reasoned: Yes/No
Whether reportable: Yes/No
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