Telangana High Court

M/S. S.V. Developers vs State Bank Of India on 7 June, 2022

Bench: Ujjal Bhuyan, P.Madhavi Devi

      IN THE HIGH COURT FOR THE STATE OF TELANGANA
                         HYDERABAD
                            ****

W.P.Nos.23067 and 27138 of 2019 And W.P.No.22195 of 2021

Between:

M/s. S.V.Developers Petitioner VERSUS

State Bank of India, Hoskote SME Rep. By its Branch Manager, Old Madras Road, Bangalore & Another Respondents

JUDGMENT PRONOUNCED ON: 07.06.2022

THE HON'BLE SRI JUSTICE UJJAL BHUYAN AND THE HON'BLE SMT. JUSTICE P. MADHAVI DEVI

1. Whether Reporters of Local newspapers may be allowed to see the Judgments? : Yes

2. Whether the copies of judgment may be Marked to Law Reporters/Journals? : Yes

3. Whether His Lordship wishes to see the fair copy of the Judgment? : Yes

____________________ UJJAL BHUYAN, J

* THE HON'BLE SRI JUSTICE UJJAL BHUYAN AND THE HON'BLE SMT. JUSTICE P. MADHAVI DEVI

+ W.P.Nos.23067 and 27138 of 2019 And W.P.No.22195 of 2021

% 07.06.2022

# Between:

M/s. S.V.Developers Petitioner VERSUS

State Bank of India, Hoskote SME Rep. By its Branch Manager, Old Madras Road, Bangalore & Another Respondents

! Counsel for Petitioner : Sri M. Laxmi Prasad

^ Counsel for the respondents : Sri Maruthi Jadhav,

<GIST:

> HEAD NOTE:

? Cases referred 1 (1993) 2 SCC 144 2 AIR 2018 SC 62 3 (2008) 1 SCC 125 4 (2014) 5 SCC 610 5 (2017) 16 SCC 741 6 (2017) SCC Online Hyderabad 326 7 (2020) SCC Online SC 1023 8 (1963) AIR SC 1558 9(2007) 8 SCC 449 10 (2008) 12 SCC 481 11 (2010) 14 SCC 38 12 (2013) 11 SCC 531 13 MANU/SC/1199/2021

THE HON'BLE SRI JUSTICE UJJAL BHUYAN AND THE HON'BLE SMT. JUSTICE P. MADHAVI DEVI

W.P.Nos.23067 and 27138 of 2019 And W.P.No.22195 of 2021

COMMON JUDGMENT AND ORDER:

(Per Hon'ble Sri Justice Ujjal Bhuyan)

This order will dispose of W.P.Nos.23067 of 2019, 27138

of 2019 and 22195 of 2021.

2. We have heard Sri M. Laxmi Prasad, learned counsel

appearing on behalf of Smt. Ch. Vedavathi, learned counsel

for the petitioner and Sri Maruthi Jadhav, learned counsel

appearing for Pearl Law Associates for the respondents.

2. In W.P.No.23067 of 2019 the prayer made is to set-aside

the notice dated 08.01.2018 issued by the respondent State

Bank of India (SBI) under Section 13 (2) of the Securitization

and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 (briefly, 'the SARFAESI Act'

hereinafter). Petitioner in W.P.No.27138 of 2019 has sought

for quashing of letter dated 22.11.2019 issued by the

respondent/SBI stating that petitioner is not entitled to the

benefit of one time settlement (OTS) scheme and further

seeks a direction to the respondent/SBI to grant the benefit

of OTS scheme to the petitioner in terms of the Circular of

SBI dated 13.08.2019.

3. In the later Writ Petition i.e., W.P.No.22195 of 2021 the

prayer made is for a declaration that respondent No.1 i.e.,

Debts Recovery Tribunal-I, Hyderabad would not have the

jurisdiction to entertain an Original Application under

Section 19 of the Recovery of Debts and Bankruptcy Act,

1993 (briefly "the 1993 Act" hereinafter), if respondent No.2

had first initiated proceedings under the SARFAESI Act.

4. Case of the petitioner is that it is a proprietary concern

having its office and place of business at Bengaluru in the

State of Karnataka.

5. Petitioner had availed a loan of Rs.5,00,00,000.00 from

the second respondent i.e., SBI, Hoskote SME, Bengaluru

Rural on 30.05.2015 for its real estate business. It is stated

that the said amount was repayable in 36 monthly

installments but with a moratorium period of 12 months from

the date of sanction of the loan.

The moratorium period was subsequently extended for

another 10 months and thereafter by another six months.

Notwithstanding the same, petitioner was repaying the loan

amount regularly.

6. Respondent/SBI had issued notice dated 08.01.2018

under Section 13 (2) of the SARFAESI Act whereby petitioner

was informed that its loan account was declared as non-

performing asset (NPA) with effect from 29.12.2017.

7. It is this notice dated 08.01.2018 issued by the

respondent/SBI under Section 13 (2) of the SARFAESI Act

which is under challenge in W.P.No.23067 of 2019. The

challenge has been made on the ground that the said demand

notice was bereft of any details. Respondent/SBI did not

follow the Reserve Bank of India (RBI) guidelines regarding

classification of loan account as NPA. As such, classification

of the loan account of the petitioner as NPA is arbitrary and

illegal. Respondent/SBI acted hastily in issuing the notice

under Section 13 (2) of the SARFAESI Act without waiting for

the period of two years thirty days from the date of first

default to expire. Therefore, respondent/SBI illegally and

erroneously assumed jurisdiction under Section 13 (2) of the

SARFAESI Act.

8. Thereafter respondent/SBI issued notice dated

16.04.2018 and again on 29.05.2018 under Section 13 (4) of

the SARFAESI Act. Petitioner had paid an amount of

Rs.25,00,000.00 by way of cheque on 15.02.2019 along with

a proposal for OTS. Respondent/SBI encashed the cheque

for the aforesaid amount whereafter the possession notices

were subsequently withdrawn on 19.02.2019.

9. While representation of the petitioner dated 05.10.2019

for OTS was declined by respondent/SBI on 08.10.2019,

subsequent representation of the petitioner dated 16.10.2019

for re-consideration of the OTS proposal was pending

consideration.

10. In the meanwhile, petitioner came to know that e-

auction notice was issued by respondent/SBI on 26.09.2019

proposing to auction sale the mortgaged movable and

immovable assets (schedule properties) of the petitioner on

23.10.2019.

11. It is in such circumstances, the petitioner has been

compelled to approach the High Court under Article 226 of

the Constitution of India seeking the relief as indicated above.

