CA. Manisha Mehta & Ors Vs. The Board of Directors of Represented by its Managing Director of ICICI Bank & Ors. - We hold that the language of section 14 is too clear and unambiguous, and does not admit of any requirement of complying with natural justice by putting the borrower on notice while an application thereunder is under consideration.

High Court Bombay (23.03.2022) in CA. Manisha Mehta & Ors Vs. The Board of Directors of Represented by its Managing Director of ICICI Bank & Ors. [Writ Petition (L) No. 8418 of 2022] held that;

• It is implicit in the scheme of the SARFAESI Act that natural justice, only to a limited extent, is available and not beyond what is expressly provided. 

• We hold that the language of section 14 is too clear and unambiguous, and does not admit of any requirement of complying with natural justice by putting the borrower on notice while an application thereunder is under consideration.

• We reiterate that natural justice for a borrower within the meaning of section 2(f) of the SARFAESI Act has very limited application in actions taken for enforcement of security interest [only consideration of objection/representation under section 13(3-A) of the SARFAESI Act is mandated] and stands excluded till such time recourse is taken to section 17.

• The remedy provided for in Article 226 of the Constitution of India, being a discretionary remedy, it would be just and proper to refuse to grant any writ in this particular case based on our satisfaction that the petitioners do have an adequate or suitable relief elsewhere. 

Excerpts of the order;

# 1. This writ petition is at the instance of multiple petitioners who are all debtors of different banks/financial institutions (hereafter ‘the secured creditors”, for short). They are aggrieved by orders passed by District Magistrates/Chief Metropolitan Magistrate under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter “the SARFAESI Act”, for short). Some of the petitioners have approached the jurisdictional Debts Recovery Tribunal under section 17 of the SARFAESI Act and proceedings are pending. 

 

# 2. The writ petition contains diverse prayers, which are set out herein below: -

• “a) Declare that the obligation to hear the Borrowers/parties affected is liable to be read into the Section 14 of the SARFAESI Act, and that without such an obligation the Section is liable to the violative of the fundamental rights/basic structure of Constitution;

• b) Declare that Exhibit “C” order in the case of Petitioner no. 1 and similar orders in the case of the other Petitioners are liable to be declared as null and void ab initio being violative of the fundamental rights.

• c) Issue a writ in the nature of certiorari quashing and setting aside the Exhibits C, C1, D1, E, F1 being rendered null and void ab initio.

• d) Issue a writ in the nature of mandamus directing the Respondents Nos.7 to 11, Chief Metropolitan Magistrate, Mumbai/District Magistrate Pune/Thane/Palghar to hear the Petitioners in all pending cases before them so far as the respective Petitioners are concerned, and where orders are already passed without hearing them, to hear the Petitioners and pass orders afresh by quashing all such orders rendered in violation of the principles of natural justice by the Chief Metropolitan Magistrate, Mumbai/District Magistrate Pune/Thane;

• e) Issue a writ in the nature of prohibition, restraining and prohibiting the Chief Metropolitan Magistrate, Mumbai/District Magistrate Pune/Thane/Palghar, from passing any further orders without affording an opportunity to be heard to the Borrowers/Petitioners and restraining the Respondents from executing the orders which have already passed;

• f) Declare that in PILs which are in the realm of class action litigation, which is distinct from ‘pro bono litigation’, to avoid a scenario as in PIL (cr) no. 24/2011, where interested persons (Creditors) could obtain orders against their adversaries (Borrowers) entirely behind their back, without notice to the borrowers or the public at large, a procedure akin to Order 1 Rule 8(2) of the CPC is liable to be adopted,

• g) In furtherance of prayer (f) above, a consequential direction to the Registry of this Court to make appropriate amendments to the rules of procedure concerning PILs;

 

# 3. We have no doubt that the writ petition, in its present form, is not maintainable. Each petitioner is a debtor of a different bank/financial institution and, therefore, has a distinct cause of action. All these petitioners could not have joined in one single writ petition. However, we do not propose to dismiss the writ petition on such technicality and proceed to consider whether it is otherwise maintainable or not considering the claims raised therein.

 

# 4. The main prayer of the petitioners is for a declaration that natural justice should be read into section 14 of the SARFAESI Act.

 

# 5. Mr. Nedumpara, learned advocate appearing for the petitioners refers to the well-known principle of law that if a statute does not exclude compliance with natural justice principles either expressly or by necessary implication, compliance with natural justice has to be read into the statute. He argues that the SARFAESI Act has neither expressly excluded nor excluded by implication the requirement to comply with natural justice while the District Magistrate/Chief Metropolitan Magistrate considers an application of a secured creditor under section 14 and passes an order thereon; therefore, natural justice has to be read into section 14 for ends of justice. It has also been contended that since an order of the CMM/DM under section 14 for taking possession would visit a borrower with civil consequence, no such order can be made without complying with natural justice. Reliance has been placed by him on the decisions in State of Orissa vs. Binapani Dei, A.K. Kraipak vs. Union of India, and Maneka Gandhi vs. Union of India, in support of his contention.

 

# 6. We do not find any reason either to doubt such established principle of law, as canvassed, or not to be bound by the ratio decidendi of the decisions cited at the Bar.

