Phoenix ARC Private Limited vs Vishwa Bharati Vidya Mandir
Phoenix ARC Private Limited vs Vishwa Bharati Vidya Mandir - Supreme Court Case 2022
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 257-259 OF 2022
Phoenix ARC Private Limited …Appellant(s)
Versus
Vishwa Bharati Vidya Mandir & Ors. …Respondent(s)
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned order dated
27.03.2018 passed by the High Court of Karnataka at Bengaluru in Writ
Petition Nos. 35564-35566 of 2015 by which the High Court has
entertained the aforesaid writ petitions under Article 226 of the
Constitution of India against the appellant, an Assets Reconstructing
Company and has passed an interim order directing for maintaining
status quo with regard to SARFAESI action (possession of the secured
assets), the original respondent – the Assets Reconstructing Company
(ARC) has preferred the present appeals.
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
2. That the respondent No.1 herein Vishwa Bharati Vidya Mandir is
running educational institutions and is a Society registered under the
Karnataka Societies Registration Act, 1960 which had availed credit
facilities to the tune of Rs.105,60,84,000/- (Rupees One Hundred Five
1
Crores Sixty Lacs and Eighty Four Thousand Only) from Saraswat Cooperative Bank Limited. That similarly, St. Ann's Education Society had
also availed credit facilities to the tune of Rs.20,05,00,000/- (Rupees
Twenty Crores and Five Lacs Only) from the aforesaid Bank.
2.1 It appears that in order to secure the due repayment of the
aforesaid credit facilities, various loans / security documents were
executed by the respective respondents, including personal guarantees
in favour of the bank. The respondents also created an equitable
mortgage by way of deposit of title deeds over the immovable properties
with respect to the mortgaged properties. It appears that on account of
defaults committed by the borrowers / respondents in repayment of the
outstanding dues, in the month of April, 2013, the account of the
borrowers / respondents were classified as a “Nonperforming Asset”
(NPA) by the Bank. As the borrowers / respondents failed and neglected
to repay the outstanding dues of the Bank, the Bank issued a notice
dated 01.06.2013 under Section 13(2) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Securities
Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”). It
appears that in the month of March, 2014, the NPA account of the
borrowers / respondents with respect to the credit facilities availed by
them was assigned by the Bank in favour of the appellant – Phoenix
2
ARC Private Limited vide registered Assignment Agreement dated
28.03.2014.
2.2 Pursuant to the assignment of the NPA account in favour of the
appellant, the borrowers approached the appellant with a request for
restructuring the repayment of outstanding dues. A Letter of Acceptance
dated 27.02.2015 was executed between the parties, wherein the
borrowers / respondents acknowledged and admitted the liability to
repay the entire outstanding dues. However, the borrowers failed to
repay the dues as per the Letter of Acceptance.
2.3 Since the borrowers again committed defaults in payment of the
outstanding dues, the appellant – Phoenix ARC Private Limited issued a
letter dated 13.08.2015 intimating the borrowers that since despite
issuance of 13(2) notice dated 01.06.2013 and the subsequent
execution of the Letter of Acceptance dated 27.02.2015, the borrowers
had failed to repay the outstanding dues, therefore, the appellant would
be proceeding to take possession of the mortgaged properties after
expiry of 15 days from the date of the said letter.
2.4 Against the aforesaid communication/letter dated 13.08.2015, the
borrowers / respondents herein filed the writ petitions before the High
Court on the ground that the communication/letter dated 13.08.2015 is a
3
possession notice under Section 13(4) of the SARFAESI Act, which is
against the Security Interest (Enforcement) Rules, 2002.
2.5 It was the case on behalf of the original writ petitioners that the
said possession notice under Section 13(4) of the SARFAESI Act is in
violation of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002
(hereinafter referred to as “Rules, 2002”) and without issuance of the
possession notice under Rule 8(1) and without publication of possession
notice in two leading newspapers as required under Rule 8(2). The High
Court passed an ex-parte ad-interim order dated 26.08.2015 directing
status quo to be maintained with regard to possession of the mortgaged
properties subject to the borrowers making a payment of Rs. 1 crore with
the appellant – Phoenix.
