SARFAESI - Case Law Reference Library: June 2022

26 Jun 2022

M/s Transcore vs Union Of India & Anr - In the present case, as stated above, the NPA Act (SARFAESI) is an additional remedy to the DRT Act. (RDDB) Together they constitute one remedy and, therefore, the doctrine of election does not apply.

Supreme Court (29.11.2006) in M/s Transcore vs Union Of India & Anr [Appeal (civil) 3228 of 2006] held that;

There are three elements of election, namely, existence of two or more remedies; inconsistencies between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply.
In the present case, as stated above, the NPA Act (SARFAESI) is an additional remedy to the DRT Act. (RDDB) Together they constitute one remedy and, therefore, the doctrine of election does not apply.
The doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent.

Excerpts of the order;

Mr. Soli J. Sorabjee, learned senior counsel appearing on behalf of Indian Bank, submitted that the doctrine of election does not apply to curative relief. He submitted, that a creditor is entitled to choose one or more cumulative remedies open to him, unless precluded by statutory provisions or by the doctrine of election; that in the absence of any bar, it is open to the creditor to choose one or more of the cumulative remedies. Learned senior counsel submitted that under the scheme of NPA Act, a bank/ FI is under no disability to take recourse under Section 13 of NPA Act even after it has invoked Section 19 of DRT Act. He submitted, that the object of both the sections is to recover dues; that there is no inconsistency inherent or implied in the two remedies; that the doctrine of election applies in cases of inconsistent remedies. He submitted that, in the present case, the two remedies are not inconsistent to each other. He submitted that the judgment of this Court in the case of A.P. State Financial Corporation (supra) has no application because in that case this Court has held that the State Financial Corporation Act has expressly provided for the doctrine of election. Learned counsel submitted that the doctrine of election is a doctrine evolved by courts on equity. It is based on the principle that a man shall not be allowed to approbate and reprobate. If a person has chosen a particular remedy and has intentionally relinquished another remedy, he is debarred by the doctrine of election to pursue the remedy he has intentionally given up. Learned counsel submitted that a creditor is not precluded by the doctrine of election if he makes a choice of one or more cumulative remedies available to him. The adoption of remedies under Section 19 of DRT Act and under Section 13(4) of NPA Act are not inconsistent with each other. Both the remedies recognize the existence of the same facts, on the basis of which reliefs are claimed. In the case of election of remedies a party is confined to the remedy first chosen, precluding a resort to another, because the two remedies are inconsistent with each other, and not analogous, consistent and concurrent. Learned senior counsel submitted that a creditor is not concluded by the rule of election where he merely makes a choice of one or more consistent and cumulative remedies available to him. Thus, a creditor whose claim is secured by two written obligations falling due simultaneously has a right to proceed thereafter upon either or both of them to enforce payment of the amount due. In this connection, learned senior counsel placed reliance on Corpus Juris Secundam, Vol. XXVIII, para 13; American Jurisprudence, 2d, Vol. 25 and Snell's Principles of Equity, Twenty-Eighth Edition, page 495. Learned counsel urged that the interpretation suggested by the borrowers would not subserve the object of the NPA Act which is enacted for speedy recovery of debts. If a bank/FI is compelled or mandatorily required to withdraw its application under the proviso to Section 19 of DRT Act and, thereafter, invoke NPA Act, it would face a situation where Section 13(10) would fail. It would lead to further complications which would involve questions of limitation and delay in the speedy recovery of its dues. Learned counsel urged that the conclusion drawn by the Punjab & Haryana High Court in the case of Kalyani Sales Co. v. Union of India was erroneous because it states that once the bank/FI decides to proceed under the NPA Act, that Act imposes an obligation on the bank/ FI to withdraw the O.A. under Section 19 of DRT Act.

Mr. Ranjit Kumar, learned senior counsel appearing for Indian Bank, submitted that if notice under Section 13(2) of NPA Act was only a show cause notice then Section 13(3-A) was not required. He submitted that because Section 13(2) notice constituted an action taken under the Act, Section 13(3-A) becomes necessary because it gives an opportunity to the borrower to object to the notice. Learned counsel submitted that the NPA Act deals only with secured assets whereas the DRT Act deals with both secured and non-secured assets. He submitted that a secured asset is an asset which is owned by the bank/ FI and, therefore, it can act without intervention of the court. Learned counsel urged that in certain respects, the DRT Act did not provide for the remedies, which led to the enactment of the NPA Act. In this connection, he cited the example of take over of management of the business of the borrower which is provided for only in the NPA Act and not in the DRT Act.

Shri D. Dave, learned senior counsel appearing for Indian Bank' Association (IBA) submitted, that NPA Act has to operate de hors the DRT Act; that both the Acts operate within the same scheme but the DRT Act is a general Act whereas the NPA Act is the special Act. He submitted that a bank/FI is entitled to go back to the DRT under Section 13(10) which indicates that the NPA Act is a special Act vis-`-vis the DRT Act which is the general Act. He urged that the NPA Act is amplification of DRT Act. In this connection, it is pointed out that the concept of asset reconstruction and the concept of asset management is wider than the concept of recovery of debt under the DRT Act. Our attention was invited to Section 5 of the NPA Act which refers to acquisition of rights or interest in financial assets which concept is not there in DRT Act. Learned counsel, therefore, submitted that NPA Act is a special Act and, therefore, irrespective of the pendency of litigation under the DRT Act, acquisition of interest in financial assets can take place under the NPA Act. Learned senior counsel further pointed out, that under DRT Act a debt could be secured as well as unsecured; that under Section 9(f) of the NPA Act, a reconstruction company or a securitisation company is empowered for the purposes of assets reconstruction to take possession of secured assets without prejudice to the provisions contained in any other law for the time being in force. Therefore, even a reconstruction company can enforce security interest under Section 13 of the NPA Act without being restricted by the provisions of the DRT Act. Section 9(f) is put into service to show that at every stage, Parliament has ousted the jurisdiction of the courts and DRT to get the NPA liquidated at the earliest opportunity. Learned senior counsel submitted, that Section 19 of the DRT Act concerns the procedure which has to be followed by the tribunal; that it is a procedural section and, therefore, Section 19 of DRT Act cannot confer or allow jurisdiction to be retained by the tribunal. He submitted that by Section 13(3-A), Parliament has made a conscience decision that there will be no interference from DRT/ court at any stage, therefore, it states that a borrower cannot approach DRT against communication of reasons by a bank/ FI which shows that in the matter of NPA, Parliament has ruled out intervention by courts and tribunals. Learned senior counsel submitted that calling to the borrowers for hearing, the NPA Act shall remain suspended till leave is given by DRT. This interpretation, according to the learned senior counsel, defeats the very object behind enactment of the NPA Act. Lastly, he pointed out that Section 35 of NPA Act states that the Act shall override all other laws which are inconsistent with NPA Act. Similarly, Section 37 of NPA Act states that if any law is consistent with NPA Act then the NPA Act shall be treated as an additional Act. The NPA Act is made in addition to the Companies Act, 1956, the SEBI Act, 1992, the DRT Act, 1993 as well as the Securities Contracts (Regulation) Act, 1956 and, therefore, the doctrine of election has no application in this case. Learned counsel submitted that the very object for enacting the NPA Act is to introduce banking reforms including change in the DRT Act so as to include the provisions of the NPA Act therein and, therefore, withdrawal of the O.A. is not a condition precedent for invoking NPA Act.