 

# 7. However, the contention of Mr. Nedumpara has no substance having regard to the scheme of the SARFAESI Act, as explained in Mardia Chemicals vs. Union of India,4 Transcore vs. Union of India, and V. Noble Kumar vs. Standard Chartered Bank, and other decisions. The SARFAESI Act is intended to facilitate quick recovery of secured debts without extending any opportunity of hearing to a borrower and without judicial/quasi-judicial intervention till such time possession of the secured asset is taken by the secured creditor after serving the requisite notices and responding to the objection/representation that may be lodged/preferred by the borrower under section 13(3A). That Mardia Chemicals (supra) and Transcore (supra) are pre section 14 amendment decisions, make no difference. There is no fundamental change in the object and purposes of the SARFAESI Act even after the amendments. Since the need for a borrower to draw legal assistance arises only after a demand notice under sub-section (2) is issued, it has been experienced in very many cases that sub-section (1) of section 13, which is the harbinger of misfortune of recalcitrant borrowers, is completely overlooked by those representing them. It permits enforcement of security interest without the intervention of a court/tribunal but in accordance with the statutory provisions. The present case is not too different. Decision by a quasi-judicial authority (see section 17) upon compliance with natural justice stands deferred till such time possession, either symbolic or physical, is taken. The SARFAESI Act does not remotely suggest compliance with natural justice at the stage when section 13(4) or 14 operates. Paragraph 36 of V. Noble Kumar (supra) explains that there are 3 (three) methods for taking possession of a secured asset. In view thereof, section 14 cannot stand independent of section 13(4). If a borrower has no right of hearing when the secured creditor takes possession under section 13(4), a fortiori, no hearing can be demanded by a borrower when he succeeds in resisting possession being gained over by the authorized officer of the secured creditor or does not on his own surrender possession, and thus compels such officer to work out the remedy by seeking assistance of the District Magistrate/Chief Metropolitan Magistrate, as the case may be, under section 14. Only a post-possession right to approach the tribunal is conferred on a borrower in terms of section 17, nothing more and nothing less.

 

# 8. Pertinently, section 14 of the SARFAESI Act was amended twice, once in 2013 and then again in 2016. If it were the intention of the legislature to extend opportunity of hearing to a borrower before the District Magistrate/Chief Metropolitan Magistrate, as the case may be, it was free to do so. Advisedly, the legislature did not do so, for, it would have militated against the scheme of the SARFAESI Act and more particularly section 13 thereof. It is implicit in the scheme of the SARFAESI Act that natural justice, only to a limited extent, is available and not beyond what is expressly provided. There seems to be little merit in the argument advanced by Mr. Nedumpara and we hold that the language of section 14 is too clear and unambiguous, and does not admit of any requirement of complying with natural justice by putting the borrower on notice while an application thereunder is under consideration.

 

# 9. Our view as aforesaid finds support from the coordinate bench decision of this Court in the case of M/s. Trade Well vs. Indian Bank. Although an off-the-cuff response of Mr. Nedumpara is heard that M/s. Trade Well (supra) does not lay down correct law, we find no reason to accept such response. In our opinion, the coordinate Bench in M/s. Trade Well (supra) has laid down a proposition of law which is correct and we share the view expressed therein.

 

# 10. The decisions in Binapani Dei (supra), A.K. Kraipak (supra) and Maneka Gandhi (supra) were rendered in entirely different fact situations. The law laid down therein would, however, not be applicable in view of our own reading and understanding of the decisions in Mardia Chemicals (supra), Transcore (supra) and V. Noble Kumar (supra), rendered on consideration of the SARFAESI Act. We reiterate that natural justice for a borrower within the meaning of section 2(f) of the SARFAESI Act has very limited application in actions taken for enforcement of security interest [only consideration of objection/representation under section 13(3-A) of the SARFAESI Act is mandated] and stands excluded till such time recourse is taken to section 17.

 

# 11. Prayers (a) and (d) to (g) are, accordingly, rejected.

 

# 12. What remains is consideration of the other prayers, viz. (b) and (c). We have noted above that some of the petitioners have approached the jurisdictional Debts Recovery Tribunal under section 17 of the SARFAESI Act. The application(s) is/are pending. Invocation of the writ jurisdiction during such pendency amounts to pursuing the writ remedy as a parallel remedy. Such a course of action is ordinarily not permissible. If any authority is required, we may refer to the decisions of the Supreme Court in Delhi Gate Auto Service Station vs. B.P.C.K. Agra Th. Sr. Div. Manager & Ors. and Orissa Power Transmission Corporation Ltd. v. Asian School of Business Management Trust as well as decisions of this Court in Digambar & Anr. vs. Union of India & Anr., John Sebastian Zezito Lobo vs. Assistant Commissioner of Income Tax, Circle-2(1), Panaji & Ors., Rambo Fashion Limited vs. Board of Directors State Bank of India & Ors.

 

# 13. Additionally, in K. S. Rashid And Son vs. Income-tax Investigation Commission, the Constitution Bench of the Supreme Court noticed that the appellants having already availed of the remedy provided for in section 8(5) of the Investigation Commission Act and that a reference had been made to the Allahabad High Court in terms of that provision which was awaiting decision, held that it would not be proper to allow the appellants to invoke the discretionary jurisdiction under Article 226 of the Constitution of India at that stage.

 

# 14. Since some of the petitioners have taken recourse to the proceedings under section 17 of the SARFAESI Act, which are pending, we would not be unjustified in drawing guidance from the decision in K. S. Rashid (supra) and hold that the remedy provided for in Article 226 of the Constitution of India, being a discretionary remedy, it would be just and proper to refuse to grant any writ in this particular case based on our satisfaction that the petitioners do have an adequate or suitable relief elsewhere. 

