M/S Kamla Rice And General Mills vs District Magistrate-Cum-Deputy ...
2024 Latest Caselaw 10464 P&H

Punjab-Haryana High Court

M/S Kamla Rice And General Mills vs District Magistrate-Cum-Deputy ... on 1 July, 2024

Author: Lisa Gill

Bench: Lisa Gill

                                  Neutral Citation No:=2024:PHHC:081026-DB
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CWP-24786-202
          2022 (O&M)




            IN THE HIGH COURT OF PUNJAB AND HARYANA
                      AT CHANDIGARH



                                       CWP-24786
                                             24786-2022 (O&M)
                                               Decision: July 1, 2024
                                       Date of Decision


M/s Kamla Rice and General Mills                                ..... Petitioner


                        Versus


District Magistrate-cum-Deputy
         Magistrate     Deputy Commissioner, Karnal and others
                                                        ..... Respondents


CORAM:- HON'BLE MRS. JUSTICE LISA GILL
        HON'BLE MS.
                MS. JUSTICE AMARJOT BHATTI


Present:    Mr. Vivek Goyal, Advocate for the petitioner.

            Mr. Sukhdeep Parmar, Senior DAG, Haryana.

            Mr. Nitin Grover, Advocate for respondents No. 3 and 4.

                               ****

LISA GILL, J.

1. Prayer in this writ petition is for setting aside notices dated

05.10.2021 and 16.12.2021 under Sections 13(2) and 13(4) of Securitization and

Reconstruction of Financial Assets and Enforcement of Security Interest Act,

2002 (for short - 'SARFAESI Act') respectively, besides auction notice dated

20.09.2022 on the premise that objections dated 30.11.2021 have not been

correctly decided inasmuch as plea regarding proceedings under SARFAESI Act

not being maintainable qua agricultural land, land, has not been decided. There is

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further prayer for directing respondent - Bank to decide proposal dated

29.09.2022 submitted by petitioners for One Time Settlement (OTS) and if not

acceptable prevailing policy of the bank should be made available to petitioner

so that fresh OTS proposal can be submitted as per latest applicable guidelines.

2. It is pleaded that petitioner, registered under the Micro, Small and

Medium Enterprises Development Act, 2006 is in the business of milling paddy

since the year 1994. Credit facility was availed of by the petitioner from

respondent - Canara Bank in the year 1995, the same being transferred to State

Bank of India in the year 2002 till 2006 when petitioner's account was again

transferred to Canara Bank. It is stated that due to circumstances created by

outbreak of pandemic COVID-19, petitioner was unable to maintainable

financial discipline leading to its account being declared Non Performing Asset

(NPA) and proceedings under SARFAESI Act being initiated. Notice dated

17.06.2021 was issued seeking recovery to the tune of Rs.15,69,81,838/- as due

on 28.02.2021. Petitioner, it is stated, raised various objections pursuant to

issuance of above said notice including the objection that part of land, as

mentioned in the demand notice, is agricultural land, therefore proceedings under

SARFAESI Act cannot be undertaken qua the said property. It is pleaded that

though objections were rejected, however for reasons best known to respondent

- bank, demand notice dated 17.06.2021 was withdrawn and second demand

notice under Section 13(2) of SARFAESI Act was issued on 05.10.2021 seeking

deposit of the amount of Rs.16,12,96,958/- stated to be due as on 28.02.2021.

Petitioner again submitted objections dated 30.11.2021 which were again

rejected on 04.01.2022, allegedly in an illegal and arbitrary manner without

taking into account or deciding the objection in respect to agricultural property

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not being amenable to proceedings under SARFAESI Act. Possession notice

dated 16.12.2021 was thereafter issued. Auction notice dated 20.09.2022 was

also issued.

3. Learned counsel for petitioner had vehemently argued that even

though the entire proceedings under SARFAESI Act initiated against it, are

illegal and unlawful with agricultural land being incorrectly put to auction,

petitioner being a bonafide borrower submitted a proposal of Rs.7.80 crores by

way of OTS but without taking any decision on the said proposal or even

indicating an acceptable amount by respondent - bank continued with

proceedings under SARFAESI Act, leading to filing of present petition.

4. Learned counsel for petitioner submitted that in terms of section 31

of SARFAESI Act, land which is agricultural in nature and is so depicted in

jamabandies for the year 2019-20 cannot be proceeded against under SARFAESI

Act. Furthermore, the entire proceedings under SARFAESI Act undertaken by

the respondent - Bank, it was asserted, are in absolute and illegal violation of

applicable provisions of law. It was thus, prayed that this writ petition be

allowed.

