Dismissed

P.Sivasankaran v. The Authorised Officer

Madras HC11 Jul 2017WP/17453/2017

Case brief

AI extract

What is this about?

The Madras High Court dismissed a writ petition challenging an E-auction notice under the SARFAESI Act, 2002. Relying on Supreme Court precedents, the court held that writ jurisdiction under Article 226 is not maintainable when effective alternative remedies exist under the DRT Act and SARFAESI Act.

What did the court decide?

Writ Petition and connected Writ Miscellaneous Petitions dismissed; no costs awarded.

P.Sivasankaran Vs The Authorised Officer — Banking and Recovery | Madras HC (2017)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 11.07.2017

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CORAM:

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THE HON'BLE MR.JUSTICE S.MANIKUMAR AND

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THE HON'BLE MRS.JUSTICE V.BHAVANI SUBBAROYAN

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W.P.No.17453 of 2017 and WMP Nos.18952 & 18953 of 2017 P.Sivasankaran ... Petitioner vs. 1. The Authorised Officer, M/s.State Bank of India, Retail Assets Central Processing Centre, No.50, A.R.Plaza, Mount Poonamallee High Road, Ayyappanthangal, Chennai - 600 056. 2. M/s.C1 India Pvt. Ltd., Plot No.301, 1st Floor, Udyog Vihar Phase 2, Gurgoan, Haryana - 122 105. ... Respondents

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WRIT Petition filed under Article 226 of the Constitution of India, praying for the issuance of a writ of certiorari, to call for the records pertaining to the E-Auction Sale Notice dated 25.05.2017 issued by the respondent Bank, quash the same.

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For Petitioner : Mr.S.Ilamvazhuthi

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ORDER (Order of the Court was delivered by S.MANIKUMAR , J)

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E-auction notice dated 25.05.2017 issued under the provisions of the

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http://www.judis.nic.in SARFAESI Act, 2002, is challenged on the grounds inter alia that the

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mandatory provisions contemplated under Rules 8(5), (6), (7) and 9(1) of the Security Interest Rules, 2002, have not been followed. Reserve price is low. Collusion with the auction purchaser is also alleged. Added further, Mr.S.Ilamvazhuthi, learned counsel for the borrower submitted that the petitioner has already paid a sum of Rs.25 Lakhs towards the loan account. Borrower is not shirking the responsibility to pay the amount, but expresses inability. Learned counsel further submitted that the writ petitioner is

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prepared to pay 25% of the outstanding amount and pay the balance, as per

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the directions of this Court.

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Heard the learned counsel for the petitioner and perused the materials available on record.

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E-auction notice can be challenged before the tribunal on all

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tenable grounds raised before this Court. Inability to pay the outstanding amount cannot be a cause to maintain the writ petition. Courts have

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consistently held that when there is an effective and alternative remedy, writ is not maintainable. We deem it fit to consider the following decisions.

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(i) In Precision Fastenings v. State Bank of Mysore , reported in 2010(2) LW 86 , this Court held as follows:

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"This Court has repeatedly held in a number of decisions right from the decision in Division

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Electronics Ltd. v. Indian Bank (DB) Markandey Katju, C.J., (2005 (3) C.T.C., 513), that the remedy of the aggrieved party as against the notice issued under Section 13(4) of SARFAESI Act is to approach the appropriate Tribunal and the writ petition is not maintainable. The same position has been succinctly stated by the Hon'ble the Supreme Court in Transcore v. Union Of India (2006 (5) C.T.C. 753) in paragraph No. 26 wherein the Supreme Court has held as under: — “The Tribunal under the DRT Act is also the Tribunal under the NPA Act. Under Section 19 of the DRT Act read with Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993 (1993 Rules), the applicant bank or FI has to pay fees for filing such application to DRT under the DRT Act and, similarly, a borrower, aggrieved by an action under Section 13(4) of NPA Act was entitled to prefer an Application to the DRT under Section 17 of NPA.” (Emphasis added) "