12. According to the petitioner, during the pendency of

W.P.No.23067 of 2019, it had come across a Circular of SBI

dated 13.08.2019 providing for an OTS scheme (SBIOTS

2019). As per the said Circular various categories of NPAs

were eligible for the OTS scheme. Last date for submission of

application under the OTS scheme was 23.09.2019 and the

last date for conveying sanction was 30.09.2019.

13. Petitioner has stated that it was incumbent upon the

respondent/SBI to have informed all the borrowers about the

above scheme but no such intimation was given to the

petitioner.

14. Without being informed about the above OTS scheme,

petitioner paid a sum of Rs.25,00,000.00 by way of cheque

towards part payment and it was encashed by the

respondent/SBI. Later on when petitioner became aware of

the scheme it submitted a representation on 16.11.2019

requesting the respondent/SBI to accept the OTS proposal of

the petitioner as petitioner fulfilled all the conditions of

SBIOTS 2019. However, respondent/SBI informed the

petitioner on 22.11.2019 that it was not entitled to the benefit

of OTS scheme.

15. In the above extent, petitioner has filed the second Writ

Petition i.e., W.P.No.27138 of 2019 to declare the action of

the respondent/SBI dated 22.11.2019 declining to grant OTS

benefit to the petitioner as being arbitrary and illegal and for

a direction to the respondent/SBI to grant the benefit of OTS

scheme in terms of SBIOTS 2019.

16. Petitioner has contended that respondent/SBI though

had initially instituted proceedings under the SARFAESI Act,

it did not take the same to its logical end. Instead, it started

another proceeding before the Debts Recovery Tribunal-1,

Hyderabad under the 1993 Act by filing Original Application

under Section 19 thereof which was registered as O.A.No.204

of 2020.

17. According to the petitioner, if a bank or a secured

creditor first initiates proceedings under the 1993 Act and

thereafter additionally initiates further proceedings under the

SARFAESI Act, the same would be permissible. However,

once proceedings under the SARFAESI Act is initiated, a

secured creditor can take recourse to provisions of the 1993

Act only for the balance amount if outstanding dues still

remain un-realized after sale of secured asset under the

SARFAESI Act. This aspect of selection of remedies under the

two enactments has not been decided by any Court.

18. Therefore, petitioner has filed W.P.No.22195 of 2021 for

a declaration that it is not open to the Debts Recovery

Tribunal-1, Hyderabad, to entertain O.A.No.204 of 2020

under the 1993 Act after first initiating proceedings under the

SARFAESI Act.

STAND OF RESPONDENT/SBI:

19. Respondent/SBI has filed counter affidavit in both Writ

Petition Nos. 23067 of 2019 and 27138 of 2019. At the

outset respondent/SBI has stated that there is serious

suppression of material facts by the petitioner which are at

two stages-suppression of material facts prior to withdrawal

of possession notices dated 16.04.2018 and 29.05.2018; and

suppression of material facts subsequent to withdrawal of

possession notices dated 16.04.2018 and 29.05.2018.

Insofar the first stage is concerned, petitioner had

approached this Court by filing W.P.No.22775 of 2018

challenging the possession notices dated 16.04.2018 and

29.05.2018. On 14.07.2018 this Court dismissed

W.P.No.22775 of 2018 on merit. In the meanwhile, petitioner

had approached the Debts Recovery Tribunal-II, Hyderabad

(Tribunal) under Section 17 of the SARFAESI Act challenging

the possession notices dated 16.04.2018 and 29.05.2018

which was registered as S.A.No.275 of 2018. In the said

securitization application, petitioner filed three Interlocutory

Applications, one after the other, being I.A.No.3968 of 2018,

I.A.No.6263 of 2018 and I.A.No.427 of 2019.

20. In the meanwhile, respondent/SBI had issued e-

auction sale notice on 12.07.2018 proposing auction sale of

schedule properties on 27.08.2018.

21. In I.A.No.3968 of 2018 petitioner sought for stay of

auction during pendency of S.A.No.275 of 2018. Tribunal

passed a conditional order on 24.08.2018 declining to

interfere with the auction sale. But respondent/SBI was

directed not to register the sale certificate in favour of the

successful bidder in the auction sale subject to the petitioner

depositing 30% of the total outstanding dues in two equal

installments ---first installment of 15% to be deposited within

a week and the second installment of 15% was directed to be

deposited within two weeks after deposit of the first

installment directly with the respondent/SBI. It was clarified

that if there was non-compliance to the above conditions, the

conditional stay order would stand vacated and

respondent/SBI would be at liberty to register the sale

certificate in favour of the successful bidder which would

however be subject to outcome of S.A.No.275 of 2018.

22. The aforesaid order dated 24.08.2018 came to be

challenged by the petitioner before this Court by filing

W.P.No.31209/2018. This Court by order dated 04.09.2018

while dismissing the Writ Petition, however granted liberty to

the petitioner to approach the respondent/SBI to grant

further time till 31.12.2018 for repayment of the entire dues.

23. Auction sale scheduled on 27.08.2018 did not

materialize for want of bidders.

24. Respondent/SBI issued fresh e-auction sale notice

dated 25.10.2018, scheduling auction of schedule properties

on 16.11.2018. This notice came to be challenged by the

petitioner before this Court by filing W.P.No.39508 of 2018.

Additionally, petitioner sought for a direction to the

respondent/SBI to consider its representation for OTS. By

order dated 05.11.2018 this Court dismissed the Writ Petition

taking note of the fact that petitioner had already approached

the Tribunal in S.A.No.275 of 2018 challenging the

possession notices which was pending. Therefore, the

proposed auction to sell the schedule property would also fall

for adjudication in S.A.No.275 of 2018. In that view of the

matter, the Writ Petition was dismissed leaving it open to the

petitioner to approach the Tribunal.

25. However, this time also the auction sale scheduled on

16.11.2018 did not materialize for want of bidders.

26. Respondent/SBI issued another e-auction sale notice

dated 10.12.2018 scheduling auction sale of schedule

properties on 31.12.2018. This time petitioner filed

I.A.No.6263 of 2018 in S.A.No.275 of 2018 for stay of auction

scheduled on 31.12.2018. Tribunal passed a conditional

order on 28.12.2018, like the previous order dated

24.08.2018 passed in I.A.No.3968 of 2018.

27. Like all previous auctions, this time also the auction

sale scheduled on 31.12.2018 did not fructify as there were

no bidders.

28. However, as alluded to hereinabove, on 1.12.2018

petitioner paid Rs.25,00,000.00 by way of cheque which was

encashed by the respondent/SBI on 15.02.2019.