2.6 The petition was opposed by the appellant by filing statement of
objections to the writ petitions contending, inter alia, that the letter dated
13.08.2015 as such cannot be said to be taking a measure under
Section 13(4) of the SARFAESI Act and that it was only a proposed
action/measure to be taken by the appellant. It was also submitted that
the writ petitions are not maintainable. That the appellants filed an
application being I.A. No. 01 of 2016 for vacation of the ex-parte adinterim order dated 26.08.2015. However, instead of deciding the
application for vacating the interim order, the High Court extended the
4
interim order on 28.02.2017 on the condition that the borrowers shall
deposit a further sum of Rs.1 crore. Simultaneously, the appellant also
filed two separate original applications against the borrowers before the
Debt Recovery Tribunal, Bangalore for recovery of the outstanding dues.
Thereafter, the High Court again vide order dated 27.03.2018 extended
the earlier ex-parte interim-order dated 26.08.2015 on condition that the
borrowers deposit a further sum of Rs. 1 crore.
2.7 Feeling aggrieved and dissatisfied with the aforesaid interim orders
/ extension of the interim orders and entertaining the writ petitions, the
appellant – Phoenix ARC Private Limited, the original respondent has
preferred the present appeals.
3. Shri V. Giri, learned Senior Advocate has appeared on behalf of
the respective appellants and Shri Basavaprabhu S. Patil, learned
Senior Advocate has appeared on behalf of the original writ petitioners –
borrowers.
4. Shri V. Giri, learned Senior Advocate appearing on behalf of the
appellant(s) has vehemently submitted that in the present case the
borrowers are liable to pay to the appellant – ARC / secured creditor an
amount of Rs.117,31,68,487/-. It is submitted that for recovery of the
amount due and payable, initially in the year 2003, notice under Section
13(2) of the SARFAESI Act was issued and therefore the proceedings
5
under the SARFAESI Act commenced. It is submitted that thereafter
despite the Letter of Acceptance dated 27.02.2015 admitting the dues
and agreeing to make the payment due and payable, the borrowers
failed to repay the amount due and payable, the appellant proposed to
proceed further with the proceedings under the SARFAESI Act and
therefore vide communication dated 13.08.2015, the borrowers were
called upon to make the payment within 15 days failing which it was
proposed to take further steps under the provisions of the SARFAESI
Act. It is submitted that, technically speaking, at that stage
communication dated 13.08.2015 cannot be said to be notice under
Section 13(4) of the SARFAESI Act. Despite the above and treating
and/or considering the communication dated 13.08.2015 as possession
notice under Section 13(4) of the SARFAESI Act, the borrowers filed the
writ petitions before the High Court against communication dated
13.08.2015. It is submitted that unfortunately the High Court has
entertained the aforesaid writ petitions though not maintainable against a
private party like the appellant – ARC and has granted an ex-parte adinterim order, which has been extended from time to time directing to
maintain status quo with respect to the possession of the mortgaged
properties on payment of meager amount of Rs. 1 crore (in all Rs. 3
crores only) against the total dues of Rs.117 crores approximately.
6
4.1 It is submitted that as such the writ petitions against the private
party – ARC and that too against the communication proposing to take
action under the SARFAESI Act would not be maintainable at all, and,
therefore, the High Court ought not to have entertained such writ
petitions and ought not to have granted the interim protection to the
borrowers, who have failed to repay the amount due and payable, which
comes to approximately Rs.117 crores.
4.2 It is further submitted by Shri Giri, learned Senior Advocate
appearing on behalf of the appellant – ARC that assuming that the
communication dated 13.08.2015 is treated as an action under Section
13(4) of the SARFAESI Act, in that case also, the only remedy available
to the borrowers was by way of an appeal under Section 17 of the
SARFAESI Act. It is submitted that under no circumstances, the writ
petitions would be maintainable and that too against the private ARC.
4.3 It is submitted that the High Court has not at all appreciated that as
such there was no occasion to interfere in exercise of the powers under
Article 226 of the Constitution of India against a private party and a nonState actor like the appellant – Phoenix ARC. It is submitted that the writ
petitions under Article 226 of the Constitution of India for the relief
sought in the writ petitions shall not be maintainable and that too against
a private party. It is submitted that, however, the Hon’ble High Court has
7
not only entertained the writ petitions but also passed an ex-parte adinterim order dated 26.08.2015, which has been continued from time to
time directing to maintain the status quo with regard to the SARFAESI
action (possession of the secured assets). It is submitted that this
effectively resulted in staying of all further proceedings under the
SARFAESI Act. It is submitted that despite the application(s) for
vacating the ex-parte ad-interim relief, the High Court extended the exparte interim order dated 26.08.2015 on condition that the borrowers pay
further sum of Rs.1 crore only.