Shri Rajiv Shakdhar, learned senior counsel appearing for ICICI Bank Ltd. submitted that Rule 2(b) of the Security Interest (Enforcement) Rules 2002 ("2002 Rules") states that a demand notice is the notice in writing issued by a secured creditor to any borrower pursuant to Section 13(2) of the NPA Act. Reliance is placed on the said rule to show that the notice under Section 13(2) is not a mere show cause notice, that it is a demand notice similar to Section 156 of the Income Tax Act. In this connection, learned counsel submitted, that Section 22 of the NPA Act refers to default in repayment of debt on the part of the borrower plus classification of his account as NPA; that once an account is classified as NPA then the account continues to remain as NPA even if there is a part payment. Learned counsel submitted that under Rule 3 of the 2002 Rules, the service of demand notice under Section 13(2) indicates the procedure to be followed in serving such notice and if the amount mentioned in the demand notice is not paid within the stipulated period then Rule 4 provides that the Authorised Officer of a bank/ FI shall proceed to realise the amount by adopting any one or more of the measures specified in Section 13(4). These rules are relied upon to show that the notice under Section 13(2) constitute an action taken under the NPA Act. Further, he pointed out that after giving of the demand notice, the debtor is debarred from dealing with the assets, vide Section 13(13) of NPA Act. He submitted that Section 13 of NPA Act deals with secured interest whereas Section 9 of the NPA Act deals with unsecured interest. Learned counsel submitted, that there is a basic difference between suits to recover debts and suits to enforce securities; that NPA Act deals with enforcement of securities and it does not wait for debts to crystallize and, therefore, O.A. filed in the DRT will not be required to be withdrawn in the event action by way of Section 13(2) notice is taken even before 11.11.2004. The doctrine of election would not apply to the proceedings under the NPA Act and the DRT Act. It is urged, that the nature, ambit and scope of the proceedings under the two Acts are different; that the legislative purpose for conferring the power on the secured creditors to enforce its security interest by taking recourse to Section 13(4) of NPA Act without intervention of the court is to free the secured creditors of the impediments contained in Section 69 of the TP Act. A secured creditor is now empowered by virtue of Section 13 of the NPA Act to take any of the measures including sale of the secured assets without intervention of the court and notwithstanding the limitations of Section 69 of the TP Act. The power of sale of property in a suit even prior to the passing of decree has been upheld by this Court by placing reliance on Order XL Rule 1(1)(d) CPC. In the circumstance, withdrawal of O.A. cannot be made a condition precedent for taking recourse to N.PA Act.

Mr. Dhruv Mehta, learned counsel appearing on behalf of the Punjab National Bank, submitted that the doctrine of election is for banks/ FIs. and not for borrowers. The reason is that a creditor has to see his debtor, it is the right of the bank to liquidate the asset which right is unfettered once a security or interest is created in favour of the bank/FI. [See Abdul Azeez v. Punjab National Bank (2005)127CompCas514(Ker)]. Learned counsel submitted that the purpose of enacting proviso to Section 19(1) is to bring in Order XXIII CPC. Learned counsel submitted that the doctrine of election applies only in case of inconsistent remedies and not in case of additional remedies. He urged that withdrawal of an application could be a condition precedent for alternate remedy, however, it cannot be a condition precedent for taking recourse to an additional remedy. Learned counsel urged that unlike SICA, in the NPA Act, 2002 there is no proviso saving limitation, and, therefore, if the argument of the borrowers is accepted, it could lead to a situation where the banks' action under NPA Act would be time barred. In any event, NPA Act, according to the learned counsel, is a later enactment and, therefore, it shall prevail over the DRT Act.

Ms. J.S. Wad, learned counsel for Central Bank of India, has adopted the above arguments advanced on behalf of the various banks.

The heart of the matter is that NPA Act proceeds on the basis that an interest in the asset pledged or mortgaged with the bank or FI is created in favour of the bank/ FI; that the borrower has become a Debtor, his liability has crystallized and that his account with the bank/ FI (which is an asset with the bank/FI) has become sub-standard.

Value of an asset in an inflationary economy is discounted by "time" factor. A right created in favour of the bank/ FI involves corresponding obligation on the part of the borrower to see that the value of the security does not depreciate with the passage of time which occurs due to his failure to repay the loan in time.

Keeping in mind the above circumstances, the NPA Act is enacted for quick enforcement of the security. The said Act deals with enforcement of the rights vested in the bank/ FI. The NPA Act proceeds on the basis that security interest vests in the bank/FI. The NPA Act proceeds on the basis that security interest vests in the bank/FI. Sections 5 and 9 of NPA Act is also important for preservation of the value of the assets of the banks/ FIs. Quick recovery of debt is important. It is the object of DRT Act as well as NPA Act. But under NPA Act, authority is given to the banks/ FIs, which is not there in the DRT Act, to assign the secured interest to securitisation company/ asset reconstruction company. In cases where the borrower has bought an asset with the finance of the bank/ FI, the latter is treated as a lender and on assignment the securitisation company/ asset reconstruction company steps into the shoes of the lender bank/ FI and it can recover the lent amounts from the borrower.