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(ii) In Union Bank of India v. Satyawati Tondon, reported in 2010

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(5) LW 193 (SC) , the Hon'ble Apex Court at paragraph Nos.16 to 18 and 27 to 29, held as follows:

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"16. The facts of the present case show that even after receipt of notices under Section 13(2) and (4) and order passed under Section 14 of the SARFAESI Act, respondent Nos. 1 and 2 did not bother to pay the

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outstanding dues. Only a paltry amount of Rs. 50,000/was paid by respondent No. 1 on 29.10.2007. She did give an undertaking to pay the balance amount in installments but did not honour her commitment. Therefore, the action taken by the appellant for recovery of its dues by issuing notices under Section 13(2) and 13(4) and by filing an application under Section 14 cannot be faulted on any legally permissible ground and, in our view, the Division Bench of the High Court committed serious error by entertaining the writ petition of respondent No. 1.

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There is another reason why the impugned order should be set aside. If respondent No. 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression ‘any person’ used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. 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

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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 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, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

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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. It is true that the rule of exhaustion of alternative remedy is a rule of discretion

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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 re-dressal of his grievance. 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 ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect 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 Corporation v. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1=19992-L.W. 200 and Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and others (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public

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interest, pass appropriate interim order.

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It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.

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Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from taking action in furtherance of notice issued under Section 13(4) of the Act.

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In the result, the appeal is allowed and the impugned order is set aside. Since the respondent has not appeared to contest the appeal, the costs are made easy."

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(iii) In Saraspathy Sundararaj v. Authorised Officer and Assistant General Manager, State Bank of India, reported in (2010) 5 LW 560 , the Court held as follows:

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"The petitioner has filed this writ petition praying for a Writ of Certiorarified Mandamus calling for the records relating to the possession notice dated 16.09.2004 issued by the respondent under the SARFAESI

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Act and consequently direct the respondent to effect the settlement in accordance with the SBI OTS-SME 2010 Scheme as contained in its letter dated 18.03.2010 and unconditionally restore physical possession of the six rooms taken physical possession by it at No. 29, Sarojini Street, T. Nagar, Chennai - 17 with such damages.

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... When a specific forum has been created which enables the borrower to challenge the action of the financial institution by filing necessary petition under Section 17, the petitioner is not entitled to invoke the writ jurisdiction of this Court. What could not be achieved by the petitioner by filing a petition before the appropriate Forum, which is at present barred by period of limitation, could not be permitted to be achieved by extending the jurisdiction conferred to this Court under Article 226 of The Constitution of India. Above all, since the petitioner has violated the terms and conditions of the loan by transferring the property in favour of her son, this Court is not inclined to entertain the petition.

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In the light of the above decision of the Honourable Supreme Court, the writ petition filed by the petitioner seeking to set aside the possession notice issued to her long back is legally not sustainable. We are of the considered view that this petition has been filed only to drag on the proceedings and to evade repayment of the loan. That be so, the petitioner has no legal right to compel the bank to accept the one time settlement offer

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made by her.

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The present case is identical in nature and it is covered by the judgment of the Supreme Court mentioned supra. In this case, the petitioner has violated the condition of mortgage by transferring the secured asset in favour of her son and therefore, as per clause 1.7 of the OTS Scheme offered by the bank, the petitioner has to be excluded from extending the benefits of the scheme which was rightly done by the bank. In any event, without exhausting the alternative remedy, the relief sought for by the petitioner by invoking the discretionary remedy under Article 226 of The Constitution of India cannot be granted."

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In the light of the decisions stated supra and the discussion, while holding that the writ petition as not maintainable, it is open to the petitioner to seek for appropriate remedy before the tribunal, if so advised. Instant Writ Petition is dismissed. No Costs. Consequently, the connected Writ Miscellaneous Petitions are closed.

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(S.M.K., J.) (V.B.S., J.) 11.07.2017

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Index: Yes/No ars

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S.MANIKUMAR,J. AND V.BHAVANI SUBBAROYAN

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ars

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