4.4 It is submitted that even in the subsequent order dated
27.03.2018, though the High Court observed that “though the learned
counsel for the petitioners seeks to refer the nature of the claim and
contend that the demand as made would not be justified, the said
consideration in a writ petition of the present nature would not arise”, still
the High Court has extended the ex-parte interim order dated
26.08.2015 by observing that the “petitioner is required to settle the
matter with the respondents”. It is submitted that the High Court is not
at all justified firstly, in entertaining the writ petitions under Article 226 of
the Constitution of India for the relief sought in the main writ petitions
and that too against a private party and, more particularly, when against
any action under the SARFAESI Act, an appeal under Section 17 of the
SARFAESI Act would be maintainable and is required to be filed.
8
4.5 Shri Giri, learned Senior Advocate appearing on behalf of the
appellant(s) has relied upon the following decisions in support of the
submission that the writ petitions before the High Court are not
maintainable:-
United Bank of India Vs. Satyawati Tondon & Ors., (2010) 8
SCC 110; Kanaiyalal Lalchand Sachdev & Ors. Vs. State of
Maharashtra & Ors., (2011) 2 SCC 782; General Manager, Sri
Siddeshwara Cooperative Bank Limited & Anr. Vs. Ikbal &
Ors., (2013) 10 SCC 83; Agarwal Tracom Private Limited Vs.
Punjab National Bank & Ors., (2018) 1 SCC 626; Authorized
Officer, State Bank of Travancore & Anr. Vs. Mathew K.C.,
(2018) 3 SCC 85; and Radha Krishnan Industries Vs. State of
Himachal Pradesh & Ors., (2021) 6 SCC 771.
4.6 Making the aforesaid submissions and relying upon the above
decisions, it is prayed to set aside the impugned order dated 27.03.2018
and also to dismiss the writ petitions filed before the High Court as being
non-maintainable.
5. Shri Basavaprabhu S. Patil, learned Senior Advocate appearing on
behalf of the original borrowers has vehemently submitted that the
present appeals are against the ad interim order/interim order passed by
the High Court and the main writ petitions are pending before the High
9
Court. It is submitted that pursuant to the earlier order passed by this
Court dated 06.08.2018, the impugned interim order passed by the High
Court has been stayed. It is therefore submitted that when the main writ
petitions are pending before the High Court, the present appeals may
not be further entertained. It is submitted that despite the fact that there
is a stay of operation of the impugned order passed by the High Court
since 06.08.2018, thereafter no further steps have been taken by the
appellant against the borrowers under the provisions of the SARFAESI
Act.
5.1 Now, so far as the maintainability of the writ petition against the
Assets Reconstruction Company (ARC) is concerned, it is submitted that
the writ petition is filed against the ARC complaining of infraction of Rule
8. It is submitted that the said rule imposes a statutory duty on the
secured creditor - the ARC to act fairly while dealing with the security so
as to secure the interest of the borrower as well as public at large
(depositors). In support of aforesaid submission, reliance is placed on
the decision of this Court in the case of J. Rajiv Subramaniyan and
Anr. Vs. Pandiyas and Ors., (2014) 5 SCC 651. It is therefore
submitted that as in the present case as the ARC has not performed the
statutory duty cast upon it and there is a contravention of the statutory
duty imposed under the Security Interest (Enforcement) Rules, 2002, a
writ would lie against ARC against such an illegal action.
10
5.2 Shri Patil, learned Senior Advocate appearing on behalf of the
borrowers has also relied upon the decisions of this Court in the case of
Praga Tools Corporation Vs. Shri C.A. Imanual and Ors., (1969) 1
SCC 585 and Ramesh Ahluwalia Vs. State of Punjab and Ors., (2012)
12 SCC 331 in support of his submission that even against a purely
private body but performing public functions, which are normally
expected to be performed by the State authorities, a writ would be
maintainable.