According to Snell's Equity (Thirty-first edition) at page 777, a dual obligation could arise on the same transaction, namely, A's obligation to repay a sum of money to B or some other obligation. In such a case, B can sue A for money or for breach of the obligation. However, B will often have some security which covers the obligation of A, say, in the form of an asset over which B can exercise his rights. B may be entitled to this security either by law or by operation of common law principles or under the transaction (contract). In addition, B may acquire a personal right of action against the third party. Security over the asset (property) may be obtained by mortgage, charge, pledge, lien etc. Security in the form of right of action against a third party is known as guarantee. Broadly, there are three types of security over the asset. One is where the creditor obtains interest in the asset concerned (mortgage). Second is securities in which the rights of the creditor depends on possession of the asset (pledge/ lien). The third is charge where the creditor neither obtains ownership nor possession of the asset but the asset is appropriated to the satisfaction of the debt or obligation in question (charge). The dichotomy, which is of importance, is that more than one obligation could arise on the same transaction, namely, to repay the debt or to discharge some other obligation.

Therefore, when Section 13(4) talks about taking possession of the secured assets or management of the business of the borrower, it is because a right is created by the borrower in favour of the bank/ FI when he takes a loan secured by pledge, hypothecation, mortgage or charge. For example, when a company takes a loan and pledges its financial asset, it is the duty of that company to see that the margin between what the company borrows and the extent to which the loan is covered by the value of the financial asset hypothecated is retained. If the borrower company does not repay, becomes a defaulter and does not keep up the value of the financial asset which depletes then the borrower fails in its obligation which results in a mis- match between the asset and the liability in the books of the bank/ FI. Therefore, Sections 5 and 9 talks of acquisition of the secured interest so that the balance sheet of the bank/ FI remains clean. Same applies to immovable property charged or mortgaged to the bank/ FI. These are some of the factors which the Authorised Officer of the bank/ FI has to keep in mind when he gives notice under Section 13(2) of the NPA Act. Hence, equity, exists in the bank/FI and not in the borrower. Therefore, apart from obligation to repay, the borrower undertakes to keep the margin and the value of the securities hypothecated so that there is no mis-match between the asset-liability in the books of the bank/FI. This obligation is different and distinct from the obligation to repay. It is the former obligation of the borrower which attracts the provisions of NPA Act which seeks to enforce it by measures mentioned in Section 13(4) of NPA Act, which measures are not contemplated by DRT Act and, therefore, it is wrong to say that the two Acts provide parallel remedies as held by the judgment of the High Court in M/s Kalyani Sales Co.. As stated, the remedy under DRT Act falls short as compared to NPA Act which refers to acquisition and assignment of the receivables to the asset reconstruction company and which authorizes banks/ FIs. to take possession or to take over management which is not there in the DRT Act. It is for this reason that NPA Act is treated as an additional remedy (Section 37), which is not inconsistent with the DRT Act.

In the light of the above discussion, we now examine the doctrine of election. There are three elements of election, namely, existence of two or more remedies; inconsistencies between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply. According to American Jurisprudence, 2d, Vol. 25, page 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Equity (Thirty-first Edition, page 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.

In our view, the judgments of the High Courts which have taken the view that the doctrine of election is applicable are erroneous and liable to be set aside.

We have already analysed the scheme of both the Acts. Basically, the NPA Act is enacted to enforce the interest in the financial assets which belongs to the bank/ FI by virtue of the contract between the parties or by operation of common law principles or by law. The very object of Section 13 of NPA Act is recovery by non-adjudicatory process. A secured asset under NPA Act is an asset in which interest is created by the borrower in favour of the bank/ FI and on that basis alone the NPA Act seeks to enforce the security interest by non-adjudicatory process. Essentially, the NPA Act deals with the rights of the secured creditor. The NPA Act proceeds on the basis that the debtor has failed not only to repay the debt, but he has also failed to maintain the level of margin and to maintain value of the security at a level is the other obligation of the debtor. It is this other obligation which invites applicability of NPA Act. It is for this reason, that Sections 13(1) and 13(2) of the NPA Act proceeds on the basis that security interest in the bank/FI; needs to be enforced expeditiously without the intervention of the court/tribunal; that liability of the borrower has accrued and on account of default in repayment, the account of the borrower in the books of the bank has become non-performing. For the above reasons, NPA Act states that the enforcement could take place by non-adjudicatory process and that the said Act removes all fetters under the above circumstances on the rights of the secured creditor.

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M/s. S.V. Developers Vs. State Bank of India - If a demand notice under Section 13 (2) of the SARFAESI Act does not give rise to any actionable claim or cause of action within the meaning of the SARFAESI Act, we fail to understand as to how action of the secured creditor in classifying the loan account as NPA can be challenged at this stage. The challenge thereto would also have to stand deferred till the stage of Section 13 (4) of the SARFAESI Act is reached.

HC Hyderabad(07.06.2022) in M/s. S.V. Developers Vs. State Bank of India [W.P.Nos. 23067 & 27138 of 2019 and W.P.No.22195 of 2021] held that;

Explanation to Sub-Section (1) of Section 17 of the SARFAESI Act, it is crystal clear that a notice under Section 13 (2) of the SARFAESI Act or the rejection of the objection raised to it including the reasons in support thereof would not give rise to a cause of action for instituting an action in law.
Supreme Court held that the High Court was not justified in entertaining the writ petition before any further action could be taken by the Bank under Section 13 (4) of the SARFAESI Act.
If a demand notice under Section 13 (2) of the SARFAESI Act does not give rise to any actionable claim or cause of action within the meaning of the SARFAESI Act, we fail to understand as to how action of the secured creditor in classifying the loan account as NPA can be challenged at this stage. The challenge thereto would also have to stand deferred till the stage of Section 13 (4) of the SARFAESI Act is reached.
That no borrower can as a matter of right pray for grant of benefit of OTS scheme. That apart, no Writ of Mandamus can be issued under Article 226 of the Constitution of India directing a bank or financial institution to positively grant the benefit of OTS scheme to a borrower.
If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme.
Examining the doctrine of election, Supreme Court held that since the SARFAESI Act is an additional remedy to the 1993 Act, together they would constitute one remedy. Therefore, the doctrine of election would not apply.
That a person who does not come to the court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums.

Excerpts of the order;

# 41. From the pleadings and submissions, the following four issues arise for consideration:-

(i) Whether the notice dated 08.01.2018 issued by the respondent/SBI under Section 13 (2) of the SARFAESI Act is legal and valid? Corollary to the above is the question as to whether the High Court should interfere in such a notice under Article 226 of the Constitution of India?
(ii) Whether petitioner is entitled to the benefit of the OTS scheme under SBIOTS 2019 and whether the High Court under Article 226 of the Constitution of India can issue a direction to the respondent/SBI to accept the OTS proposal of the petitioner?
(iii) Whether respondent/SBI would be precluded from taking steps under the 1993 Act after having invoked provisions of the SARFAESI Act?
(iv) Is there any suppression of material facts by the petitioner? And If so, whether the same would disentitle the petitioner to any relief from the Writ Court?

