Dismissed

M/s.M a M Spinning Mills, v. The Authorized Officer

Madras HC6 Nov 2017WP/28228/2017

Case brief

AI extract

What is this about?

The Madras High Court dismissed a writ petition challenging a bank's tender cum auction notice under the SARFAESI Act. Holding that an effective alternative remedy exists, the Court ruled agricultural nature of properties must be pleaded before the Debts Recovery Tribunal, not the High Court.

What did the court decide?

Writ petition dismissed; connected writ miscellaneous petition closed; no costs.

M/s.M a M Spinning Mills, Vs The Authorized Officer — Banking and Recovery | Madras HC (2017)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 06.11.2017

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CORAM:

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THE HON'BLE MR.JUSTICE S.MANIKUMAR AND THE HON'BLE MR.JUSTICE R.SURESH KUMAR

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W.P.No.28228 of 2017

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and WMP No.30349 of 2017

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M/s.M.A.M.Spinning Mills, Reptd. by Proprietor Mrs.M.Alli

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... Petitioner

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vs.

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The Authorised Officer, City Union Bank Ltd., Administrative Office, No.24-B, Gandhi Nagar, Kumbakonam - 612 001. ... Respondent

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WRIT Petition filed under Article 226 of the Constitution of India, praying for the issuance of a writ of Certiorarified Mandamus, calling for the records of the respondent and quashing the Tender Cum Auction Sale Notice dated 21.09.2017 issued under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 under SARFAESI Act, 2002, for the immovable properties offered as security by the petitioners and further directing the respondent not to take any action against the immovable properties offered as security without adhering to the procedure contemplated in law.

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For Petitioner : Mr.G.Peranban

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ORDER

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

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Tender-cum-auction sale notice dated 29.01.2017 issued under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 is extracted hereunder.

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TENDER CUM AUCTION SALE NOTICE UNDER SARFAESI ACT, 2002

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Notice of intended sale under Rule 8 (6) of the Security Interest (Enforcement) Rules 2002 under Securitisation of Financial Assets and Enforcement of Security Interest Act, 2002

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M/s. M.A.M.Spinning Mills SF No.678/5 Murugankattu Valasu Olapalayam Kangayam Taluk Tiruppur Dist 638 701.

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https://hcservices.ecourts.gov.in/hcservices/ Also at

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M/s. M A M Spinning Mills No.347-J Bharathi Illam Kamarajapuram Vellakovil Kangayam Taluk Tiruppur District 638 111 2. Mrs.M.Alli W/o Mohanraaj No.347-J Bharathi Illam Kamarajapuram Vellakovil Kangayam Taluk Tiruppur Dist 638 111. 3. Mr.M.A.Mohanraaj S/o.Ayyavoo No.347-J Bharathi Illam Kamarajapuram Vellakovil Kangayam Taluk Tiruppur District 638 111. 4. Mrs.A.Nallammal W/o M. Ayyavoo No 79 LKC Nagar Vellakoil,Kangayam Taluk Tiruppur District 638 111.

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M/s. Praanesh Textiles Door No.330 Murugankattuvalasu Olapalayam Kangayam Taluk Tiruppur District 638 701. Sub: Loan account of M/s. MAM Spinning Mills – with our Vellakoil Branch

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All of you had availed a credit facility from City Union Bank Limited, Vellakoil branch, 210/D, Muthaiah Towers, Muthur Road, Vellakovil 638 111, the repayment of which is secured by mortgage of schedule mentioned property hereinafter referred to as “The Property”. All of you failed to pay the outstanding to the Bank. Therefore, Demand Notice dated 27/4/2017 under Section 13 (2) of Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (for short called as “The Act”), was issued by the Authorised Officer calling upon all of you to pay a sum of Rs.3,65,80,134/- (Rupees Three crore sixty five lakh eighty thousand one hundred thirty four only) as on 11/4/2017 with further interest from 12/4/2017 but all of you failed to discharge the dues.

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As all of you failed to make payment despite Demand https://hcservices.ecourts.gov.in/hcservices/ Notice dated 27/4/2017 the Authorised Officer took

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possession of the schedule mentioned property under the Act on 1/8/2017 after complying with all legal formalities. Now all of you are liable to pay Rs.3,89,96,712/- (Rupees Three Crore Eighty Nine Lakh Ninety Six Thousand Seven Hundred Twelve Only) including interest as on 28/8/2017 and further interest from 29/8/2017 and other charges till the settlement of the account in full. Therefore, the under mentioned mortgaged property as per schedule is proposed to be sold by the Authorised Officer on 7/11/2017 at City Union Bank Limited, Vellakoil Branch, 210/D, Muthaiah Towers, Muthur Road, Vellakovil 638 111.