29. Respondent/SBI issued fresh e-auction sale notice on

17.01.2019 proposing to hold auction sale of schedule

properties on 04.02.2019. At that stage, petitioner filed

I.A.No.427 of 2019 in S.A.No.275 of 2018 seeking stay of the

auction scheduled on 04.02.2019. Like on the previous

occasions, Tribunal passed a conditional stay order on

01.02.2019. While declining to stay the auction scheduled on

04.02.2019, respondent/SBI was directed not to register the

sale certificate that may be issued in favour of the highest

bidder in the auction, subject to petitioner depositing 30% of

the total outstanding dues in two equal installments---first

installment of 15% to be deposited within two weeks and the

second installment of 15% to be deposited within two weeks

of deposit of the first installment directly with the

respondent/SBI. It was clarified that in the event of non-

compliance to any of the above conditions, respondent/SBI

would be at liberty to register the sale certificate in favour of

the highest bidder.

30. It is stated that petitioner has not complied with any of

the conditions imposed by the Tribunal in the orders dated

24.08.2018 (passed in I.A.No.3968 of 2018, 28.12.2018

(passed in I.A.No.6263 of 2018) and 01.02.2019 (passed in

I.A.No.427 of 2019).

31. None of these facts which are material and relevant have

been mentioned by the petitioner in any of the three Writ

Petitions.

32. Not content with the above suppression of material

facts, it is contended that there is further suppression of

material facts subsequent to withdrawal of possession notices

dated 16.04.2018 and 29.05.2018. These two possession

notices were withdrawn by respondent/SBI on 19.02.2019.

Thereafter fresh possession notice was issued to the

petitioner on 22.02.2019 under Section 13 (4) of the

SARFAESI Act whereafter respondent/SBI issued e-auction

sale notice dated 29.05.2019 proposing to hold auction sale

of schedule properties on 10.07.2019.

33. At that stage, petitioner filed W.P.No.13873 of 2019

challenging e-auction sale notice dated 29.05.2019. This

Court by order dated 09.07.2019 observed that petitioner had

already filed S.A.No.275 of 2018 before the Tribunal; further

earlier Writ Petition filed by the petitioner was dismissed;

therefore it was not open to the petitioner to come before the

Court again. If the petitioner had any grievance, the same

could be raised before the Tribunal in S.A.No.275 of 2018.

Accordingly, the Writ Petition was dismissed.

34. Auction sale scheduled on 10.07.2019 could not be held

as there were no bidders. Thereafter respondent/SBI issued

e-auction sale notice dated 11.07.2019 proposing auction

sale on 31.07.2019 which also did not materialize. Finally,

respondent/SBI issued e-auction sale notice dated

26.09.2019 scheduling auction sale on 23.10.2019 where

after petitioner has filed the three Writ Petitions one after the

other.

35. Answering respondent has also contested the averments

made by the petitioner on merit. Respondent/SBI had

sanctioned cash credit of Rs.4.90 crores to the petitioner on

17.06.2015. The same was secured by creating equitable

mortgage of the schedule properties and personal guarantees

of two persons viz. M. Prabhakar Rao and M. Sandhya.

Petitioner defaulted in repayment of loan. Accordingly, the

loan account was classified as NPA on 29.12.2017 where

after demand notice dated 08.01.2018 was issued under

Section 13 (2) of the SARFAESI Act. Outstanding dues of the

petitioner as on 08.01.2018 was quantified at

Rs.4,93,03,766.00 plus future interest, expenses, costs etc.

36. Petitioner had made a representation on 27.03.2018

under Section 13 (3A) of the SARFAESI Act but it was rejected

by the respondent/SBI on 05.04.2018. No objection was

raised by the petitioner as to classification of its loan account

as NPA, more specifically with regard to the plea taken in the

Writ Petition that without expiry of a period of two years and

ninety days from the date of first default secured creditor

would not have the jurisdiction to issue notice under Section

13 (2) of the SARFAESI Act. Petitioner had filed S.A.No.275 of

2018 before the Tribunal as well as W.P.Nos.22775 of 2018,

31208 of 2018, 39508 of 2018 and 13873 of 2019 before this

Court. In none of these proceedings any plea was taken as

regards classification of the loan account as NPA.

37. Thereafter answering respondent has narrated details of

possession notices and consequential e-auction sale notices.

Mention has also been made about the securitization

application filed by the petitioner before the Tribunal and the

related I.As. Answering respondent has also stated about the

Writ Petitions filed by the petitioner before this High Court.

38. It is stated that on 15.02.2019 respondent/SBI received

representation from the petitioner regarding settlement of

loan account by way of OTS. However, the same was rejected

on 19.02.2019. Petitioner made further representation for

OTS on 05.10.2019 and 16.10.2019 both of which were

rejected by respondent/SBI on 08.10.2019 and 18.10.2019

respectively.

39. Counter affidavit on identical line has been filed by the

respondent/SBI in W.P.No.27138 of 2019 as well. In so far

OTS proposal of the petitioner is concerned, it is stated that

petitioner had offered to pay Rs.3.50 crores as the full and

final OTS amount. This was rejected by the respondent/SBI

as total dues as on that date was Rs.5,38,24,414.85 plus

expenses.

40. Though petitioner has filed reply affidavit in

W.P.No.23067 of 2019, petitioner has not denied the

allegation of suppression of material facts made by the

respondent/SBI.

41. From the pleadings and submissions, the following four

issues arise for consideration:-

(i) Whether the notice dated 08.01.2018 issued by the respondent/SBI under Section 13 (2) of the SARFAESI Act is legal and valid? Corollary to the above is the question as to whether the High Court should interfere in such a notice under Article 226 of the Constitution of India?

(ii) Whether petitioner is entitled to the benefit of the OTS scheme under SBIOTS 2019 and whether the High Court under Article 226 of the Constitution of India can issue a direction to the respondent/SBI to accept the OTS proposal of the petitioner?

(iii) Whether respondent/SBI would be precluded from taking steps under the 1993 Act after having invoked provisions of the SARFAESI Act?

(iv) Is there any suppression of material facts by the petitioner? And If so, whether the same would disentitle the petitioner to any relief from the Writ Court?

42. We now take up the above issues.

42.1. ISSUE NO.I:-

Whether the notice dated 08.01.2018 issued by the respondent/SBI under Section 13 (2) of the SARFAESI Act is legal and valid? Corollary to the above is the question as to whether the High Court should interfere in such a notice under Article 226 of the Constitution of India?

