Kanaiyalal Lalchand
Sachdev & Ors. Vs State of Maharashtra & Ors.
J U D G M E N T
D.K. JAIN, J.:
1.
Leave
granted.
2.
Challenge
in these appeals, by special leave, is to the judgments and orders dated 28th April,
2009 and 1st July, 2009 delivered by the High Court of Bombay in W.P. No. 707
of 2009, and Criminal Application No. 178 of 2009 in W.P. No. 707 of 2009, respectively
whereby it has dismissed the writ petition filed by the appellants herein, and also
declined to extend the status-quo order granted by it to them.
3.
Briefly
stated, the facts, material for adjudication of the present appeals, may be
stated thus: Respondent No. 3, viz. the State Bank of India had advanced a loan
of `4,50,00,000/- to appellant No. 6 on an equitable mortgage by deposit of the
title deeds of certain properties, subject matter of these appeals, on 6th February,
2006. Appellant Nos.1 to 5 and one Mr. Lalchand Sachdeo stood as personal
guarantors to the said loan.
4.
On
default of re-payment of loan amount, respondent No. 3 issued a notice under the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest (Second) Ordinance, 2002 on 18th November, 2006. On 12th
February, 2007, the officers of respondent No. 3 dispossessed the appellants of
one of the secured properties viz. T-125, CTS, No. 1729. Being aggrieved, the appellants
filed a writ petition being CRL. W.P. No.286 of 2007 before the Bombay High
Court, inter-alia, contending that the notice issued by respondent No. 3 was illegal,
no action could be taken in pursuance thereof, and if at all, the respondent
wanted to take any action, it was required to approach the Chief Metropolitan
Magistrate under Section 14 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (for short
"the Act").
5.
Before
the High Court, respondent No. 3 offered to withdraw the notice dated 18th November,
2006 without prejudice to the rights and contentions advanced by them, and to
return the possession of the said property to the appellants, subject to the
appellants and all adult members furnishing an undertaking to the effect that they
shall not alienate, encumber, transfer, dispose of and/or create any third
party interest in the said premises for a period of six months. Accepting the
statement made on behalf of respondent No. 3, the High Court dismissed the writ
petition vide order dated 7th March, 2007.
6.
Thereafter,
on 11th April, 2007 respondent No. 3 issued to the appellants a notice under
Section 13(2) of the Act. The appellants replied to the said notice on 23rd May,
2007. Vide letter dated 29th May, 2007, respondent No. 3, communicated its reasons
for not accepting the reply. Subsequently, respondent No. 3 issued a public notice
in newspapers, informing the appellants of the issuance of notice under Section
13(2) of the Act.
7.
In
pursuance thereof, respondent No.3, filed C.C. No. 223/M/2008 before the Chief
Metropolitan Magistrate under Section 14 of the Act for taking possession of
the secured assets. Vide order dated 3rd February, 2009, the Magistrate allowed
the said application and directed the Assistant 3 Registrar, Kurla Centre of
Courts, to take possession of the mortgaged properties after issuing notice to
the appellants. 8. Vide notice dated 27th February, 2009, the Assistant
Registrar, directed the appellants to hand over the possession of the mortgaged
properties to respondent No. 3 within 15 days from the receipt of the said
notice. At this juncture, it would be expedient to extract the relevant
portions of the said notice: "Whereas, the Chief Metropolitan Magistrate, Esplanade,
Mumbai has passed the following order on 3.2.2009 on the application filed before
him by State Bank of India, Mazda Complex, Parsi Agari Lane, Thana (W) 400601 through
its Authorized Officer Fazlur Rehman Sheikh. ORDER The Application is allowed. Asst.
Registrar, Mr. P.A. Tendolkar, Kurla Centre of Court after issuing notice of
taking possession of the secured assets...............................................................................................................
..................................
8.
.............................."It
is manifest from a bare perusal of the said notice that the order passed by the
Magistrate dated 3rd February, 2009 was referred to by the Assistant Registrar
in his notice.
9.
Being
aggrieved by the said notice, the appellants herein again approached the High
Court. As afore-stated, the High Court dismissed 4 the said writ petition, vide
order dated 28th April, 2009, on the ground that an alternative remedy was
available to the appellants under Section 17 of the Act. Nevertheless, the High
Court directed the respondents to maintain status quo in the matter for a
period of 10 weeks from the date of its order, so as to enable the appellants to
approach the Debts Recovery Tribunal (for short the "DRT") under
Section 17 of the Act.
10.
Thereafter,
the appellants filed Criminal Application No. 178 of 2009 in W.P. No. 707 of 2009
seeking an extension of the status quo period granted vide order dated 28th
April, 2009. As afore-stated, the High Court rejected the said application
filed by the appellants.
11.
Hence,
the present appeals against both the said orders.
12.
Ms.