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The sale is intended to be carried out by way of inviting Tender cum Auction from public. The Tender/Bid/offer forms with the terms and conditions can be had on behalf of the undersigned from City Union Bank Ltd., Vellakoil branch, 210/D Muthaiah Towers, Muthur Road, Vellakovil 638 111 against written request. The last date for submitting tenders/bids complying with all necessary terms along with EMD to the undersigned in the above mentioned address is 7/11/2017 before 12.00 Noon. The tenders/bids shall be opened on 7/11/2017 at 1.00 p.m., at the same address.

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The reserve price for sale of the secured assets is fixed as mentioned in the schedule. The probable purchaser shall remit Earnest Money Deposit (EMD) as specified in the schedule. In the case of immovable properties the sale shall be conferred on the person making highest offer/tender/bid. In the case of immovable properties 25% of the sale price shall be paid immediately on the date of sale and the balance of sale price shall be paid within 15 days of confirmation of sale. The sale is subject to confirmation by City Union Bank Limited.

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The undersigned reserves right to accept or reject the Tender/Bid/officer without assigning any reason therefor.

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This Notice is issued without prejudice to any other remedy available to the Bank

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SCHEDULE OF PROPERTIES Immovable Property Mortgaged to our Bank Schedule A (Property owned by Mrs.M.Alli W/o. Mr.M.A.M.Mohanraj)

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Item:1

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Tirupur Registration Dist, Vellakovil Sub-Registration Dist, Kangayam Taluk, Pachapalayam Village, in Old SF No.1213 in Re.SF.No.678/5 punja hectare 0.70.0 tharam 1.40 in this and extent of punja acre 1.00 tharam 1.12 with spinning mill building in D.Nos.330, 331, 332, 333, https://hcservices.ecourts.gov.in/hcservices/ 334, 352 and all appurtenance thereon with all pathway

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rights situated with the following boundaries North of East West road South of Appachi Gounder Vahayara land East of North South itteri in Sf.No.678/3 West of item 2 applicant M.Alli's land Item:2 Tirupur Registration Dist, Vellakovil Sub Registration Dist, Kangayam Taluk, Pachapalayam Village, in Old SF No:1213 in Re SF.678/5 punja hectare 0.70.0 tharam 1.40 in this an extent of pubja acre 0.73 with spinning mill building in D.Nos.330, 331, 332, 333, 334 and 352 and all appurtenance thereon with all pathway rights situated with the following boundaries

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North of East west Road South of Appachi Gounder vahayara land East of item:1 applicant M.Alli's ;and West of Ponnusamy land

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Reserve Price Rs.1,50,00,000/- (For item I & II) E.M.D.Rs.15,00,000/Item:3 Tirupur Registration Dist, Vellakovil Sub-Registration Dist, Kangayam taluk, Vellakovil Village in Old S.No.572/A in Re SF No.1702/14 punja acre 1.42 in this an extent of 1512 sq.ft land with building in D.No.347/1 and all pathway rights situated within the following boundaries North of tamilarasi land South of Jayalakshmi land East of 20 ft wide North South pathway West of 16 ft wide North South pathway Measuring North South on both side 21 ft Measuring East west on northern side 72 ft, southern side 72 ft.

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Reserve price Rs.30,00,000/- E.M.D.Rs.3,00,000/-

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Item:4 Tirupur Registration Dist, vellakovil Sub Registration Dist, Kangayam Taluk, Vellakovil Vilalge, in Old SF 277/A, punja acre 14.16 thaaram 1.40 in Re.SF.No.277/30 punja hectare 0.04.0 in this an extent of 2157 ½ sq.ft land and all pathway rights situated within the following boundaries

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North of Kuppusamy vahayara land South of 20 ft wide East West pathway East of Ramasamy Gounder vahayara land West of Arumugam vahayara land Measuring North-South on both side 591/2 ft Measuring East-west on the Northern side 361/2 ft and on southern side 36 ft. https://hcservices.ecourts.gov.in/hcservices/ Reserve price Rs.11,00,000/- E.M.D.Rs.1,10,000/-

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Item:5 Tirupur Registration Dist, vellakovil Sub Registration Dist, Kangayam Taluk, Vellakovil village, in Old SF 569 in Re.SF.N:569/8 punja acre 13.21 tharam 10.70 in this extent of 10881/2 sq ft land with old building in D.No.89 A, 89 B and all pathway rights situated within the following boundaries,

