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Kasturi Devi Jain v/s Union Bank Of India & Others

    Writ Petition No.1494 of 2011

    Decided On, 27 July 2011

    At, High Court of Madhya Pradesh

    By, THE HONOURABLE MR. JUSTICE SUJOY PAUL

    For the Petitioner: R.K. Goyal, Advocate. For the Respondents: Pravin N. Surange, Advocate



Judgment Text

1. Learned counsel for the petitioner submits that the respondent No.1-Union Bank of India filed a civil suit before Fourth Additional District Judge, Morena for recovery of term loan. The said suit was decreed in favour of the Bank with direction to the present petitioner to pay Rs.4,57,543/- within six months along with interest @ 17.35% per annum. It is further directed that if the aforesaid amount is not paid, the mortgaged property can be auctioned and a final decree can be passed in this regard. This document is filed as Annexure P-1.

2. Admittedly, the petitioner and respondents No.3 and 4 have not paid the said amount and, therefore, the respondent No.1-Bank preferred an application under Order 21 Rule 11 of CPC, which was allowed by order dated 13.4.2006 (Annexure P/2) and the Bank was permitted to auction the property.

3. Against the order (Annexure P-2) a Civil Revision No.105/2006 was filed by the petitioner before this Court and this Court vide order (Annexure P/3) dated 22.4.2010 quashed and set aside the preliminary decree/order dated 6.5.2006. The relevant portion of the order passed by this Court reads as under:-

'17. Consequently, the revision petition is allowed and the impugned order passed by the Executing Court on Date 13.4.2006, in Execution Case No.2-A/2000x2004 is set aside and as the Bank has preferred the execution proceedings under Order 21 Rule 11 of CPC, without applying for obtaining a Final Decree, the main Execution Application is also rejected on being premature, on the ground that such a Preliminary Decree would not be executable without obtaining the Final Decree.'

4. Shri R.K.Goyal, learned counsel for the petitioner submits that in the light of the judgment passed by this Court, it is not open for the respondents to invoke Section 13(2) of Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act'). Learned counsel for the petitioner has raised following points while arguing the matter:-

'(i) Since the Bank has already invoked the remedy under the Code of Civil Procedure, it is not open for the Bank to take recourse of the remedy under the SARFAESI Act.

(ii) As per Section 36 of the SARFAESI Act, the action of the Bank is barred by limitation and, accordingly, the provisions of the SARFAESI Act are not attracted.'

5. Per Contra, Shri Praveen N. Surange, learned counsel for the Bank submits that there is no infirmity, illegality or impropriety in action of the Bank in invoking Section 13(2) of the SARFAESI Act. Learned counsel supports Annexure P-6, whereby the Bank has invoked Section 13(2) and published a document in the newspaper.

6. Further stand of the Bank is that the petitioner has not approached this Court with clean hands and suppressed the material facts. The stand of the Bank is that the petitioner has illegally sold the property, which was mortgaged with the Bank. Copy of registered sale deed is enclosed as Annexure R/1 with the Bank's return. The Bank has relied on the judgment of Apex Court in the case of Prestige Lights Limited vs. State Bank of India, reported in (2007) 139 Comp. Case 169 (SC). The relevant portion of the said judgment reads as under:-

'It is well settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a writ court will indeed bear in the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppress relevant materials or is otherwise guilty of misleading the court, the court may dismiss the action without adjudicating the matter. The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of court by deceiving it. The very basis of the writ jurisdiction rest in disclosure of true, complete and correct facts. If the material facts are not candidly stated or are suppressed or are distorted, the very functioning of the writ court would become impossible.'

7. The Bank has also relied on an affidavit dated 5.2.1996, wherein the petitioner gave an undertaking on oath to deposit the loan amount with interest if the original borrower fails to deposit the same. The petitioner also mortgaged his property in favour of the Bank by deposit of original title deed. Copy of this affidavit dated 5.2.1996 is filed as Annexure R/4.

8. Shri Praveen N. Surange, learned counsel for the Bank submits that the petitioner has a statutory remedy under the SARFAESI Act read with the Recovery of Debts due to Banks & Financial Institutions Act, 1993. Learned counsel for the Bank relies on a judgment of Supreme Court in the case of United Bank of India vs. Satyawati Tondon and others, reported in (2010) 8 SCC 110. Learned counsel for the Bank has also placed reliance on the judgment in Mardia Chemicals Ltd. and others etc. vs. Union of India and others, reported in AIR 2004 SC 2371.