# 42. We now take up the above issues.

# 42.1. ISSUE NO.I:-

Whether the notice dated 08.01.2018 issued by the respondent/SBI under Section 13 (2) of the SARFAESI Act is legal and valid? Corollary to the above is the question as to whether the High Court should interfere in such a notice under Article 226 of the Constitution of India?

# 42.2. Section 13 of the SARFAESI Act deals with enforcement of security interest. As per Sub-section (1), any security interest created in favour of any secured creditor may be enforced without the intervention of the Court or Tribunal by such creditor in accordance with the provisions of the SARFAESI Act notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882. Sub-section (2) says that where any borrower who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset (NPA), then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor would be entitled to take action under Sub-section (4).

# 42.3. Pausing here for a moment, what Sub-section (2) of Section 13 contemplates is that in the event of a borrower defaulting in repayment and his account in respect of such debt is classified by the secured creditor as NPA, the secured creditor may require the borrower by notice in writing to discharge his liabilities in full to the secured creditor within sixty days of the notice. In other words, the stage at which the loan account is classified as NPA precedes issuance of a demand notice under Sub-section (2) of Section 13.

# 42.4. Proceeding further, we find that Sub-section (3) mentions that the demand notice under Sub-section (2) should provide details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

# 42.5. This brings us to Sub-section (3-A). If the borrower makes any representation or raises any objection upon receipt of the demand notice, the secured creditor is under an obligation to consider such representation or objection. If the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower.

# 42.6. Before we deal with the proviso to Sub-section (3-A), we may mention that in the event of failure by the borrower to discharge his liability in full within the period specified in Sub-section (3-A), Sub-section (4) will come into the picture, where under the secured creditor may take recourse to one or more of the measures mentioned therein to recover the secured debt. The measures include taking over of possession of the secured assets, assignment or sale thereof for realizing the secured asset.

# 42.7. Reverting back to the proviso to Sub-section (3-A), we may mention that the legislative intent is quite manifest there under in as much as the proviso makes it very clear that the reasons so communicated under Sub-section (3-A) or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the jurisdictional Debts Recovery Tribunal under Section 17 or to the Court of District Judge under Section 17-A. This position is made more specific by insertion of the Explanation below the proviso to Sub-section (1) of Section 17. Sub-section (1) of Section 17 provides a remedy to the aggrieved person including borrower to file application against any of the measures taken by the secured creditor under Sub-section (4) of Section 13. The Explanation however declares that the communication of 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 would not entitle the aggrieved person including the borrower to make an application to the jurisdictional Debts Recovery Tribunal under Sub-section (1) of Section 17.

# 43. This Court in M/s NECX Private Limited Vs. Union Bank of India (W.P.No.23643 of 2020) and Katepalli Lavanya Vs. Union Bank of India (W.P.No.20046 of 2021), decided on 09.02.2022, analyzed the provisions of Sub-section (2) of Section 13 of the SARFAESI Act and held that no cause of action within the meaning of the SARFAESI Act can be said to have been arisen at the stage of issuance of demand notice under Section 13 (2) of the SARFAESI Act or at the stage of rejection of representation/objection of the borrower to the issuance of demand notice by the secured creditor. It has been held as follows:

“25. From a conjoint reading of Sub-Sections (2), (3) and (3A) of Section 13 of the SARFAESI Act, it is seen that if upon receipt of a notice under Sub-Section (2) of Section 13, the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate the reasons for non-acceptance of the representation or objection to the borrower within a period of 15 days of receipt of such representation or objection. However, as per the proviso, the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the jurisdictional Debts Recovery Tribunal under Section 17 of the SARFAESI Act or to the Court of District Judge under Section 17A of the SARFAESI Act.
26. At this stage we may also mention that under Section 17 (1) of the SARFAESI Act, any person including a borrower who is aggrieved by any of the measures referred to in Sub-Section (4) of Section 13 taken by the secured creditor or by his authorized officer may make an application before the jurisdictional Debts Recovery Tribunal within 45 days from the date on which such measure has been taken. The Explanation to Sub-Section (1) clarifies that the communication of 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 concerned including the borrower to make an application to the jurisdictional Debts Recovery Tribunal under Sub-Section (1) of Section 17 of the SARFAESI Act.
27. Reverting back to Sub-Section (3A) of Section 13 of the SARFAESI Act, this Court in Smt. Gudupati Laxmi Devi Vs. Canara Bank, W.P.No.28291 of 2021, decided on 10.11.2021, held as follows:
5. A careful analysis of sub-section (3-A) of Section 13 of the SARFAESI Act would go to show that upon receipt of notice issued by the secured creditor under sub-section (2), the borrower has a right to make a representation, or raise any objection, as to the notice so issued. If the borrower exercises that right, then, it is incumbent upon the secured creditor to consider such representation or objection. The use of the word ‘shall’ in sub section (3-A) is indicative of the legislative intent of considering such representation or objection, by the secured creditor mandatory. If the secured creditor is not satisfied with the representation or objection, and finds it to be unacceptable, or untenable, he shall communicate such decision within fifteen days along with the reasons to the borrower.
6. While the statute is silent as to what happens in case of a positive decision by the secured creditor on consideration of such representation or objection, it is axiomatic that once the decision is taken either way, the same has to be communicated to the borrower, notwithstanding the fact that it would not give rise to a cause of action for moving an application either under Section 17 or under Section 17(A). But the fact remains that it would be obligatory on the part of the secured creditor to consider the representation or objection of the borrower, and then take a conscious decision one way or the other, which should be communicated to the borrower within fifteen days of receipt of such representation or objection.
28. Supreme Court in Mardia Chemicals (supra) and in ITC Limited Vs. Blue Coast Hotels Limited stressed upon the need of the secured creditor to consider the representation / objection of the borrower and to communicate the decision taken thereon within the stipulated period. The secured creditor has to act in a fair and reasonable manner.
29. In the instant case, respondent No.1 issued the impugned notice under Section 13 (2) of the SARFAESI Act on 16.11.2020. Petitioner raised objection to such notice vide letter dated 24.11.2020 under Section 13 (3A) of the SARFAESI Act, which was replied to by the authorized officer of the first respondent on 04.12.2020.
30. Thus, on a careful consideration of the statutory language employed in the proviso to Sub-Section (3A) of Section 13 of the SARFAESI Act read with the Explanation to Sub-Section (1) of Section 17 of the SARFAESI Act, it is crystal clear that a notice under Section 13 (2) of the SARFAESI Act or the rejection of the objection raised to it including the reasons in support thereof would not give rise to a cause of action for instituting an action in law. To that extent, we find sufficient force in the contention advanced by the respondents that the writ petition filed is premature. The statute does not contemplate any intervention at this preliminary stage. Only when the process ripens into a definitive action taken by the secured creditor under Sub-Section (4) of Section 13 of the SARFAESI Act, the aggrieved person can avail the statutory remedy under Section 17 of the SARFAESI Act by filing securitization application before the jurisdictional Debts Recovery Tribunal.
31. This aspect was highlighted by the Supreme Court in Punjab National Bank Vs. Imperial Gift House. In that case, the High Court had interfered with the notice issued under Section 13 (2) of the SARFAESI Act and quashed the proceedings initiated by the Bank. Setting aside the order of the High Court, Supreme Court held that the High Court was not justified in entertaining the writ petition before any further action could be taken by the Bank under Section 13 (4) of the SARFAESI Act.
32. That being the position, we are of the view that filing of this writ petition is misconceived. Consequently Writ Petition No.23643 of 2020 is dismissed. However, dismissal of the writ petition would not foreclose the remedies available to the petitioner under the law as and when the cause of action arises”.