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North of Sukumari land South on 24 ft wide East West pathway East of Muthusamy land West of Subramani Vahayara land Measuring North South on both sides 65 ft Measuring East West on Northern side 16 ¾, southern side 163/4 ft

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Reserve price Rs.25,00,000/E.M.D.Rs.2,50,000/Schedule B (Property owned by Mr.M.A.M.Mohanraj)

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Item:1

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Tiruppur Registration Dist, Vellakovil Sub-Registration District, Kangayam Taluk, Vellakovil Vilalge, in Old S.F.369/A punja acre 10.30 in Re.S.F.369/A1L in this an extent of 1684 1.2 sq.ftwith all pathway rights situated within the following boundaries North of item 2 land South of Arukkaniammal land East of Veeramani Land West of Sellammal Vahayara land

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Measuring north south on western side 42 ft eastern side 45 ½ ft

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Measuring east west on northern side 38 ½ ft southern side 38 ½ ft

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Item 2: Tiruppur Registration Dist, Vellakovil Sub-Registration District, Kangayam Taluk, Vellakovil Vilalge, in Old S.F.372 punja acre 5.10 in Re.Sf.372/4 punja acre 0.13 in this an extent of 471 ¼ sq.ft with all pathway rights situated within the following boundaries

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North of item 2 land South of Arukkaniammal land East of Sellammal vahayara land Measuring north south on western side 14 ft eastern side 11 ft Measuring east west on northern side 38 ½ southern side 38 ½ ft

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Total an extent of 2165 ¾ sq ft

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Reserve price Rs.20,00,000/- (for Item I & II) E.M.D.Rs.2,00,000/-

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Schedule C (Proeprty owned by Mrs.Nallamal W/o. Late https://hcservices.ecourts.gov.in/hcservices/ M.Ayyavu

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Tiruppur Registration Dist, Vellakovil Sub-Registration District, Kangayam Taluk, Vellakovil Vilalge, in Old S.F.260 punja acre 9.81 in Re.S.F.No.260/3 B in this an extent of 2184 sq.ft with all pathway rights situated within the following boundaries

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North of Banumathi's 2179 sq.ft land South of N.Samimuthu's 2199 sq.ft land East of 25 ft wide North South pathway West of Uma Devi land Measuring North South on Western Side 55 ft eastern side 53 ½ ft Ward No.21 Kadaiyuranvalasu near

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Reserve price Rs.5,00,000/E.M.D.Rs.50,000/-

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Schedule D (Machineries hypothecated to our bank) Blow room machineries, Carding, Drawing, Simplex Spinning, Core winding machineries along with diesel generator, air compressor and all other machineries

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Reserve price Rs.70,00,000/E.M.D.Rs.7,00,000/-

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Place: Kumbakonam for CITY UNION BANK LTD., sd/Date : 21.09.2017 Authorised Officer

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Though, the said notice is assailed on various grounds, Mr.Peranban, learned counsel for the petitioner submitted that some of the properties included in the tendercum-auction sale notice dated 21.09.2017 are agricultural properties and therefore, when Section 31(i) of the SARFAESI Act, 2002, does not confer jurisdiction, on the respondent to bring in the said property for auction, impugned sale notice dated 21.09.2017, has to be set aside by issuance of a writ of certiorarified mandamus as prayed for.

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

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Impugned sale notice has been issued on 21.09.2017, fixing the tender-cum-auction on 07.11.2017. Writ petition has been filed on the eleventh hour. Courts have 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: "This Court has repeatedly held in a number of decisions right from the decision in Division 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 https://hcservices.ecourts.gov.in/hcservices/ appropriate Tribunal and the writ petition is not

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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 (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 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 https://hcservices.ecourts.gov.in/hcservices/ not entertain a petition under Article 226 of the

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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 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 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, https://hcservices.ecourts.gov.in/hcservices/ financial institutions and secured creditors, stay

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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=1999-2-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 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 Act and consequently direct the respondent to effect the settlement in accordance with the SBI OTSSME 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 https://hcservices.ecourts.gov.in/hcservices/ 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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" ........

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Issue as to whether some of the properties mortgaged with City Union Bank, Kumbakonam Branch, respondent herein is an agricultural property and therefore, does not fall within the ambit of SARFAESI Act, 2002, can always be pleaded and substantiated before the competent forum viz., Debts Recovery Tribunal.

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In the light of the decisions and the discussion, we are not inclined to entertain the instant writ petition. Writ petition is dismissed. No costs. Consequently, the connected Writ Miscellaneous Petition is closed.

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Sd/Assistant Registrar(CS)

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//True Copy//

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Sub Assistant Registrar

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ars

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