1. Leave to amend the cause title for impleading the District Magistrate, and the Mamlatdar-Executive Magistrate as the party-respondents in the petition is granted. Necessary amendment be carried out forthwith.
2. The petitioners by way of present petition filed under Article 226 of the Constitution of India have prayed for the following reliefs:
“25.(a) Your Lordship be pleased to quash and set aside the declaration of account as NPA on 31.3.2018, as being without jurisdiction, illegal and in breach of the RBI guidelines on Framework for Revival & Rehabilitation of MSMEs, annexed at Annexure - to this petition and in breach of RBI guidelines on Asset Classification, Provisioning and Income Recognition Norms to further issue a writ of mandamus to the respondent Bank directing the respondent Bank to implement and follow the RBI guidelines on Framework for Revival and Rehabilitation of MSMEs in the interest of justice.
(b) Your Lordship be pleased to declare, quash and set aside the demand notice dated 17.4.2018 at Annexure-B, issued by the respondent under Section 13(2) of the SARFAESI Act, 2002 such as the possession notice dated 27.6.2018 at Annexure-H, order of the learned Collector dated 30.10.2018, annexed at Annexure J, as being illegal, without jurisdiction, in breach of the principles of natural justice and in violation of the guidelines of the Reserve Bank of India and the provisions of the SARFAESI Act, 2002 in the interest of justice.
(c) Your Lordship be pleased to stay the order dated 30.10.2018 of the learned Collector, annexed at Annexure J, and the notice of the learned Mamlatdar dated 12.12.2018, annexed at Annexure K, and all subsequent steps pursuant to the demand notice dated 17.4.2018 taken by the respondent Bank under Section 13(2) of the SARFAESI Act, 2002 and further be pleased to restrain the respondent Bank from taking steps against the petitioners under the SARFAESI Act, 2002 pending admission and final disposal of the petition.”
3. The broad facts as transpiring from the petition and the annexures thereto are that the petitioner No. 1 is a partnership firm and the petitioner No. 2 is the father of one of the partners of the petitioner No. 1 firm. According to the petitioners, the petitioner No. 1 is a small enterprise as provided under the Micro, Small and Medium Enterprises Development Act, 2006. The petitioner company had availed finance from the respondent-Bank by way of cash credit limit of Rs. 12 crores and term loan of Rs. 1.20 crores. According to the petitioners, the petitioner No. 1 company was regularly paying its instalments, however, due to implementation of demonetization and GST, the petitioners’ business started to suffer. It is the further case of the petitioners that the respondent Bank failed to act as per the guidelines of the RBI being Framework of Revival and Rehabilitation of Micro, Small and Medium Enterprises, dated 17.3.2016, and classified the account of the petitioner No. 1 as Non-Performing Asset (hereinafter referred to as ‘NPA’) on 30.10.2018. The respondent Bank thereafter issued a demand notice dated 17.4.2018 to the petitioners under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’). The petitioners therefore raised objections by writing a letter dated 13.6.2018, which objections were dealt with by the respondent Bank as per Section 13 (3-A) of the SARFAESI Act as per the letter dated 28.6.2018. According to the petitioners, however in the meantime, the respondent Bank proceeded to take symbolic possession of the secured assets of the petitioners by issuing possession notice dated 27.6.2018 informing the petitioners that the respondent Bank would take possession thereof on 5.7.2018. The respondent-Bank thereafter proceeded under the provisions of the SARFAESI Act by filing application and an affidavit before the District Magistrate under Section 14 of the SARFAESI Act for taking over physical possession of the premises in question belonging to the petitioners. The petitioners submitted their objections to the said application. However, the respondent District Magistrate vide order dated 30.10.2018 (Annexure-J) allowed the said application and authorised the respondent Mamlatdar and Executive Magistrate to take physical possession of the premises in question belonging to the petitioners. Accordingly, the respondent-Mamlatdar and Executive Magistrate vide letter dated 12.12.2018 has informed the petitioners that pursuant to the order passed by the District Magistrate under Section 14 the SARFAESI Act possession of the premises in question shall be taken over on 18.1.2019. The petitioners therefore filed the present petition on 15.1.2019 seeking reliefs as stated herein above.