42.2. Section 13 of the SARFAESI Act deals with

enforcement of security interest. As per Sub-section (1), any

security interest created in favour of any secured creditor

may be enforced without the intervention of the Court or

Tribunal by such creditor in accordance with the provisions

of the SARFAESI Act notwithstanding anything contained in

Section 69 or Section 69-A of the Transfer of Property Act,

1882. Sub-section (2) says that where any borrower who is

under a liability to a secured creditor under a security

agreement, makes any default in repayment of secured debt

or any installment thereof, and his account in respect of such

debt is classified by the secured creditor as non-performing

asset (NPA), then, the secured creditor may require the

borrower by notice in writing to discharge in full his liabilities

to the secured creditor within sixty days from the date of

notice failing which the secured creditor would be entitled to

take action under Sub-section (4).

42.3. Pausing here for a moment, what Sub-section (2) of

Section 13 contemplates is that in the event of a borrower

defaulting in repayment and his account in respect of such

debt is classified by the secured creditor as NPA, the secured

creditor may require the borrower by notice in writing to

discharge his liabilities in full to the secured creditor within

sixty days of the notice. In other words, the stage at which

the loan account is classified as NPA precedes issuance of a

demand notice under Sub-section (2) of Section 13.

42.4. Proceeding further, we find that Sub-section (3)

mentions that the demand notice under Sub-section (2)

should provide details of the amount payable by the borrower

and the secured assets intended to be enforced by the

secured creditor in the event of non-payment of secured debts

by the borrower.

42.5. This brings us to Sub-section (3-A). If the borrower

makes any representation or raises any objection upon

receipt of the demand notice, the secured creditor is under an

obligation to consider such representation or objection. If the

secured creditor comes to the conclusion that such

representation or objection is not acceptable or tenable, he

shall communicate within fifteen days of receipt of such

representation or objection the reasons for non-acceptance of

the representation or objection to the borrower.

42.6. Before we deal with the proviso to Sub-section (3-

A), we may mention that in the event of failure by the

borrower to discharge his liability in full within the period

specified in Sub-section (3-A), Sub-section (4) will come into

the picture, where under the secured creditor may take

recourse to one or more of the measures mentioned therein to

recover the secured debt. The measures include taking over

of possession of the secured assets, assignment or sale

thereof for realizing the secured asset. 42.7. Reverting

back to the proviso to Sub-section (3-A), we may mention that

the legislative intent is quite manifest there under in as much

as the proviso makes it very clear that the reasons so

communicated under Sub-section (3-A) or the likely action of

the secured creditor at the stage of communication of reasons

shall not confer any right upon the borrower to prefer an

application to the jurisdictional Debts Recovery Tribunal

under Section 17 or to the Court of District Judge under

Section 17-A. This position is made more specific by

insertion of the Explanation below the proviso to Sub-section

(1) of Section 17. Sub-section (1) of Section 17 provides a

remedy to the aggrieved person including borrower to file

application against any of the measures taken by the secured

creditor under Sub-section (4) of Section 13. The

Explanation however declares that the communication of

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 would not entitle the aggrieved person

including the borrower to make an application to the

jurisdictional Debts Recovery Tribunal under Sub-section (1)

of Section 17.

43. This Court in M/S NECX PRIVATE LIMITED Vs.

UNION BANK OF INDIA (W.P.No.23643 of 2020) and

KATEPALLI LAVANYA Vs. UNION BANK OF INDIA

(W.P.No.20046 of 2021), decided on 09.02.2022, analyzed

the provisions of Sub-section (2) of Section 13 of the

SARFAESI Act and held that no cause of action within the

meaning of the SARFAESI Act can be said to have been arisen

at the stage of issuance of demand notice under Section 13

(2) of the SARFAESI Act or at the stage of rejection of

representation/objection of the borrower to the issuance of

demand notice by the secured creditor. It has been held as

follows:

"25.From a conjoint reading of Sub-Sections (2), (3) and (3A) of Section 13 of the SARFAESI Act, it is seen that if upon receipt of a notice under Sub-Section (2) of Section 13, the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate the reasons for non- acceptance of the representation or objection to the borrower within a period of 15 days of receipt of such representation or objection. However, as per the proviso, the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the jurisdictional Debts Recovery Tribunal under Section 17 of the SARFAESI Act or to the Court of District Judge under Section 17A of the SARFAESI Act.

26. At this stage we may also mention that under Section 17 (1) of the SARFAESI Act, any person including a borrower who is aggrieved by any of the measures referred to in Sub-Section (4) of Section 13 taken by the secured creditor or by his authorized officer may make an application before the jurisdictional Debts Recovery Tribunal within 45 days from the date on which such measure has been taken. The Explanation to Sub-Section (1) clarifies that the communication of 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 concerned including the borrower to make an application to the jurisdictional

Debts Recovery Tribunal under Sub-Section (1) of Section 17 of the SARFAESI Act.

27. Reverting back to Sub-Section (3A) of Section 13 of the SARFAESI Act, this Court in Smt. Gudupati Laxmi Devi Vs. Canara Bank, W.P.No.28291 of 2021, decided on 10.11.2021, held as follows:

5. A careful analysis of sub-section (3-A) of Section 13 of the SARFAESI Act would go to show that upon receipt of notice issued by the secured creditor under sub-section (2), the borrower has a right to make a representation, or raise any objection, as to the notice so issued. If the borrower exercises that right, then, it is incumbent upon the secured creditor to consider such representation or objection. The use of the word 'shall' in sub section (3-A) is indicative of the legislative intent of considering such representation or objection, by the secured creditor mandatory. If the secured creditor is not satisfied with the representation or objection, and finds it to be unacceptable, or untenable, he shall communicate such decision within fifteen days along with the reasons to the borrower.

6. While the statute is silent as to what happens in case of a positive decision by the secured creditor on consideration of such representation or objection, it is axiomatic that once the decision is taken either way, the same has to be communicated to the borrower, notwithstanding the fact that it would not give rise to a cause of action for moving an application either under Section 17 or under Section 17(A). But the fact remains that it would be obligatory on the part of the secured creditor to consider the representation or objection of the borrower, and then take a conscious decision one way or the other, which should be communicated to the borrower within fifteen days of receipt of such representation or objection.

28. Supreme Court in Mardia Chemicals (supra) and in ITC Limited Vs. Blue Coast Hotels Limited stressed upon the need of the secured creditor to consider the representation / objection of the borrower and to communicate the decision taken thereon within the stipulated period. The secured creditor has to act in a fair and reasonable manner.

29. In the instant case, respondent No.1 issued the impugned notice under Section 13 (2) of the SARFAESI Act on 16.11.2020. Petitioner raised objection to such notice vide letter dated 24.11.2020 under Section 13 (3A) of the SARFAESI Act, which was replied to by the authorized officer of the first respondent on 04.12.2020.