5. Per contra, learned counsel for respondent - bank vehemently

opposed the writ petition while taking preliminary objection regarding

entertainability of writ petition itself. It was submitted that in view of specific

efficacious remedy available to petitioner under SARFAESI Act itself, present

writ petition should not be entertained. It was denied being incorrect that the

property in question has to be treated as agricultural land. It was submitted that

in view of the fact that petitioner itself had mortgaged the property in question as

security for loan account with the same being a part and parcel of the factory

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land and building and not in fact being used for agricultural purposes, petitioner

cannot claim the benefit of section 31 of SARFAESI Act. Learned counsel for

respondent - bank while referring to the detail of property as mortgaged by the

petitioner by deposit of the respective title deeds, submits that the same is a part

and parcel of the factory land and building. Learned counsel for respondent

submits that property is in fact being put to commercial use. The same being four

walled and gated. Reference was made to photographs of the area, attached as

Annexures R3 and R4 with the reply filed on behalf of respondent - bank to

submit that land in question is not being put to agricultural use, therefore, it

cannot be treated to be agricultural land which would be exempt in view of

Section 31 of SARFAESI Act. Dismissal of the writ petition was sought.

6. We heard learned counsel for parties and have carefully scrutinized

the file.

7. It is a matter of record that petitioner availed of credit facility from

respondent - bank with there being financial indiscipline on the part of the

petitioner for reasons as may be, with proceedings under SARFAESI Act being

initiated against it by respondent - bank. Primary argument raised by learned

counsel for petitioner was that land in question being agricultural land,

proceedings under SARFAESI Act are not permissible. Section 31 of

SARFAESI Act reads as under:-

" 31. Provisions of this Act not to apply in certain cases.- The provisions of this Act shall not apply to

(a) a lien on any goods, money or security given by or under the Indian Contract Act, 1872 (9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force;

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(b) a pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872 (9 of 1872);

(c)creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act, 1934(24 of 1934);

(d)creation of security interest in any vessel as defined in clause (55) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);

(e) any conditional sale, hire-purchase or lease or any other contract in which no security interest has been created;

(f) any rights of unpaid seller under section 47 of the Sale of Goods Act, 1930 (3 of 1930);

(g) any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act)] or sale under the first proviso to sub-section (1) of section 60 of the Code of Civil Procedure, 1908 (5 of 1908);

(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;

(i) any security interest created in agricultural land; (emphasis added)

(j) any case in which the amount due is less than twenty per cent. of the principal amount and interest thereon."

8. It is a settled position that even though land may be classified as

agricultural land in the revenue entries but for the purpose of SARFAESI Act, it

cannot be held to be agricultural land merely on the said basis. Determination of

the character of land for this purpose would depend upon the manner of its use

and intention of the parties. In the present case, the petitioner had duly created

the security interest in respect to the so-called agricultural land. Gainful

reference in this regard can be made to judgments of Hon'ble the Supreme Court

in K. Sreedhar v. M/s Raus Constructions Pvt. Ltd. and others, 2023 AIR

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(SC) 306 and ITC Limited v. Blue Coast Hotels Limited and others, (2018)

15 SCC 99.

9. Therefore, in any case this would be an issue to be determined by

the appropriate Forum as available to the petitioner. It is undisputed that

interference by the High Court in exercise of jurisdiction under Article 226 of

Constitution of India has to be limited in matters like the present and actuated

only in exceptional and extraordinary circumstances, keeping in view the

specific remedies as available to aggrieved persons under SARFAESI Act itself.

Gainful reference in this respect 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; M/s South Indian bank Ltd. and others v. Naveen

Mathew Philip and another, 2023(2) RCR (Civil) 771 and PHR Invent

Educational Society Versus UCO Bank and others, 2024 AIR (SC) 1893.

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.

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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."

10. All the arguments as have been raised before us are very well within

the realm of consideration by the learned Tribunal. Argument raised by learned

counsel for petitioner that objections have been incorrectly decided, can also not

be a ground to cause interference, keeping in view the specific provisions as

contained in Sections 13(4) and 17 of SARFAESI Act which specifically provide

that grounds for rejection cannot provide a cause of action to aggrieved person to

resort to the remedy at that stage.

11. There is also no merit in the argument raised by learned counsel for

petitioner that respondent - bank should first decide the fresh proposal for OTS

submitted by petitioner on 14.05.2024 before proceeding any further. It is to be

noticed that petitioner's earlier request for OTS was rejected by respondent and

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communicated on 18.01.2023. It is a settled position of law that borrower/

guarantor does not have a vested right to an OTS. Gainful reference in this

regard can be made to judgment of Hon'ble the Supreme Court in The Bijnor

Urban Cooperative Bank Limited, Bijnor and others vs. Meenal Aggarwal

and others, 2022 AIR (SC) 56.

12. Proceedings under SARFAESI Act cannot be stalled in the given

factual matrix in view of the proposal for OTS for a sum of Rs. 10.50 crores now

submitted by the petitioner on 14.05.2024 qua a sum of about Rs.23.66 crores.

13. Keeping in view the facts and circumstances as above, this writ

petition is dismissed with liberty to petitioner to avail remedy(ies) available to it

in accordance with law.

14. It is clarified that there is no expression of opinion on the merits of

matter and that parties are always at liberty to arrive at a mutually acceptable

settlement.

                                                           (LISA GILL)
                                                             JUDGE




                                                      (AMARJOT BHATTI)
July 1, 2024                                             JUDGE
rts

              Whether speaking/reasoned: Yes/No
              Whether reportable: Yes/No




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