Dismissed

M/s.Swarnalekha Agencies Pvt. v. City Union Bank Ltd.

Madras HC21 Feb 2017WP/4155/2017

Case brief

AI extract

What is this about?

The Madras High Court dismissed a writ petition filed by a borrower seeking to quash a possession notice issued under the SARFAESI Act. The Court held that the High Court cannot interfere via writ jurisdiction when the statute provides a specific and efficacious remedy before the Debts Recovery Tribunal under Section 17, citing Supreme Court precedents.

What did the court decide?

Writ petition and connected miscellaneous petition dismissed; original possession notice to be returned.

M/s.Swarnalekha Agencies Pvt. Vs City Union Bank Ltd. — Arbitration | Madras HC (2017)

¶1

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.02.2017 CORAM: THE HON'BLE MR.JUSTICE S.MANIKUMAR AND THE HON'BLE MR.JUSTICE M.GOVINDARAJ

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Writ Petition No.4155 of 2017 and W.M.P.No.4302 of 2017

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M/s.Swarnalekha Agencies Pvt. Ltd. Rep. by its Authorised Signatory/Director Mr.V.Vasanth No.17/1, 1st Floor, Vyasar Street T.Nagar, Chennai - 600 017 .... Petitioner

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vs.

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1.City Union Bank Ltd., Rep.. by its Branch Manager Rangarajapuram Branch No.99/1, Viswanathapuram Main Road Rangarajapuram, Chennai - 600 024

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2.The Authorised Officer City Union Bank Ltd., No.24-V, Gandhi Nagar Kumbakonam - 612 001 .... Respondents

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WRIT Petition filed under Article 226 of the Constitution of India, for a writ of certiorari, calling for the order and records of the 2nd respondent in Proceeding No.Nil dated 04.02.2017 wherein the respondents have issued possession notice with regard to properties morefully described in Schedule A, B and C and quash the same.

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Petitioner/borrower, who has availed financial assistance from the 1st respondent bank, by giving the following properties, situate at (1) Plot No.50, Door No.6/2, Judge Krishnasamy Colony, 4th Street, Chitlapakkam, Chennai - 600 064; (2) Flat No.T5, 3rd Floor, Chandra Flats situated in Door Nos.43 and 44, Brindavan Street, West Mambalam, Chennai - 33; and (3) Plot No.80, Lake View, 10th Street, Ayyappan Nagar Extension, Madipakkam, Chennai - 600 091, as security, has committed default in repayment.

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

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The respondent bank, has issued a demand notice under Section 13(2) of the SARFAESI Act, 2002, dated 02.08.2016 calling upon the writ petitioner/borrower to repay Rs.2,68,50,091/- with interest, within 60 days from the date of receipt of the said notice.

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As payment has not been made, the Authorised Officer, City Union Bank Limited, Kumbakonam, has issued possession notice under Section 13(4) of the SARFAESI Act, dated 04.02.2017. Being aggrieved by the same, borrower, has filed the instant writ petition to quash the same contending inter alia that though a representation/objection dated 22.09.2016 under Section 13(3A) of the SARFAESI Act, 2002, has been sent to the respondent bank, without considering such representation/objection, respondent bank/secured creditor has taken action under Section 13(4) of the said Act and therefore left with no other alternative, writ petition is filed.

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

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Material on fact discloses that receipt of Section 13 (4) notice dated 14.02.2017 has not been disputed, and as per sub section 1 of Section 17, any person (including borrower), aggrieved by any of the measures referred in sub section (4) of Section 13 taken by the secured creditor or its authorised officer, can make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter, within 45 days from the date, on which such measure had been made. Writ petitioners have not challenged Section 13(4) possession notice. As per Section 13 (4)(a) of the Act, in case the borrower fails to discharge its liability in full within the period specified in sub section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely, take possession of the secured assets of the borrower including the right to transfer by way of lease assignment or sale for realising the secured asset.