30. Thus, on a careful consideration of the statutory language employed in the proviso to Sub-Section (3A) of Section 13 of

the SARFAESI Act read with the Explanation to Sub-Section (1) of Section 17 of the SARFAESI Act, it is crystal clear that a notice under Section 13 (2) of the SARFAESI Act or the rejection of the objection raised to it including the reasons in support thereof would not give rise to a cause of action for instituting an action in law. To that extent, we find sufficient force in the contention advanced by the respondents that the writ petition filed is premature. The statute does not contemplate any intervention at this preliminary stage. Only when the process ripens into a definitive action taken by the secured creditor under Sub-Section (4) of Section 13 of the SARFAESI Act, the aggrieved person can avail the statutory remedy under Section 17 of the SARFAESI Act by filing securitization application before the jurisdictional Debts Recovery Tribunal.

31. This aspect was highlighted by the Supreme Court in Punjab National Bank Vs. Imperial Gift House. In that case, the High Court had interfered with the notice issued under Section 13 (2) of the SARFAESI Act and quashed the proceedings initiated by the Bank. Setting aside the order of the High Court, Supreme Court held that the High Court was not justified in entertaining the writ petition before any further action could be taken by the Bank under Section 13 (4) of the SARFAESI Act.

32. That being the position, we are of the view that filing of this writ petition is misconceived. Consequently Writ Petition No.23643 of 2020 is dismissed. However, dismissal of the writ petition would not foreclose the remedies available to the petitioner under the law as and when the cause of action arises".

44. This decision was followed in the subsequent judgment

dated 03.03.2022 passed in M/S. TANDRA IMPEX

PRIVATE LIMITED Vs. PUNJAB NATIONAL BANK

(W.P.No.23268 of 2020, dated 03.03.2022). After

analyzing the provisions of Section 13 (2) of the SARFAESI

Act and the decision in W.P.Nos.23643 of 2020 and 20046 of

2021, this Court held as follows:

"From the above, it is quite clear that the legislative intent is to ensure that there should be no judicial or quasi judicial interdiction at the stage of issuance of demand notice under Section 13 (2) of the SARFAESI Act. This is so because of the very object and reasons behind enactment of the SARFAESI Act.

* * *

We have already noticed above that classification of loan account by the secured creditor is at a stage prior to issuance of the demand notice under Section 13(2) of the SARFAESI Act. If at the stage of issuance of demand notice, interference by the Court and Tribunal is not to be made, we fail to understand as to how such intervention can be made at a stage prior to issuance of demand notice under Section 13(2) of the SARFAESI Act".

45. Therefore, answer to issue No.1 is very clear: at the

stage of issuance of notice under Section 13 (2) of the

SARFAESI Act, no interference is called for by the Court.

Therefore, question of examining legality and validity of such

demand notice would not arise. The adjudication would

have to wait till the stage of Sub-Section (4) of Section 13 is

reached, where after the aggrieved person including a

borrower can file securitization application under Section 17

of the SARFAESI Act in which all grounds of challenge would

be available.

46. Before we proceed to the next issue, we may also

mention that classification of a defaulter's loan account as

NPA precedes issuance of demand notice under Section 13

(2) of the SARFAESI Act. As held in M/S. TANDRA IMPEX

PRIVATE LIMITED (supra), if a demand notice under

Section 13 (2) of the SARFAESI Act does not give rise to any

actionable claim or cause of action within the meaning of the

SARFAESI Act, we fail to understand as to how action of the

secured creditor in classifying the loan account as NPA can

be challenged at this stage. The challenge thereto would

also have to stand deferred till the stage of Section 13 (4) of

the SARFAESI Act is reached.

47. ISSUE NO.2:-

Whether the petitioner is entitled to the benefit of the OTS scheme under SBIOTS 2019 and whether the High Court under Article 226 of the Constitution of India can issue a direction to the respondent/SBI to accept the OTS proposal of the petitioner?

48. This issue is also no longer res-integra as the

Supreme Court in BIJNOR URBAN CO-OPERATIVE BANK

LIMITED, BIJNOR Vs. MEENAL AGARWAL, Civil Appeal

No.7411 of 2021, decided on 15.12.2021, has held that no

borrower can as a matter of right pray for grant of benefit of

OTS scheme. That apart, no Writ of Mandamus can be

issued under Article 226 of the Constitution of India

directing a bank or financial institution to positively grant

the benefit of OTS scheme to a borrower. Such decision

should be left to the commercial wisdom of the bank or

financial institution. It has been held as follows:

"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 realized 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.

10. If a prayer is entertained on the part of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per the terms of the agreement entered into by it/him would like to get one time settlement in its/his favour. Who would not like to get his liability reduced and pay lesser amount than the amount he/she is liable to pay under the loan account? In the present case, it is noted that the original writ petitioner and her husband are making the payments regularly in two other loan

accounts and those accounts are regularized. Meaning thereby, they have the capacity to make the payment even with respect to the present loan account and despite the said fact, not a single amount/installment has been paid in the present loan account for which original petitioner is praying for the benefit under the OTS Scheme.

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 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.

12. In view of the aforesaid discussion and for the reasons stated above, we are of the firm opinion that the High Court, in the present case, has materially erred and has exceeded in its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of the Constitution of India by directing the appellant-Bank to positively consider/grant the benefit of OTS to the original writ petitioner. The impugned judgment and order passed by the High Court is hence unsustainable and deserves to be quashed and set aside and is accordingly quashed and set aside".

49. The above being the position, this issue is decided

against the petitioner.

50. ISSUE NO.3:-

Whether respondent/SBI would be precluded from taking steps under the 1993 Act after having invoked provisions of the SARFAESI Act?

51. Insofar this issue is concerned, petitioner had filed an

I.A.in O.A.No.204 of 2020 filed by the respondent/SBI before

the Debts Recovery Tribunal-I at Hyderabad contending that

respondent/SBI having invoked provisions of the SARFAESI

Act would be estopped from proceeding further by filing

Original Application under Section 19 of the 1993 Act. The

I.A. was registered as I.A.No.263 of 2021. By order dated

27.08.2021 Debts Recovery Tribunal-I, Hyderabad held that

the said I.A was devoid of merit and was accordingly

dismissed. Referring to various Supreme Court decisions, it

was held that both the SARFAESI Act and the 1993 Act are

complimentary to each other and parallel proceedings can go

on under both the said acts. In other words, proceedings

under the two enactments can be pursued side by side. It

was held that there is no embargo in either of the two

enactments restraining the secured creditor from pursuing

both the remedies either simultaneously or one after the

other. Any reading of such an embargo would frustrate the

very object and purport of the two enactments. If sale of the

schedule property under the SARFAESI Act succeeds and

any amount is recovered, then the jurisdictional Debts

Recovery Tribunal or the recovery officer can be approached

and the amount recoverable under the recovery certificate

issued following the proceedings under the 1993 Act would

accordingly be modified to operate only for the balance

amount of the debt remaining outstanding. While

dismissing the I.A., Debts Recovery Tribunal-I, Hyderabad

held that the petitioner was trying to protract the litigation.

