Supreme Court (12.01.2022) In Phoenix ARC Pvt. Ltd. Vs. Vishwa Bharati Vidya Mandir & Ors. [Civil Appeal Nos. 257-259 of 2022] held that;
That a writ petition against the private financial institution - ARC - appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable.
Applying the law laid down by this Court in the case of Mathew K.C. (supra) to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court.
As observed hereinabove, even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions.
Excerpts of the Order;
# 1. Feeling aggrieved and dissatisfied with the impugned order dated 27.03.2018 passed by the High Court of Karnataka at Bengaluru in Writ Petition Nos. 35564-35566 of 2015 by which the High Court has entertained the aforesaid writ petitions under Article 226 of the Constitution of India against the appellant, an Assets Reconstructing Company and has passed an interim order directing for maintaining status quo with regard to SARFAESI action (possession of the secured assets), the original respondent – the Assets Reconstructing Company (ARC) has preferred the present appeals.
# 2. That the respondent No.1 herein Vishwa Bharati Vidya Mandir is running educational institutions and is a Society registered under the Karnataka Societies Registration Act, 1960 which had availed credit facilities to the tune of Rs.105,60,84,000/- (Rupees One Hundred Five Crores Sixty Lacs and Eighty Four Thousand Only) from Saraswat Cooperative Bank Limited. That similarly, St. Ann’s Education Society had also availed credit facilities to the tune of Rs.20,05,00,000/- (Rupees Twenty Crores and Five Lacs Only) from the aforesaid Bank.
# 2.1 . . . . . It appears that in the month of March, 2014, the NPA account of the borrowers / respondents with respect to the credit facilities availed by them was assigned by the Bank in favour of the appellant – Phoenix ARC Private Limited vide registered Assignment Agreement dated 28.03.2014.
# 2.2 Pursuant to the assignment of the NPA account in favour of the appellant, the borrowers approached the appellant with a request for restructuring the repayment of outstanding dues. A Letter of Acceptance dated 27.02.2015 was executed between the parties, wherein the borrowers / respondents acknowledged and admitted the liability to repay the entire outstanding dues. However, the borrowers failed to repay the dues as per the Letter of Acceptance.
# 2.3 Since the borrowers again committed defaults in payment of the outstanding dues, the appellant – Phoenix ARC Private Limited issued a letter dated 13.08.2015 intimating the borrowers that since despite issuance of 13(2) notice dated 01.06.2013 and the subsequent execution of the Letter of Acceptance dated 27.02.2015, the borrowers had failed to repay the outstanding dues, therefore, the appellant would be proceeding to take possession of the mortgaged properties after expiry of 15 days from the date of the said letter.
# 2.4 Against the aforesaid communication/letter dated 13.08.2015, the borrowers / respondents herein filed the writ petitions before the High Court on the ground that the communication/letter dated 13.08.2015 is a possession notice under Section 13(4) of the SARFAESI Act, which is against the Security Interest (Enforcement) Rules, 2002.
# 2.5 It was the case on behalf of the original writ petitioners that the said possession notice under Section 13(4) of the SARFAESI Act is in violation of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as “Rules, 2002”) and without issuance of the possession notice under Rule 8(1) and without publication of possession notice in two leading newspapers as required under Rule 8(2). The High Court passed an ex-parte ad-interim order dated 26.08.2015 directing status quo to be maintained with regard to possession of the mortgaged properties subject to the borrowers making a payment of Rs. 1 crore with the appellant – Phoenix.
# 2.6 The petition was opposed by the appellant by filing statement of objections to the writ petitions contending, inter alia, that the letter dated 13.08.2015 as such cannot be said to be taking a measure under Section 13(4) of the SARFAESI Act and that it was only a proposed action/measure to be taken by the appellant. It was also submitted that the writ petitions are not maintainable. That the appellants filed an application being I.A. No. 01 of 2016 for vacation of the ex-parte ad-interim order dated 26.08.2015. However, instead of deciding the application for vacating the interim order, the High Court extended the interim order on 28.02.2017 on the condition that the borrowers shall deposit a further sum of Rs.1 crore. Simultaneously, the appellant also filed two separate original applications against the borrowers before the Debt Recovery Tribunal, Bangalore for recovery of the outstanding dues. Thereafter, the High Court again vide order dated 27.03.2018 extended the earlier ex-parte interim-order dated 26.08.2015 on condition that the borrowers deposit a further sum of Rs. 1 crore.
