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M/s. Kiran Cold Storage v/s Authorised Officer, Bank of Baroda

    Special Civil Application No. 5076 of 2020; Civil Application (For Stay) No. 1 of 2020
    Decided On, 04 September 2020
    At, High Court of Gujarat At Ahmedabad
    By, THE HONOURABLE MR. JUSTICE G.R. UDHWANI
    For the Appearing Parties: Aditya J. Pandya, Anip A. Gandhi, Bharat T. Rao, Advocates.


Judgment Text
Following main reliefs have been prayed in this petition.

"9(A). YOUR LORDSHIP be pleased to issue writ of certiorari or any other writ, order or direction in the nature of certiorari and be pleased to quash and set aside the judgment dated 21.02.2020 passed in Securitisation Application No. 257 of 2019.

(B) YOUR LORDSHIP be further pleased to quash and set aside the section 13(2) notice dated 21.02.2019, symbolic possession dated 03.06.2019 as well as auction notice dated 18.11.2019 and consequent sale proceedings issued pursuant to such an illegal and arbitrary demand.

(C) xxxxxx

(D) xxxxxx"

In the civil application the following main relief is prayed for.

"13(A) YOUR LORDSHIP be pleased to allow this application and be pleased to direct the opponent no.1 to accept the due amount from the applicants and to release the mortgaged property in favour of applicant.

(B) xxxx

(C) xxxx"

2. The petitioner is indebted to the respondent No.1 - bank; initially the overdraft facility was availed of to an extent of Rs.100/- lakhs which was subsequently enhanced to Rs. 3.50 crores. These transactions were concededly secured by mortgage and then again funded interest termed loan (for short "FITL") was advanced to the petitioner on 15.12.2017, which, according to the petitioner was an unsecured transaction. The assets have been declared as non-performing assets and the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for short "SARFAESI Act") have been invoked against the petitioner on the premise that the facilities aforesaid were secured under SARFAESI Act. In the proceedings with the tribunal, an application No. 257 of 2019 came to be unsuccessfully preferred by the petitioner wherein one of the contentions of the petitioner that FITL was unsecured debt came to be dispelled. Instead of availing the alternative remedy, the petition is filed on the premise that, in view of the legal questions sought to be raised in this petition, the alternative remedy would not be efficacious. The respondents, however, have urged this court to dismiss the petition for availability of alternative remedy.

3. In addition to the above contention, the rival comtentions has given rise the following issues:

(1) Whether FITL is an unsecured debt disentitling the first respondent to invoke the provisions of SARFAESI Act.

(2) Whether the petitioner has a right to redeem the mortgage under the provisions of Transfer of Property Act independent of Section 13 of SARFAESI Act.

4. To assert the right to redeem, learned counsel for the petitioner has invited attention of this court to the decisions: (1) MATHEW VARGHESE v. M. AMRITHA KUMAR, (2015) AIR SC 50 and (2) DWARIKA PRASAD v. STATE OF UTTAR PRADESH, (2018) AIR SC 1286.

4.1 Learned counsel for the petitioner has also invited attention of this court to the notice issued under Section 13(2) of the SARFAESI Act, mortgage deed qua over- draft facilities, averments by the respondents in the affidavit, the sanction letter of FITL, the provision of different rates of interest in the terms of two different facilities, separate loan and separate guarantee agreement, separate operation of two accounts; to make his submission good that only over-draft facilities was secured; FITL was unsecured and that the security contemplated in the agreement as to FITL having remained unfulfilled by the petitioner, the FITL remained unsecured as also it was unsecured in absence of the transfer of interest in accordance with the provisions contemplated in Transfer of Property Act.

5. Per contra, learned counsel for the respondents have drawn attention of this court to the fact that it was on account of deliberations under the guidelines of Reserve Bank of India that the rephasement of loan facility was extended to the loanees in distress, and the petitioner approached the bank with the letter stating that he was not able to pay the instalments as also the interest since the period specified in the letter; FITL was sanctioned only to save the assets being declared non-performing assets, and thus, the rephasement was an integral part of the over-draft facility which was not required to be secured by independent security as the security already furnished while availing of over-draft facility was sufficient and was agreed to be valid security for FITL also. Attention of this court was also drawn to the documents executed by the petitioner subscribing to the afore-mentioned fact.

6. The respondents would also contend that despite the petitioner having an alternative remedy at his disposal under SARFAESI Act, Article 226 has been invoked, unnecessarily, only to delay the recovery, and therefore, the cost should be imposed upon the petitioner. Reliance is placed on Letters Patent Appeal No. 1025 of 2018 with allied matters PRAVIN COTGIN PVT. LTD. v. AXIS BANK LIMITED; the decision which was rendered on 17.08.2020.