52. Learned counsel for the petitioner has referred to Sub-

Section (10) of Section 13 of the SARFAESI Act and submits

that where the dues of the secured creditor are not fully

satisfied with the sale proceeds of the secured assets, the

secured creditor may file an application in the form and

manner as may be prescribed before the Debts Recovery

Tribunal having jurisdiction or a competent Court, as the

case may be, for recovery of the balance amount from the

borrower. On the strength of this provision he submits that

once a secured creditor invokes provisions of the SARFAESI

Act, till such proceedings are taken to its logical conclusion

i.e., sale of the secured asset through auction sale, it would

be open to the secured creditor to file application under

Section 19 of the 1993 Act which can only be filed for

recovery of the balance amount i.e., amount still due to be

paid after sale of the secured asset in auction sale. He has

also referred to Section 35 of the SARFAESI Act which shows

that provisions of the SARFAESI Act would have over-riding

effect over other laws, which provision has to be read with

Section 37 of the SARFAESI Act which allows application of

other laws including the 1993 Act in addition to the

SARFAESI Act. To support his contentions learned counsel

for the petitioner has placed reliance on the following two

decisions:

(1) MAHARASHTRA TUBES LIMITED VS. STATE INDUSTRIAL & INVESTMENT CORPORATION OF MAHARASHTRA LIMITED1

(2) RANVIR DEWAN VS. RASHMI KHANNA2

1 (1993) 2 SCC 144 2 AIR 2018 SC 62

53. We are afraid we can accept such contention of the

petitioner. As a matter of fact, this issue is also no longer

res-integra and therefore, we are in agreement with the views

expressed by the Debts Recovery Tribunal-I, Hyderabad,

dated 27.08.2021 rejecting I.A.No.236 of 2021 filed by the

petitioner. Incidentally, this Order is not under impugnment

in any of the proceedings.

54. In TRANSCORE VS. UNION OF INDIA3, the question

which fell for consideration before the Supreme Court was

whether withdrawal of Original Application filed under

Section 19 (1) of the 1993 Act was a condition precedent for

taking recourse to the SARFAESI Act. In other words,

whether the secured creditor having elected to seek its

remedy in terms of the 1993 Act would still be entitled to

invoke provisions of the SARFAESI Act for realizing the

outstanding dues without withdrawing or abandoning the

Original Application filed under Section 19 of the 1993 Act.

After a threadbare analysis of both the enactments, Supreme

3 (2008) 1 SCC 125

Court held that it would be wrong to say that the two

enactments provide parallel remedies. Remedy under the

1993 Act falls short as compared to the SARFAESI Act,

which refers to acquisition and assignment of the receivables

to the asset reconstruction company and which authorizes

banks and financial institutions to take possession over the

management which is not there in the 1993 Act. It is for this

reason that the SARFAESI Act is treated as an additional

remedy which is not inconsistent with the 1993 Act.

Examining the doctrine of election, Supreme Court held that

since the SARFAESI Act is an additional remedy to the 1993

Act, together they would constitute one remedy. Therefore,

the doctrine of election would not apply. It was held as

follows:-

"In the light of the above discussion, we now examine the doctrine of election. There are three elements of election, namely, existence of two or more remedies; inconsistencies between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply. According to American Jurisprudence, 2d Vol. 25, page 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the Debts Recovery Tribunal Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Equity (Thirty-first Edition, page 119), the doctrine of election of remedies is applicable only

when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application".

55. This issue was also examined by the Supreme Court in

MATHEW VARGHESE Vs. M. AMRITHA KUMAR4,

whereafter it was answered that simultaneous proceedings

under the two enactments can go on. It was held as follows:

"45. A close reading of Section 37 shows that the provisions of the SARFAESI Act or the Rules framed thereunder will be in addition to the provisions of the RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of the RDDB Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely the SARFAESI Act and the RDDB Act, would be complimentary to each other. In this context, reliance can be placed upon the decision of Transcore V. Union of India [(2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116]. In para 64 it is stated as under after referring to Section 37 of the SARFAESI Act: (SCC p.162)

64. ... According to American Jurisprudence, 2d, Vol.25, p.652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the Debts Recovery Tribunal Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Principles of Equity (31st Edn., p.119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.

46. A reading of Section 37 discloses that the application of the SARFAESI Act will be in addition to and not in derogation of the

4 (2014) 5 SCC 610

provisions of the RDDB Act. In other words, it will not in any way nullify or annul or impair the effect of the provisions of the RDDB Act. We are also fortified by our above statement of law as the heading of the said section also makes the position clear that application of other laws are not barred. The effect of Section 37 would, therefore, be that in addition to the provisions contained under the SARFAESI Act, in respect of proceedings initiated under the said Act, it will be in order for a party to fall back upon the provisions of the other Acts mentioned in Section 37, namely, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, or any other law for the time being in force".

56. Again in MD. FROZEN FOODS EXPORTS PRIVATE

LIMITED Vs. HERO FINCORP LIMITED5, Supreme Court

after analyzing the decisions in Transcore (3 supra) and

Mathew Varghese (4 supra) vis-a-vis Sections 35 and 37 of

the SARFAESI Act concluded that the issue is no more res-

integra. The aforesaid two acts i.e., the SARFAESI Act and

the 1993 Act are complimentary to each other and it is not a

case of election of remedy.

57. A Division Bench of the then High Court of Andhra

Pradesh in M/S. SWETHA EXPORTS VS. BANK OF INDIA6

also dwelled on this issue and held as follows:

"29. It is not as if the bank/financial institution is precluded from instituting proceedings either under the SARFAESI Act or the

5 (2017) 16 SCC 741 6 (2017) SCC Online Hyderabad 326

RDDB Act merely because they had invoked the provisions of the other enactment earlier. There are three elements to the doctrine of election, namely, existence of two or more remedies; inconsistencies between such remedies; and a choice of one of them. If any one of the three elements does not exist, the doctrine will not apply. The doctrine of election of remedies is applicable only when there are two or more co-existent remedies, available to the litigants at the time of election, which are repugnant and inconsistent. As there is neither repugnancy nor inconsistency between the two remedies under the SARFAESI Act and the RDDB Act, the doctrine of election has no application. (Transcore1; Snells Principles of Equity (31st Edn., p.119).

