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Prakash Singh V/S Oriental Bank of Commerce and Others.

    W.P. No. 758 (W) of 2020

    Decided On, 06 February 2020

    At, High Court of Judicature at Calcutta

    By, THE HONORABLE JUSTICE: SABYASACHI BHATTACHARYYA

    For Petitioner: Arindam Banerjee, Lalratan Mondal and Subhajit Chattopadhyay And For Respondents: Srijit Chakraborty, M. Rahman, Tanweer Ahmed Khan and A. Jamal



Judgment Text


1. The present challenge is directed against a proceeding taken out by the respondent-bank under Section 14 of the SARFAESI Act, 2002.

2. Learned counsel for the petitioner argues that the petitioner, being a monthly tenant in respect of the property-in-dispute, was entitled to be heard prior to the disposal of the proceeding under Section 14 of the 2002 Act.

3. It is submitted that, despite there being an order passed by a co-ordinate Bench in W.P. 8307(W) of 2014, directing the police authorities to ensure compliance with the order passed by the District Magistrate on March 1, 2013 in such proceeding under Section 14 of the said Act, the said order was obtained by the respondent-bank by practising fraud on court inasmuch as the present petitioner, who was a necessary party, being a tenant, was not impleaded in the said writ petition and/or the proceeding under Section 14 of the 2002 Act. Moreover, it is submitted that the bank lost its status as a "secured creditor" as defined in Section 3(zd) of the 2002 Act, after the respondent-bank transferred its title to the auction purchaser, admittedly, in the year 2011.

4. It is submitted that upon such transfer, the bank lost its right to maintain or proceed with the application under Section 14 of the 2002 Act, which necessarily requires a secured creditor to maintain such application.

5. By placing reliance on the judgment reported at : 2014 (6) SCC 1 (Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited and others), learned counsel for the petitioner argues that the Supreme Court categorically held that in case of a lessee or even a person claiming to be a lessee, the concerned Magistrate under Section 14 of the SARFAESI Act has to give an opportunity of hearing to such person, claiming to be a lessee, consistent with the principles of natural justice and then take a decision on the application under Section 14 of the 2002 Act.

6. Learned counsel for the petitioner further submits that the Supreme Court further elaborated the judgment rendered in Harshad Govardhan Sondagar (supra) in the judgment reported at : (2016) 3 SCC 762 (Vishal N. Kalsaria Vs. Bank of India and others) wherein it was held, inter alia, that the principles laid down in Vishal N. Kalsaria (supra) also applied to tenants having unregistered lease agreements with the borrower. It is, thus, argued that the entire proceeding under Section 14 of the 2002 Act is vitiated on the said two scores.

7. It is submitted that, since it is well-settled that fraud vitiates all, as also laid down in the decision reported at : (2007) 4 SCC 221 (A.V. Papayya Sastry and others vs. Govt. of A.P. and others), the petitioner is entitled to move before a co-ordinate forum, or even before an "inferior" forum challenging the veracity of an order passed by a superior forum on the ground that the same is a nullity, being vitiated by fraud.

8. It is evident from the order passed by a co-ordinate Bench, it is submitted, that the bank suppressed the prior sale of the property to an auction purchaser as long back as in the year 2011, while obtaining the said order from the co-ordinate Bench.

9. Learned counsel appearing for the bank, by placing reliance on Section 17(4A), as amended with effect from September 1, 2016, of the 2002 Act, submits that any person claiming to be a tenant or lessee can approach the tribunal under Section 17 of the 2002 Act for having such claim vindicated and the tribunal, after examination of the facts of the case and evidence produced by the parties in relation to such claims shall, for the purpose of enforcement of security interest, have the jurisdiction to examine whether the conditions laid down therein were fulfilled.

10. As such, it is argued that the petitioner has an equally efficacious alternative remedy in the form of an application under Section 17 of the 2002 Act.

11. It is further argued that, in any event, the petitioner could also have challenged the order of possession passed by the Magistrate under Section 14 of the 2002 Act within the period of limitation. Having not done so, it is argued, the present writ petition ought not to be entertained at all.

12. Upon considering the submissions of the parties, it is seen that the expression "secured creditor" includes, within the contemplation of Section 3(zd) of the 2001 Act, that any bank or financial institution or any consortium or group of banks or financial institutions, holding any right, title or interest upon any tangible asset or intangible asset, falls within the definition of the expression "secured creditor".

13. In the present case, the petitioner has argued that, upon devolution of interest by sale to the auction purchaser, the bank lost its status as secured creditor as contemplated in the 2002 Act. Section 14 categorically specifies that it is the secured creditor of any secured asset who can maintain an application under the said provision.

14. Delving into the true purport of Section 3(zd)(i) of the 2002 Act, it is seen that the bank or financial institution, in order to retain its status as a "secured creditor", has to have a right, title or interest upon the asset-in-question.