5.3 Now, in so far as the submission on behalf of the appellant that
assuming that a communication dated 13.08.2015 can be said to be a
SARFAESI action under Section 13(4) of the Act, the borrowers had to
prefer an appeal under Section 17 and, therefore, the writ petition would
not be maintainable and/or is required to be entertained, it is vehemently
submitted by Shri Patil, learned Senior Advocate appearing on behalf of
the borrowers that on the ground of alternative remedy only, the writ
petition would not be barred.
5.4 It is submitted that Section 13 of the SARFAESI Act provides for
enforcement of security interest and sub-section 4(a) of Section 13
provides that in case a borrower fails to discharge his liability within the
period specified under sub-section (2) of Section 13, the secured creditor
may take possession of the secured assets of the borrower. It is
11
submitted that Rule 8(1) of the Rules, 2002 mandates that where the
secured assets is an immovable property, the authorized officer of the
secured creditor shall take or cause to be taken possession, by
delivering the possession notice prepared as nearly as possible in
Appendix – IV of the said Rules, to the borrower and by affixing the
possession notice on the outer door or at the conspicuous space of the
property. It is submitted that Rule 8(2) of the said Rules also mandates
that the said possession notice be published as soon as possible, but in
any case not later than 7 days from the date of taking possession, in two
leading newspapers, one in vernacular language having sufficient
circulation in that locality by the authorized officer.
5.5 It is submitted that in the instant case, it is not the case of the
appellant that it took any measure in terms of Section 13(4) of the
SARFAESI Act. It is therefore submitted that the remedy under Section
17 of the SARFAESI Act, which would be against any measure referred
to in sub-section (4) of Section 13 of the SARFAESI Act to file an
application to the Debts Recovery Tribunal is not available to the
borrowers in the instant case. It is further submitted that there is no
compliance with Rule 8(1) and 8(2) of the Rules, 2002. It is submitted
that as held by this Court in the case of Mathew Varghese Vs. M.
Amritha Kumar and Ors., (2014) 5 SCC 610 on a detailed analysis of
Rules 8 and 9 that any sale effected without complying with the same
12
would be unconstitutional and, therefore, null and void. It is submitted
therefore that the High Court has rightly entertained the writ petitions.
5.6 Making the above submissions and relying upon the decision of
this Court in the case of J. Rajiv Subramaniyan and Anr. (supra), it is
urged that the High Court has not committed any error in entertaining the
writ petitions.
5.7 It is further submitted by Shri Patil, learned Senior Advocate
appearing on behalf of the respondents – borrowers that even otherwise
considering the fact that the present appeals are against the interim
order granted by the High Court, the same may not be entertained.
Reliance is also placed on the decision of this Court in the case of
United Commercial Bank Vs. Bank of India and Ors., (1981) 2 SCC
766.
5.8 It is further submitted that even otherwise in the present case,
subsequently, the appellant has taken recourse under Section 19 of the
Recovery of Debts due to Banks and Financial Institutions Act, 1993 by
filing O.A. No. 715 of 2017 before the Debts Recovery Tribunal,
Bengaluru and the said Tribunal has passed an interim order directing
the borrowers to deposit the fee collected / to be collected by all
educational institutions run by the Society – borrower for academic year
2017-2018 into the Bank. It is submitted that another interim order has
13
been passed on 06.07.2017 restraining the borrowers from selling,
transferring, alienating or otherwise dealing with certain properties of the
borrowers/respondents. It is submitted therefore that the interest of the
appellant is fully protected and no prejudice would be caused to the
appellant if the writ petitions are finally considered and disposed of by
the High Court on merits.
5.9 Making the above submissions, it is prayed to dismiss the present
appeals.
6. We have heard the learned counsel for the respective parties at
length.
7. At the outset, it is required to be noted that in the present case, the
respondents – borrowers whose accounts have been declared as NPA in
the year 2013 have filed the writ petitions before the High Court
challenging the communication dated 13.08.2015 purporting it to be a
notice under Section 13(4) of the SARFAESI Act. It is required to be
noted that as per the appellant – assignor approximately Rs.117 crores
is due and payable to the Bank. While passing the ex-parte interim
order on 26.08.2015 and while entertaining the writ petitions against the
communication dated 13.08.2015, the High Court has directed to
maintain status quo with respect to the possession of the secured
14
properties on condition that the borrowers deposit Rs. 1 crore only.
