Dismissed

Pushpa S. Khater v. the State of Maharashtra and Ors.

Bombay HC30 Aug 2013WP/687/2013

Case brief

AI extract

What is this about?

The High Court of Bombay, in a writ petition challenging Section 14 of the SARFAESI Act and specific orders thereunder, held that the remedy lies in substantive appeal. Continuing Division Bench judgments preclude the claim that the Section violates natural justice. The petition was dismissed as devoid of merits.

What did the court decide?

None granted. Writ petition dismissed as it is devoid of merits and the remedy lies in substantive appeal.

Pushpa S. Khater Vs the State of Maharashtra and Ors. — Banking and Recovery | Bombay HC (2013)

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Sherla V.

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

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WRIT PETITION NO.687 OF 2013

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Pushpa S. Khater ... Petitioner Vs

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The State of Maharashtra & Ors. ... Respondents

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Mr.Mathew J. Nedumpara for the Petitioner Mrs.M.H. Mhatre, APP, for the Respondent State

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Mr.Sham Walve a/w Ms.Jaya Alve i/b M/s.AKS Legal Consultants for Resp. Nos.6 to 9

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CORAM: S.C. DHARMADHIKARI &

G.S. PATEL, JJ.

DATE: 30.8.2013

P.C.

1. By this Writ Petition under Article 226 of the Constitution of

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India, the petitioner is seeking the following reliefs:

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“a) issue an order of injunction or prohibition restraining the Respondent No.4 and 3 from in any manner interfering with the peaceful possession and enjoyment of the Petitioner of her residential flats.

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aa) issue an appropriate writ or order or declaration, declaring that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is unconstitutional and void inasmuch as it permits the learned Chief Judicial Magistrate/District Magistrate to order dispossession of the property of a borrower/ tenant or even a third party on a mere application at the hands of a Bank or Financial Institution, often a simple mortgage, without notice and without hearing him, and thus in violation of Articles 14, 19 and 21 of the Constitution of India or, in the alternative, and may be more appropriately, to read into the said Section an

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obligation to issue a notice and afford a hearing to the borrower/tenant or third party;

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(b) issue a declaration or a writ in the nature of or akin to certiorari or any other appropriate writ or order, declaring that Sections 13(2), 13(3) and 13(3A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 are unconstitutional on the ground that they are in violation of the second principle of natural justice namely, nemo potest esse simul actor et judex or nemo iudex in sua causa or nemo debet esse judex in propria causa – no one can be judge in his own cause – and the issue remains res integra or, in the alternative and more ideally, to read into the said Sections the requirement of observations of the principles of natural justice;

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(c) issue an appropriate writ, order or declaration, declaring that Sections 34 and 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 are unconstitutional and void inasmuch as while the said Sections bar the jurisdiction of Civil Courts to entertain and adjudicate any matter with respect to which the Debt Recovery Tribunal and Debt Recovery Appellate Tribunal (constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993) are empowered and competent to decide, including granting of ad-interim relief, the said SARFAESI Act does not provide for any express provision whereunder a secured debtor or borrower or guarantor, who has suffered injury, damage and loss and thus is entitled to an action as against the Bank for compensation, damages, specific performance, injunction and other remedies or, in the alternative and more ideally, to declare that the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 have been incorporated in the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 and sub-Sections (6) to (11) of Section 19 Recovery of Debts Due to Banks and Financial Institutions Act, 1993 entail a right in a borrower or secured debtor or guarantor to institute a claim for compensation or damages or other remedies by virtue of a counterclaim/set-off etc.;

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(d) declare that the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 be read into the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 with such modification, implied or express, by incorporation as called for;

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(e) issue a writ in the nature of certiorari or any other appropriate writ or order or declaration declaring that Rule 2(a) of the Security Interest (Enforcement) Rules, 2002 is unconstitutional, void and in violation of the first principle of natural justice, namely, nemo debet esse judex in propria sua cause , inasmuch as it permits an officer of a secured creditor/ Bank or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured credit to act as an arbiter to determine the lis between the secured debtor and the secured creditor;

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(f) issue an appropriate writ or order or declaration, declaring that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is unconstitutional and void inasmuch as it permits the learned Chief Judicial Magistrate/District Magistrate to order dispossession of the property of a borrower/ tenant or even a third party on a mere application at the hands of a Bank or Financial Institution, often a simple mortgage, without notice and without hearing him, and thus in violation of Articles 14, 19 and 21 of the Constitution of India or, in the alternative, and may be more appropriately, to read into the said Section an obligation to issue a notice and afford a hearing to the borrower/tenant or third party;

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(g) issue a declaration or an appropriate writ or order, declaring that subSection (3) of Section 14 of the Securitisation Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is unconstitutional and void inasmuch as the said Section enables a secured creditor/Bank/financial institution to take possession of the property of a citizen, thereafter sell the same and liquidate the amount allegedly due to the Bank or financial institution without providing for an appeal against the order of the learned Magistrate;