Kranti Anand, learned counsel appearing on behalf of the appellants, while
assailing the impugned orders, strenuously urged that apart from the fact that
the notice issued by the Assistant Registrar was vague, it was never served on
the appellants. In fact, appellants received a copy of the order of the
Magistrate during the proceedings before the High Court, pleaded the learned
counsel. Learned counsel also urged that the notice issued by the Assistant Registrar
was vitiated on account of non- compliance with Rule 8 of the Security Interest
(Enforcement) Rules, 2002 (for short "the 2002 Rules") as well. It
was argued that the High 5 Court had also erred in equating action under
Section14 of the Act with action under Section 13(4)(a) of the Act. It was
thus, asserted that for all these reasons, the impugned orders deserve to be
set aside.
13.
Per
contra, Mr. Buddy A. Ranganadhan, learned counsel appearing on behalf of
respondent No.3--Bank, supporting the impugned judgments, contended that in
light of the decision of this Court in Transcore Vs. Union of India & Anr.1,
no fault could be found with the impugned judgments. It was also urged that the
appellants having already availed of the remedy of approaching the DRT, they
are estopped from challenging the decision of the High Court.
14.
Mr.
Sushil Karanjakar, learned counsel appearing on behalf of the State of Maharashtra
contended that Rule 8 of the 2002 Rules was inapplicable in the instant case,
in as much as it deals with sale of secured assets. According to the learned
counsel, it was Rule 4 which was applicable to the facts of the instant case. In
support, reliance was placed on the decision of this Court in Mardia Chemicals
Ltd. & Ors. Vs. Union of India & Ors.
15.
Having
bestowed our anxious consideration to the facts at hand, we are of the opinion
that the appeals are utterly misconceived.
16.
Section
13 of the Act deals with enforcement of security interest, providing that
notwithstanding anything contained in Sections 69 or 69A of the Transfer of Property
Act, 1882, any security interest created in favour of any secured creditor may be
enforced, without the court's intervention, by such creditor in accordance with
the provisions of the Act. Section 13(2) of the Act provides that when a borrower,
who is under a liability to a secured creditor, makes any default in repayment
of secured debt, and his account in respect of such debt is classified as non- performing
asset, then the secured creditor may require the borrower, by notice in
writing, to discharge his liabilities within sixty days from the date of the
notice, failing which the secured creditor shall be entitled to exercise all or
any of the rights given in Section 13(4) of the Act. Section 13(3) of the Act
provides that the notice under Section 13(2) of the Act shall give details of the
amount payable by the borrower as also the details of the secured assets
intended to be enforced by the bank. Section 13(3-A) of the Act was inserted by
Act 30 of 2004 after the decision of this Court in Mardia Chemicals (supra), and
provides for a last opportunity for the borrower to make a representation to the
secured creditor against the classification of his account as a non-performing asset.
The secured creditor
is required to consider the representation of the borrowers, and if the secured
creditor comes to the conclusion that 7 the representation is not tenable or acceptable,
then he must communicate, within one week of the receipt of the communication
by the borrower, the reasons for rejecting the same. Section 13(4) of the Act provides
that if the borrower fails to discharge his liability within the period specified
in Section 13(2), then the secured creditor, may take recourse to any of the
following actions, to recover his debt, namely-
a. "take possession
of the secured assets of the borrower including the right to transfer by way of
lease, assignment or sale for realising the secured asset;
b. take over the
management of the business of the borrower including the right to transfer by
way of lease, assignment or sale for realising the secured asset: Provided that
the right to transfer by way of lease, assignment or sale shall be exercised
only where the substantial part of the business of the borrower is held as
security for the debt: Provided further that where the management of whole, of
the business or part of the business is severable, the secured creditor shall
take over the management of such business of the borrower which is relatable to
the security for the debt;
c. appoint any person
(hereafter referred to as the manager), to manage the secured assets the possession
of which has been taken over by the secured creditor;
d. require at any time
by notice in writing, any person who has acquired any of the secured assets
from the borrower and from whom any money is due or may become due to the borrower,
to pay the secured creditor, so much of the money as is sufficient to pay the
secured debt." 8 Section 14 of the Act provides that the secured creditor can
file an application before the Chief Metropolitan Magistrate or the District Magistrate,
within whose jurisdiction, the secured asset or other documents relating
thereto are found for taking possession thereof.
If any such request is
made, the Chief Metropolitan Magistrate or the District Magistrate, as the case
may be, is obliged to take possession of such asset or document and forward the
same to the secured creditor. (See: United Bank of India Vs. Satyawati Tondon &
Ors.3). Therefore, it follows that a secured creditor may, in order to enforce
his rights under Section 13(4), in particular Section 13(4)(a), may take
recourse to Section 14 of the Act. 17. Section 17 of the Act which provides for
an appeal to the DRT, reads as follows: "
17.
Right
to appeal.--(1) Any person (including borrower), aggrieved by any of the
measures referred to in sub-section (4) of Section 13 taken by the secured
creditor or his authorised officer under this Chapter, may make an application
along with such fee, as may be prescribed to the Debts Recovery Tribunal having
jurisdiction in the matter within forty-five days from the date on which such
measures had been taken: Provided that different fees may be prescribed for
making the application by the borrower and the person other than the borrower.