30. The RDDB and the SARFAESI Acts do not provide parallel remedies. The SARFAESI Act is treated as an additional remedy (Section 37) which is not inconsistent with the RDDB Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. (Transcore1). As the remedy under the SARFAESI Act, in view of Section 37 thereof, is an additional remedy, it is open to the bank/financial institution to simultaneously take recourse to both the provisions of the RDDB and the SARFAESI Act, and it is not obligatory for them to elect either one or the two remedies. Further, Section 13 (10) of the SARFAESI Act enables the secured creditor, in cases where the dues are not fully satisfied with the sale proceeds of the secured asset, to file an application to the Debts Recovery Tribunal in the form and manner prescribed. It is evident therefore that the secured creditor can invoke either of the two enactments i.e., the SARFAESI Act or the RDDB Act or both".

58. As a matter of fact, the question before the Court was

whether a secured creditor would be disabled from

continuing to take action under the SARFAESI Act merely

because it had later on filed an application under Section 19

(1) of the 1993 Act for recovery of its dues. As noticed above,

the question was answered in the negative by the High Court

by holding that nothing prevents a bank or a financial

institution from continuing with the proceedings initiated by

it earlier under the SARFAESI Act even if it has subsequently

invoked the jurisdiction of the Debts Recovery Tribunal

under Section 19 (1) of the 1993 Act. Such a contention of

bar of jurisdiction under the SARFAESI Act merely because

the secured creditor has instituted proceedings under the

1993 Act after having initiated proceedings under the

SARFAESI Act earlier does not merit acceptance.

59. Therefore, from the above it is crystal clear that the

contention urged by learned counsel for the petitioner is

without any substance. In so far the two decisions are

concerned in Maharastra Tubes Limited (1 supra), the

question was in a case where an industrial concern makes

any default in repayment of any loan or advance or otherwise

fails to meet its obligations with the said financial

corporation under any agreement, can the latter take

recourse to Sections 29 and 31 of the Financial Corporations

Act, 1951 notwithstanding the bar of Section 22 of the Sick

Industrial Companies (Special Provisions) Act, 1985? As

seen from the question framed, the issue in Maharastra

Tubes Limited (1 supra) was completely different from the

one which we are dealing with in the present proceeding. In

that case it was held that both the enactments were subject

statutes dealing with different situations. Therefore, in the

case of sick industrial undertakings provisions of the 1985

Act would ordinarily prevail and govern.

59.1. Likewise, in RANVIR DEWAN (2 supra) provisions

of Hindu Succession Act, 1956 were in issue. The dispute

was essentially between mother, son and daughter relating

to a residential house in Delhi.

60. We are afraid neither of the above two decisions can be

made applicable to the facts of the present case.

61. However, in S. VANITHA VS. DEPUTY

COMMISSIONER7 Supreme Court observed that principles

of statutory interpretation dictate that in the event of two

special acts containing non-obstante clauses, ordinarily the

later law will prevail. However, in the event of a conflict

7 (2020) SCC Online SC 1023

between two special acts the dominant purpose of both the

statutes would have to be analyzed to ascertain which one

should prevail over the other. Primary effort of the

interpreter must be to harmonize, not excise.

62. Insofar the 1993 Act and the SARFAESI Act are

concerned, there is no doubt that both are special

enactments. However, as has been held by the Supreme

Court, both the enactments are complimentary to each

other. There is no question of any conflict between the two.

Together they provide one remedy to the secured creditor. It

is immaterial as to which remedy the secured creditor opts

first. Both can proceed simultaneously or either of the

remedies can proceed after the other enactment is invoked.

63. In the light of the above discussion, issue No.3 is

answered against the petitioner.

64. This brings us to the fourth issue i.e.,

ISSUE NO.4:-

Is there any suppression of material facts by the petitioner? And if so, whether the same would disentitle the petitioner to any relief from the Writ Court?

65. We have already noted that there is serious

suppression of material facts by the petitioner. Petitioner

has not mentioned about filing of S.A.No.275 of 2018 as well

as I.A.Nos.3968 of 2018, 6263 of 2018 and 427 of 2019 in

the said securitization application. Petitioner has also not

mentioned about the conditional stay orders passed by the

Tribunal in the said I.As on 24.08.2018, 28.12.2018 and

01.02.2019 as well as the fact that it has not complied with

the conditions imposed by the Tribunal in those orders.

Further, petitioner has not mentioned about filing of

W.P.Nos.22775 of 2018, 31208 of 2018, 39508 of 2018 and

13873 of 2019 which were all dismissed by this Court.

66. Relief under Article 226 is discretionary. It is therefore

fundamental that a litigant approaching the Court under

Article 226 of the Constitution of India should come with

clean hands and disclose all material facts. Non disclosure

or suppression of material facts would disentitle a litigant

from any relief by the Court. In HARI NARAIN Vs. BADRI

DAS8, Supreme Court emphasized that in making material

statements care must be taken not to make any statements

which are in-accurate, untrue or misleading.

67. Supreme Court in PRESTIGE LIGHTS LIMITED Vs.

STATE BANK OF INDIA9, held that a prerogative writ

remedy is not available as a matter of course. In exercising

its extra-ordinary powers, a writ Court would need to bear in

mind the conduct of the party invoking such jurisdiction. If

the applicant does not disclose full facts or suppresses

material facts or is otherwise guilt of misleading the Court,

the Court may dismiss the action without adjudicating the

matter.

68. In K.D.SHARMA Vs. STEEL AUTHORITY OF INDIA

LIMITED10, Supreme Court held as follows:

8 (1963) AIR SC 1558 9 (2007) 8 SCC 449 10 (2008) 12 SCC 481

"34. The jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary. Prerogative writs mentioned therein are issued for doing substantial justice. It is, therefore, of utmost necessity that the petitioner approaching the writ court must come with clean hands, put forward all the facts before the court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the court, his petition may be dismissed at the threshold without considering the merits of the claim.

35.The underlying object has been succincity stated by Scrutton, L.J., in the leading case of R.v.Kensington Income Tax Commrs.-[1917] 1 K.B.486 : 86 LJKB 257 : 116 LT 136 (CA) in the following words : (KB p.514)

"...it has been for many years the rule of the court, and one which it is of the greatest importance to maintain, that when an applicant comes to the court to obtain relief on an ex parte statement he should make a full and fair disclosure of all the material facts---it says facts, not law. He must not misstate the law if he can help it--- the court is supposed to know the law. But it knows nothing about the facts, and the applicant must state fully and fairly the facts; and the penalty by which the court enforces that obligation is that if it finds out that the facts have not been fully and fairly stated to it, the court will set aside any action which it has taken on the faith of the imperfect statement."