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(h) issue a writ in the nature of certiorari or any other appropriate writ or order or direction quashing and setting aside the notice dated 06^th September, 2012 (Exhibit “A” hereto) issued by Respondent No.3 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002; the notice published in the daily newspaper Free Press Journal dated 16.12.2012 (Exhibit “B” hereto) purportedly under Section 13(4) of the said Act; the ex-parte order dated 13^th January, 2013 (Exhibit “C” hereto) passed by the learned Chief Metropolitan Magistrate, Mumbai, in 2/SA/2013 and the Notice dated 23^rd January, 2013 (Exhibit “D” hereto) issued by Respondent No.4, as null and void, being in violation of the principles of natural justice;

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(i) issue an order of injunction or prohibition restraining the Respondent No. 4 i.e the Assistant Registrar Bandra Centre of Courts, Respondent No. 3 i.e the Senior Inspector of Police, Amboli Police Station at Andheri (W),

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Mumbai and the Respondent Bank, its officers, men, agents and privies from in any manner interfering with the peaceful possession and enjoyment of the Petitioner of her residential flats, namely, Flat Nos.603 & 604, A/5, Sunderbhan Complex, Off Lokhandwala Road, Oshiwara, Andheri (West), Mumbai-400 053., which the Respondent Bank claims to be a secured asset at its hands and, in particular, from dispossessing the Petitioner in the purported execution of the order dated 13^th January, 2013 (Exhibit “C”) hereto passed by the learned Chief Metropolitan Magistrate, Mumbai;

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(j) issue a writ in the nature of certiorari or a writ in the nature or akin to certiorari or any other appropriate writ or order, declaring that Sections 13(2), 13(3) and 13(3A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 are unconstitutional on the ground that they are in violation of the second principle of natural justice namely, nemo potest esse simul actor et judex or nemo iudex in sua causa or nemo debet esse judex in propria causa – no one can be judge in his own cause – and the issue remains res integra or, in the alternative and more ideally, to read into the said Sections the requirement of observations of the principles of natural justice;

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(k) issue an appropriate writ, order or declaration, declaring that Sections 34 and 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 are unconstitutional and void inasmuch as while the said Sections bar the jurisdiction of Civil Courts to entertain and adjudicate any matter with respect to which the Debt Recovery Tribunal and Debt Recovery Appellate Tribunal (constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993) are empowered and competent to decide, including granting of ad-interim relief, the said SARFAESI Act does not provide for any express provision whereunder a secured debtor or borrower or guarantor, who has suffered injury, damage and loss and thus is entitled to an action as against the Bank for compensation, damages, specific performance, injunction and other remedies or, in the alternative and more ideally, to declare that the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 have been incorporated in the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 and sub-Sections (6) to (11) of Section 19 Recovery of Debts Due to Banks and Financial Institutions Act, 1993 entail a right in a borrower or secured debtor or guarantor to institute a claim for compensation or damages or other remedies by virtue of a counterclaim/set-off etc.;

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(l) declare that the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 be read into the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 with such modification, implied or express, by incorporation as called for;

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(m) issue a writ in the nature of certiorari or any other appropriate writ or order or declaration declaring that Rule 2(a) of the Security Interest (Enforcement) Rules, 2002 is unconstitutional, void and in violation of the first principle of natural justice, namely, nemo debet esse judex in propria sua cause , inasmuch as it permits an officer of a secured creditor/ Bank or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured credit to act as an arbiter to determine the lis between the secured debtor and the secured creditor;

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(g) issue an appropriate writ or order or declaration, declaring that Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 is unconstitutional inasmuch as it does not provide for a right of hearing to the secured debtor before valuation of the secured asset;

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(h) issue an appropriate writ or order or declaration, declaring that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is unconstitutional and void inasmuch as it permits the learned Chief Metropolitan Magistrate/District Magistrate to order dispossession of the property of a borrower/ tenant or even a third party on a mere application at the hands of a Bank or Financial Institution, often a simple mortgage, without notice and without hearing him/her, and thus in violation of Articles 14, 19 and 21 of the Constitution of India or, in the alternative, and may be more appropriately, to read into the said Section an obligation to issue a notice and afford a hearing to the borrower/tenant or third party;

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(i) issue a declaration or an appropriate writ or order, declaring that subSection (3) of Section 14 of the Securitisation Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 is unconstitutional and void inasmuch as the said Section enables a secured creditor/Bank/ Financial Institution to take possession of the property of a citizen, thereafter sell the same and liquidate the amount allegedly due to the Bank or financial institution without providing for an appeal against the order of the learned Magistrate;

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(j) award a damage of Rs.10 crore to the Petitioner at the hands of Respondent Bank as compensation for the loss and injury caused by it to the Petitioner/the Company, in view of the peculiar situation emanating in the case where, by virtue of Sections 34 and 35 of the SARFAESI Act, jurisdiction of the Civil Court stands ousted to entertain a plea for damages at the hands of the Petitioner without therein in existence in the place of the Civil Court, an alternative Forum empowered to embark upon an enquiry on such a plea for damages and render a final and binding judgment either way ;

