Dismissed

M/s. Sri Venkateswara Sortex Processing Unit v. Authorized Officer and Chief Manager

Telangana HC12 Feb 2014WP/3270/2014

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition challenging an auction notice and demand for vacating premises. Determining that Section 17 provides an efficacious remedy via the DRT, the Court held that the petitioner must exhaust this statutory appeal before approaching the High Court under Article 226.

What did the court decide?

Writ petition dismissed; liberty granted to petitioner to exhaust statutory remedy under Section 17 of SARFAESI Act.

M/s. Sri Venkateswara Sortex Processing Unit Vs… — Banking and Recovery | Telangana HC (2014)

¶1

THE HON’BLE SRI JUSTICE ASHUTOSH MOHUNTA AND

¶2

THE HON’BLE SRI JUSTICE M. SATYANARAYANA MURTHY

¶3

WRIT PETITION No.3270 of 2014

¶4

ORDER: (Per the Hon’ble Sri Justice M. Satyanarayana Murthy)

¶5

M/s Sri Venkateswara Sortex Processing Unit, rep. by its Managing Partner, Sri Palaparthi Kesava Rao filed this petition under Article 226 of Constitution of India seeking a direction in the nature of Writ of Mandamus declaring the action of respondent Nos.1 and 2 in issuing auction notice dated 17.01.2014 to conduct auction of secured asset where petitioner firm M/s Sri Venakteswara Sortex Processing Unit machinery is in existence along with the other property in an extent of Ac 2.50 cents in R.S.No.567/2 of Narendrapuram Gram Panchayat, Rajangaram Mandal, East Godavari District under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) though no amount was due and suppressing the lease hold rights of the petitioner firm is without jurisdiction, illegal, irregular, arbitrary and violative of provisions of statute and offends Articles 14, 21 and 300-A of Constitution of India.

¶6

2. It is alleged that the petitioner obtained part of the premises on lease from Managing Partner of M/s Sri Venkateswara Enterprises, Sri Nagulapati Raghunadha Rao and others, who are the borrowers, for a period of 10 years commencing from 01.11.2010 and the said lease will expire by 31.10.2020. The property is comprising of an extent of Ac 2.50 cents in R.S.No.567/2 of Narendrapuram Gram Panchayat, Rajanagarm Mandal, East Godavari District and in the premises,

¶7

obtained on lease, the petitioner established Sortex Processing Unit availing loan of Rs.75,00,000/- under term loan vide account No.31616540584 on 04.02.2011 basing on the lease agreement between the writ petitioner and Nagulapati Raghunadha Rao and others. He also invested more than 3.5 crores to establish the unit and repaid the loan to the bank.

¶8

3. M/s Sri Venkateswara Enterprises also availed loan from the respondents and the account of Sri Venkateswara Enterprises was declared as NPA and initiated proceedings under SARFAESI Act. The respondent bank issued notice on 09.07.2013 to the petitioner demanding to vacate the premises and the petitioner got issued a detailed reply on 30.07.2013 informing about the attachment of property by filing suit in O.S.No.85 of 2013 by M/s Sri Bhargavi Agro-Tech Firm, Adavipalem, on the file of the learned V Additional District & Sessions Judge, Rajahmundry, East Godavari District in I.A.No.503 of 2013 attaching the machinery lying in the name of M/s Sri Venkateswara Enterprises. This fact was duly communicated and still the attachment is subsisting over the machinery.

¶9

4. Since the attachment is in force over the machinery, the petitioner is not in position to vacate the premises by shifting the machinery and if for any reason, the machinery is shifted, it amounts to violation of orders passed by the learned V Additional District & Sessions Judge, Rajahmundry, therefore, he is not in a position to vacate the premises till the attachment is raised.

¶10

5. It is further contended that due to participation of advocates in “Samaikyandhra” agitation, no advocate is attending to the Courts for the last six months, therefore, no steps have

¶11

been taken to get the attachment raised.

¶12

6. The first respondent issued auction notice on 17.01.2014 maliciously demanding the petitioner to shift the machinery, claiming demurrage charges at the rate of Rs.75,000/- per month, in case, the writ petitioner failed to shift the machinery. The said notice is illegal, irregular, arbitrary and prayed for the relief mentioned in para-1 of the order.

¶13

7. At the stage of admission, we have heard the learned counsel for the writ petitioner and the respondents at length. Learned counsel for the writ petitioner contended that the writ petitioner is a lessee in M/s Sri Venkateswara Enterprises establishing Sri Venkateswara Sortex Processing Unit obtaining the premises on lease, the bank has to get the petitioner vacated by following necessary procedure, till then, he is entitled to continue in possession of the property and as such the respondents are not entitled to claim any demurrage for keeping machinery in the premises and if secured property is sold in the auction, his lease hold rights will be defeated. Therefore, he sought for relief as mentioned above.

¶14

8. Learned counsel for the respondents would submit that an efficacious alternative remedy is available to any person aggrieved by the order passed under Section 13(4) of the Act as provided under Section 17 of SARFAESI Act, the petitioner has to exhaust the statutory remedy. In such case, the Court cannot exercise its extraordinary power of judicial review under Article 226 of Constitution of India, and prayed to dismiss the petition.