# 2.7 Feeling aggrieved and dissatisfied with the aforesaid interim orders / extension of the interim orders and entertaining the writ petitions, the appellant – Phoenix ARC Private Limited, the original respondent has preferred the present appeals.
# 3. Shri V. Giri, learned Senior Advocate has appeared on behalf of the respective appellants and Shri Basavaprabhu S. Patil, learned Senior Advocate has appeared on behalf of the original writ petitioners – borrowers.
# 4.5 Shri Giri, learned Senior Advocate appearing on behalf of the appellant(s) has relied upon the following decisions in support of the submission that the writ petitions before the High Court are not maintainable:-
United Bank of India Vs. Satyawati Tondon & Ors., (2010) 8 SCC 110;
Kanaiyalal Lalchand Sachdev & Ors. Vs. State of Maharashtra & Ors., (2011) 2 SCC 782;
General Manager, Sri Siddeshwara Cooperative Bank Limited & Anr. Vs. Ikbal & Ors., (2013) 10 SCC 83;
Agarwal Tracom Private Limited Vs. Punjab National Bank & Ors., (2018) 1 SCC 626;
Authorized Officer, State Bank of Travancore & Anr. Vs. Mathew K.C., (2018) 3 SCC 85; and
Radha Krishnan Industries Vs. State of Himachal Pradesh & Ors., (2021) 6 SCC 771.
# 4.6 Making the aforesaid submissions and relying upon the above decisions, it is prayed to set aside the impugned order dated 27.03.2018 and also to dismiss the writ petitions filed before the High Court as being non-maintainable.
# 6. We have heard the learned counsel for the respective parties at length.
# 7. At the outset, it is required to be noted that in the present case, the respondents – borrowers whose accounts have been declared as NPA in the year 2013 have filed the writ petitions before the High Court challenging the communication dated 13.08.2015 purporting it to be a notice under Section 13(4) of the SARFAESI Act. It is required to be noted that as per the appellant – assignor approximately Rs.117 crores is due and payable to the Bank. While passing the ex-parte interim order on 26.08.2015 and while entertaining the writ petitions against the communication dated 13.08.2015, the High Court has directed to maintain status quo with respect to the possession of the secured properties on condition that the borrowers deposit Rs. 1 crore only. Despite the fact that subsequently an application for vacating the ex-parte ad-interim order has been filed in the year 2016, the application for vacating the interim order has not been decided and disposed of. On the contrary, the High Court thereafter has further extended the ex-parte ad-interim order dated 26.08.2015 on condition that the borrowers should deposit a further sum of Rs. 1 crore. Thus, in all the borrowers are directed to deposit Rs. 3 crores only against the dues of approximately Rs.117 crores.
# 7.1 It is the case on behalf of the appellant that the writ petitions against the communication dated 13.08.2015 proposing to take further action under Section 13(4) of the SARFAESI Act and that too against a private Assets Reconstructing Company (ARC) shall not be maintainable. It is also the case on behalf of the appellant that assuming that the communication dated 13.08.2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in view of the alternative statutory remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions.
# 7.2 While considering the issue regarding the maintainability of and/or entertainability of the writ petitions by the High Court in the instant case, a few decisions of this Court relied upon by the learned Senior Advocate appearing on behalf of the appellant – ARC are required to be referred to.
# 7.3 In the case of Satyawati Tondon & Ors. (supra), it was observed and held by this Court that the remedies available to an aggrieved person against the action taken under section 13(4) or Section 14 of the SARFAESI Act, by way of appeal under Section 17, can be said to be both expeditious and effective. On maintainability of or entertainability of a writ petition under Article 226 of the Constitution of India, in a case where the effective remedy is available to the aggrieved person, it is observed and held in the said decision in paragraphs 43 to 46 as under:-
“43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad [AIR 1969 SC 556], Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107] and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.”
