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M/S. Rafiq Traders & Others v/s District Magistrate & Others

    Writ – C. No. 15581 of 2020

    Decided On, 14 October 2020

    At, High Court of Judicature at Allahabad

    By, THE HONOURABLE MS. JUSTICE NAHEED ARA MOONIS & THE HONOURABLE MR. JUSTICE VIVEK VARMA

    For the Petitioners: Vineet Kumar Singh, Advocate. For the Respondents: C.S.C., Satish Chaturvedi, Advocate.



Judgment Text

Heard Shri Vineet Kumar Singh, learned counsel for the petitioners, Shri Satish Chaturvedi and Shri P.P. Srivastava, learned counsel for the respondent Nos. 2 and 3 and learned Standing Counsel representing respondent No. 1.

The instant petition has been filed by the petitioners under Article 226 of the Constitution of Indian seeking the following relief:

“1. Issue a suitable writ, order or direction in the nature of certiorari quashing the impugned order dated 13.8.2020 passed by the District Magistrate, Jalaun at Orai in Case No. 49 of 2020 (State Bank of India, Main Branch Orai Vs. M/s Rafiq Traders and others) and the impugned order dated 10.1.2020 passed by the District Magistrate, Jalaun at Orai in Case No. 46 of 2020 (State Bank of India Vs. Rafiq Traders and others) (Annexure Nos. 8 and 5 to the writ petition.

2. Issue a writ, order or direction in the nature of mandamus commanding the respondents not to give effect to the impugned orders referred to above.

3. Issue a suitable writ, order or direction in the nature of mandamus commanding the respondents to adjourn the proceeding initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2020 against the petitioners until the decision in Original Suit No. 209 of 2018 (State Bank of India Vs. M/s Rafiq Traders and others), pending in the Court of Civil Judge (SD), Jalaun at Orai.”

Proceeding has been undertaken against the petitioners pursuant to the steps taken under Section 13(2) and 13(4) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2020 (hereinafter referred to as the SARFAESI Act”). From the perusal of the record, it transpires that against the aforesaid proceeding, the petitioners had already approached this Court by filing Writ-C No. 12422 of 2019 (M/s Rafiq Traders Vs. State Bank of India and another) and a Coordinate Bench of this Court, after considering the submissions of the learned counsel for the petitioners in that writ petition, dismissed the petition as not maintainable on the ground of availability of alternative remedy of filing application/appeal under Section 17(1) of the SARFAESI Act.

However, the petitioners have not availed the remedy of appeal under Section 17(1) of SARFAESI Act and again approached this Court for quashing of the impugned order which has been passed by the District Magistrate, respondent No. 1 in exercise of powers under Section 14(1) of SARFAESI Act. The petitioners also challenged the order whereby the recall/restoration application moved by the petitioners for recalling the order dated 10.1.2020 has also been rejected by the District Magistrate, Jalaun by order dated 13.8.2020.

This is how the petitioners have again approached this Court.

Learned counsel for the petitioners submits that without considering the objections of the petitioners and without giving any opportunity of hearing to the petitioners, the impugned order dated 10.1.2020 has been passed by respondent No. 1, which is absolutely unjust, illegal and arbitrary.

Learned counsel for the petitioners further contended that for the same cause, the respondent-bank has instituted a civil suit being Original Suit No. 209 of 2018 in the court of Civil Judge (SD), Jalaun seeking recovery of outstanding dues from the petitioners by way of attaching and subjecting the disputed property to auction proceeding, which is still pending for consideration. When the suit filed by the respondent-bank for recovery of the dues was pending, the District Magistrate has erred in passing the order which is in clear violation of the Principle of Natural Justice.