Despite the fact that subsequently an application for vacating the exparte ad-interim order has been filed in the year 2016, the application for
vacating the interim order has not been decided and disposed of. On
the contrary, the High Court thereafter has further extended the ex-parte
ad-interim order dated 26.08.2015 on condition that the borrowers
should deposit a further sum of Rs. 1 crore. Thus, in all the borrowers
are directed to deposit Rs. 3 crores only against the dues of
approximately Rs.117 crores.
7.1 It is the case on behalf of the appellant that the writ petitions
against the communication dated 13.08.2015 proposing to take further
action under Section 13(4) of the SARFAESI Act and that too against a
private Assets Reconstructing Company (ARC) shall not be
maintainable. It is also the case on behalf of the appellant that
assuming that the communication dated 13.08.2015 can be said to be a
notice under Section 13(4) of the SARFAESI Act, in view of the
alternative statutory remedy available by way of appeal under Section 17
of the SARFAESI Act, the High Court ought not to have entertained the
writ petitions.
7.2 While considering the issue regarding the maintainability of and/or
entertainability of the writ petitions by the High Court in the instant case,
15
a few decisions of this Court relied upon by the learned Senior Advocate
appearing on behalf of the appellant – ARC are required to be referred
to.
7.3 In the case of Satyawati Tondon & Ors. (supra), it was observed
and held by this Court that the remedies available to an aggrieved
person against the action taken under section 13(4) or Section 14 of the
SARFAESI Act, by way of appeal under Section 17, can be said to be
both expeditious and effective. On maintainability of or entertainability of
a writ petition under Article 226 of the Constitution of India, in a case
where the effective remedy is available to the aggrieved person, it is
observed and held in the said decision in paragraphs 43 to 46 as under:-
“43. Unfortunately, the High Court overlooked the settled
law that the High Court will ordinarily not entertain a
petition under Article 226 of the Constitution if an
effective remedy is available to the aggrieved person and
that this rule applies with greater rigour in matters
involving recovery of taxes, cess, fees, other types of
public money and the dues of banks and other financial
institutions. In our view, while dealing with the petitions
involving challenge to the action taken for recovery of the
public dues, etc. the High Court must keep in mind that
the legislations enacted by Parliament and State
Legislatures for recovery of such dues are a code unto
themselves inasmuch as they not only contain
comprehensive procedure for recovery of the dues but
also envisage constitution of quasi-judicial bodies for
redressal of the grievance of any aggrieved person.
Therefore, in all such cases, the High Court must insist
that before availing remedy under Article 226 of the
16
Constitution, a person must exhaust the remedies
available under the relevant statute.
44. 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.
45. 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.
46. It must be remembered that stay of an action initiated
by the State and/or its agencies/instrumentalities for
recovery of taxes, cess, fees, etc. seriously impedes
execution of projects of public importance and disables
them from discharging their constitutional and legal
obligations towards the citizens. In cases relating to
recovery of the dues of banks, financial institutions and
secured creditors, stay granted by the High Court would
have serious adverse impact on the financial health of
such bodies/institutions, which (sic will) ultimately prove
detrimental to the economy of the nation. Therefore, the
High Court should be extremely careful and circumspect
17
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 [AIR 1969 SC 556], Whirlpool
Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1]
and Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2
SCC 107] and some other judgments, then the High
Court may, after considering all the relevant parameters
and public interest, pass an appropriate interim order.”
7.4 In the case of City and Industrial Development Corpn. Vs. Dosu
Aardeshir Bhiwandiwala, (2009) 1 SCC 168, it was observed by this
Court in paragraph 30 that the Court while exercising its jurisdiction
under Article 226 is duty bound to consider whether ……………(c) the
petitioner has any alternative or effective remedy for the resolution of the
dispute.”
7.5 In the case of Kanaiyalal Lalchand Sachdev and Ors. (supra)
after referring to the earlier decisions of this Court in the cases of
Sadhana Lodh Vs. National insurance Co. Ltd. and Anr., (2003) 3
SCC 524; Surya Dev Rai Vs. Ram Chander Rai and Ors., (2003) 6
SCC 675 and State Bank of India Vs. Allied Chemical Laboratories
and Anr., (2006) 9 SCC 252 while upholding the order passed by the
High Court dismissing the writ petition on the ground that an efficacious
remedy is available under Section 17 of the SARFAESI Act, it was
observed that ordinarily relief under Articles 226/227 of the Constitution
18
of India is not available if an efficacious alternative remedy is available to
any aggrieved person.