7. Having considered the rival submissions, at the outset, this court is of the opinion that the petition must fail in view of the alternative efficacious remedy in the nature of appeal available to the petitioner under SARFAESI Act against the order impugned in this petition. It is settled legal position that entertaining of the petition despite alternative remedy is a discretion to be exercised depending upon the facts and circumstances of each case. The scope and ambit of Article 226 is no doubt very wide but self-imposed restrictions are always exercised when alternative efficacious remedy is available to the litigant. The jurisdiction under Article 226 ignoring the alternative remedy have been exercised where a complete lack of inherent jurisdiction is found with the authority seeking to exercise the jurisdiction, or the remedy is so cumbersome that without causing serious prejudice to the statutory rights of the litigant, it cannot be availed of; or for such similar reasons the High Court has been exercising the discretion despite alternative remedy. In the instant case, there is an assertion by the respondent No.1 and denial by the petitioner in the proceedings before the Tribunal that both the debts are secured as defined in SARFAESI Act. The issue raised by such affirmation and denial would necessarily require the adjudication by the tribunal as also during the statutory appeal contemplated under SARFAESI Act, and thus, the issue would fall within the jurisdiction of statutory machinery. This court therefore does not find any special circumstance warranting the exercise of discretion under Article 226 of the Constitution of India. The petition therefore ought to fail on this count alone. However the matter having been extensively argued on merits despite objection as regards its maintainability, by the learned counsel for the petitioner, this court proceeds to decide the case on merits as well.

8. One of the contention as noted above is as regards right of the petitioner to redeem the mortgage by clearing all outstanding dues before execution of the sale deed in favour of respondent No.2 who is a successful bidder in the auction carried out by the bank. The answer to this submission is traceable to Section 13(8) of the SARFAESI Act which reads thus:

"Sec.13(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets -

(i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and

(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.]

The provision was substituted by Act 44 of 2016 with effect from 01.09.2016 and the pre-amended text reads thus:

"(8). If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset."

9. The significant change which can be noticed between the two provisions is that while the unamended provision saved the transfer of secured assets on the debtor tendering the dues of the creditor inclusive of cost, charges and expenses at any time before the date of execution of sale deed, the amended provision expedited the stage of such payments to a stage before the publication of notice for public auction if the debtor desires to save the asset being auctioned. The provision itself is an opportunity to the debtor to redeem the mortgage, which right the debtor has under the Transfer of Property Act. The conjoint reading of the amended provision with the relevant provision of Transfer of Property Act would lead to the conclusion that while the debtor has a right to seek redemption under the provisions of Transfer of Property Act, such right must be availed of, at the stage provided in sub-sec.8 of Section 13 of SARFAESI Act. As a matter of fact, the provision does not contemplate a fresh right but merely sets the stage of exercise of the right to redeem contemplated under the Transfer of Property Act. In the facts of the instant case, concededly, the petitioner who was required to tender the dues before the occurrence of events indicated in the amended provision, did not do so, and thus, missed the opportunity, and it is too late in a day for him now to make a tender particularly when the respondent No.2 has successfully participated in the auction. The conception by the petitioner that right under the Transfer of Property Act is independent than the right under Section 13(8) of the SARFAESI Act is thoroughly misconceived. Having failed to exercise such right at appropriate stage; the petitioner has no right to install the sale proceedings. The judicial pronouncements (supra) relied upon by the petitioner on the subject can be of no avail to it as it concededly dealt with unamended provision (supra) with which, this case is not concerned.

10. This takes the court to the next question as to whether FITL transaction is independent of the original transaction of over-draft facility. One crucial aspect which remains undisputed is that FITL facility was availed of by the petitioner for repayment of interest due on the over-draft facility. To that extent, undisputedly, there is an over-lapping between the two transactions. It is evident from the record that, somewhere in the year 2017, a need was felt to help loanees in distress to help them tide over the financial crisis being faced by them then; it appears that under the advise of RBI a meeting headed by Collector of Banaskantha District was held wherein certain guidelines were prescribed and the modalities for rephasement of the facilities were evolved and offered to the distressed loanees on the terms and conditions as may be agreed upon. It is unnecessary for this court to deliberate in detail on this subject; suffice it to say that the petitioner seems to have made an application after the said event, to the bank pointing out his inability to repay the instalment with interest. It appears that thereafter FITL in the sum of Rs.46.00 lakhs was sanctioned and availed of by the petitioner without objecting to the offer. It thus cannot be disputed that F

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ITL is a rephasement of original facility which facility was concededly secured. It is no doubt true that security documents other than those which secured the original loan or original facility, to secure FITL, were not executed; but certainly the security was intended as is evident by FITL agreement as also a writing, undisputedly executed by the petitioner practically adopting the security offered in the original facility as the security for the FITL. 11. Having regard to the totality of the facts concerning the said subject, it appears that the FITL was intended to be integrated part of the original transaction notwithstanding its separate execution with different terms and conditions. In the opinion of this court, as such separate security was unnecessary as the very nature of the agreement relating to FITL is an indicator that the purpose of FITL was to help the petitioner to discharge the original liability. 12. Last but not the least, concededly, at the time of availing of FITL, the petitioner agreed to secure the transaction and it now cannot be permitted to take advantage of its own omission and therefore also the transaction is required to be treated as secured transaction. 13. For the foregoing reasons, the petition and the civil application must fail; accordingly dismissed.
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