 

# 15. Since the SARFAESI Act provides a remedy which is being pursued, this writ petition ought not to be entertained for considering prayers (b) and (c). These prayers are also rejected.

 

# 16. For the reasons as above, this writ petition stands dismissed. There shall be no order as to costs.

 

# 17. All contentions on the merits of the application(s) pending before the jurisdictional Debts Recovery Tribunal under section 17 of the SARFAESI Act are left open.

 

---------------------------------------------------

Shriram Housing Finance Limited Vs. State of Haryana & Ors - That a District Magistrate, after passing an order under Sec.14 of the SARFAESI Act,2002 has no jurisdiction to review or recall such order.

HC Chandigarh (11.03.2022) in Shriram Housing Finance Limited  Vs. State of Haryana & Ors. (CWP-31871-2019 ) held that;

• Gujarat High Court held that after passing of an order  under Section 14 of SARFAESI Act, the District Magistrate becomes functus  officio and he cannot reopen a concluded issue.

• That there is no provision under the SARFAESI Act under  which the District Magistrate or the Chief Metropolitan Magistrate, as  the case may be, can review, recall or modify his order.

• It is well settled that  the power to review is not an inherent power and it must always be  conferred by law either expressly or by necessary implication.

• Be that it may, we are of the considered opinion that the  District Magistrate has absolutely no jurisdiction to review his order  dated 24.06.2013 passed under the Act, 2002

• “That a District Magistrate, after passing an order under Sec.14 of the SARFAESI  Act,2002 has no jurisdiction to review or recall such order. 

• Supreme Court held that ordinarily a Court does  not regard a decree binding upon a person, who was not impleaded in the action  but, one of the important exceptions to the said Rule is that where by the  personal law governing the absent heir, the heir impleaded represents his  interest in the estate of the deceased, the decree would be binding on all the  persons interested in the estate; if there be a debt justly due and no prejudice is  shown to the absent heir, 

• The decree in an action where the plaintiff has after  bona fide enquiry impleaded all the heirs known to him will ordinarily be held  binding upon all persons interested in the estate; 

• “Therefore, in the absence of fraud, collusion  or other similar grounds, which taint the decree, a decree passed against the  heirs impleaded, binds the estate, even though the other persons interested in  the estate are not brought on record. 

Excerpts of the order;

In this Writ petition the petitioner has challenged order  dt. 24.05.2018 (P7) passed by the District Magistrate, Kaithal (Respondent  No.2).  

 

The Back Ground Facts 

 

The Writ petitioner is a financial institution.  

 

Respondent No.5, his deceased mother, namely, Saroj Rani and  family members had availed loan against property for an amount of  `28,39,988/- vide loan agreement dt. 28.5.2016.  

 

To secure the said loan, the above referred borrowers had created  security interest over their residential property and some agricultural land by  way of equitable mortgage of deposit of title deeds in favour of the petitioner.   On account of default by the borrowers, their loan account was  declared as Non Performing Asset (NPA) by the petitioner on 08.05.2017.  

 

Thereafter a demand notice dt. 24.07.2017 (P2) under Section  13(2) of the Securitisation and Reconstruction of Financial Assets and  Enforcement of Security Interest Act, 2002 [for short ‘the SARFAESI Act’]  was issued through speed post to respondent No.5 and his late mother (during  her lifetime), demanding total outstanding of `31,48,379/-, which was  outstanding and demanded a payment of the same within 60 days of the demand  notice.  

 

But the borrowers did not discharge their liability and symbolic  possession of the Secured Assets was taken on 02.12.2017 by issuance of notice  (P4) under Section 13(4) of the SARFAESI Act.  

 

Actual possession could not be taken by the authorised officer of  the petitioner and so the petitioner filed an application under Section 14 of  SARFAESI Act before the District Magistrate, Kaithal (respondent No.2) on  12.02.2018 for seeking assistance in taking the possession of the said Secured  Asset.  

 

The said application was allowed by respondent No.2 on  02.05.2018 (P5) and respondent No.2 appointed the Sub Tehsildar (respondent  No.3) to take possession of the Secured Asset with the assistance of the  concerned police and to forward it to the petitioner.  

 

In the meantime, on 17.3.2018, the mother of respondent No.5  Saroj Rani passed away but, this fact was not within the knowledge of the  petitioner, and so it could not bring it to the notice of respondents No.2 & 3  before passing of the order dt.02.05.2018 (P5).  

 

According to the petitioner, it came to know about the death of the  co-borrower Saroj Rani only when the respondents filed their reply on  27.08.2018 to CWP-16875-2018, filed by the petitioner earlier.   The petitioner contends that it also came to know from the filing of  the said reply in that Writ petition that respondent No.2 had passed a  subsequent order dt.24.05.2018 (Annexure P7) asking respondent No.3 to return  the original order dt.02.05.2018 (P5) passed by respondent No.2 and thus, the  proceedings initiated under Section 14 of SARFAESI Act came to be halted.   Counsel for the petitioner contended that there is no provision  under the Act to review or to recall an order passed by the District Magistrate  because such a power has not been conferred under the SARFAESI Act. He  also placed reliance on the order passed by the Gujarat High Court in Prime  Cooperative Bank Limited Vs. District Magistrate/Chief Metropolitan  Magistrate wherein, the Gujarat High Court held that after passing of an order  under Section 14 of SARFAESI Act, the District Magistrate becomes functus  officio and he cannot reopen a concluded issue. It is, therefore, contended by  petitioner that respondent No.2 could not have recalled his order  dt. 02.05.2018/07.05.2018 (P5) vide its order dt.24.05.2018 (P-7).  

