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Judgment
D.N. Patel, J. - Being aggrieved and feeling dissatisfied by the judgment and order, delivered by the learned Single Judge in W.P.(C) No. 4030 of 2014 dated 20th January, 2015, whereby the writ petition, preferred by the original petitioners (appellants herein), was dismissed on the ground of availability of efficacious alternative remedy under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter to be referred as "the Act, 2002" for short), the original petitioners have preferred this Letters Patent Appeal.
Factual Matrix:
Following is the sanctioned limit, as per Annexure 1 to the memo of this
Letters Patent Appeal:
Sl.No.
Facility
Existing Limit
Sanctioned Limit
A
FUND BASED LIMITS:
a.
Cash Credit (Stocks)
250.00
150.00
b.
Cash Credit (Book Debts) (Cover Period 30 days)
50.00
50.00
c.
e-DFS Limit with DSIPL
190.00
140.00
d.
Fresh Sanction of WCTL (Repayable in 30 qtly instalments)
-
100.00
e.
Fresh Sanction of Corporate Loan (Repayable in 30 qtly instalments)
-
45.00
f.
Advance payment to CISPL within thew overall limit of CC (stock) limit of Rs. 150.00 lac
50.00
50.00
Total of Fund Based Limits
490.00
485.00
B. NON-FUND BASED LIMITS:
a.
Bank Guarantee
NAP
NAP
b.
Derivative Limit (Cancelled)
2.50
NIL
Total of Non-Fund Based Limits
2.50
NIL
TOTAL LIMITS
492.50
485.00
It appears from the letter at Annexure 1 to the memo of this L.P.A. that there are terms and conditions for repayment also and the rate of interest is 14.20% per annum, as per paragraph no. 3 of the terms and conditions at Annexure A to the letter at Annexure 1.
It appears that after taking a loan of sizable amount, some meager amount was paid and sizable amount remained outstanding and, hence, a notice under Section 13(2) of the Act, 2002 was issued to the appellants on 15th May, 2014 (Annexure 3 to the memo of this L.P.A.) and the outstanding amount was at Rs.4,41,27,461.92 paise as on 15th May, 2014 and accrued interest with effect from 1st March, 2014.
There is no reply of the notice under Section 13(2) of the Act, 2002.
One letter dated 5th June, 2014 (Annexure 4 to the memo of this L.P.A.) was written by the appellants for Renewal Project Report of Black Diamond Techno Pvt. Ltd. along with Action Plan, wherein desire was shown by these appellants to sell the property, which is in the shape of vehicles, spare parts, tools and other equipments, belonging to someone else i.e. Chevrolet Sales India Pvt. Ltd. Thus, a promise was given to sell somebody''s else property and to make payment of Rs.108 Lacs, which was rightly declined by the Bank vide communication dated 16th June, 2014 (Annexure 8 to the memo of this L.P.A.).
Thereafter, possession notice was issued by the respondents on 16th July, 2014 under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (Annexure 5 to the memo of this L.P.A.) to be made effective with effect from 25th July, 2014. Thereafter, possession of immovable property of the appellants was taken over with effect from 25th July, 2014 and with respect to certain movable property symbolic possession was also take over later on.
Auction notice was also issued thereafter on 28th November, 2014 and ultimately the property was auctioned on 29th December, 2014 to the highest bidder, but, as the stay has been granted by this Court vide order dated 1st April, 2015, the sale has not been finalised in favour of the highest bidder.
These appellants (original petitioners) have challenged the notice dated 15th May, 2014 issued by the respondent-Bank under Section 13(2) of the Act, 2002 as also the notice dated 16th July, 2014 issued by the respondent-Bank under Section 13(4) of the Act, 2002.
Arguments canvassed by learned counsel for appellants:
Learned counsel appearing for the appellants submitted that there is a breach of Section 13(3-A) of the Act, 2002 and there is no efficacious alternative remedy available to these appellants for the breach of the aforesaid Section.
It is also submitted by the learned counsel for the appellants that the reply given by respondent-Bank on 16th June, 2014 (Annexure 8 to the memo of this L.P.A.) to the reply/representation given by these appellants dated 5th June, 2014 (Annexure 4 to the memo of this L.P.A.) was in violation of Section 13(3-A) of the Act, 2002. This aspect of the matter has not been properly appreciated by the learned Single Judge, while dismissing the writ petition, preferred by these appellants bearing W.P.(C) No. 4030 of 2014.