Learned counsel for the petitioners in support of his submissions, has relied upon the following decisions of Hon’ble Supreme Court as well as of High Courts:

1. Harshad Govardhan Sondagar Vs. International Assessts Reconstruction Company Limited and others, (2014) 6 SCC 1.

2. Kalyani Sales Company and another Vs. Union of India and another, 2006 AIR (Punjab) 107.

3. Dalip Singh Vs. State of Uttar Pradesh and others, (2010)2 SCC 114.

4. Assistant Commissioner, Commercial Tax Department Vs. Shukla and brothers, (2010) 4 SCC 785.

5. Asit Kumar Kar Vs. State of West Bengal and others, 2009(2) AWC 1628.

6. Ghurahoo Prasad alias G. Prasad and others Vs. State of U.P. and others, 2018 (10) ADJ 748.

7. Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and others, (1998)8 SCC 1.

Learned counsel for the petitioners has contended that in the above noted cases, the writ petitions have been entertained and the Hon’ble Apex Court has consistently held that alternative remedy is not a bar for the enforcement of fundamental right or when there is violation of principle of natural justice.

Learned counsel appearing on behalf of respondent Nos. 2 and 3 has refuted the contention of the learned counsel for the petitioners and has submitted that there is no illegality or perversity in the order passed by the District Magistrate in initiating the proceeding in exercise of powers under Section 14 (1) of the SARFAESI Act for taking possession of the property in question. The Magistrate was well within his jurisdiction in passing the impugned order.

Learned counsel for the respondents further submits that the petitioners have not approached this Court with clean hands as is evident from the pleadings as the petitioner has earlier approached this Court against the proceeding initiated against them under Section 13(2) and 13(4) of the Act. At that stage, the petitioners had never replied to the notice issued under Section 13(2) by the Bank for the realization of the loan amount. If he would have filed the objection within stipulated period of 60 days, it could have been considered by the bank, but failure on the part of the petitioners to reply to the notice, the Bank has proceeded under Section 13(4) of the Act for taking possession of the property in question. Even, thereafter, the petitioners had an alternative remedy to approach the Bank, but on account of their failure to do so, the proceeding under Section 13(4) of the Act was initiated against them.

Being aggrieved by the said proceeding, the petitioners had filed writ petition, which too has been dismissed vide order dated 22.4.2019 directing the petitioners to avail alternative remedy as provided under Section 17(1) of the SARFAESI Act. The said remedy was not availed by the petitioners and now when the order has been passed by the District Magistrate on the application moved by the Bankauthority for initiating proceeding for taking possession of the property in question, the petitioners had made a futile exercise for moving an application for recall of the said order, which too has been rejected by respondent No. 1.

Learned counsel for the respondents No. 2 and 3 has relied upon the decision of Hon’ble Supreme Court in Authorized Officer, State Bank of Travancore and another Vs. Mathew K.C. and the decision of this Court in Jafar Ahmad Khan Vs. State of U.P. and others (Writ-C No. 33616 of 2018), decided on 14.12.2018.

Hon’ble Apex Court in Mathew K.C. (Supra) has held that if alternative remedy is available, normally the writ petition under Article 226 of the Constitution of India ought not to be entertained. In the aforesaid case, Hon’ble Apex Court has relied upon various decisions, particularly, Union Bank of India Vs. Satyawati Tandon, (2010) 8 SCC 110. Hon’ble Apex Court in Satyawati Tandon (Supra) has held as under:

“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 persons 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.”

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 the 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.”

In similar circumstances, this Court in Jafar Ahmad Khan (Supra) dismissed the writ petition.

As the petitioners have alternative remedy of approaching the DRT, hence the petitioners do not deserve any indulgence by this Court.

We have considered the submissions advanced by the learned counsel for the parties and have gone through the case law relied upon by the learned counsel for the parties. The proceeding initiated against petitioner No. 1 by issuing demand notice dated 11.10.2018 under Section 13(2) to discharge in full its liabilities amounting to Rs. 8,78, 428/- within a period of 60 days. The aforesaid notice was also served upon the guarantors, who were arrayed as petitioners No. 2 to 4 to clear the outstanding dues of respondent-bank and on failure to pay the outstanding dues, the Bank has initiated proceeding under sub-clause (4) to Section 13 of the Act for taking symbolic possession of the disputed property by way of issuing notice dated 26.2.2019.