 

Written statement of respondents No.1 to 3  

In the written statement filed on behalf of respondents No.1 o 3, it  is contended that the warrant dakhal was called back in view of the application  filed by Sukhbir Singh, husband of the borrower Saroj Rani intimating to the  District Magistrate, Kaithal that Saroj Rani had died and it was felt that it is not  appropriate to pass a warrant against a dead person. It is stated that a letter dt.  25.05.2018 (R2) was addressed to the petitioner asking it to submit list of legal    heirs of Saroj Rani against whom warrant of possession may be issued, but the  petitioner did not furnish such a list and filed the instant Writ Petition.  A plea is also raised that there is no violation of the provisions of the  Statute by respondent No.2 and he had not passed any fresh order but had only  recalled the warrant dakhal for the aforesaid reason of the death of Saroj Rani  after the application under Section 14 of SARFAESI Act was filed on  12.02.2018 (P4), and before passing of the initial order by respondent No.2 on  02.05.2018.  

 

Mr.S.S. Pannu, DAG, Punjab reiterated the aforesaid submissions.

 

The stand taken by respondents No.4 & 5 

The legal heirs of respondent No.4 and respondents No.5  (co-borrower) supported the stand of respondents No.1 to 3.  

 

It is also contended that the mortgage property was only in the name of  deceased Saroj Rani but the petitioner had got signatures of Saroj Rani, her  husband Sukhbir Singh, son Paramjeet Singh (respondent No.5) and Sudha  Rani daughter, as borrowers in the loan agreement, and that this was cleverly  done by the petitioner so that if the owner of the property dies, the petitioner  would still have the remedy to take possession of the mortgaged property under  the SARFAESI Act from the legal representatives.  

 

Mr.Ishan Ksheterpal, counsel for respondents No.4 & 5 reiterated  the said submissions.  

 

The consideration by the Court 

In the light of the above submissions of the respective parties, the  following points arise for consideration:  

• (i) Whether a District Magistrate, after passing an order under Section 14  of the SARFAESI Act, can stop the enforcement of the order by a  subsequent order/direction for whatever reason?  

• (ii) Whether, in the facts and circumstances, the absence of husband and  daughter of the deceased borrower Saroj Rani as parties in the  application under Section 14 of the SARFAESI Act would justify the  non-enforcement of the said order?  

 

Point (a): 

The SARFAESI Act,2002 was enacted to provide machinery for  enabling banks and financial institutions to take possession of the secured assets  of borrowers/guarantors and to sell them speedily in the event of a default by  the borrowers in their payment obligations. Section 14 of the SARFAESI Act is a provision enacted in the Act to  enable banks and financial institutions to take possession of the Secured Asset.  In Asset Reconstruction Company (India) Limited Vs. State of  Haryana in CWP-16366-2016 decided on 18.8.2017, a Division Bench of this  Court considered the question “whether the District Magistrate is competent to  ‘review’ his own order or the one passed by his predecessor under Section 14  of the SARFAESI Act? .  

 

It held as under:  

• “(27) The powers exercisable by a District Magistrate under Section 14  are creation of a Statute. Those powers are required to be exercised  within the four corners of the said provision. In the case in hand, the  then District Magistrate, Sonepat rightly exercised such power and  passed the order dated 08.02.2016 thereby directing his subordinate  officer, namely, Naib Tehsildar-cum-Executive Magistrate to take  possession of the secured assets and hand over the same to ARCIL. It  could not be disputed by the learned State counsel or senior counsel for  the borrowers that there is no provision under the SARFAESI Act under  which the District Magistrate or the Chief Metropolitan Magistrate, as  the case may be, can review, recall or modify his order. The successor  District Magistrate, therefore, had no jurisdiction whatsoever either to  entertain the borrower’s application dated 12.06.2016 or to pass the  impugned orders dated 14.06.2016 and 24.10.2016. These orders are  totally without jurisdiction and void ab initio, for it is well settled that  the power to review is not an inherent power and it must always be  conferred by law either expressly or by necessary implication. The so called reasons assigned by the successor District Magistrate, even if  assumed to be correct, did not and cannot clothe him with a non existent power to review the order passed by him or his predecessor. [Ref. (i) Patel Narshi Thakershi & Ors. vs. Shri Pradyumansinghji  Arjunsinghji (1971) 3 SCC 844; (ii) Kewal Chand Mimani (D) By Lrs.  Vs. S.K. Sen & Ors. (2001) 6 SCC 512].”  

• (28) It would be apt to cite a Division Bench decision of Allahabad  High Court in Writ-C No.30899 of 2016 (Kotak Mahindra Bank Ltd.  vs. State of UP & 4 others) decided on 21.10.2016, where an identical  question came up for consideration and the High Court viewed as  follows:-  

• “Be that it may, we are of the considered opinion that the  District Magistrate has absolutely no jurisdiction to review his order  dated 24.06.2013 passed under the Act, 2002 specifically when the  order was subjected to challenge before the Debt Recovery Tribunal  and such application was dismissed by a reasoned order holding therein  that the borrower had not approached the Tribunal with clean hands. If  they were not satisfied they had the remedy of approaching the  Appellate Tribunal under Section 18 of the Act, 2002. We are, therefore,  more than satisfied that such order of the District Magistrate cannot be  permitted to stand on record. The order of the District Magistrate dated  27.04.2016 and dated 30.06.2016 are hereby quashed.” 