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(k) grant a permanent injunction prohibiting and restraining the Respondent

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No. 4 i.e the Assistant Registrar Bandra Centre of Courts, Respondent No. 3 i.e the Senior Inspector of Police, Amboli Police Station at Andheri (W), Mumbai, Respondent Bank, their agents, servants and privies from in any manner proceeding further with the proceedings pursuant to notice dated 06^th September, 2012 (Exhibit “A” hereto) issued by Respondent No.3 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002; the notice published in the daily newspaper Free Press Journal dated 16^th December, 2012 (Exhibit “B” hereto) purportedly under Section 13(4) of the said Act; the ex-parte order dated 13^th January, 2013 (Exhibit “C” hereto) passed by the learned Chief Metropolitan Magistrate, Mumbai, in 2/SA of 2013 and the Notice dated 23^rd January, 2013 (Exhibit “D” hereto) issued by Respondent No.4 or in any way interfering with the peaceful possession, right, title and enjoyment of her residential home by the Petitioner, which the Bank falsely claims to be a secured asset at its hands, pending hearing and final disposal of the above petition;

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(l) Without prejudice to the reliefs above, to stay the operation of notice dated 06^th September, 2012 (Exhibit “A” hereto) issued by Respondent No.3 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002; the notice published in the daily newspaper Free Press Journal dated 16^th December, 2012 (Exhibit “B” hereto) purportedly under Section 13(4) of the said Act; the ex-parte order dated 13^th January, 2013 (Exhibit “C” hereto) passed by the learned Chief Metropolitan Magistrate, Mumbai, in 2/SA of 2013 and the Notice dated 23^rd January, 2013 (Exhibit “D” hereto) issued by Respondent No.4;

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(m) pass such further and other orders as the nature and circumstances of the case may require.

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When this Writ Petition was posted for admission on the

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earlier occasion, noting that the petitioner and her advocate was absent, we listed it for today. Today, we have heard Mr.Nedumpara, appearing for the petitioner. Though Mr.Nedumpara feels that he has

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not been heard fully, we have noted from his arguments that the petitioner has urged before us that section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security

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Interest Act, 2002 (for short, “Securitisation Act”) is unconstitutional. The challenge is also to the order passed u/s 14 of the said Act.

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When this petition was placed for admission, what we have noted is that the proceedings are under the Securitisation Act. The proceedings u/s 13 of the said Act have concluded and now the Bank / Financial Institution concerned has taken consequential measures and steps u/s 14 of the Act.

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The argument is that even when such measures are taken, though they are styled as purely administrative, enabling the bank to take physical possession of the security interest, yet, at that stage, principles of natural justice and all three ingredients of the same are attracted. The authority, therefore, is obliged to give notice to a borrower like the petitioner and who has faced proceedings u/s 13 even of such consequential measures those styled as administrative.

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If such an interpretation of section 14 is not placed, then it is unconstitutional, ultra vires the Article 14 and 21 of the Constitution of India and Article 13 as well. It cannot continue on the statute book after the Constitution of India has been brought into effect and any such provision therefore must be declared to be void.

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We are afraid none of these contentions can be accepted and for more than one reason. The act as a whole has been held to be constitutionally valid including section 14. What we have also noted is that at least in 3 judgments of this Court - all delivered by Division Benches, it has been held that section 14 does not decide any substantive rights and the measure envisaged thereby is purely to assist those who have taken the necessary steps and in accordance with law to obtain physical possession of the assets and interest secured in their favour. The authorities stipulated thereunder are therefore obliged to render assistance and it cannot undertake any exercise muchless an adjudication as desired in which there would be another round. At such a stage, neither the borrower is entitled to object, leave lone insist, on being heard before the requisite steps u/s 14 are taken.

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Such judgments, delivered by coordinate benches, are binding upon us. Though Mr.Nedumpara would term all of them per incuriam , what we have noted is that the rule of precedents envisages that once a Supreme Court judgment has been applied by a Division Bench, then reading and equally misreading of the Supreme Court judgment by a coordinate bench is binding upon us. We cannot

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ignore and brush aside all three or four Division Bench judgments directly on the point of the specious plea as raised by Mr.Nedumpara. We also cannot take into account his other pleas that the judgments of the Supreme Court, particularly, in the case of Transcore v. Union of India¹ , are also per incuriam.

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To our mind, the remedy of the petitioner is to file substantive appeal if the petitioner desires to challenge the notice and the steps taken pursuant thereto u/s 13 of the Securitisation Act. Therefore, when only consequential orders are challenged and there is no adjudicative exercise contemplated thereunder, we cannot entertain this petition under writ jurisdiction.

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Writ Petition is devoid of merits and is dismissed.

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(G.S. PATEL, J.) (S.C. DHARMADHIKARI, J.)

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1 AIR 2007 SC 712

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Pushpa S. Khater v. the State of Maharashtra and Ors.

Case brief

What is this about?

What did the court decide?

Pushpa S. Khater v. the State of Maharashtra and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

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