15. Since ownership is a bundle of rights, including the component of possession, as the possession of the asset-in-question was not handed over to the auction purchaser by the bank till date, it has to be construed that the bank still has a limited interest in the asset, insofar as the possession thereof is concerned, although the title thereof has already been transferred in favour of a third party. In such view of the matter, a restricted view of the definition of "secured creditor" would frustrate the purpose and the scheme of the 2002 Act, which provides for a summary remedy for banks and financial institutions to take measures in respect of defaulters. Thus, taken in such perspective, the bank still remains a secured creditor for the purpose of satisfaction of Section 14 of the 2002 Act, since it comes within the broad interpretation of the said expression in Section 3(zd) of the said Act. Hence, the argument that the application under Section 14 was not maintainable at the behest of the bank in view of prior transfer of the property in favour of a third party, cannot be accepted.

16. However, the petitioner is a on sound footing insofar as the contention of non-impleadment of the petitioner to the proceeding under Section 14 is concerned. The judgment of the Supreme Court in Harshad Govardhan Sondagar (supra), read in continuation with Vishal N. Kalsaria (supra), point unerringly towards the sole conclusion that even monthly tenants covered by the Rent Control Acts, and not merely registered lease holders, get the protection of the law. Once a tenancy is created, a tenant can be evicted only after following due process of law as prescribed under the provisions of the Rent Control Act. In Vishal N. Kalsaria (supra) it was specifically held that a tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act, as that would amount to stultifying the statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on tenants under the Rent Control Act.

17. In such view of the matter, it was incumbent upon the concerned Magistrate to give a hearing worthy the name to the present petitioner prior to passing an order under Section 14 of the SARFAESI Act and before taking subsequent steps for eviction of the writ petitioner, who claims to be a tenant in his own right in respect of the property-in-dispute.

18. Despite there being a provision of appeal against an order passed by the Magistrate under Section 14 of the 2002 Act itself, the scope of such appeal is limited to the order itself and cannot operate on the maintainability of the entire proceeding under Section 14 of the 2002 Act.

19. The relief provided under Section 17 of the said Act, as extended to persons claiming to be tenants, which the petitioner does, under sub-section (4A), contemplates an original application by the present petitioner, who claims that he had no knowledge of the proceeding prior to communication with the bank, when the petitioner came to know about the direction of the co-ordinate Bench of this Court for the first time.

20. It is submitted by the petitioner that till date, the petitioner does not have the necessary papers pertaining to the proceeding under Section 14 or the connected proceeding under Section 13 of the 2002 Act.

21. In such view of the matter, the proceeding under Section 14 of the 2002 Act is prima facie bad in law in the absence of the present writ petitioner and, as such, might have been quashed by this Court under Article 226 of the Constitution of India.

22. In spite of the above observation, that the proceeding under Section 14 of the 2002 Act is vitiated for non-impleadment of the writ petitioner, it would be unfair and against the scheme of the 2002 Act to take the clock back prior to the initiation of Section 13(2) proceeding or even the proceeding under Section 14, in the event the proceeding itself is quashed at this juncture.

23. As such, the ends of justice would be sub-served if the petitioner is impleaded in the proceeding under Section 14 of the 2002 Act and the order dated March 1, 2013 passed by the District Magistrate in the connected proceeding under Section 14 of the 2002 Act is set aside. In fact, it still remains open to the petitioner to take out an independent application under Section 17 of the Act as well, by virtue of the scope provided under Sub-Section (4A) thereof.

24. As far as the direction of co-ordinate Bench is concerned, the said order was in the nature of an order in terrorem and, as such, this Court need not go to the extent of an examination whether the same was vitiated by fraud. Since orders in terrorem are, by their very nature, directory in a sense, particularly in view of the Respondent Bank having suppressed material facts before the coordinate Bench, the said direction upon the police to implement the order of the Magistrate cannot be a deterrent to this Court entering into the merits of the present writ petition; more so, since the order of the Magistrate, on the basis of which such direction was passed, is itself being set aside in the present writ petition, being vitiated due to non-impleadment of the petitioner in the proceeding under Section 14 of the 2002 Act.

25. Accordingly, W.P. 758(W) of 2020 is disposed of by directing the respondent No. 1/bank to implead the present petitioner in the proceeding under Section 14 of the 2002 Act, initiated by the respondent No. 1/bank in connection with the property in dispute in the present writ petitio

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n. The order dated March 1, 2013 passed by the District Magistrate in such proceeding is hereby set aside. The Magistrate is directed to dispose of the proceeding under Section 14 of the SARFAESI Act, 2002 only upon giving full hearing to all parties concerned, including the added party, that is, the present writ petitioner. 26. It is further made clear that the writ petitioner will also be at liberty to take out an independent application under Section 17 of the SARFAESI Act, 2002 claiming to be a tenant in respect of the disputed property, the veracity of which claim shall be examined by the tribunal in accordance with law, if so approached, upon examination of the facts of the case and evidence produced by the parties. The concerned Magistrate is directed to dispose of the proceeding under Section 14 of the SARFAESI Act, 2002, indicated above, as expeditiously as possible upon hearing all sides, preferably within two months from the date of communication of this order to the said Magistrate. 27. There will be no order as to costs. 28. Urgent certified website copies of this order, if applied for, be given to the parties upon compliance of all requisite formalities.
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