¶15

9. As per material available on record, Sri Venkateswara Enterprises represented by its Managing Partner Sri Nagulapati

¶16

Raghunadha Rao, who is the borrower and who is not a party to the writ petition, committed default in payment of loan due to the respondents. Thereby respondent No.1 declared account of Sri Venakteswara Enterprises as NPA and initiated proceedings under SARFAESI Act issued notice to the borrowers under Section 13(2), demanding payment of amount due, and later, issued notice under Section 13(4) of the Act taking possession of the property on 17.01.2014 and addressed a letter to M/s Sri Venkateswara Sortex Processing Unit represented by its Managing Partner Palaparthi Kesava Rao, by letter, dated 17.01.2014, requesting to shift the machinery before the date of sale, while demanding payment of demurrage for keeping the machinery, which amounts to unauthorized occupation intimating, the auction date as 17.02.2014. Thereupon, the writ petitioner was issued a registered notice on 26.01.2014 through his advocate i.e., Bharani Kumar setting up the lease of the property raising several objections for conducting auction. However, these objections were not considered.

¶17

10. As per material on record, there was earlier correspondence between the writ petitioner and the bank particularly, letter, dated 13.7.2013 by the writ petitioner addressed to the Chief Manger, State Bank of India, the first respondent herein, and thereupon, the letter was addressed by the first respondent dated 09.07.2013, finally demanding to vacate the premises within a week.

¶18

11. The writ petitioner filed a copy of the lease agreement executed by Sri Venkateswara Enterprises in favour of the writ petitioner for a period of 10 years on payment of only rent of Rs.18,000/-. The schedule of property obtained on lease is only

¶19

vacant site, which is a secured asset for the loan which is declared as NPA by the respondent. The lease agreement is only written on Rs.100/- stamp paper and it is an unregistered document for a period of more than one year. According to provisions of Transfer of Property Act and Registration Act, a lease for a period of more than one year is required to be registered. But the lease was not registered, therefore, this cannot be looked into for any purpose, more particularly, to believe the lease between the petitioner and Sri Venkateswara Enterprises. Even assuming for a moment that there is a lease subsisting, it is nothing but a creation to defeat the rights of the bank to proceed under SARFAESI Act initiating proceedings under Section 13 of SARFAESI Act. Therefore, the lease is always subject to the sale of property in the auction, if any, and if the lessee, the writ petitioner is continue in possession, lease can be attorned under Section 109 of Transfer of Property Act and the rights of the writ petitioner as a lessee can continue in possession of the property subject to payment of lease amount by way of attornment.

¶20

12. The main contention raised by the learned counsel for the respondent is that when efficacious remedy is available to file petition under Section 17 of SARFAESI Act before the Debts Recovery Tribunal (DRT) raising objections against notice of proposed auction, the petitioner has to exhaust the statutory efficacious remedy without exhausting such remedy, the petitioner is not entitled to approach to this Court seeking relief under Article 226 of Constitution of India.

¶21

13. In the similar circumstances, the Apex court in a judgment reported in Kanaiyalal Lalchand Sachdev and others Vs State of

¶22

Maharashtra and others^[1] held in para 22 & 23 as follows : An action under Section 14 of the Act constitutes an action taken after the sage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT. The High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person by holding para 22 and 23 therefore uphold the order passed by the High court.

¶23

14. In another decision reported in General Manager, Sri Siddeshwara Cooperative Bank Limited and another Vs Ikbal and others^[2] held in para-27 as follows : No doubt an alternative remedy is not an absolute bar to the exercise of extraordinary jurisdiction under Article 226 but by now it is well settled that where a statute provides efficacious and adequate remedy, the High Court will do well in not entertaining a petition under Article 226. On misplaced considerations, statutory procedures cannot be allowed to be circumvented.

¶24

15. In another decision reported in Hindustan Steel Works Construction Limited and another Vs Hindustan Steel Works Construction Limited Employees Union^[3] the Apex Court held that when the dispute relates to enforcement of a right or obligation under the statute and a specific remedy is, therefore, provided under the statute, the High court should not deviate from the general view and interfere under Article 226 except when a very strong case is made out for making a departure. The person who insists upon such remedy can avail of the process as provided under the statute.

¶25

16. Thus in view of settled principles of law referred above when efficacious adequate alternative remedy by way of appeal under Section 17 of SARFAESI Act is available to any person including borrower without exhausting the statutory efficacious and adequate remedy by way of appeal the petitioner shall not be allowed to circumvent the procedures prescribed by the statute and approach the High Court for extraordinary relief of Writ of Mandamus under Article 226 of Constitution of India.

¶26

17. The word used any person under clause 1 of Section 17 of SARFAESI Act, is an inclusive one it includes lessee or any of the person claiming right in the property including the borrower. Therefore, on close analysis of language used under clause 1 of Section 17 of the SARFAESI Act, the writ petitioner claiming to be a lessee has got right to file appeal under Section 17 of the Act, but without exhausting a statutory efficacious and adequate alternative relief straight away approached this Court seeking extraordinary remedy of Writ of Mandamus, which is impermissible in view of the settled law referred above.

¶27

18. Therefore, we are unable to exercise the extraordinary jurisdiction under Article 226 of Constitution of India to issue Writ of Mandamus declaring that the action of respondent Nos. 1 and 2 in issuing auction notice dated 17.01.2014 to conduct auction of secured asset where petitioner firm M/s Sri Venkateswara Sortex Processing Unit machinery is in existence along with the other property in an extent of Ac 2.50 cents in R.S.No.567/2 of Narendrapuram Gram Panchayat, Rajangaram Mandal, East Godavari District since alternative remedy is available.

¶28

19. In view of the aforementioned reasons, this Writ Petition is dismissed giving liberty to the writ petitioner to exhaust

¶29

statutory remedy if so advised. There shall be no order as to costs.

¶30

Miscellaneous petitions pending, if any, shall stand closed.

¶31

__________________________________ JUSTICE ASHUTOSH MOHUNTA.

¶32

_________________________________________ JUSTICE M. SATYANARAYANA MURTHY.

¶33

Date : -02-2014 Gvl