 

We are respectfully in agreement with the view taken by the  Allahabad High Court. Consequently, it is held that the District  Magistrate, Sonepat had no authority or power to review the order  dated 08.02.2016 and his subsequent orders being without any authority  of law, cannot sustain.” ( emphasis supplied) 

 

This was reiterated by another Division Bench of this Court in  CWP-4892-2019 titled as “Indiabulls Housing Finance Ltd. Vs. State of  Haryana and others”, decided on 15.10.2019.  In view of the above, Point (a) is answered accordingly holding  that a District Magistrate, after passing an order under Sec.14 of the SARFAESI  Act,2002 has no jurisdiction to review or recall such order.  

 

Point (b): 

We shall next consider the question:  

“(b) Whether, in the facts and circumstances, the absence of husband  and daughter of the deceased borrower Saroj Rani as parties in the  application under Section 14 of the SARFAESI Act would justify the  non-enforcement of the said order?”  

 

In the instant case admittedly, late Saroj Rani, her son i.e.  Paramjeet Singh (respondent No.5), Sukhbir Singh, husband of Saroj Rani and  also Sudha Rani daughter of Saroj Rani have signed the loan agreement  dt. 28.05.2016 (R4/2) with the petitioner.  

 

The property is admittedly in the name of only Late Saroj Rani, who  passed away on 17.03.2018 after filing of application under Section 14 of  SARFAESI Act on 12.2.2018 (P4) by the petitioner and before 02.05.2018  when respondent No.2 passed the order under Section 14 of the SARFAESI  Act.  

 

On her death, under Section 15 of the Hindu Succession Act,1956,  her children would succeed to her property.  

 

In the application made under Section 14 of the SARFAESI Act  before District Magistrate, Kaithal (respondent No.2), the petitioner had sought  possession of the Secured Assets from both late Saroj Rani and her son  Paramjeet Singh, and the respondent no.2 had allowed the same on 02.05.2018.  Even if Saroj Rani had died prior to the passing of the order, in our  considered opinion there could not be any abatement of the proceeding when  her estate is represented by her son Paramjeet Singh (respondent No.5), who is  one of the legal heirs.  In Mohammed Hussain (Dead) by LRs and Others v.  Occhavlal and others, the question whether there would be abatement of a  suit if all legal heirs of a deceased party are not impleaded, was considered by  the Supreme Court.  

 

In that case, the Madhya Pradesh High Court in a Second appeal  had set aside the concurring judgments of the Courts below decreeing a suit for  redemption of mortgage filed by the appellants against the respondents on the  ground that the suit for redemption could not be held to be maintainable in law  in the absence of two married daughters of one of the mortgagees, who had  died.  

 

When this judgment was challenged in the Supreme Court, by  relying upon its judgment in N.K. Mohd. Sulaiman Sahib Vs. N.C. Mohd.  Ismail Saheb and others, the Supreme Court held that ordinarily a Court does  not regard a decree binding upon a person, who was not impleaded in the action  but, one of the important exceptions to the said Rule is that where by the  personal law governing the absent heir, the heir impleaded represents his  interest in the estate of the deceased, the decree would be binding on all the  persons interested in the estate; if there be a debt justly due and no prejudice is  shown to the absent heir, the decree in an action where the plaintiff has after  bona fide enquiry impleaded all the heirs known to him will ordinarily be held  binding upon all persons interested in the estate; the Court will also investigate,  if invited, whether the decree was obtained by fraud, collusion or other means  intended to overreach the Court. Therefore, in the absence of fraud, collusion  or other similar grounds, which taint the decree, a decree passed against the  heirs impleaded, binds the estate, even though the other persons interested in  the estate are not brought on record.  

 

Applying the said principle, the Supreme Court held that the  decision of the High Court was erroneous since two sons had sufficiently and in  bona fide manner represented the estate of the deceased and so the suit for  redemption of mortgage cannot be dismissed on the ground that the two married  daughters were not on record..  

 

Similar view was also taken by the Supreme Court in Ramdass  and another Vs. Dy. Director of Consolidation and others. In that case, it  was held that when two of the legal representatives of the deceased were  already on record, failure to bring the 3rd legal representative on record would  not result in the abatement of appeal.  

 

No doubt proceeding under Section 14 of the SARFAESI Act is  not akin to a suit since no adjudication is permitted by the District Magistrate  but, the principle laid down in the aforesaid decisions would equally apply by  way of analogy, and on the sole ground that the husband and other legal heirs of  the deceased Saroj Rani were not on record, the process of execution of the  order passed under Section 14 of the SARFAESI Act could not have been  stopped by respondent No.2.  

 

This is because respondent No.5 was already on record in the said  proceedings and he represented the estate of the deceased; and the order against  him would be binding on all the other heirs or persons interested in the estate of  the deceased. Point (b) is answered accordingly.  

 

Therefore, the Writ Petition is allowed; order dt. 24.5.2018 issued  by respondent No.2 to the respondent No.3 is set aside; and respondents No.1 to  3 are directed to implement the order dt.02.5.2018 passed by respondent No.2  within four weeks from the date of receipt of certified copy of this order. No  costs.  

 

----------------------------------------------------------

Jaipur Texweaving Park Ltd. Vs. Union of India. - Extra-ordinary powers under Article- 226 is not a rule of compulsion and in the matters of SARFAESI Act, 2002, a very slow and cautious approach has to be adopted and when specific remedy is available writ court should not entertain the writ petitions.

