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Judgment
S.J. Mukhopadhaya, J.—Challenge in this appeal is directed against the decision of a learned Single Judge dated 30th June 2009, whereby writ petition preferred by the Appellant-guarantor against notice issued by the Respondents u/s 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as `the SARFAESI Act'') was not entertained, there being an alternative remedy of appeal.
The case of the Appellant- M/s. Vasant Dyeing and Printing Works (guarantor) is that Hem Vijay Dychem Private Limited (principal borrower) has taken loan from Punjab National Bank (hereinafter referred to as `the Bank'') in the year 1995, whose account was declared as Non-Performing Asset (N.P.A.) on 31st March 1998. A sum of Rs. 80,73,096/- was due to the Bank at that time, including interest. The Bank preferred an application u/s 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as `the Debts Recovery Act'') on 2nd July 1999 in Original Application No. 211 of 1999 for recovery of Rs. 1,00,10,620/- with future interest. The Bank confirmed that it has received a sum of Rs. 9,11,000/- from the Insurance Company by their letter dated 18th May 2000. The Company (principal borrower) requested for a One Time Settlement (O.T.S.) in Rs. 78,00,000/- by letter dated 27th September 2003, but it was not accepted by the Bank, which issued a notice u/s 13(2) of the SARFAESI Act on 11th October 2003 claiming Rs. 2,14,00,000/- with further interest.
The Appellant, being the guarantor, preferred a writ petition before this Court in Special Civil Application No. 17294 of 2003, which was dismissed on 2nd September 2004. The Appellant filed objections to the notice issued by the Bank on 21st January 2005. Thereafter, the Bank took measures u/s 13(4) of the SARFAESI Act on 12th May 2005.
The Company (principal borrower) on 16th February 2005 sent a proposal for O.T.S. in Rs. 80,00,000/-. The Appellant-guarantor subsequently filed another writ petition against the Bank in Special Civil Application No. 2448 of 2005 on the ground of violation of Section 13(3A) of the SARFAESI Act, which was dismissed on the ground of alternative remedy on 30th June 2009.
During the pendency of the aforesaid case, Bank recovered a further sum of Rs. 12,00,000/- by sale of some movable property of the principal borrower Company on 27th September 2005. Subsequently, the Bank assigned the debt to Respondent-Asset Reconstruction Company (India) Limited (hereinafter referred to as `ARCIL'') on 1st February 2006. The principal borrower Company along with 2nd Respondent applied for O.T.S. with ARCIL on 3rd April 2007 in Rs. 70,00,000/-, but ARCIL by its letter dated 13th April 2007 agreed to release one property of the principal borrower Company on receipt of Rs. 40,00,000/- and personal guarantee of Respondents Nos. 2 to 6 in between April-May 2007. Therefore, no due certificate was issued by ARCIL in favour of Respondents Nos. 2 to 6 on 22nd May 2007. ARCIL filed purshis in Debt Recovery Tribunal, Ahmedabad on 17th August 2007 releasing property No. B(A) of Schedule and personal guarantee of Respondents Nos. 2 to 6.
Debt Recovery Tribunal having heard the parties on 5th May 2009 passed an award in Original Application No. 211 of 1999 for Rs. 1,00,10,620/- with simple interest @ 7% from 2nd July 1999 after deducting the payment received by the Bank and ARCIL. Thereafter, the writ petition preferred by the Appellant having been dismissed on the ground of alternative remedy, the present appeal has been preferred.
The only question that was raised on behalf of the Appellant in this appeal is whether the Bank/Financial Institution under the SARFAESI Act can discharge one of the borrowers on the basis of part payment, or it should discharge all the borrowers on receipt of full payment.
Learned Counsel for the Appellant would submit that secured creditor cannot release the principal borrower on receipt of part payment, and pursue the matter against the guarantor for recovery of dues of the principal borrower, and such action is arbitrary and violative of Article 14 of the Constitution of India. The O.T.S. would have been made with regard to the total dues as was due to the secured creditor, but there could not have been a part payment of O.T.S. vis-a-vis the principal borrower.
On merit, learned Counsel for the Appellant would contend that the notice dated 12th May 2005 is contrary to the provisions of the SARFAESI Act, and has been issued in violation of principles of natural justice, provisions of Section 13(3A) having been violated by the secured creditors.