4. Learned Advocate Mr. Narendra Khare appearing on caveat for the respondent No. 1-Bank, having raised preliminary objection as regards the maintainability of the present petition pressing into service Section 17 of the SARFAESI Act to the effect that an alternative efficacious statutory remedy is available to the petitioners for challenging the measures taken by the respondent Bank under Section 13(4) of the SARFAESI Act, the learned Advocate Mr. A.L. Shah appearing for the petitioners vehemently submitted that the respondent Bank having failed to follow the procedure as prescribed under Sub-sections (2), (3) and (3A) of Section 13, the measures taken under Sub-section (4) thereof were not required to be challenged under Section 17 of the SARFAESI Act. He also submitted that the account of the petitioner No. 1 company could not have been declared as NPA account in view of the guidelines issued by the RBI. Mr. Shah has placed heavy reliance on the decision of the Division Bench of this Court in the case of Rajkot Nagarik Sahkari Bank Ltd. v. Jignesh Jayantilal Ramanuj, IV (2012) BC 785 (DB)=AIR 2011 Gujarat 163 to submit that the measures taken under Section 13(4) of the Act could be challenged before the DRT under Section 17 of the SARFAESI Act. He has also placed reliance on the judgment of the Patna High Court in the case of Tirupati Storage and Allied Pvt. Ltd. v. United Commercial Bank, Kolkata, 2012 (4) PLJR 748 to submit that the provisions contained in Section 13(4) of the SARFAESI Act, are independent to the other provisions contained in Sections 13(2), 13(3) and 13(4) and that when there is violation of Sub-sections (2), (3) and (3-A) of Section 13, the petitioners could approach the High Court under Article 226 of the Constitution of India. The reliance is also placed on one unreported judgment of this Court passed by the Single Bench in Special Civil Application No.14614 of 2015 decided on 10.9.2015 to submit that petition would be maintainable, when there is violation of principles of natural justice.
5. At the outset, it may be stated that undisputedly the petitioners have not challenged the measures taken by the respondent Bank under Section 13(4) of the SARFAESI Act by issuing demand notice on 27.6.2018 (Annexure-H) by filing application under Section 17 of the said Act and have filed the present petition challenging the same and the other subsequent proceedings undertaken by the Bank under the said Act. The petitioners had also not challenged the action of the respondent-Bank in declaring their account as the NPA or other correspondence before any other Court or Tribunal. It is for the first time all the proceedings prior to and after the measures taken under Section 13(4) of the Act, have been challenged by way of present petition filed on 15.1.2018, when the respondent Mamlatdar had issued notice to take over possession of the premises in question on 18.1.2018.
6. At this juncture, it may be noted that the Supreme Court has strongly deprecated the tendency of the High Courts in entertaining the writ petition filed under Article 226 of the Constitution of India by the petitioners, without availing the alternative efficacious remedy available to them, and more particularly in the matters which arise under the SARFAESI Act. In case of Authorised Officer, State Bank of Travancore and Anr. v. Mathew K.C., II (2018) SLT 405=(2018) 3 SCC 85, the Supreme Court recently while dealing with the alternative remedy available with the SARFAESI Act has held as under:
“3. The SARFAESI Act is a complete code by itself, providing for expeditious recovery of dues arising out of loans granted by financial institutions, the remedy of appeal by the aggrieved under Section 17 before the Debt Recovery Tribunal, followed by a right to appeal before the Appellate Tribunal under Section 18. The High Court ought not to have entertained the writ petition in view of the adequate alternate statutory remedies available to the respondent. The interim order was passed on the very first date, without an opportunity to the appellant to file a reply. Reliance was placed on United Bank of India v. Satyawati Tandon and Others, III (2010) BC 495 (SC)=VI (2010) SLT 52=2010 (8) SCC 110, and General Manager, Sri Siddeshwara Cooperative Bank Limited and Another v. Ikbal and Others, VIII (2013) SLT 290=2013 (10) SCC 83. The writ petition ought to have been dismissed at the threshold on the ground of maintainability. The Division Bench erred in declining to interfere with the same.