High Court Jaipur (09.03.2022) in Jaipur Texweaving Park Ltd. Vs. Union of India. (S.B. Civil Writ Petition No. 12090/2018) held that;

• That in cases relating to recovery of dues of banks, the secured creditors, the stay granted by the High Court would have serious adverse impact on the financial health of such institutions and ultimately prove detrimental to the economy of nation. 

• Thirdly, extra-ordinary powers under Article- 226 is not a rule of compulsion and in the matters of SARFAESI Act, 2002, a very slow and cautious approach has to be adopted and when specific remedy is available writ court should not entertain the writ petitions and therefore, the writ petition is not maintainable.

Excerpts of the order;

# 1. Being aggrieved by the notice dated 31.05.2017 u/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short hereinafter to be referred as “SARFAESI Act, 2002”) as well as notice u/s 13(4) of SARFAESI Act, 2002 dated 09.03.2018 and for violation of terms and conditions of the sanction letter dated 12.03.2009 issued by the Ministry of Textiles and for violation of Fundamental Rights enshrined under Articles -14, 19 & 300A of the Constitution of India, the present writ petition has been filed with the following prayers;

• “It is therefore, humbly prayed that Your Lordship may graciously be pleased to:

• a) Call for the entire record of proceedings from the respondent;

• b) declare the entire impugned action of the respondents, and notice under Section 13(2) of the SARFAESI Act dated 31.05.2017 to be arbitrary, unlawful and unconstitutional and set aside (Annexure-4);

• c) declare the entire impugned action of the respondents, and notice under Section 13(4) of SARFAESI Act dated 09.03.2018 to be arbitrary, unlawful and unconstitutional and set aside (Annexure-20);

• d) declare and set aside the entire action initiated by the respondents under the SARFAESI Act to be illegal, perverse, unconstitutional and void ab initio;

• e) direct the respondent no. 1 & 5 to intervene in the matter and take necessary & appropriate actions as per law to protect & preserve the first textile park of Rajasthan keeping in view of the aims & objectives of the 10th Five Year Plan;

• f) in the alternative, this Hon’ble Court may appoint a Court commissioner having the understanding of the commercial laws and transactions to bifurcate the categories of members who are willing to pay the amount, who have paid the entire amount and further who have not paid the amount and further for recovery of the amount whatsoever, to be made from the members who have not paid the amount by disposing their respective sheds and any outstanding amounts thereafter be recovered by disposing off the Common area and any other such area in the project which is not operational and is not put to industrial use.

• Any other appropriate writ, order or direction which may be considered just and proper in the facts and circumstances of the case may kindly be issued in favour of the petitioner.”

 

# 2. FACTS OF THE CASE:

(i) The Ministry of Textiles, Union of India launched scheme for Integrated Textile Parks across India to cope up with the global development. In this regard, on 16.09.2005 the respondent No. 1 entered into an agreement with the respondent No. 2 for providing expert advisory for development of Integrated Textile Parks.

(ii) On 21.09.2005, the petitioner entered into a Memorandum of Agreement (MoA) with respondent No. 2 and the project of the petitioner was approved by the Project Approval Committee on 25.11.2005 and allotment letter and lease deed were executed in favour of the petitioner by RIICO for a period of 99 years.

(iii) On 18.09.2006, individuals/juristic persons applied for membership of the said park by way of share subscription agreement. On 23.05.2008 and 27.02.2012, security trustee i.e. respondents No. 2 to 4 entered into an agreement for creating and maintaining security interest over the said land in terms of financing the Amendatory Security Trustee Agreement executed on 27.02.2012.

(iv) Common Loan Agreement dated 23.05.2012 was entered in between the petitioner and consortium of 15 banks and financial institutions through respondent No. 3 for fulfilling financial needs for the development of the project.

(v) On 12.03.2009 sanction letter releasing the second instalment of grant-in-aid was issued by Ministry of Textiles to the petitioner. On account of default, on 02.02.2016 a letter was issued by respondent No. 2 stating therein that the members of the petitioner company who are intending to repay their arrears and respective shares in the loan facility account, their respective Units would be kept out of purview and be absolved from recovery in future.

(vi) On 04.05.2017, the petitioner was issued a notice under Section 13(2) of the SARFAESI Act, 2002 from one of the consortium Banks i.e. Indian Bank, New Delhi main branch for recovery of an amount of Rs. 1,66,12,493/-. The same was part of the loan provided by Consortium of Banks and financial institutions.

(vii) On 31.05.2017, respondent No. 4 in the light of the notice under Section 13(2) of the SARFAESI Act, 2002 dated 04.05.2017 directed the petitioner to deposit the entire liability of Rs. 19,23,68,956/- in respect of the entire plot qua petitioner and members.

(viii) On 25.07.2017 the petitioner filed their statutory objections in response to the notice under Section 13(2) in terms of Section 13(3A) of the SARFAESI Act, 2002.

(ix) The respondent No. 5 turned down his request and neither reciprocated the objections qua the action initiated under SARFAESI Act, 2002 by Consortium of Banks and Financial Institutions and Security Trustee nor intervened in the matter.

(x) The petitioner in parallel filed a representation dated 16.08.2017 before the respondent No. 1 to intervene in the matter being an interested party but no intervention was provided in the recovery initiated under the SARFAESI Act, 2002.

(xi) On 28.02.2018, respondent No. 4 issued a notice which was served upon the petitioner for taking possession of entire land on 09.03.2018, qua the same, petitioner submitted their objections by submitting that the notice is vague and does not disclose the area to which they want to take possession of and the said letter is without jurisdiction and has no sanctity in law.