36. A prerogative remedy is not a matter of course. While exercising extraordinary power a writ court would certainly bear in mind the conduct of the party who invokes the jurisdiction of the court. If the applicant makes a false statement or suppresses material fact or attempts to mislead the court, the court may dismiss the action on that ground alone and may refuse to enter into the merits of the case by stating, "We will not listen to your application because of what you have done." The rule has been evolved in the larger public interest to deter unscrupulous litigants from abusing the process of court by deceiving it.

37. In Kensington Income Tax Commrs. (supra), Viscount Reading, C.J. observed : (KB pp.495-96)

"...Where an ex parte application has been made to this Court for a rule nisi or other process, if the Court comes to the conclusion that the affidavit in support of the application was not candid and did not fairly state the facts, but stated them in such a way as to mislead the Court as to the true facts, the Court ought, for its own

protection and to prevent an abuse of its process, to refuse to proceed any further with the examination of the merits. This is a power inherent in the Court, but one which should only be used in cases which bring conviction to the mind of the Court that it has been deceived. Before coming to this conclusion a careful examination will be made of the facts as they are and as they have been stated in the applicant's affidavit, and everything will be heard that can be urged to influence the view of the Court when it reads the affidavit and knows the true facts. But if the result of this examination and hearing is to leave no doubt that the Court has been deceived, then it will refuse to hear anything further from the applicant in a proceeding which has only been set in motion by means of a misleading affidavit".

38. The above principles have been accepted in our legal system also. As per settled law, the party who invokes the extraordinary jurisdiction of this Court under Article 32 or of a High Court under Article 226 of the Constitution is supposed to be truthful, frank and open. He must disclose all material facts without any reservation even if they are against him. He cannot be allowed to play "hide and seek" or to "pick and choose" the facts he likes to disclose and to suppress (keep back) or not to disclose (conceal) other facts. The very basis of the writ jurisdiction rests in disclosure of true and complete (correct) facts. If material facts are suppressed or distorted, the very functioning of writ courts and exercise would become impossible. The petitioner must disclose all the facts having a bearing on the relief sought without any qualification. This is because "the court knows law but not facts".

39. If the primary object as highlighted in Kensington Income Tax Commrs. (supra) is kept in mind, an applicant who does not come with candid facts and "clean breast" cannot hold a writ of the court with "soiled hands". Suppression or concealment of material facts is not an advocacy. It is a jugglery, manipulation, manoeuvring or misrepresentation, which has no place in equitable and prerogative jurisdiction. If the applicant does not disclose all the material facts fairly and truly but states them in a distorted manner and misleads the court, the court has inherent power in order to protect itself and to prevent an abuse of its process to discharge the rule nisi and refuse to proceed further with the examination of the case on merits. If the court does not reject the petition on that ground, the court would be failing in its duty. In fact, such an applicant requires to be dealt with for contempt of court for abusing the process of the court".

69. This aspect was also discussed in RAMJAS

FOUNDATION Vs. UNION OF INDIA11, whereafter Supreme

Court held that if a litigant does not come to the Court with

clean hands, he is not entitled to be heard. It was held as

follows:

"The principle that a person who does not come to the court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums. The object underlying the principle is that every court is not only entitled but is duty bound to protect itself from unscrupulous litigants who do not have any respect for truth and who try to pollute the stream of justice by resorting to falsehood or by making misstatement or by suppressing facts which have a bearing on adjudication of the issue(s) arising in the case".

70. Supreme Court in BHASKAR LAXMAN JADHAV VS.

KARAMVEER KAKASAHEB WAGH EDUCATION SOCIETY12

has clarified that it is not for a litigant to decide what fact is

material for adjudicating a case and what is not material. It

is the obligation of a litigant to disclose all the facts of a case

and leave the decision making to the Court.




11   (2010) 14 SCC 38
12   (2013) 11 SCC 531




71.       Finally,      in     K.      JAYARAM            Vs.      BANGALORE

DEVELOPMENT AUTHORITY13, Supreme Court has held as

follows:

"12. It is well-settled that the jurisdiction exercised by the High Court under Article 226 of the Constitution of India is extraordinary, equitable and discretionary and it is imperative that the petitioner approaching the writ court must come with clean hands and put forward all facts before the Court without concealing or suppressing anything. A litigant is bound to state all facts which are relevant to the litigation. If he withholds some vital or relevant material in order to gain advantage over the other side then he would be guilty of playing fraud with the court as well as with the opposite parties which cannot be countenanced".

* * * "17. In the instant case, since the appellants have not disclosed the filing of the suit and its dismissal and also the dismissal of the appeal against the judgment of the civil court, the appellants have to be non-suited on the ground of suppression of material facts. They have not come to the court with clean hands and they have also abused the process of law. Therefore, they are not entitled for the extraordinary, equitable and discretionary relief".

72. Thus, it is evident that there is blatant suppression of

material facts by the petitioner for which he is not entitled to

any relief from the Court though we have adjudicated the

issues raised by it. Accordingly, this question is also

answered against the petitioner.

73. Having answered the issues as framed, we would like

to place on record our dis-pleasure in the manner in which

13 MANU/SC/1199/2021

petitioner has filed one writ petition after the other

notwithstanding the fact that earlier writ petitions were

dismissed and that he has availed the statutory remedy

under Section 17 of the SARFAESI Act. That apart, the way

the petitioner is filing one writ petition after the other raising

new grounds in each writ petition, as if by installments,

cannot be appreciated. This is nothing but an attempt to

multiply proceedings and create a web around the secured

creditor so that it becomes difficult to extricate there from

and recover the outstanding dues. In K.JAYARAM (13

supra) Supreme Court also held as follows:

"16. It is necessary for us to state here that in order to check multiplicity of proceedings pertaining to the same subject- matter and more importantly to stop the menace of soliciting inconsistent orders through different judicial forums by suppressing material facts either by remaining silent or by making misleading statements in the pleadings in order to escape the liability of making a false statement, we are of the view that the parties have to disclose the details of all legal proceedings and litigations either past or present concerning any part of the subject-matter of dispute which is within their knowledge. In case, according to the parties to the dispute, no legal proceedings or court litigations was or is pending, they have to mandatorily state so in their pleadings in order to resolve the dispute between the parties in accordance with law".

74. Thus on a thorough consideration of all aspects of the

matter, we are of the unhesitant view that all the three writ

petitions are devoid of merit; rather filing of the writ petitions

is a part of a well orchestrated plan hatched by the petitioner

to obfuscate the entire matter relating to recovery of

outstanding dues and thereby prevent the secured creditor

from realizing the outstanding dues by protracting the

litigation.

75. Consequently, all the writ petitions are dismissed.

However, having regard to what we have observed above,

cost of Rs.50,000/- is imposed on the petitioner to be

deposited to the Telangana State Legal Services Authority,