Dismissed

Smt.T.Vijaya Lakshmi, v. PNB Housing Finance Ltd.

Telangana HC14 Feb 2012WP/1921/2012

Case brief

AI extract

What is this about?

Single judge bench dismissed the writ petition challenging an auction notice under the SARFAESI Act. The court held that statutory remedies under §§17 and 18 before the DRT and DRAT are the exclusive and efficacious remedies available to aggrieved borrowers, barring Article 226 jurisdiction.

What did the court decide?

The Writ Petition and W.P.M.P are dismissed with liberty to approach the Debts Recovery Tribunal; further remedy lies under Section 18 before the Debts Recovery Appellate Tribunal.

Smt.T.Vijaya Lakshmi, Vs PNB Housing Finance Ltd. — Cheque Dishonour | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY

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WRIT PETITION No.1921 of 2012

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Dated:14.02.2012

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Between:

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Smt.T.Vijaya Lakshmi.

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Petitioner

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PNB Housing Finance Ltd., And another.

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... Respondents

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND

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THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY

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WRIT PETITION No.1921 of 2012

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ORDER: (Per Hon’ble Sri Justice V.V.S.Rao)

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The petitioner is the owner of land admeasuring 7744 square yards (Ac.1.24 guntas) comprised in survey No.222 of Gajularamaram Village, Qutubullapur Mandal in Ranga Reddy District. She entered into a development agreement with the second respondent for construction of about 2,00,000 square feet of residential space in which the petitioner is to get 80,000 square feet of built up area. Be that as it is, the second respondent availed project finance loan of Rs.5.00 crores from the first respondent. The loan is secured by the creation of mortgage of the property referred to hereinabove by the petitioner. When there

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was a default in payment of instalments, the first respondent issued notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act), followed by the possession notice and proclamation of sale by publishing auction - cum - sale notice under Rule 8(2) read with Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 (the Rules). Being aggrieved, the petitioner filed an application under Section 17 of the Act, being S.A.No.52 of 2011, before the Debts Recovery Tribunal (DRT), Hyderabad, on 11.03.2011. The DRT passed an order on 11.03.2011 staying all further proceedings on condition of the petitioner depositing an amount of Rs.25.00 lakhs with the bank. The petitioner did not comply with the same. In the meanwhile, the respondent bank issued another auction notice dated 28.12.2011 scheduling the sale on 31.01.2012. Being aggrieved, the present writ petition is filed.

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The counsel for the petitioner vehemently contends that the auction-cum-sale notice flouts the mandatory requirements of Rules 8(1), (5), (6) and (7) of the Rules, and therefore, it is vitiated. He would further submit that there was no notice issued to the petitioner at any time before invoking the provisions for sale of mortgaged property for recovery of the debt. Per contra, opposing the writ petition, the Standing Counsel for the first respondent would submit that when the petitioner has already availed the effective alternative remedy under Section 17 of the Act, simultaneously she cannot maintain the writ petition, and that the S.A.No.52 of 2011 before the DRT stands posted for judgment on 17.02.2012. This is not denied by the Counsel for the petitioner.

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It is now well settled that when a fiscal or monetary

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legislation creates hierarchy of authorities and statutory Tribunals, the person aggrieved has to avail the remedies before such authorities and a petition for judicial review is ordinarily barred.

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The notice of demand under Section 13(2) of the Act is mandatory requiring the borrower to discharge or liquidate the entire debt due to the bank within sixty days of the issue. If the same is not complied with or a representation is not made under Section 13(3A) of the SARFAESI Act or such representation is rejected by the bank or financial institution, it is open to initiate and take all measures as contemplated under Section 13(4) of the Act read with the Rules. If any order is passed after issue of notice under Section 13(4) of the Act, often called possession notice, or any steps are taken for auctioning the movable/immovable property or confirmation of such auction sale or cancellation of auction sale, the remedy to either borrower or surety, or a third party auction purchaser is only to avail the effective alternative remedies available under Sections 17 and 18 of the Act. A writ petition is not maintainable. In United Bank of India v Satyawati

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[1] Tondon it was held.

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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. … It is a matter of serious concern that despite repeated

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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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5. In a recent judgment in Kanaiyalal Lalchand Sachdev v State of Maharashtra^[2] after referring to Sadhana Lodh v National Insurance [3] [4] Co. Ltd. , Surya Dev Rai v Ram Chander Rai , Mardia Chemicals Ltd. v Union of India^[5] , State Bank of India v Allied Chemical [6] [7] Laboratories , Transcore v Union of India , City and Industrial Development Corporation v Dosu Aardeshir Bhiwandiwala^[8] [9] Authorised Officer, Indian Overseas Bank v Ashok Saw Mill and Satyawati Tondon, the Supreme Court held that the DRT would have jurisdiction to consider and adjudicate post Section 13(4) events and an order passed under Section 14 would be within the ambit of Section 17(1) of the Act. It was also held that when the Act contemplates an efficacious remedy to the borrower or any person affected by an action under Section 13(4) of the Act, a writ petition would be barred.

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Apart from that, in this case, when the petitioner has already availed the remedy under Section 17 of the Act, simultaneously she cannot avail the remedy of writ petition (see K.S.Rashid & Son v. ITI Commission^[10] , Jai Singh v. Union of India[11] [12] and Carl Still G.M.B.H. v. State of Bihar ). Therefore, without expressing any opinion on the merits of the case, we give liberty to the petitioner to approach the DRT for expeditious disposal. If any adverse order is passed, it shall be open to the petitioner to avail further remedy under Section 18 of the Act before the Debts

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Recovery Appellate Tribunal.

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The Writ Petition is misconceived and the same is accordingly dismissed. The W.P.M.P shall also stand dismissed. There shall be no order as to costs.

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(V.V.S.RAO, J)

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________________________________ (G.KRISHNA MOHAN REDDY, J)

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14.02.2012 vs

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[1] (2010) 8 SCC 110 : AIR 2010 SC 311 [2] (2011) 2 SCC 782 : 2011 (8) SCJ 484 [3] (2003) 3 SCC 524

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