Learned counsel for the appellants relying upon the decisions, rendered by Hon''ble Supreme Court in the case of Mardia Chemicals Ltd. v. Union of India, as reported in (2004)4 SCC 311 as well as in the case of Mathew Verghese v. M. Amritha Kumar & ors. , as reported in (2014)5 SCC 610, submitted that in view of the aforesaid facts and judicial pronouncements, the judgment and order delivered by the learned Single Judge dated 20th January, 2015 in W.P.(C) No. 4030 of 2014 deserves to be quashed and set aside.
Arguments canvassed by learned counsel for respondents:
It is submitted by the learned counsel for the respondents that as per the provisions of Section 17 of the Act, 2002, there is an efficacious alternative remedy available to these appellants and this aspect of the matter has been properly appreciated by the learned Single Judge, while dismissing the writ petition, preferred by these appellants.
It is also submitted by the learned counsel for the respondents that the procedure prescribed under the Act, 2002 and the Rules, made thereunder, has been scrupulously observed and followed by the respondent-Bank. Required notice under Section 13(2) of the Act, 2002 was given by the respondent-Bank dated 15th May, 2014 (Annexure 3 to the memo of this L.P.A.), reply whereof was never given by the respondents rather a letter was written by the appellants on 5th June, 2014 for Renewal Project Report of Black Diamond Techno Pvt. Ltd. along with Action Plan, in which ostensibly false excuses have been made out to sell the property , belonging to others and to make payment of Rs.108 Lacs, out of total dues amounting to Rs.4,53,00,000/-, which was decided by the respondent-Bank on 16th June, 2014 and ultimately it was also communicated to the appellants vide letter at Annexure 8 to the memo of this L.P.A. Thereafter, possession notice dated 16th July, 2014 was also issued and possession of the immovable property of the appellants was taken over with effect from 25th July, 2014 and with respect to certain movable property symbolic possession was also take over later on. Thereafter, auction notice was also issued on 28th November, 2014 and actual auction has taken place on 29th December, 2014 and to the highest bidder the property is now to be handed over, but, as there is stay granted by this Court, the last formality is yet to be completed. Even the amount realised from the aforesaid auction/sale is much lesser than the outstanding amount and, hence, this Letters Patent Appeal may not be entertained by this Court.
REASONS:
Having heard learned counsel for both the sides and looking to the facts and circumstances of this case, we see no reason to entertain this Letters Patent Appeal, mainly for the following facts and reasons:
(i) These appellants are borrower from the State Bank of India and a sizable amount is yet to be paid by these appellants, for which a notice was issued by the respondent-Bank under Section 13(2) of the Act, 2002, which is at Annexure 3 to the memo of this L.P.A. Dated 15th May, 2014.
(ii) As per the aforesaid facts, the amount payable is Rs.4,41,27,461.92 paise plus the accrued interest with effect from 1st April, 2014.
(iii) It appears that this notice has not been replied to by these appellants at all.
(iv) It appears that several correspondences were made by the debtor with the Bank. It is emphasised by the learned counsel for the appellants that Annexure 4 to the memo of this L.P.A. Is one of the correspondences/representations, which is in reply to the notice issued by the respondent-Bank under Section 13(2) of the Act, 2002. This one of the correspondences, which is alleged to have been the reply of the notice under Section 13(2) of the Act, 2002, is at Annexure 4 to the memo of this L.P.A. with the subject "Renewal Project Report of Black Diamond Techno Pvt. Ltd. Along with Action Plan". This letter/correspondence is not a reply to the notice under Section 13(2) of the Act, 2002, mainly for the reasons that:
(a) Nowhere in this correspondence at Annexure 4 dated 5th June, 2014, these appellants have mentioned that this is a reply to the notice under Section 13(2) of the Act, 2002;
(b) Neither in the subject nor in the main contents of this correspondence these appellants have mentioned that they are giving reply to the notice under Section 13(2) of the Act, 2002;
(c) The correspondence dated 5th June, 2014 is nothing, but, a crocodile tears. False promise has been given to sell the movable property, belonging to someone else i.e. vehicles, spare parts, tools and other equipments, which does not have any use for these appellants, for which these appellants were going to talk with the management of Chevrolet Sales India Pvt. Ltd.