# 7.4 In the case of City and Industrial Development Corpn. Vs. Dosu Aardeshir Bhiwandiwala, (2009) 1 SCC 168, it was observed by this Court in paragraph 30 that the Court while exercising its jurisdiction under Article 226 is duty bound to consider whether ……………(c) the petitioner has any alternative or effective remedy for the resolution of the dispute.”
# 7.5 In the case of Kanaiyalal Lalchand Sachdev and Ors. (supra) after referring to the earlier decisions of this Court in the cases of Sadhana Lodh Vs. National insurance Co. Ltd. and Anr., (2003) 3 SCC 524; Surya Dev Rai Vs. Ram Chander Rai and Ors., (2003) 6 SCC 675 and State Bank of India Vs. Allied Chemical Laboratories and Anr., (2006) 9 SCC 252 while upholding the order passed by the High Court dismissing the writ petition on the ground that an efficacious remedy is available under Section 17 of the SARFAESI Act, it was observed that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person.
# 7.6 Similar view has been expressed by this Court in subsequent decisions in the case of General Manager, Sri Siddeshwara Cooperative Bank Limited & Anr. (supra) as well as in the case of Agarwal Tracom Private Limited (supra).
# 8. Applying the law laid down by this court in the aforesaid decisions, it is required to be considered whether, in the facts and circumstances of the case, the High Court is justified in entertaining the writ petitions against the communication dated 13.08.2015 and to pass the ex-parte ad interim order virtually stalling/restricting the proceedings under the SARFAESI Act by the creditor.
# 9. It is required to be noted that it is the case on behalf of the appellant that as such the communication dated 13.08.2015 cannot be said to be a notice under Section 13(4) of the SARFAESI Act at all. According to the appellant, after the notice under Section 13(2) of the SARFAESI Act was issued in the year 2013 and thereafter despite the Letter of Acceptance dated 27.02.2015, no further amount was paid, the appellant called upon the borrowers to make the payment within two weeks failing which a further proceeding under Section 13(4) of the SARFAESI Act was proposed. Thus, according to the appellant, it was a proposed action. Therefore, the writ petitions filed against the proposed action under Section 13(4) of the SARFAESI Act was not maintainable and/or entertainable at all.
# 10. Assuming that the communication dated 13.08.2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in that case also, in view of the statutory remedy available under Section 17 of the SARFAESI Act and in view of the law laid down by this Court in the cases referred to hereinabove, the writ petitions against the notice under Section 13(4) of the SARFAESI Act was not required to be entertained by the High Court. Therefore, the High Court has erred in entertaining the writ petitions against the communication dated 13.08.2015 and also passing the ex-parte ad-interim orders directing to maintain the status quo with respect to possession of secured properties on the condition directing the borrowers to pay Rs. 1 crore only (in all Rs.3 crores in view of the subsequent orders passed by the High Court extending the exparte ad-interim order dated 26.08.2015) against the total dues of approximate Rs.117 crores. Even the High Court ought to have considered and disposed of the application for vacating the ex-parte ad-interim relief, which was filed in the year 2016 at the earliest considering the fact that a large sum of Rs.117 crores was involved.
# 12. Even otherwise, it is required to be noted that a writ petition against the private financial institution – ARC – appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in the cases of Praga Tools Corporation (supra) and Ramesh Ahluwalia (supra) relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers.
# 13. Now, so far as the submission on behalf of the borrowers that in exercise of the powers under Article 226 of the Constitution, this Court may not interfere with the interim / interlocutory orders is concerned, the decision of this Court in the case of Mathew K.C. (supra) is required to be referred to.
# 13.2 Applying the law laid down by this Court in the case of Mathew K.C. (supra) to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs.1 crore only (in all Rs.3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs.117 crores. The ad-interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of Court. It appears that the High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed.
# 14. In view of the above and for the reasons stated above, present appeals succeed. The Writ Petition Nos. 35564 to 35566 of 2015 before the High Court are dismissed. Consequently, the ex-parte ad-interim order dated 26.08.2015 further extended by orders dated 28.02.2017 and 27.03.2018 stand vacated.
Present appeals are accordingly allowed with costs to the appellants to be paid by the original writ petitioners quantified at Rs.1 lakh in both the cases to be directly paid to the appellant within a period of four weeks from today. Pending application(s), if any, also stand disposed of.
-----------------------------------------------
No comments:
Post a Comment