# 44. This decision was followed in the subsequent judgment dated 03.03.2022 passed in M/s. Tandra Impex Private Limited Vs. Punjab National Bank (W.P.No.23268 of 2020, dated 03.03.2022). After analyzing the provisions of Section 13 (2) of the SARFAESI Act and the decision in W.P.Nos.23643 of 2020 and 20046 of 2021, this Court held as follows:

“From the above, it is quite clear that the legislative intent is to ensure that there should be no judicial or quasi judicial interdiction at the stage of issuance of demand notice under Section 13 (2) of the SARFAESI Act. This is so because of the very object and reasons behind enactment of the SARFAESI Act.
* * *
We have already noticed above that classification of loan account by the secured creditor is at a stage prior to issuance of the demand notice under Section 13(2) of the SARFAESI Act. If at the stage of issuance of demand notice, interference by the Court and Tribunal is not to be made, we fail to understand as to how such intervention can be made at a stage prior to issuance of demand notice under Section 13(2) of the SARFAESI Act”.

# 45. Therefore, answer to issue No.1 is very clear: at the stage of issuance of notice under Section 13 (2) of the SARFAESI Act, no interference is called for by the Court. Therefore, question of examining legality and validity of such demand notice would not arise. The adjudication would have to wait till the stage of Sub-Section (4) of Section 13 is reached, where after the aggrieved person including a borrower can file securitization application under Section 17 of the SARFAESI Act in which all grounds of challenge would be available.

# 46. Before we proceed to the next issue, we may also mention that classification of a defaulter’s loan account as NPA precedes issuance of demand notice under Section 13 (2) of the SARFAESI Act. As held in M/s. Tandra Impex Private Limited (supra), if a demand notice under Section 13 (2) of the SARFAESI Act does not give rise to any actionable claim or cause of action within the meaning of the SARFAESI Act, we fail to understand as to how action of the secured creditor in classifying the loan account as NPA can be challenged at this stage. The challenge thereto would also have to stand deferred till the stage of Section 13 (4) of the SARFAESI Act is reached.

# 47. ISSUE NO.2:-

Whether the petitioner is entitled to the benefit of the OTS scheme under SBIOTS 2019 and whether the High Court under Article 226 of the Constitution of India can issue a direction to the respondent/SBI to accept the OTS proposal of the petitioner?

# 48. This issue is also no longer res-integra as the Supreme Court in Bijnor Urban Co-operative Bank Limited Bijnor Vs. Meenal Agarwal Civil Appeal No.7411 of 2021, decided on 15.12.2021, has held that no borrower can as a matter of right pray for grant of benefit of OTS scheme. That apart, no Writ of Mandamus can be issued under Article 226 of the Constitution of India directing a bank or financial institution to positively grant the benefit of OTS scheme to a borrower. Such decision should be left to the commercial wisdom of the bank or financial institution. It has been held as follows:

“9. Even otherwise, as observed hereinabove, no borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme. In a given case, it may happen that a person would borrow a huge amount, for example Rs.100 crores. After availing the loan, he may deliberately not pay any amount towards installments, though able to make the payment. He would wait for the OTS Scheme and then pray for grant of benefit under the OTS Scheme under which, always a lesser amount than the amount due and payable under the loan account will have to be paid. This, despite there being all possibility for recovery of the entire loan amount which can be realized by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS Scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS Scheme and that cannot be purpose of the Scheme which may encourage such a dishonesty.
10. If a prayer is entertained on the part of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per the terms of the agreement entered into by it/him would like to get one time settlement in its/his favour. Who would not like to get his liability reduced and pay lesser amount than the amount he/she is liable to pay under the loan account? In the present case, it is noted that the original writ petitioner and her husband are making the payments regularly in two other loan accounts and those accounts are regularized. Meaning thereby, they have the capacity to make the payment even with respect to the present loan account and despite the said fact, not a single amount/installment has been paid in the present loan account for which original petitioner is praying for the benefit under the OTS Scheme.
11. The sum and substance of the aforesaid discussion would be that no writ of mandamus can be issued by the High Court in exercise of powers under Article 226 of the Constitution of India, directing a financial institution/bank to positively grant the benefit of OTS to a borrower. The grant of benefit under the OTS is always subject to the eligibility criteria mentioned under the OTS Scheme and the guidelines issued from time to time. If the bank/financial institution is of the opinion that the loanee has the capacity to make the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove.
12. In view of the aforesaid discussion and for the reasons stated above, we are of the firm opinion that the High Court, in the present case, has materially erred and has exceeded in its jurisdiction in issuing a writ of mandamus in exercise of its powers under Article 226 of the Constitution of India by directing the appellant-Bank to positively consider/grant the benefit of OTS to the original writ petitioner. The impugned judgment and order passed by the High Court is hence unsustainable and deserves to be quashed and set aside and is accordingly quashed and set aside”.

# 49. The above being the position, this issue is decided against the petitioner.

# 50. ISSUE NO.3:-

Whether respondent/SBI would be precluded from taking steps under the 1993 Act after having invoked provisions of the SARFAESI Act?

