Dismissed

M/S Modern Industries and Another v. Reserve Bank of India and 4 Others

Allahabad HC25 Feb 2021WRIC/7136/2021

Case brief

AI extract

What is this about?

Petitioners challenged an auction notice under the SARFAESI Act via writ petition. The Court held the petition not maintainable as alternative remedies exist under the SARFAESI Act, specifically approaching the Debt Recovery Tribunal or Appellate Tribunal, and dismissed the petition.

What did the court decide?

The writ petition is dismissed as not maintainable and the appropriate forum is the Debt Recovery Tribunal.

M/S Modern Industries and Another Vs Reserve Bank… — Execution and Attachment | Allahabad HC (2021)

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Court No. - 39

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Case :- WRIT - C No. - 7136 of 2021

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Petitioner :- M/S Modern Industries And Another Respondent :- Reserve Bank Of India And 4 Others Counsel for Petitioner :- In Person Counsel for Respondent :- Krishna Mohan Asthana

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Hon'ble Mrs. Sunita Agarwal,J. Hon'ble Deepak Verma,J.

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Heard Sri Sachin Gupta, the petitioner no.2 in person and Sri K.M Asthana learned Advocate for respondent nos.2 and 3, Bank.

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As the lawyers are abstaining from judicial work today, video link has been provided to Sri K.M Asthana facilitating his presence in the Court. The petitioner no.2 has been heard while physically present in the Court whereas Sri K.M.Asthana learned Advocate for respondent-bank has been heard through video conferencing.

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By means of the present petition, the petitioners seek following reliefs:-

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"(i) Issue, an appropriate writ, order or direction, directing to Respondent Bank to quash the order dated 03.02.2021 passed by the Respondent Bank.

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(ii) Issue, an appropriate writ, order or direction, directing to Respondent Bank to quash the entire recovery proceedings against the petitioner and let to restart the unit of the Petitioner for repayment of entire lone."

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The challenge is to the auction notice dated 3.2.2021 whereby date 26.2.2021 has been fixed for auction of the secured assets by the Bank.

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The counsel for the respondent-Bank raises preliminary objection with regard to the maintainability of the writ petition on the ground that the proceedings initiated by the bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 cannot be challenged directly in writ jurisdiction, inasmuch as, the petitioners have an alternative remedy of approaching Debt Recovery Tribunal under Section 17(1) of the SARFAESI Act, 2002. It has been brought to the notice of the Court that against the auction sale notice dated 9.11.2017, an application under Section 17(1) was filed by the petitioners before the Debt Recovery Tribunal which was registered as S.A No.117 of

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2018.

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The said challenge had been repelled by the Debt Recovery Tribunal vide judgment and order dated 26.11.2018. It was noticed that the petitioners had approached the Debt Recovery Tribunal challenging the measures taken by the bank with delay and the demand notice and possession notice proceeding had been dismissed being barred by time.

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It is an admitted fact of the matter that the petitioners did not challenge the order passed by the Debt Recovery Tribunal dated 26.11.2018 by filing appeal under Section 18 of the SARFAESI Act, 2002 before the appellate Tribunal.

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Two writ petitions namely Writ Petition no.1641 of 2018 (M/s Modern Industries vs Canara Bank and others) and Writ Petition no.42856 of 2018 (M/s Modern Industries vs Canara Bank and 5 others) filed by the petitioners at different stages of the proceedings have also been dismissed.

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The judgment and order dated 16.4.2018 in Writ Petition no.1641 of 2018 indicates that on the challenge to the proceedings under SARFAESI Act, 2002, the petitioners were relegated to approach the Debt Recovery Tribunal under Section 17 of the Act. The judgment and order dated 17.1.2019 passed in writ petition no.42856 of 2018 (M/s Modern Industries vs Canara Bank and 5 others) further indicates that the prayer made by the petitioners for quashing of the orders dated 26.11.2018 and 30.11.2018 (passed on the Review Application) by the Debt Recovery Tribunal in S.A no.117 of 2018 had been dismissed being the second writ petition practically for the same relief. All other prayers made in the said writ petition were also rejected with the observations in paragraphs '11' and '12' read as under:-

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"11. Once the earlier writ petition had been dismissed by order noted above, clearly, there does not arise any situation wherein a second writ petition practically for the same relief may be entertained by this Court.

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12. Even otherwise, once it is admitted, there is a default committed by the petitioner, resulting wherefrom, the respondent-bank is admittedly claiming NPA in excess to Rs.4 Crores though Sri K.M. Asthana that the NPA is more than Rs.7 Crores with respect to which, recovery proceedings are outstanding against the petitioner, the respondent-bank cannot be forced to expose itself to further credit as that may prejudice the bank financially. Commercial decisions are primarily based on the bank's own wisdom. Those may be interfered with by the Courts in exceptional and extreme circumstances only. Therefore, the enforcement of the circular contrary to the commercial wisdom of the bank arising from default committed by the petitioner may not be made."

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The special leave petition (Civil) Diary No.19101 of 2019 against the judgment and order dated 17.1.2019 has also been dismissed on 6.9.2019.

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The petitioner (in person) has invited the attention of the Court to an order dated 28.9.2015 passed by the Additional District Magistrate (Finance and Revenue)/Additional Collector, Agra, under Section 14 of the SARFAESI Act, 2002 wherein certain observations had been made with regard to the measures taken by the bank overlooking the directions/guidelines issued by the Reserve Bank of India in declaring the account NPA.

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The contention of the petitioners is that the Additional District Magistrate had rejected the application under Section 14 of the SARFAESI Act, 2002 moved by the bank noticing that the bank could not satisfy him about the validity of the steps taken by it. The contention is that the observations made by the District Magistrate in the order dated 28.9.2015 make it clear that the bank had proceeded illegally in the matter.

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It is then argued that, at no stage of the proceedings, the petitioners were heard on merits rather the application moved by them before the Debt Recovery Tribunal and the writ petitions filed before this Court all have been dismissed either on the ground of limitation or on objection of the bank with regard to the maintainability of the same.

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The attention of the Court is invited to page '74' of the paper book to state that the questions of law framed by the petitioners have not been answered by any Court of law. The mandatory guidelines of Reserve Bank of India had not been followed by the bank and, the entire recovery proceedings initiated against the petitioners are faulty, being without considering the prayer of the petitioners for revival and rehabilitation of the sick company.

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Having carefully considered the submissions of the petitioners and the objections taken by the learned Advocate for the respondent-bank, we find that the present petition is not maintainable, inasmuch as, the petitioners seek to challenge the auction sale notice issued by the bank after conclusion of the steps taken by it under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

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The appropriate course of action for the petitioners is to approach the Debt Recovery Tribunal challenging the auction sale notice by moving an application under Section 17(1) of the Securitization and Reconstruction of Financial Assets and

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Enforcement of Security Interest (SARFAESI) Act, 2002. While challenging the auction notice, the petitioners may also challenge the validity of the measures taken by the respondentbank under SARFAESI Act, 2002, being in violation of the R.B.I guidelines or statutory provisions. The petitioners may also approach the Debt Recovery Appellate Tribunal challenging the order dated 26.11.2018 passed by the Debt Recovery Tribunal in rejecting S.A no.117 of 2018 on the ground of limitation.

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From any angle, the present petition cannot be entertained, and is, accordingly, dismissed.

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Order Date :- 25.2.2021 Harshita

M/S Modern Industries and Another v. Reserve Bank of India and 4 Others

Case brief

What is this about?

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M/S Modern Industries and Another v. Reserve Bank of India and 4 Others

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