7.6 Similar view has been expressed by this Court in subsequent
decisions in the case of General Manager, Sri Siddeshwara
Cooperative Bank Limited & Anr. (supra) as well as in the case of
Agarwal Tracom Private Limited (supra).
8. Applying the law laid down by this court in the aforesaid decisions,
it is required to be considered whether, in the facts and circumstances of
the case, the High Court is justified in entertaining the writ petitions
against the communication dated 13.08.2015 and to pass the ex-parte
ad interim order virtually stalling/restricting the proceedings under the
SARFAESI Act by the creditor.
9. It is required to be noted that it is the case on behalf of the
appellant that as such the communication dated 13.08.2015 cannot be
said to be a notice under Section 13(4) of the SARFAESI Act at all.
According to the appellant, after the notice under Section 13(2) of the
SARFAESI Act was issued in the year 2013 and thereafter despite the
Letter of Acceptance dated 27.02.2015, no further amount was paid, the
appellant called upon the borrowers to make the payment within two
weeks failing which a further proceeding under Section 13(4) of the
19
SARFAESI Act was proposed. Thus, according to the appellant, it was a
proposed action. Therefore, the writ petitions filed against the proposed
action under Section 13(4) of the SARFAESI Act was not maintainable
and/or entertainable at all.
10. Assuming that the communication dated 13.08.2015 can be said to
be a notice under Section 13(4) of the SARFAESI Act, in that case also,
in view of the statutory remedy available under Section 17 of the
SARFAESI Act and in view of the law laid down by this Court in the
cases referred to hereinabove, the writ petitions against the notice under
Section 13(4) of the SARFAESI Act was not required to be entertained
by the High Court. Therefore, the High Court has erred in entertaining
the writ petitions against the communication dated 13.08.2015 and also
passing the ex-parte ad-interim orders directing to maintain the status
quo with respect to possession of secured properties on the condition
directing the borrowers to pay Rs. 1 crore only (in all Rs.3 crores in view
of the subsequent orders passed by the High Court extending the exparte ad-interim order dated 26.08.2015) against the total dues of
approximate Rs.117 crores. Even the High Court ought to have
considered and disposed of the application for vacating the ex-parte adinterim relief, which was filed in the year 2016 at the earliest considering
the fact that a large sum of Rs.117 crores was involved.
20
11. Now, in so far as the reliance placed upon the decision of this
Court in the case of J. Rajiv Subramaniyan and Anr. (supra) by the
learned senior counsel appearing on behalf of the borrowers in support
of his submission that writ petition would be maintainable, it is to be
noted that in the aforesaid case, the learned counsel appearing on
behalf of the Bank did not press the maintainability and/or entertainability
of the writ petition under Article 226 and therefore, this Court had no
occasion to consider the entertainability and/or maintainability of the writ
petition. Therefore, the aforesaid decision is not of any assistance to the
respondents – borrowers.
12. Even otherwise, it is required to be noted that a writ petition
against the private financial institution – ARC – appellant herein under
Article 226 of the Constitution of India against the proposed
action/actions under Section 13(4) of the SARFAESI Act can be said to
be not maintainable. In the present case, the ARC proposed to take
action/actions under the SARFAESI Act to recover the borrowed amount
as a secured creditor. The ARC as such cannot be said to be performing
public functions which are normally expected to be performed by the
State authorities. During the course of a commercial transaction and
under the contract, the bank/ARC lent the money to the borrowers herein
and therefore the said activity of the bank/ARC cannot be said to be as
performing a public function which is normally expected to be performed
21
by the State authorities. 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. Therefore, decisions of this Court in the cases of Praga
Tools Corporation (supra) and Ramesh Ahluwalia (supra) relied upon
by the learned counsel appearing on behalf of the borrowers are not of
any assistance to the borrowers.
13. Now, so far as the submission on behalf of the borrowers that in
exercise of the powers under Article 226 of the Constitution, this Court
may not interfere with the interim / interlocutory orders is concerned, the
decision of this Court in the case of Mathew K.C. (supra) is required to
be referred to.