# 51. Insofar this issue is concerned, petitioner had filed an I.A.in O.A.No.204 of 2020 filed by the respondent/SBI before the Debts Recovery Tribunal-I at Hyderabad contending that respondent/SBI having invoked provisions of the SARFAESI Act would be estopped from proceeding further by filing Original Application under Section 19 of the 1993 Act. The I.A. was registered as I.A.No.263 of 2021. By order dated 27.08.2021 Debts Recovery Tribunal-I, Hyderabad held that the said I.A was devoid of merit and was accordingly dismissed. Referring to various Supreme Court decisions, it was held that both the SARFAESI Act and the 1993 Act are complimentary to each other and parallel proceedings can go on under both the said acts. In other words, proceedings under the two enactments can be pursued side by side. It was held that there is no embargo in either of the two enactments restraining the secured creditor from pursuing both the remedies either simultaneously or one after the other. Any reading of such an embargo would frustrate the very object and purport of the two enactments. If sale of the schedule property under the SARFAESI Act succeeds and any amount is recovered, then the jurisdictional Debts Recovery Tribunal or the recovery officer can be approached and the amount recoverable under the recovery certificate issued following the proceedings under the 1993 Act would accordingly be modified to operate only for the balance amount of the debt remaining outstanding. While dismissing the I.A., Debts Recovery Tribunal-I, Hyderabad held that the petitioner was trying to protract the litigation.

# 52. Learned counsel for the petitioner has referred to Sub-Section (10) of Section 13 of the SARFAESI Act and submits that where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed before the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower. On the strength of this provision he submits that once a secured creditor invokes provisions of the SARFAESI Act, till such proceedings are taken to its logical conclusion i.e., sale of the secured asset through auction sale, it would be open to the secured creditor to file application under Section 19 of the 1993 Act which can only be filed for recovery of the balance amount i.e., amount still due to be paid after sale of the secured asset in auction sale. He has also referred to Section 35 of the SARFAESI Act which shows that provisions of the SARFAESI Act would have over-riding effect over other laws, which provision has to be read with Section 37 of the SARFAESI Act which allows application of other laws including the 1993 Act in addition to the SARFAESI Act. To support his contentions learned counsel for the petitioner has placed reliance on the following two decisions:

(1) Maharashtra Tubes Limited Vs. State Industrial & Investment Corporation of Maharashtra Limited 1
(2) Ranvir Dewan Vs. Rashmi Khanna 2

# 53. We are afraid we can accept such contention of the petitioner. As a matter of fact, this issue is also no longer res-integra and therefore, we are in agreement with the views expressed by the Debts Recovery Tribunal-I, Hyderabad, dated 27.08.2021 rejecting I.A.No.236 of 2021 filed by the petitioner. Incidentally, this Order is not under impugnment in any of the proceedings.

# 54. In Transcore Vs. Union of India3, the question which fell for consideration before the Supreme Court was whether withdrawal of Original Application filed under Section 19 (1) of the 1993 Act was a condition precedent for taking recourse to the SARFAESI Act. In other words, whether the secured creditor having elected to seek its remedy in terms of the 1993 Act would still be entitled to invoke provisions of the SARFAESI Act for realizing the outstanding dues without withdrawing or abandoning the Original Application filed under Section 19 of the 1993 Act. After a threadbare analysis of both the enactments, Supreme Court held that it would be wrong to say that the two enactments provide parallel remedies. Remedy under the 1993 Act falls short as compared to the SARFAESI Act, which refers to acquisition and assignment of the receivables to the asset reconstruction company and which authorizes banks and financial institutions to take possession over the management which is not there in the 1993 Act. It is for this reason that the SARFAESI Act is treated as an additional remedy which is not inconsistent with the 1993 Act. Examining the doctrine of election, Supreme Court held that since the SARFAESI Act is an additional remedy to the 1993 Act, together they would constitute one remedy. Therefore, the doctrine of election would not apply. It was held as follows:-

“In the light of the above discussion, we now examine the doctrine of election. There are three elements of election, namely, existence of two or more remedies; inconsistencies between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply. According to American Jurisprudence, 2d Vol. 25, page 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the Debts Recovery Tribunal Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell’s Equity (Thirty-first Edition, page 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application”.

# 55. This issue was also examined by the Supreme Court in Mathew Varghese Vs. M. Amritha Kumar4, whereafter it was answered that simultaneous proceedings under the two enactments can go on. It was held as follows:

“45. A close reading of Section 37 shows that the provisions of the SARFAESI Act or the Rules framed thereunder will be in addition to the provisions of the RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of the RDDB Act not being inconsistent with the provisions of the SARFAESI Act, the application of both the Acts, namely the SARFAESI Act and the RDDB Act, would be complimentary to each other. In this context, reliance can be placed upon the decision of Transcore V. Union of India [(2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116]. In para 64 it is stated as under after referring to Section 37 of the SARFAESI Act: (SCC p.162)
64. … According to American Jurisprudence, 2d, Vol.25, p.652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the Debts Recovery Tribunal Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell’s Principles of Equity (31st Edn., p.119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.
46. A reading of Section 37 discloses that the application of the SARFAESI Act will be in addition to and not in derogation of the provisions of the RDDB Act. In other words, it will not in any way nullify or annul or impair the effect of the provisions of the RDDB Act. We are also fortified by our above statement of law as the heading of the said section also makes the position clear that application of other laws are not barred. The effect of Section 37 would, therefore, be that in addition to the provisions contained under the SARFAESI Act, in respect of proceedings initiated under the said Act, it will be in order for a party to fall back upon the provisions of the other Acts mentioned in Section 37, namely, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, or any other law for the time being in force”.

# 56. Again in MD. Frozen Foods Exports Private Limited Vs. Hero Fincorp Limited5, Supreme Court after analyzing the decisions in Transcore (3 supra) and Mathew Varghese (4 supra) vis-a-vis Sections 35 and 37 of the SARFAESI Act concluded that the issue is no more res-integra. The aforesaid two acts i.e., the SARFAESI Act and the 1993 Act are complimentary to each other and it is not a case of election of remedy.