The 1st Petitioner is running the unit, which has given employment to 250 persons, and their livelihood over and above their family members is dependent upon the Appellant No. 1 unit, which is surviving in spite of fierce competition prevailing in the market. If the Appellant unit is taken over by the secured creditor in exercise of powers conferred u/s 13(4) of the SARFAESI Act, 250 employees gainfully employed will lose their jobs.
Learned Counsel for the Appellant would further contend that the Appellant always wanted O.T.S. on depositing a sum of Rs. 75,00,000/-; the Respondents have in their possession land and building of M/s. Hem Vijay Dye Chem Private Limited, being Plot No. 806/2, situated at Sachin Industrial Area, falling under Survey No. 4 paiki and Survey No. 282 to 285 paiki at village Gabhari, Taluka Choryasi, District Surat and another land and building situated at Rampura, Rambaug, Taluka Choryasi, District Surat, in Ward No. 7, Nondh No. 678, paiki part No. 4, paiki northern part of land paiki Block No. A/3, B/3 and E/3, and also the plant and machineries lying at the factory premises of Sachin Industrial area, which according to the Appellants is certainly valued more than Rs. 75,00,000/-. Therefore, instead of taking recourse u/s 13(4) of the SARFAESI Act, so far as Appellant''s unit is concerned, the secured creditor can always invoke Section 13(4) the SARFAESI Act and deal with the properties of the principal borrower i.e. M/s. Hem Dye Chem Private Limited, and after dealing with the same, if so required, then only the secured creditor should proceed against the property of the guarantor. Till then, without realising the amount from the principal borrower, no action should be taken against guarantor u/s 13(4) of the SARFAESI Act.
According to the Respondents, whatever settlement made with some of the borrowers is not done under the provisions of SARFAESI Act, but is done under the provisions of Debt Recovery Act, and hence the question raised by the Appellant does not arise in this appeal.
The provisions of Section 35 r.w. Section 37 of the SARFAESI Act makes it clear that the provisions of other law are applicable and not superseded. Hence, the provisions of Indian Contract Act are applicable, particularly Section 138, which enables the creditor to release one of the co-sureties and it will not discharge othersureties. He referred to some of the judgments of this Court and the Supreme Court to suggest that the secured creditor can have measures under the SARFAESI Act against any of the borrowers, including the guarantors.
The aforesaid issue fell for consideration before the Supreme Court in the case of United Bank of India Vs. Satyawati Tondon and Others, Therein, the Supreme Court held that issuance of notice to guarantor-mortgagor u/s 13(2) and (4) and filing an application u/s ec. 14 of the SARFAESI Act without first initiating action against the principal borrower is permissible. In the said case, the Supreme Court also noticed that there was alternative remedy of appeal u/s 17, which could have been availed by any aggrieved person, and held that the High Court will ordinarily not entertain the 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 the said case, the Supreme Court held as follows:
There is another reason why the impugned order should be set aside. If Respondent No. 1 had any tangible grievance against the notice issued u/s 13(4) or action taken u/s 14, then she could have availed remedy by filing an application u/s 17(1). The expression ''any person'' used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken u/s 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.
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 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, 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.
In view of the settled principle under the SARFAESI Act, it is always open to the secured creditor to take measures u/s 14, 13(4) against a guarantor, without initiating any action against the principal borrower, as both stand in the same footing of borrower, and action can be taken against any one or other borrower, we hold that it was well within the jurisdiction of the secured creditor to take separate action against the principal borrower and/or to settle the issue with such principal borrower, and a separate action against the guarantor, and/or to settle with the guarantor. In case the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or the Rules framed thereunder are violated, it will be always open to the aggrieved person to assail such action or measures taken by secured creditor by filing appeal u/s 17 before the Debt Recovery Tribunal. Learned Single Judge, thereby, having refused to exercise jurisdiction under Article 226, there being a remedy of appeal, no interference is called for against such order. The Appellant-Petitioner is given liberty to move before the Debt Recovery Tribunal, if it is aggrieved, within a reasonable period, say within a month. The Letters Patent Appeal and the connected Civil Application are dismissed with the aforesaid observations, but there shall be no order as to costs.