13.1 In the case of Mathew K.C. (supra) after referring to and/or
considering the decision of this Court in the case of Chhabil Dass
Agarwal (supra), it was observed and held in paragraph 5 as under:-
“5. We have considered the submissions on behalf of
the parties. Normally this Court in exercise of jurisdiction
under Article 136 of the Constitution is loath to interfere
with an interim order passed in a pending proceeding
before the High Court, except in special circumstances,
to prevent manifest injustice or abuse of the process of
the court. In the present case, the facts are not in
22
dispute. The discretionary jurisdiction under Article 226 is
not absolute but has to be exercised judiciously in the
given facts of a case and in accordance with law. The
normal rule is that a writ petition under Article 226 of the
Constitution ought not to be entertained if alternate
statutory remedies are available, except in cases falling
within the well-defined exceptions as observed
in CIT v. Chhabil Dass Agarwal [CIT v. Chhabil Dass
Agarwal, (2014) 1 SCC 603], as follows: (SCC p. 611,
para 15)
“15. Thus, while it can be said that this Court
has recognised some exceptions to the rule of
alternative remedy i.e. where the statutory
authority has not acted in accordance with the
provisions of the enactment in question, or in
defiance of the fundamental principles of
judicial procedure, or has resorted to invoke the
provisions which are repealed, or when an
order has been passed in total violation of the
principles of natural justice, the proposition laid
down in Thansingh Nathmal case [Thansingh
Nathmal v. Supt. of Taxes, AIR 1964 SC
1419] , Titaghur Paper Mills case [Titaghur
Paper Mills Co. Ltd. v. State of Orissa, (1983) 2
SCC 433] and other similar judgments that the
High Court will not entertain a petition under
Article 226 of the Constitution if an effective
alternative remedy is available to the aggrieved
person or the statute under which the action
complained of has been taken itself contains a
mechanism for redressal of grievance still holds
the field. Therefore, when a statutory forum is
created by law for redressal of grievances, a
writ petition should not be entertained ignoring
the statutory dispensation.”
13.2 Applying the law laid down by this Court in the case of Mathew
K.C. (supra) to the facts on hand, we are of the opinion that filing of the
writ petitions by the borrowers before the High Court under Article 226 of
23
the Constitution of India is an abuse of process of the Court. The writ
petitions have been filed against the proposed action to be taken under
Section 13(4). As observed hereinabove, even assuming that the
communication dated 13.08.2015 was a notice under Section 13(4), in
that case also, in view of the statutory, efficacious remedy available by
way of appeal under Section 17 of the SARFAESI Act, the High Court
ought not to have entertained the writ petitions. Even the impugned
orders passed by the High Court directing to maintain the status quo with
respect to the possession of the secured properties on payment of Rs.1
crore only (in all Rs.3 crores) is absolutely unjustifiable. The dues are to
the extent of approximately Rs.117 crores. The ad-interim relief has
been continued since 2015 and the secured creditor is deprived of
proceeding further with the action under the SARFAESI Act. Filing of the
writ petition by the borrowers before the High Court is nothing but an
abuse of process of Court. It appears that the High Court has initially
granted an ex-parte ad-interim order mechanically and without assigning
any reasons. The High Court ought to have appreciated that by passing
such an interim order, the rights of the secured creditor to recover the
amount due and payable have been seriously prejudiced. The secured
creditor and/or its assignor have a right to recover the amount due and
payable to it from the borrowers. The stay granted by the High Court
would have serious adverse impact on the financial health of the secured
24
creditor/assignor. Therefore, the High Court should have been
extremely careful and circumspect in exercising its discretion while
granting stay in such matters. In these circumstances, the proceedings
before the High Court deserve to be dismissed.
14. In view of the above and for the reasons stated above, present
appeals succeed. The Writ Petition Nos. 35564 to 35566 of 2015 before
the High Court are dismissed. Consequently, the ex-parte ad-interim
order dated 26.08.2015 further extended by orders dated 28.02.2017
and 27.03.2018 stand vacated.
Present appeals are accordingly allowed with costs to the
appellants to be paid by the original writ petitioners quantified at Rs.1
lakh in both the cases to be directly paid to the appellant within a period
of four weeks from today. Pending application(s), if any, also stand
disposed of.
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
JANUARY 12, 2022. [B.V. NAGARATHNA]
25
Comments
Post a Comment