# 57. A Division Bench of the then High Court of Andhra Pradesh in M/s. Swetha Exports Vs. Bank of India6 also dwelled on this issue and held as follows:

“29. It is not as if the bank/financial institution is precluded from instituting proceedings either under the SARFAESI Act or the RDDB Act merely because they had invoked the provisions of the other enactment earlier. There are three elements to the doctrine of election, namely, existence of two or more remedies; inconsistencies between such remedies; and a choice of one of them. If any one of the three elements does not exist, the doctrine will not apply. The doctrine of election of remedies is applicable only when there are two or more co-existent remedies, available to the litigants at the time of election, which are repugnant and inconsistent. As there is neither repugnancy nor inconsistency between the two remedies under the SARFAESI Act and the RDDB Act, the doctrine of election has no application. (Transcore1; Snells Principles of Equity (31st Edn., p.119).
30. The RDDB and the SARFAESI Acts do not provide parallel remedies. The SARFAESI Act is treated as an additional remedy (Section 37) which is not inconsistent with the RDDB Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. (Transcore1). As the remedy under the SARFAESI Act, in view of Section 37 thereof, is an additional remedy, it is open to the bank/financial institution to simultaneously take recourse to both the provisions of the RDDB and the SARFAESI Act, and it is not obligatory for them to elect either one or the two remedies. Further, Section 13 (10) of the SARFAESI Act enables the secured creditor, in cases where the dues are not fully satisfied with the sale proceeds of the secured asset, to file an application to the Debts Recovery Tribunal in the form and manner prescribed. It is evident therefore that the secured creditor can invoke either of the two enactments i.e., the SARFAESI Act or the RDDB Act or both”.

# 58. As a matter of fact, the question before the Court was whether a secured creditor would be disabled from continuing to take action under the SARFAESI Act merely because it had later on filed an application under Section 19 (1) of the 1993 Act for recovery of its dues. As noticed above, the question was answered in the negative by the High Court by holding that nothing prevents a bank or a financial institution from continuing with the proceedings initiated by it earlier under the SARFAESI Act even if it has subsequently invoked the jurisdiction of the Debts Recovery Tribunal under Section 19 (1) of the 1993 Act. Such a contention of bar of jurisdiction under the SARFAESI Act merely because the secured creditor has instituted proceedings under the 1993 Act after having initiated proceedings under the SARFAESI Act earlier does not merit acceptance.

# 59. Therefore, from the above it is crystal clear that the contention urged by learned counsel for the petitioner is without any substance. In so far the two decisions are concerned in Maharastra Tubes Limited (1 supra), the question was in a case where an industrial concern makes any default in repayment of any loan or advance or otherwise fails to meet its obligations with the said financial corporation under any agreement, can the later take recourse to Sections 29 and 31 of the Financial Corporations Act, 1951 notwithstanding the bar of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985? As seen from the question framed, the issue in Maharastra Tubes Limited (1 supra) was completely different from the one which we are dealing with in the present proceeding. In that case it was held that both the enactments were subject statutes dealing with different situations. Therefore, in the case of sick industrial undertakings provisions of the 1985 Act would ordinarily prevail and govern.

# 59.1. Likewise, in Ranvir Dewan (2 supra) provisions of Hindu Succession Act, 1956 were in issue. The dispute was essentially between mother, son and daughter relating to a residential house in Delhi.

# 60. We are afraid neither of the above two decisions can be made applicable to the facts of the present case.

# 61. However, in S. Vanitha Vs. Deputy Commissioner Supreme Court observed that principles of statutory interpretation dictate that in the event of two special acts containing non-obstante clauses, ordinarily the later law will prevail. However, in the event of a conflict between two special acts the dominant purpose of both the statutes would have to be analyzed to ascertain which one should prevail over the other. Primary effort of the interpreter must be to harmonize, not excise.

# 62. Insofar the 1993 Act and the SARFAESI Act are concerned, there is no doubt that both are special enactments. However, as has been held by the Supreme Court, both the enactments are complimentary to each other. There is no question of any conflict between the two. Together they provide one remedy to the secured creditor. It is immaterial as to which remedy the secured creditor opts first. Both can proceed simultaneously or either of the remedies can proceed after the other enactment is invoked.

# 63. In the light of the above discussion, issue No.3 is answered against the petitioner.

# 64. This brings us to the fourth issue i.e.,

ISSUE NO.4:-

Is there any suppression of material facts by the petitioner? And if so, whether the same would disentitle the petitioner to any relief from the Writ Court?

# 65. We have already noted that there is serious suppression of material facts by the petitioner. Petitioner has not mentioned about filing of S.A.No.275 of 2018 as well as I.A.Nos.3968 of 2018, 6263 of 2018 and 427 of 2019 in the said securitization application. Petitioner has also not mentioned about the conditional stay orders passed by the Tribunal in the said I.As on 24.08.2018, 28.12.2018 and 01.02.2019 as well as the fact that it has not complied with the conditions imposed by the Tribunal in those orders. Further, petitioner has not mentioned about filing of W.P.Nos.22775 of 2018, 31208 of 2018, 39508 of 2018 and 13873 of 2019 which were all dismissed by this Court.

# 66. Relief under Article 226 is discretionary. It is therefore fundamental that a litigant approaching the Court under Article 226 of the Constitution of India should come with clean hands and disclose all material facts. Non disclosure or suppression of material facts would disentitle a litigant from any relief by the Court. In Hari Narain Vs. Badri Das8, Supreme Court emphasized that in making material statements care must be taken not to make any statements which are in-accurate, untrue or misleading.

# 67. Supreme Court in Prestige Lights Limited Vs. State Bank of India, held that a prerogative writ remedy is not available as a matter of course. In exercising its extra-ordinary powers, a writ Court would need to bear in mind the conduct of the party invoking such jurisdiction. If the applicant does not disclose full facts or suppresses material facts or is otherwise guilt of misleading the Court, the Court may dismiss the action without adjudicating the matter.