(xii) The respondent No. 4 on 08.03.2018 replied to the said letter/ representation and rejected the contentions of the petitioner and on 09.03.2018 took symbolic possession of the entire park, sheds not only of the members in errors but also of the petitioner.

(xiii) On 17.04.2018, the petitioner received a legal notice from Corporation Bank, New Delhi Branch, one of the members of Consortium of Banks and Lenders, to deposit their liabilities under Section 13(3) of the SARFAESI Act, 2002 read with Rule 8(1) of the Security Interest Enforcement Rules, 2002.

(xiv) In this background, the present writ petition has been filed with the prayers referred (supra) challenging the impugned action of respondent(s) in terms of notices under Section 13(2) and Section 13(4) of the SARFAESI Act, 2002 and for declaring the entire act of the respondents under the SARFAESI Act, 2002 to be illegal, perverse and unconstitutional and for directing the respondents No. 1 & 5 to intervene in the matter or in the alternate for appointment of Court Commissioner for demarcating the arrears and liabilities in question in between the members.

 

# 3. Upon hearing the said writ petition, the Co-ordinate Bench of this Court, on account of strike of the Advocates, granted no coercive action on 01/06/2018 and the stay order was continued on one count or the other vide order dated 18/07/2018.

 

# 4. In this background, vide order sheet dated 31.01.2022 on the request of both the sides, the matter was taken up for final arguments on 04.02.2022 as the matter pertained to SARFAESI Act, 2002, recovery proceedings were at halt and urgency was claimed by both sides.

 

# 5. This Court has heard arguments advanced by respective counsels, considered the written submissions, records of the writ petition and the judgments cited at bar.

 

6. A preliminary objection has been raised by the respondents that the SARFAESI Act is a self-contained Code and provides for alternate remedy under Section 17 of the SARFAESI Act, 2002 Act and has an overriding application in terms of Sections 35 of the SARFAESI Act, 2002. 

 

# 7. The respondents submitted that writ petition against notice under Sections 13(2) & 13(4) of the SARFAESI Act is not maintainable, specially when admittedly the objections raised by the petitioner under Section 13(3A) are duly considered. The attempt of the petitioner bypassing provisions of Section 17 of the SARFAESI Act, 2002 and straightway approaching this Court is against the judgments of Apex Court in the matter of United Bank of India Vs. Satyavati Tandon & Ors. reported in (2010) 8 SCC 110; Kanhaiya Lal Vs. State of Maharashtra reported in (2011) 2 SCC 782; Phoenix ARC Private Limited Vs. Viswa Bharati Vidya Mandir and others reported in 2022 SCC online SC 44.

 

# 8. The respondents submitted that time and again it has been held by the Hon’ble Apex Court in catena of judgments that:-

• “If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable” and has also held that “filing of the writ petitions by the borrowers before the High Court under Article-226 of the Constitution of India is an abuse of process of the Court.”

 

# 9. Secondly, the respondents have raised an objection that the petitioner has not approached the Hon’ble Court with clean hands inasmuch as they do admit in the writ petition that notices under Sections 13(2) & 13(4) were issued by consortium of lenders i.e. 15 Consortium Banks and Financial Institutions in a scheme of Pooled Municipal Debts Obligation (PMDO) and the petitioner was granted facility by formulating respondent No. 4 as a security trustee but despite having joined in several recovery proceedings, the petitioner has not impleaded them as necessary party though the prayer is raised qua them. In the light of the said misrepresentation, the writ petition is liable to be dismissed on this count alone. The respondents relied upon judgement rendered by the Apex Court in U.P. Junior Doctors’ Action Committee Vs. B. Sheetal Nandwani and Ors. reported in AIR 1991 SC 909.

 

# 10. Lastly, the respondents have submitted that in pursuance to setting up the said project under the aforesaid scheme the grant of Rs.38.37 crore was sanctioned from the Ministry of Textiles and PMDO lended them 51.6 crores, as per the terms and conditions of sanction letter, facility and security agreements were duly executed referred to as Common Loan Agreement (CLA) and Trust and Retention Account (TRA) in addition to deed of hypothecation under security cover of title deeds. The petitioner has failed to serve the interest to the said credit facility and on 24.02.2012 because of the said default looking to the project in question the term loan facility was restructured to the tune of Rs. 20.31 crores and the same was accepted by the petitioner on 24.02.2012, the same was affirmed on 28.12.2015 by admission of liability by the petitioner.

 

# 11. In spite of the respondents’ umpteen requests and communications, during the period from 2012 to 2016 the petitioner has again failed to repay the instalments and regularise the loan account due to PMDO lenders.

 

# 12. Consequently, the action of petitioner was declared NPA on 29.11.2016 as per the guidelines of Reserve Bank of India and, therefore, proceedings under SARFAESI Act, 2002 were issued on 31.05.2017 to the tune of Rs. 19.24 crores approximately. The market value of the assets as per the respondents is more than 50 crores and is enough to recover the debts.