At this juncture, there is no pleading of the petitioners that they have filed any objections to the demand notice or to the possession notice, rather the petitioners have earlier approached this Court under Article 226 of the Constitution of India for quashing of the proceeding initiated by the Bank-authority. The said petition came to be dismissed on 22.4.2019 directing the petitioners to avail alternative remedy available by filing appeal under Section 17(1) of the SARFAESI Act. Again no reason was indicated in the pleading as to why the petitioners avoided to approach the DRT and it is also not the case of the petitioner No. 1 that he had made any attempt to approach the Bank for the repayment of his loan after the account of the petitioner No. 1 has been declared NPA and only when the respondent- Bank approached the District Magistrate for taking possession of the property in question and the District Magistrate has passed the order under Section 14 of the Act, the petitioner moved a recall application for recalling the order dated 10.1.2020 and for the first time a plea has been taken that the petitioner was not afforded any opportunity of hearing prior to passing of the aforesaid order.

For ready reference, Section 14 of the SARFAESI Act is being reproduced herein under:

“14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-

(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him-

(a) take possession of such asset and documents relating thereto; and 9 of 20

(b) forward such asset and documents to the secured creditor.

Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that-

(i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application;

(ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period;

(iii) the borrower has created security interest over various properties giving the details of properties referred to in subclause (ii) above;

(iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount;

(v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset;

(vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower;

(vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for nonacceptance of such objection or representation had been communicated to the borrower;

(viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act;

(ix) that the provisions of this Act and the rules made thereunder had been complied with:

Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets (within a period of thirty days from the date of application):

Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days. Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.

(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him-

(i) to take possession of such assets and documents relating thereto; and

(ii) to forward such assets and documents to the secured creditor.

(2) For the purpose of securing compliance with the provisions of sub- section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.”

We are conscious of the settled law that discretionary power under Article 226 of the Constitution is not absolute and can be exercised judiciously in given facts of a case and in accordance with law. In view of the availability of statutory remedy available to the petitioners under Section 17(1) of the Act, the petition is liable to be dismissed at the threshold.

In I.TC Limited Vs. Blue Coast Hotel, (2018) LW 492, Hon’ble Apex Court was of the the view that debtor is not entitled to the discretionary relief under Article 226 of the Constitution which is indeed an equitable relief. In the aforesaid case, the Hon’ble Apex Court was of the view that non-compliance of sub-section 3(A) of Section 13 cannot be of any avail to the debtor whose conduct has been merely to seek time and not to repay the loan as promised. In the case of State of Maharashtra Vs. Digamber, 1995(4) SCC 683, Hon’ble Supreme Court observed as under :

“Power of the High Court to be exercised under Article 226 of the Constitution, if is discretionary, its exercise must be judicious and reasonable, admits of no controversy. It is has cautioned time and again as to what particular rule of natural justice to be applied to a particular case must depends upon the facts and circumstances of that case. If some principle of nature justice has been contravened, the Court has to decide whether the observance of that rule is necessary on the just decision of the case for that reason, a person's entitlement for relief from a High Court under Article of the Constitution, be it against the State or anybody else, even if is founded on the allegation of infringement of his legal right, has to necessarily depend upon unblame-worthy conduct of the person seeking relief, and the Court refuses to grant the discretionary relief to such person in exercise of such power, when he approaches it with unclean hands or blame- worthy conduct.

Hon’ble Supreme Court very recently in ICICI Bank Limited Vs. Umakanta Mohapatra, 2019(13) SCC 497 held as under:

“ Delay condoned.

Leave granted.

Despite several judgments of this Court, including a judgment by Hon’ble Mr. Justice Navin Sinha, as recently as on 30.01.2018, in Authorized Officer, State Bank of Travancore and Anr. vs. Mathew K.C., (2018) 3 SCC 85, the High Courts continue to entertain matters which arise under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), and keep granting interim orders in favour of persons who are Non-Performing Assets (NPAs).

The writ petition itself was not maintainable, as a result of which, in view of our recent judgment, which has followed earlier judgments of this Court, held as follows:-

“18. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd. and Another, (1997) 6 SCC 450, observing:-

“32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.”

