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

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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

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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

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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

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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

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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.

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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

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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.

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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.

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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

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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

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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

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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,

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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

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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

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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

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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.

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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

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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

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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

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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

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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]

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