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8. The statement of objects and reasons of the SARFAESI Act states that the banking and financial sector in the country was felt not to have a level playing field in comparison to other participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of securities and sell them. The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of Banks and financial institutions. The Narasimhan Committee I and II as also the Andhyarujina Committee constituted by the Central Government Act had suggested enactment of new legislation for securitisation and empowering Banks and financial institutions to take possession of securities and sell them without Court intervention which would enable them to realise long term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as ‘the DRT Act’) with passage of time, had become synonymous with those before regular Courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order.
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10. In Satyawati Tandon (supra), the High Court had restrained further proceedings under Section 13(4) of the Act. Upon a detailed consideration of the statutory scheme under the SARFAESI Act, the availability of remedy to the aggrieved under Section 17 before the Tribunal and the appellate remedy under Section 18 before the Appellate Tribunal, the object and purpose of the legislation, it was observed that a writ petition ought not to be entertained in view of the alternate statutory remedy available holding :
“43. 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 a code unto them-selves 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.
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55. 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.”
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15. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same. The caution required, as expressed in Satyawati Tandon (supra), has also not been kept in mind before passing the impugned interim order:
“46. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of Banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corpn. v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass an appropriate interim order.”
7. The Supreme Court in the subsequent order dated 5.10.2018 in the case of ICICI Bank Ltd. v. Umakanta Mohapatra in Civil Appeal No. 10243 to 10250 of 2018 observed as under:
“Despite several judgments of this Court, including a judgment by Hon’ble Mr. Justice Navin Sinha, as recently as on 30.1.2018, in Authorized Officer, State Bank of Travancore and Anr. v. Mathew K.C., II (2018) SLT 405=(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. v. Prem Heady Engineering Works (P) Ltd. and Anr., (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”
8. In view of the aforestated clear legal position settled by the Supreme Court, and in view of the fact that the petitioners have not exhausted the alternative remedy available to them under Section 17 of the SARFAESI Act for challenging, the measures undertaken by the respondent Bank under Section 13(4) of the SARFAESI Act, the present petition could not be entertained and deserves to be dismissed in limine.
9. Mr. Shah for the petitioners though had sought to submit that the account of the petitioners could not have been declared NPA in view of the guidelines issued by the RBI, and that there was non-compliance of the provisions contained in Sub-section (3-A) of Section 13 of the SARFAESI Act and therefore, the measures under Section 13(4) were not required to be challenged before the DRT under Section 17 of the Act, the said submission of Mr. Shah could not be accepted in view of the powers conferred upon the DRT under Section 17(3) of the SARFAESI Act, which reads as under:
“17. Application against right measures to recover secured debts:
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3. If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order:
(a) declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured creditor as invalid;
(b) restore the possession of the secured assets or management of secured assets to the borrower of such other aggrieved person, who has made an application under Sub-section (1), as th
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e case may be; and (c) pass such order direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13.” 10. From the bare reading of the said provision, it clearly transpires that if the DRT after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor were not in accordance with the provisions contained in the Act and the rules made thereunder, and require restoration of the management or restoration of possession of the secured assets to the borrower, it has jurisdiction to pass necessary orders as mentioned therein. It is needless to say that the issue of non-compliance of any of the provisions including the provision contained in Sub-sections (2), (3) or (3-A) of Section 13 of the SARFAESI Act could be agitated by the petitioners before the Tribunal in the application under Section 17 challenging the measures taken by the respondent Bank under Section 13(4) of the SARFAESI Act. The petitioners have not challenged any of the said proceedings or the orders or measures taken by the respondent Bank under Section 13 of the SARFAESI Act before the DRT or the Court and have approached this Court at the last minute, when pursuant to the order passed by the District Magistrate on 30.10.2018, the respondent-Mamlatdar and Executive Magistrate has issued notice dated 12.12.2018 for taking over the possession on 18.1.2019. It is needless to say that the writ jurisdiction is an equitable jurisdiction and delay defeats equity. The petitioners having not challenged the earlier orders, actions and measures undertaken by the Respondent-Bank, before the appropriate Forum at the appropriate stage, it cannot be permitted to invoke the extraordinary jurisdiction of this Court without exhausting the alternative, efficacious statutory remedy available to them. 11. In that view of the matter, present petition being devoid of merits is dismissed. Petition dismissed.