9. I have heard the learned counsel at length and perused the record.

10. I will deal with the specific points raised by the parties.

Point No.(i) :

11. The bone of contention of the petitioner is that once a remedy under the Code of Civil Procedure is selected, it is not open for the Bank to switch over to a remedy under the SARFAESI Act in midway. The petitioner, in other words, intends to rely on Doctrine of Election.

High Court of Madras while dealing with this issue in the case of A. Venkatramani vs. LIC Housing Finance Limited, reported in (2007) 135 Comp.Case 514 (Madras), decided on 28.9.2006, held as under:-

'26. Section 37 of the SARFAESI Act reads:

The provisions of this Act or the rules made there under shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and 'financial institutions' Act, 1953 (51 of 1993) or any other law for the time being in force.

Thus, prima facie, it is clear, that there could be no bar, for initiating the proceedings under Section 13(2) of SARFAESI Act despite the fact, civil suits are pending. The 'financial institutions' in this case are taking the recourse under common law as well as under the special law viz. SARFAESI Act.

The Doctrine of Election clearly suggests that when two remedies are available for the same relief, the party to whom the said remedies are available, has the option to elect either of them but that doctrine would not apply to cases where the ambit and scope of the two remedies is essentially different.

28. In the case on hand, suits are filed for the recovery of the amounts due to the 'financial institutions', where cumbersome procedure is contemplated – trial, preliminary decree followed by final decree etc. under law coupled with CPC. Because of the prolonged litigation unavoidable & available under common law, when there is no certainty in realising the amount due to this kind of 'financial institutions' as well taking into account the pathetic situation of the 'financial institutions', who have advanced huge amounts to the borrower, unable to realise the same and are suffering, as per the recommendation of the Committee, the Government, after deep consideration, has brought into force the SARFAESI Act, for speedy recovery of the amounts, in addition to Act 51/1993. Under the SARFAESI Act, the recovery procedures are simplified, options are given to the 'financial institutions' to issue notice, wait till the statutory period, then invoking Section 13(4), taking possession of the property even to sell the secured asset, without intervention of the Court, thereby showing the ambit and scope of the two remedies invoked by the 'financial institutions' are essentially different, though the goal sought to be achieved may be one and the same. For these reasons, I am of the considered opinion that there there can be no estoppel, based upon the doctrine of election, and this conclusion is fortified as per the law laid down by the Apex Court in Andhra Pradesh State Financial Corporation v. Gar Re- Rolling Mills and another. (1994) 1 SCR 857.

31. A Division Bench of the Kerala High Court in Abdul Azeez v. Punjab National Bank CDJ 2005 Ker HC 442, has considered a similar situation of the case on hand, wherein it is concluded, 'here is no illegality in the Bank taking recourse to the provisions of the Securitization Act, 2002, even though civil suits are pending concerning the subject matter.' In the case involved in the above decision also, when the civil suits are pending, the Bank sought the aid of the provisions of Section 13 of the SARFAESI Act against the borrower and the same was questioned, as if when the suits are already pending, invoking Section 13(2) of 13(4) of the SARFAESI Act, without withdrawal of the civil case, is legally correct. The Division Bench of the Kerala High Court, considering the purpose and effect of Section 37 of the SARFAESI Act, has held:

The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the other laws. So, the remedy provided under the Act is additional remedy which is unless barred by the statute can be enforced at any point of time. This being the legal position, we find no illegality in the Bank taking recourse to the provisions of the Securitization Act, 2002, even though civil suits are pending concerning the subject matter. The question of law posed by the counsel is answered accordingly. In such circumstances, there is no merit in the appeals and they are accordingly dismissed.'

Pausing here for a moment, Section 37 of the SARFAESI Act is relevant for the purpose of dealing with this issue. Section 37 reads as under:-

'The provisions of this Act or the rules made there under shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and 'financial institutions' Act, 1953 (51 of 1993) or any other law for the time being in force.'

A bare perusal of Section 37 makes it clear that the provisions of the SARFAESI Act and the rules made thereunder are in addition to and not in derogation of the other laws. So, the remedy provided under the Act is an additional remedy which is unless barred by the Statute can be enforced at any point of time. This being the legal position, no illegality can be found in the action of Bank taking recourse of provisions of the SARFAESI Act.

12. Madras High Court in A. Venkatramani's case (supra) in para 35 held as under:-

'Therefore, I conclude, it is not necessary or mandatory for the financial institutions to invoke Section 13, only after withdrawing the civil suits, pending before the Civil Court.'