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It is the contention of the petitioner that though a representation/objection dated 22.09.2016 under Section 13(3A) of the SARFAESI Act, 2002, has been sent to the respondent bank, without considering such representation/objection, the respondent bank/secured creditor has taken action under Section 13(4) of the said Act and therefore left with no other alternative, writ petition is filed. We are not inclined to accept the said contention for the reason that the above said ground can be urged if any challenge is made under Section 17 (1) of the SARFAESI Act, 2002, before the Tribunal. Writ of certiorari cannot be issued to have the effect of setting at naught action taken under the provisions of the statute when an alternate remedy is provided. Contention of the petitioner https://hcservices.ecourts.gov.in/hcservices/ that remedy under SARFAESI Act, 2002 is too dilatory and

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difficult to get quick relief and that the said remedy is not efficacious, forcing the petitioners to file a writ petition before this court, cannot be accepted.

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7 . Having regard to the practice of High Courts in entertaining writ petitions against SARFAESI action, ignoring the statutory remedies, the Hon'ble Supreme Court in United Bank of India v. Satyawati Tondon and others reported in (2010) BC 495 (SC) = 2010-5-L.W. 193, took a very strong view and at paragraph No.55 observed as follows:

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“55. 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 the 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.”

¶18

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 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:—

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“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) Therefore, when there is an efficacious remedy available in law to the petitioner and the petitioner having stated in uncontraverted terms that he has invoked the SARFAESI Act by filing necessary appeal before the Debts Recovery Tribunal, the claim of the petitioner to seek for the very same relief in this writ petition cannot be entertained."

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In Satyawati Tondon's case, the Hon'ble Apex Court also held at Paragraphs 16 to 18 and 27 to 29, as follows:

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

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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. 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 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 https://hcservices.ecourts.gov.in/hcservices/ any other purpose are very wide and there is no express

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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, 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=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.

¶28

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."

¶30

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

¶31

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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"6. It is categorically brought out by the bank that pending the SARFAESI proceedings initiated by the bank, the petitioner, in order to deprive the right of the bank to recover the amount, has clandestinely transferred the secured assets in favour of her son and in that event, the bank has got every right to decline to extend the benefits of One time settlement scheme to the petitioner. Further, the possession notice sent to the petitioner way back in the year 2004, remains unchallenged by her till 2010 by approaching the competent Forum namely Debts Recovery Tribunal. 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 this connection, we are fortified by the decision of the Honourable Supreme Court reported in ( United Bank of India v. Satyawati Tondon and others ) III (2010) BC 495 (SC) = 2010-5-L.W. 193, wherein in para Nos. 17 and 18, it was held thus:—

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“17. …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 t he 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, https://hcservices.ecourts.gov.in/hcservices/ in all such cases, High Court must insist that before availing

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remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

¶36

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 redressal 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 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, (underlining added).

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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 made by her."

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

¶39

In the light of the above, decisions and discussion, we are not inclined to entertain the writ petition.

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Accordingly, the writ petition is dismissed. However, there shall be no order as to cost. Consequently, the connected writ miscellaneous petitions is also dismissed. Registry is directed to return the original possession notice dated 04.02.2017 filed along with this writ petition, after obtaining an attested copy of it from the learned counsel for the petitioner.

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Sd/-
Asst.Registrar
/true copy/
Sub Asst. Registrar
Copy to :-
The Section Officer, E.R. Section (To return the Original
possession Notice)
+1cc to Mr.G. Vijay Anand Associates 10937
W.P.No.4155 of 2017
and
W.M.P.No.4302 of 2017
SVI(CO)
VR(09/03/2017)

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

M/s.Swarnalekha Agencies Pvt. v. City Union Bank Ltd.

Case brief

What is this about?

What did the court decide?

M/s.Swarnalekha Agencies Pvt. v. City Union Bank Ltd.

Case brief

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What the court decided

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