# 68. In K.D.Sharma Vs. Steel Authority of India Limited, Supreme Court held as follows:

“34. The jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary. Prerogative writs mentioned therein are issued for doing substantial justice. It is, therefore, of utmost necessity that the petitioner approaching the writ court must come with clean hands, put forward all the facts before the court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the court, his petition may be dismissed at the threshold without considering the merits of the claim.
35. The underlying object has been succincity stated by Scrutton, L.J., in the leading case of R.v.Kensington Income Tax Commrs.-[1917] 1 K.B.486 : 86 LJKB 257 : 116 LT 136 (CA) in the following words : (KB p.514)
“…it has been for many years the rule of the court, and one which it is of the greatest importance to maintain, that when an applicant comes to the court to obtain relief on an ex parte statement he should make a full and fair disclosure of all the material facts—it says facts, not law. He must not misstate the law if he can help it— the court is supposed to know the law. But it knows nothing about the facts, and the applicant must state fully and fairly the facts; and the penalty by which the court enforces that obligation is that if it finds out that the facts have not been fully and fairly stated to it, the court will set aside any action which it has taken on the faith of the imperfect statement.”
36. A prerogative remedy is not a matter of course. While exercising extraordinary power a writ court would certainly bear in mind the conduct of the party who invokes the jurisdiction of the court. If the applicant makes a false statement or suppresses material fact or attempts to mislead the court, the court may dismiss the action on that ground alone and may refuse to enter into the merits of the case by stating, “We will not listen to your application because of what you have done.” The rule has been evolved in the larger public interest to deter unscrupulous litigants from abusing the process of court by deceiving it.
37. In Kensington Income Tax Commrs. (supra), Viscount Reading, C.J. observed : (KB pp.495-96)
“…Where an ex parte application has been made to this Court for a rule nisi or other process, if the Court comes to the conclusion that the affidavit in support of the application was not candid and did not fairly state the facts, but stated them in such a way as to mislead the Court as to the true facts, the Court ought, for its own protection and to prevent an abuse of its process, to refuse to proceed any further with the examination of the merits. This is a power inherent in the Court, but one which should only be used in cases which bring conviction to the mind of the Court that it has been deceived. Before coming to this conclusion a careful examination will be made of the facts as they are and as they have been stated in the applicant’s affidavit, and everything will be heard that can be urged to influence the view of the Court when it reads the affidavit and knows the true facts. But if the result of this examination and hearing is to leave no doubt that the Court has been deceived, then it will refuse to hear anything further from the applicant in a proceeding which has only been set in motion by means of a misleading affidavit”.
38. The above principles have been accepted in our legal system also. As per settled law, the party who invokes the extraordinary jurisdiction of this Court under Article 32 or of a High Court under Article 226 of the Constitution is supposed to be truthful, frank and open. He must disclose all material facts without any reservation even if they are against him. He cannot be allowed to play “hide and seek” or to “pick and choose” the facts he likes to disclose and to suppress (keep back) or not to disclose (conceal) other facts. The very basis of the writ jurisdiction rests in disclosure of true and complete (correct) facts. If material facts are suppressed or distorted, the very functioning of writ courts and exercise would become impossible. The petitioner must disclose all the facts having a bearing on the relief sought without any qualification. This is because “the court knows law but not facts”.
39. If the primary object as highlighted in Kensington Income Tax Commrs. (supra) is kept in mind, an applicant who does not come with candid facts and “clean breast” cannot hold a writ of the court with “soiled hands”. Suppression or concealment of material facts is not an advocacy. It is a jugglery, manipulation, manoeuvring or misrepresentation, which has no place in equitable and prerogative jurisdiction. If the applicant does not disclose all the material facts fairly and truly but states them in a distorted manner and misleads the court, the court has inherent power in order to protect itself and to prevent an abuse of its process to discharge the rule nisi and refuse to proceed further with the examination of the case on merits. If the court does not reject the petition on that ground, the court would be failing in its duty. In fact, such an applicant requires to be dealt with for contempt of court for abusing the process of the court”.

# 69. This aspect was also discussed in Ramjas Foundation Vs. Union of India, whereafter Supreme Court held that if a litigant does not come to the Court with clean hands, he is not entitled to be heard. It was held as follows:

“The principle that a person who does not come to the court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums. The object underlying the principle is that every court is not only entitled but is duty bound to protect itself from unscrupulous litigants who do not have any respect for truth and who try to pollute the stream of justice by resorting to falsehood or by making misstatement or by suppressing facts which have a bearing on adjudication of the issue(s) arising in the case”.

# 70. Supreme Court in Bhaskar Laxman Jadhav Vs. Karamveer Kakasaheb Wagh Education Society12 has clarified that it is not for a litigant to decide what fact is material for adjudicating a case and what is not material. It is the obligation of a litigant to disclose all the facts of a case and leave the decision making to the Court.

# 71. Finally, in K. Jayaram Vs. Bangalore Development Authority13, Supreme Court has held as follows:

“12. It is well-settled that the jurisdiction exercised by the High Court under Article 226 of the Constitution of India is extraordinary, equitable and discretionary and it is imperative that the petitioner approaching the writ court must come with clean hands and put forward all facts before the Court without concealing or suppressing anything. A litigant is bound to state all facts which are relevant to the litigation. If he withholds some vital or relevant material in order to gain advantage over the other side then he would be guilty of playing fraud with the court as well as with the opposite parties which cannot be countenanced”.
* * *
“17. In the instant case, since the appellants have not disclosed the filing of the suit and its dismissal and also the dismissal of the appeal against the judgment of the civil court, the appellants have to be non-suited on the ground of suppression of material facts. They have not come to the court with clean hands and they have also abused the process of law. Therefore, they are not entitled for the extraordinary, equitable and discretionary relief”.

# 72. Thus, it is evident that there is blatant suppression of material facts by the petitioner for which he is not entitled to any relief from the Court though we have adjudicated the issues raised by it. Accordingly, this question is also answered against the petitioner.

# 73. Having answered the issues as framed, we would like to place on record our dis-pleasure in the manner in which petitioner has filed one writ petition after the other notwithstanding the fact that earlier writ petitions were dismissed and that he has availed the statutory remedy under Section 17 of the SARFAESI Act. That apart, the way the petitioner is filing one writ petition after the other raising new grounds in each writ petition, as if by installments, cannot be appreciated. This is nothing but an attempt to multiply proceedings and create a web around the secured creditor so that it becomes difficult to extricate there from and recover the outstanding dues. In K.Jayaram (13 supra) Supreme Court also held as follows:

“16. It is necessary for us to state here that in order to check multiplicity of proceedings pertaining to the same subject-matter and more importantly to stop the menace of soliciting inconsistent orders through different judicial forums by suppressing material facts either by remaining silent or by making misleading statements in the pleadings in order to escape the liability of making a false statement, we are of the view that the parties have to disclose the details of all legal proceedings and litigations either past or present concerning any part of the subject-matter of dispute which is within their knowledge. In case, according to the parties to the dispute, no legal proceedings or court litigations was or is pending, they have to mandatorily state so in their pleadings in order to resolve the dispute between the parties in accordance with law”.

# 74. Thus on a thorough consideration of all aspects of the matter, we are of the unhesitant view that all the three writ petitions are devoid of merit; rather filing of the writ petitions is a part of a well orchestrated plan hatched by the petitioner to obfuscate the entire matter relating to recovery of outstanding dues and thereby prevent the secured creditor from realizing the outstanding dues by protracting the litigation.

# 75. Consequently, all the writ petitions are dismissed. However, having regard to what we have observed above, cost of Rs.50,000/- is imposed on the petitioner to be deposited to the Telangana State Legal Services Authority, Hyderabad within 30 days from today.

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