(d) Looking to the contents of this correspondence, there is nothing like action plan, except to avoid the payment of a sizable amount. In fact, there is no need to reply such type of letters/correspondences of the borrowers by the busy Banks like State Bank of India. Nonetheless, the State Bank of India has already given reply on 16th June, 2014 (Annexure 8 to the memo of this L.P.A.). It ought to be kept in mind that defaulters are in fond of writing different letters to the Banks/Financial Institutions, but, each and every letter is not to be replied by the Banks/Financial Institutions.
(v) It further appears from the facts of the case that thereafter, possession notice dated 16th July, 201 (Annexure 5 to the memo of this L.P.A.) has also been given by the respondent-Bank, as per Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 and actual possession was taken over with effect from 25th July, 2014. In this notice also, the amount due and payable by the defaulter-appellants is mentioned as Rs.4,52,17,543.42 paise with interest. There is also a mention of further interest and incidental expenses. This possession notice is under Section 13(4) of the Act, 2002 to be read with Rule 8 & 9 of the Security Interest (Enforcement) Rules, 2002. Surprisingly, no reply has been given of this possession notice by these appellants.
(vi) Writ petition bearing W.P.(C) No. 4030 of 2014 has been preferred, challenging both the aforesaid notices viz. the notice dated 5th May, 2014, issued by the respondent-Bank under Section 13(2) of the Act, 2002 (Annexure 3 to the memo of this L.P.A.) as well as the notice dated 16th July, 2014, issued by the respondent-Bank under Section 13(4) of the Act, 2002 (Annexure 5 to the memo of this L.P.A.).
(vii) Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 reads as under:
"17. Right to appeal.- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation.- For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make any application to the Debts Recovery Tribunal under this sub-section.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(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 subsection (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 of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order 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.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of Section 13, it is in accordance with the provisions of this Act and the rules made thereunder, then notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under subsection (4) of Section 13 to recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application, pending before the Debts and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.
(Emphasis supplied)
(viii) In view of the aforesaid provisions, efficacious alternative remedy is available to these appellants. This aspect of the matter has properly been appreciated by the learned Single Judge, while dismissing the writ petition preferred by these appellants and we also see no reason to take any other view than what is taken by the learned Single Judge
(ix) It has been held by Hon''ble the Supreme Court in the case of United Bank of India v. Satyawati Tondon & ors., as reported in (2010)8 SCC 110, specially paragraph nos. 43 to 45 and 55 thereof, 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 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 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.
While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
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.
(x) It has further been held by Hon''ble the Supreme Court in the case of Kanaiyalal Lalchand Sachdev & ors. v. State of Maharashtra & ors., as reported in (2011)2 SCC 782, specially paragraph nos. 21 to 25 thereof, as under:
In Indian Overseas Bank v. Ashok Saw Mill the main question which fell for determination was whether the DRT would have jurisdiction to consider and adjudicate post Section 13(4) events or whether its scope in terms of Section 17 of the Act will be confined to the stage contemplated under Section 13(4) of the Act? On an examination of the provisions contained in Chapter III of the Act, in particular Sections 13 and 17, this Court held as under: (SCC pp. 375-76, paras 35-36 & 39)
"35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof.
The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.
* *
We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quoante can be restored by the DRT."
(emphasis supplied by us)
We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT.
In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See Sadhana Lodh v. National Insurance Co. Ltd., Surya Dev Rai v. Ram Chander Rai and SBI v. Allied Chemical Laboratories.)
In City and Industrial Development Corpn. v. Dosu Aardeshir Bhiwandiwala this Court had observed that: (SCC p. 175, para 30)
"30. The Court while exercising its jurisdiction under Article 226 is duty-bound to consider whether:
(a) adjudication of the writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;
(b) the petition reveals all material facts;
(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;
(d) the person invoking the jurisdiction is guilty of unexplained delay and laches;
(e) ex facie barred by any laws of limitation;
(f) grant of relief is against public policy or barred by any valid law; and host of other factors."
In the instant case, apart from the fact that admittedly certain disputed questions of fact viz. non-receipt of notice under Section 13(2) of the Act, non communication of the order of the Chief Judicial Magistrate, etc. are involved, an efficacious statutory remedy of appeal under Section 17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution.