13. The Apex Court in the case of Transcore vs. Union of India 6 W.P. No.1494/11 (UOI) and another, reported in (2008) 1 SCC 125, held as under:-

'36. 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 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 DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to snall'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.

37. ........... . The NPA Act proceeds on the basis that the debtor has failed not only to repay the debt, but he has also failed to maintain the level of margin and to maintain value of the security at a level is the other obligation of the debtor. It is this other obligation which invites applicability of NPA Act. It is for this reason, that Sections 13(1) and 13(2) of the NPA Act proceeds on the basis that security interest in the bank/FI; needs to be enforced expeditiously without the intervention of the court/tribunal; that liability of the borrower has accrued and on account of default in repayment, the account of the borrower in the books of the bank has become non-performing. For the above reasons, NPA Act states that the enforcement could take place by non-adjudicatory process and that the said Act removes all fetters under the above circumstances on the rights of the secured creditor.

40. For the above reasons, we hold that withdrawal of the O.A. pending before the DRT under the DRT Act is not a pre-condition for taking sources to NPA Act. It is for the bank/FI to exercise its discretion as to cases in which it may apply for leave and in cases where they may not apply for leave to withdraw.'

In the light of the aforesaid discussion by the Hon'ble Apex Court, it is clear that the doctrine of election has no application in the facts and circumstances of this case.

14. In the present case there is no repugnancy or inconsistency between two remedies available in the Code of Civil Procedure & under the SARFAESI Act and, therefore, the doctrine of election has no application in the matter.

15. Thus, point No.(i) deserves to be decided against the petitioner.

Point No.(ii) :

16. So far the contention of the petitioner that the impugned proceedings under the SARFAESI Act are impermissible in the teeth of Section 37 of the SARFAESI Act is concerned, it is clear that Section 37 permits the Bank to take action in accordance with the limitation prescribed under the Limitation Act. However, the stand of the Bank is that the petitioner may take this stand before the statutory appellate forum under Section 17 of the SARFAESI Act.

17. In Satyawati Tondon's case (supra), the Apex Court held as under:-

'17. There is another reason why the impugned order should be set aside. If respondent No.1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression 'any person' used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. 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 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, 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.

27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.'

18.. The Apex Court has finally drawn the curtains on the issue & held that in view of availability of statutory remedy, the High Court shall not invoke its jurisdiction under Article 226 of the Constitution.

19. The contention of the petitioner is liable to be rejected for yet another reason. The claim even assuming for sake of argument is barred by time, can always be raised in an appeal under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal. This point is dealt with in extenso by Madras High Court in Misons Leather Ltd. vs. Canara Bank, reported in (2007) 4 MLJ 245. The relevant portion is reproduced as under:-

'10

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. We are afraid that the contention is totally misconceived. The provisions of Section 17(1) of the Act provides remedy for the borrower/ guarantor/mortgagor to challenge the action of the bank under Section 13(4) of the Act before the Debt Recovery Tribunal. The Debt Recovery Tribunal is required to decide whether the action of the bank/Financial Institutions, under Section 13(4) is in accordance with the provisions of the Act and the rules framed there under. It is open to the borrower/ guarantor/mortgagor to demonstrate before the Debt Recovery Tribunal that resort to Section 13 of the Act is not permissible by law. In a given case, the claim of the bank/Financial Institutions may be barred by limitation or there may be cases, where the adjustment of the amount paid is not reflected in the notice or the calculation of interest may not be in accordance with the contract between the parties. Needless to say that all such grounds, which render the action of the bank/Financial Institutions illegal can be raised in the proceedings under Section 17 of the Act before the Debt Recovery Tribunal.' 20. In view of this judgment, there is no manner of doubt that even in cases where question of limitation is involved, the remedy of appeal under Section 17 of the SARFAESI Act is very much available to the petitioner. 21. Thus, point No.(ii) also deserves to be decided against the petitioner. 22. The petitioner has a statutory appellate remedy and can invoke the same. The proceedings under the SARFAESI Act and the rules made thereunder are in addition to and not in derogation of other provisions of law applicable for the time being in force. The intention of the law makers is very clear that notwithstanding other provisions for the same, the SARFAESI Act can be invoked. 23. In the light of the aforesaid analysis, I do not find any justification in interfering in the matter. The writ petition is, therefore, dismissed. No costs.
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