 

# 13. The petitioner, on the other hand, has submitted that the action of the respondents is without authority of law and without taking permission from Ministry of Textile/respondent  No. 1. They have initiated action under the SARFAESI Act, 2002. The respondent No. 4 has no authority as the individual banks are sending notices of recovery and therefore they have approached the Hon’ble Court by way of writ jurisdiction. They further submitted that the petitioner is defending the case before the Debts Recovery Tribunal on the action initiated by the banks, therefore, they have not impleaded them as necessary party. On merits, their submission is that this is a project of public importance, funded by the Government of India with a given objective and, therefore, without intervention of the Ministry of Textile, action cannot be initiated. The petitioner has also placed reliance upon the judgments of the Apex Court in the matters of United Bank of India Vs. Satyawati Tandon & Ors. (2010) 8 SCC 110; Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Ors (1998) 8 SCC 1; Shalini Shyam Shetty and Ors. Vs. Rajendra Shankar Patil (2010) 8 SCC 329; Ramesh Ahluwalia Vs. State of Punjab and Ors (2012) 12 SCC 331; Harbanslal Sahnia and Ors. Vs. India Oil Corpn. Ltd. and Ors (2002) 2 SCC 107; Unitech Limited and Ors. Vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and Ors. (2021) 2 SCJ 19 and further relied on Civil Appeal No. 925-926 of 2021 in the matter of Rapid Metro Rail Gurgaon Limited Etc. Vs. Haryana Mass Rapid Transport Corporation Limited & Ors. decided on 26.03.2021.

 

# 14. On consideration of submissions advanced by respective counsels, the first and foremost issue which is required to be addressed is maintainability of the writ petition against the prayers made in the writ petition i.e. for quashing and setting aside notices under Sections 13(2) & 13(4) and the proceedings under the SARFAESI Act, 2002. This Court is of the view that firstly on account of the fact that the SARFAESI Act, 2002 specifies specific remedy under Section 17 and Section 35 has an overriding effect over the other laws; secondly in the light of the judgments of Apex Court rendered titled as United Bank Vs. Satyavati Tandon (supra) and Phoenix ARC Private Limited Vs. Viswa Bharati Vidya Mandir (supra) and others wherein it has been held that in cases relating to recovery of dues of banks, the secured creditors, the stay granted by the High Court would have serious adverse impact on the financial health of such institutions and ultimately prove detrimental to the economy of nation. Thirdly, extra-ordinary powers under Article- 226 is not a rule of compulsion and in the matters of SARFAESI Act, 2002, a very slow and cautious approach has to be adopted and when specific remedy is available writ court should not entertain the writ petitions and therefore, the writ petition is not maintainable.

 

# 15. The present writ petition is also not maintainable as the petitioner has not approached this Court with clean hands and has not impleaded consortium banks as a necessary party though the prayers were sought against their action. In this regard, reliance is placed upon U.P. Junior Doctors’ Action Committee (supra).  Furthermore, as iterated by Hon’ble Apex Court in the case of S.P. Chengalvaraya Naidu (Dead) by L.Rs. vs. Jagannath (Dead) by L.Rs. and Ors. reported in (1994) 1 SCC 1, ‘Fraud-avoids all judicial acts, ecclesiastical or temporal’ the present writ petition is not maintainable.

 

# 16. The contention of the petitioner that the action is without jurisdiction and is contrary to letter dated 12.03.2009 issued by respondent No.1 i.e. the Ministry of Textile is also not tenable but is only aimed to avoid admitted liability against NPA account. On perusal of Clause 4 in Annexure-16 which is the letter dated 12.03.2019, the approval of the Ministry of Textile is only required when the assets are acquired wholly or substantially out of Government grants. In the case in hand, liability of the investment was by PMDO bankers and against the members’ equity and admittedly, restructuring was done in the year 2012. Further, SARFAESI Act, 2002 in terms of Section 35 has an overriding effect and the Ministry of Textile in spite of the representation by the petitioner has turned down the request for intervention by not replying to the same.

 

# 17. The arguments raised by the petitioner are technical in nature and are not tenable. The petitioner has been successful in misrepresenting the Court and by-passing the statutory remedy, acting against the settled position of law and on relying upon the judgments namely Whirlpool Corporation Vs. Registrar Trade Marks, Mumbai & Ors. (1998) 8 SCC 1 on account of alternative remedy rendered in trade mark or tender matters or matters of public interest whereas, the case in hand is of SARFAESI Act, 2002 which is a special law having self-contained provisions and the practice and procedures are well-defined by the Apex Court in series of judgments referred above, more specifically in United Bank of India Vs. Satyawati Tandon & Ors. (2010) 8 SCC 110 wherein it was held as under:

• 18. 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 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 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 MANU/SC/0399/1968 : AIR 1969 SC 556; Whirlpool Corporation v. Registrar of Trade Marks, Mumbai MANU/SC/0664/1998 : (1998) 8 SCC 1 and Harbanslal Sahnia and Anr. v. Indian Oil Corporation Ltd. and Ors. MANU/SC/1199/2002 : (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order.

 

# 18. In these facts and circumstances, this Court is of the view that the writ petition is liable to be dismissed with a cost of Rs. 2 lac on account of misrepresentation, not impleading the consortium banks as necessary parties and praying for relief against them in their absence, not availing the alternative remedy and keeping the Court in dark by getting ex-parte stay vide order dated 01.06.2018 during the course of the strike and by giving an impression to the Court on 18.07.2018 that there are several members of the petitioner who have paid their entire dues and in parallel defending the matter before the Debts Recovery Tribunal whereby they were successful in avoiding payment of due of Rs.20 crores and interest thereon.

 

# 19. In the light of the above, the writ petition is dismissed with a cost of Rs.2 lac which has to be deposited with the respondent No. 4 in half i.e. Rs.1 lac and the other half will be deposited before Rajasthan State Legal Services Authority, Jaipur within a period of 60 days.

 

# 20. All the pending applications stand disposed of.

 

---------------------------------------------