(xi ) It has also been held by Hon''ble the Supreme Court in the case of Union of India & ors. v. Major General Shri Kant Sharma & anr. , as reported in (2015) 6 SCC 773, specially paragraph no. 36 thereof, as under:
The aforesaid decisions rendered by this Court can be summarised as follows:
(i) The power of judicial review vested in the High Court under Article 226 is one of the basic essential features of the Constitution and any legislation including the Armed Forces Tribunal Act, 2007 cannot override or curtail jurisdiction of the High Court under Article 226 of the Constitution of India.(Refer: L. Chandra Kumar and S.N. Mukherjee.)
(ii) The jurisdiction of the High Court under Article 226 and this Court under Article 32 though cannot be circumscribed by the provisions of any enactment, they will certainly have due regard to the legislative intent evidenced by the provisions of the Acts and would exercise their jurisdiction consistent with the provisions of the Act. (Refer: Mafatlal Industries Ltd.)
(iii) When a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. (Refer: Nivedita Sharma.)
(iv) The High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance. (Refer: Nivedita Sharma.) (Emphasis supplied)
(xii ) In view of the aforesaid decisions, no error has been committed by the learned Single Judge in dismissing the writ petition, preferred by these appellants. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is a complete code for these appellants and the respondent-Bank and efficacious alternative remedy is available to these appellants.
(xiii) Learned counsel for the appellants has submitted that for a breach of Section 13(2) to be read with Section 13(3-A) of the Act, 2002 there is no efficacious alternative remedy.
This articulated argument is not accepted by this Court, mainly for the reasons, as stated herein below:
(a) There is no reply by these appellants to the notice given by the respondent-Bank under Section 13(2) of the Act, 2002.
(b) Every borrower, who is a defaulter of a huge amount, is always entering into several correspondences with the Banks/Financial Institutions and these appellants are not an exception to the same. In fact, each and every letter of the borrower is not required to be replied by the Bank or Financial Institution. Nonetheless, the so called reply to the notice under Section 13(2) of the Act, 2002, which is nothing, but, one of the correspondences at Annexure 4 to the memo of this L.P.A. having a subject Renewal Project Report of Black Diamond Techno " Pvt. Ltd. Along with Action Plan", in which the appellants have stated that some property, which is of no use to these appellants and which belongs to Chevrolet Sales India Pvt. Ltd., may be sold away and out of the total dues of Rs.4,53,00,000/-, only Rs.108 Lacs may be adjusted, which shows their future plan to sell the property, belonging to someone else, was rightly brushed aside by the respondent-Bank vide communication dated 16th June, 2014 (Annexure 8 to this memo of L.P.A.).
(xiv ) Thus, on the basis of a letter/communication at Annexure 4 to the memo of this L.P.A., the contention is raised of a breach of Section 13(2) and Section 13(3-A) of the Act, 2002. In fact, neither there is any breach of Section 13(2) or Section 13(3-A) of the Act, 2002 nor there is any procedural lapses on the part of respondent-Bank in issuing the notices under Section 13(2) and 13(4) of the Act, 2002, as stated herein above and hence, this contention of these appellants is not accepted by this Court.
(xv ) Much has been argued by the learned counsel for the appellants about the time limit to the decide the representation as well as for giving notice in regard to public auction etc., but, on being asked as to what is the time limit for repayment of the dues, learned counsel for the appellants submitted that mobile phone of these appellants is not working.
As a cumulative effect of the aforesaid facts, reasons and judicial pronouncements, no error has been committed by the learned Single Judge while dismissing the writ petition bearing W.P.(C) No. 4030 of 2014 vide order dated 20th January, 2015 and hence, there being no substance, this Letters Patent Appeal is hereby dismissed.
If the appellants are approaching the appellate forum under Section 17 of the Act, 2002, the said appellate forum will decide the disputes between the parties, in accordance with law and on the basis of the evidences on record and without being influenced by the observations, made by learned Single Judge vide order dated 20th January, 2015 in W.P.(C) No. 4030 of 2014 as well as without being influence by the observations, made by this Court while dismissing this Letters Patent Appeal.
The interim relief, granted by this Court vide order dated 1st April, 2015 is hereby vacated.
I.A. Nos. 943 of 2015 and 4949 of 2015:
In view of final order, passed in the main writ petition, both the interlocutory applications stand disposed of.