Explanation.--For the removal of doubts it is hereby declared that the
communication of the reasons to the borrower by the secured creditor for not
having accepted his representation or 3 (2010) 8 SCC 110 9 objection or the
likely action of the secured creditor at the stage of communication of reasons
to the borrower shall not entitle the person (including borrower) to make an
application to the Debts Recovery Tribunal under sub-section (1) of Section 17.
(2) The Debts Recovery Tribunal shall consider whether any of the measures
referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement
of security are in accordance with the provisions of this Act and the rules
made there under."
18.
18.The
2002 Rules, enacted under sub-section (1) and clause (b) of sub- section (2) of
Section 38 read with sub-sections (4), (10) and (12) of Section 13 of the Act,
set down the procedure for enforcing a security interest. Rule 4 of the 2002
Rules deals with the possession of movable assets, whereas Rule 8 deals with
the possession of immoveable assets. It is manifest that Rule 4 has no
application to the facts of the instant case, as contended by the learned
counsel for the State.
19.
In
Authorised Officer, Indian Overseas Bank & Anr. Vs. Ashok Saw Mill4, the
main question which fell for determination was whether the DRT would have jurisdiction
to consider and adjudicate post Section 13(4) events or whether its scope in
terms of Section 17 of the Act will be confined to the stage contemplated under
Section 13(4) of the Act? On an examination of the provisions contained in
Chapter III of the Act, in particular Sections 13 and 17, this Court, held as
under : 4 (2009) 8 SCC 366 1 "35. In order to prevent misuse of such wide powers
and to prevent prejudice being caused to a borrower on account of an error on
the part of the banks or financial institutions, certain checks and balances
have been introduced in Section 17 which allow any person, including the
borrower, aggrieved by any of the measures referred to in sub-section (4) of
Section 13 taken by the secured creditor, to make an application to the DRT having
jurisdiction in the matter within 45 days from the date of such measures having
taken for the reliefs indicated in sub- section (3) thereof. 36. The intention
of the legislature is, therefore, clear that while the banks and financial institutions
have been vested with stringent powers for recovery of their dues, safeguards have
also been provided for rectifying any error or wrongful use of such powers by vesting
the DRT with authority after conducting an adjudication into the matter to
declare any such action invalid and also to restore possession even though possession
may have been made over to the transferee. .............................................................................
39. We are unable to agree with or accept the submissions made on behalf of the
appellants that the DRT had no jurisdiction to interfere with the action taken
by the secured creditor after the stage contemplated under Section 13(4) of the
Act. On the other hand, the law is otherwise and it contemplates that the
action taken by a secured creditor in terms of Section 13(4) is open to scrutiny
and cannot only be set aside but even the status quo ante can be restored by
the DRT." (Emphasis supplied by us)
20.
We
are in respectful agreement with the above enunciation of law on the point. It
is manifest that an action under Section 14 of the Act constitutes an action
taken after the stage of Section 13(4), and therefore, the same would fall
within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates
an efficacious remedy for the borrower or any person 1 affected by an action
under Section 13(4) of the Act, by providing for an appeal before the DRT.
21.
In
our opinion, therefore, the High Court rightly dismissed the petition on the ground
that an efficacious remedy was available to the appellants under Section 17 of
the Act. It is well-settled 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. (See: Sadhana Lodh Vs. National Insurance
Co. Ltd. & Anr.5; Surya Dev Rai Vs. Ram Chander Rai & Ors.6; State Bank
of India Vs. Allied Chemical Laboratories & Anr.7). In City and Industrial
Development Corporation Vs. Dosu Aardeshir Bhiwandiwala & Ors.8, this Court
had observed that: "The Court while exercising its jurisdiction under
Article 226 is duty-bound to consider whether:
a. adjudication of writ petition
involves any complex and disputed questions of facts and whether they can be satisfactorily
resolved;
b. the petition reveals
all material facts;
c. the petitioner has
any alternative or effective remedy for the resolution of the dispute;
d. person invoking the jurisdiction
is guilty of unexplained delay and laches;
e. ex facie barred by
any laws of limitation;
f. grant of relief is
against public policy or barred by any valid law; and host of other
factors."
22.
In
the instant case, apart from the fact that admittedly certain disputed questions
of fact viz. non-receipt of notice under Section 13(2) of the Act,
non-communication of the order of the Chief Judicial Magistrate etc. are
involved, an efficacious statutory remedy of appeal under Section 17 of the Act
was available to the appellants, who ultimately availed of the same. Therefore,
having regard to the facts obtaining in the case, the High Court was fully justified
in declining to exercise its jurisdiction under Articles 226 and 227 of the
Constitution.
23.
For
the foregoing reasons, the impugned judgments cannot be flawed, warranting
interference by this Court. Accordingly, the appeals, being devoid of any
merit, are dismissed with costs, quantified at `20,000/-.
...........................................
J. (D.K. JAIN,)
...........................................
J. (H.L. DATTU,)
NEW
DELHI; 1
FEBRUARY
7, 2011.
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