The writ petition, in this case, being not maintainable, obviously, all orders passed must perish, including the impugned order, which is set aside.

The appeals are allowed in the aforesaid terms.

Pending applications, if any, shall stand disposed of.”

Hon’ble Apex Court has cautioned time and again as to what particular rule of natural justice to be applied to a particular case must depend to a great extent upon the facts and circumstances of that case. If some principle of nature justice has been contravened, the Court has to decide whether the observance of that rule is necessary for a just decision on the facts.

In the case in hand, the order passed by the District Magistrate cannot said to violative of Principle of natural justice. In fact, it is specifically observed that the petitioner No. 1 has neither paid any heed to the notice, which was issued under Section 13(2) of the Act nor filed any objection with respect to the demand for repayment of dues of the bank. Thus, it does not lie in the mouth of the petitioner to say that the District Magistrate has passed the order without assigning any reasons or opportunity of hearing ought to have been given to the petitioners.

The cases, which have been cited by the learned counsel for the petitioners are not at all applicable to the facts of the present case.

In Harshad Govardhan Sondagar (Supra) the case of the appellant before the Hon’ble Apex Court was dispossession of the premises under Section 14 of the Act was against the lessees of the borrowers and their claim was that they are entitled to remain in possession of the secured assets and in that light the order was passed to give opportunity of hearing to the appellant-lessees and the secured creditor. In the said case it has been laid down by the Hon’ble Apex Court that merely filing of a suit by the secured creditor would not debar the bank to proceed under the SARFAESI Act.

Kalyani Sales Company (Supra) was a case related to pecuniary jurisdiction of the DRT and the recovery tribunal was directed to entertain and decide the appeal filed by the petitioner in accordance with law on payment of fixed court fee pursuant to the proceeding under Section 13(4) of the Act.

In Dalip Singh (Supra), the Hon’ble Apex Court has imposed cost upon the petitioner, who had approached the Court under Article Article 136, 226 and 32 of the Constitution of India with unclean hand. It has been observed that 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.

In Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota (Supra), Hon’ble Apex Court reminded the High Courts that while exercising powers under Article 226 of the Constitution, there should be some reasoning recorded by the Court declining or granting relief to the petitioners as in the said case, it was a non-speaking order in just one paragraph and that is why the Hon’ble Apex Court interfered and remanded the matter.

The facts involved in Asit Kumar Kar and Ghurahoo Prasad alias G. Prasad and others (Supra) are also not applicable to the facts of the present case.

In Whirlpool Corporation (Supra) question of jurisdiction was involved, hence the writ petition was entertained even though there was an alternative remedy.

The second submission of the

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learned counsel for the petitioners is that the suit filed by the bank is pending and the District Magistrate has ignored this fact and proceeded to pass the order under Section 14(1) of the Act. The answer to this question is Section 34 of the SARFAESI Act, which is extracted herein below: “34. Civil court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).” From the perusal of second limb of Section 34 of the Act, it would reveal that no injunction can be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. In view of the above provision, the petitioner cannot derive any benefit of this objection also. In the case in hand, the petitioners, who had earlier approached this Court, had an alternative remedy against the proceeding under Section 13(2) and 13(4) to approach the DRT, but has not approached before the appropriate forum and there in no candid disclosure of the relevant material facts as to the reasons why they have not availed the alternative remedy, which clearly speaks in volume that they are not interested to repay the loan, which was taken by petitioner No. 1 by way back in the year 2018 and was trying to linger on repayment on one ground or the other. The pleadings in the writ petition are very bald and the allegations of violation of principle of natural justice is rhetorical, as such the relief sought by the petitioners is highly misconceived. The writ petition is not instituted to show any bonafide from any remote corner but only to somehow install further action of the bank-secured creditor. It cannot be said that the orders passed by the District Magistrate are without jurisdiction or non-speaking. There is no illegality or infirmity in the impugned orders passed by the District Magistrate, which may call for any interference. In view of what has been indicated herein above, we find no justification for invoking our extraordinary jurisdiction under Article 226 of the Constitution of India. The writ petition sans any merit is accordingly dismissed.
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