Dismissed

M/s. Sree Rama Educational Society v. Indian Bank

Telangana HC17 Feb 2014WP/4378/2014

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition challenging a Debt Recovery Tribunal order rejecting an interim application. The Court held that the Tribunal did not violate principles of natural justice and that an effective alternative remedy existed under Section 18 of the SARFAESI Act, barring writ jurisdiction.

What did the court decide?

Writ petition dismissed; no order as to costs.

M/s. Sree Rama Educational Society Vs Indian Bank — Banking and Recovery | Telangana HC (2014)

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THE HON’BLE SRI JUSTICE ASHUTOSH MOHUNTA AND THE HON’BLE SRI JUSTICE M. SATYANARAYANA MURTHY

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WRIT PETITION No.4378 of 2014

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

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M/s. Sree Rama Educational Society and nine others filed this writ petition under Article 226 of the Constitution of India, with a specific prayer to issue a writ of Mandamus setting aside the docket order dated 11-022014 passed in I.A.No.4030 of 2013 in S.A.No.738 of 2013 passed by the 2^nd respondent-Debt Recovery Tribunal, Hyderabad, and consequently to stay all further proceedings including the dispossession of the petitioners from the secured assets, the auction proceedings and sale notice dated 01.11.2013.

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The 1^st petitioner is an Educational Society under Andhra Pradesh Societies Act, and it obtained necessary permission from All India Council for Technical Education and other Departments affiliated to JNTU, Ananthapur, Andhra Pradesh, and to run colleges under the Society. The 1^st petitioner approached the 1^st respondent-Bank and availed cash credit facility to the extent of Rs.574.00 lakhs, Rs.261.00 lakhs Rs.405.00 lakhs, Rs.149.00 lakhs, Rs.104.00 lakhs and Rs.134.00 lakhs respectively, totaling to Rs.1627.00 lakhs. Though MTL-V & VI was sanctioned by the 1^st respondent-Bank, no amount was released for the reasons known to the Bank. It is further contended that Rs.48,00,000/- and Rs.84,00,000/were released under MTL-III and MTL-IV as against the original limit of Rs.405.00

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lakhs and Rs.149.00 lakhs and moreover adjusted the said sanctioned

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amount to other loan facilities. Even in MTL-I facility provided by it, 1^st respondent has released only Rs.4,24,38,000/- against sanctioned limit of Rs.574.00lakhs.

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The 1^st respondent charged interest at penal rate without disbursing the amount as per the terms and conditions of Cash Credit facility and ultimately declared the loan account of the 1^st petitioner as Non Performing Asset for non payment of amount due to the 1^st respondent. A notice under Section 13 (2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the SARFAESI Act’) dated 04-02-2013 was issued demanding payment of amount due to the Bank under Cash Credit Facility. The total amount due to the 1^st respondent is Rs.9,43,66,399-20 paise as on 03-02-2013, and called upon the 1^st petitioner and guarantors to pay the amount within 60 days from the date of receipt of notice.

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It is contended that the notice under Section 13 (2) of the SARFAESI Act, does not disclose the details of amount payable by the petitioners to the 1^st respondent. On receipt of the said notice, the 1^st petitioner approached the 1^st respondent and requested to reschedule the loan. It is further requested to stop proceedings since they are in process of mobilizing the funds. After discussing the matter, a representation/reply dated 30-03-2013 was given to the demand notice. Thus, the 1^st petitioner had no intention to avoid payment of debt due, and with a view to protect the interest of the students, who are prosecuting education in the 1^st petitioner society, paid part of the amount. Without considering the objections, the Bank issued notice under Section 13 (4) of the SARFAESI Act read with Rule 8 of the Rules framed under the said Act and proposed to auction the property on 10-12-2013 fixing reserve price at Rs.2310.00

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lakhs for recovery of outstanding amount of Rs.10,10,38,130/- as on 3009-2013.

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It is further contended that the account of the petitioner is not non performing asset and declaring the account of 1^st petitioner as non performing asset itself is illegal and not in accordance with law.

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The 1^st respondent did not take possession of the property and without taking possession of the secured property, issued notice under Section 13 (4) of the SARFAESI Act and sale of the property is illegal.

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The 1^st respondent did not comply Section 13 (3A) of the SARFAESI Act, but issued notice under Section 13 (4) of the SARFAESI Act, which is illegal, in view of the judgment of the Apex Court in Maridia Chemicals Vs Union of India. Therefore, the possession notice itself is illegal.

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The value of the secured property is more than Rs.200 Crores. But for realization of Rs.10 Crores and odd, the value of the secured property is estimated at Rs.23 Crores only. Therefore, the proposed sale is not in accordance with the rules. Finally it is contended that the petitioner has no other alternative remedy, except to approach this Court under Article 226 of the Constitution of India and prayed to issue a writ of Mandamus setting aside the docket order dated 11.02.2014 passed in I.A.No.4030 of 2013 in S.A.No.738 of 2013 passed by the 2^nd respondent-Debt Recovery Tribunal, Hyderabad, and consequently to stay all further proceedings including the dispossession of the petitioners from the secured assets, the auctioin proceedings and sale notice dated o01.11.2013.

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At the time of admission of this writ petition, we heard both the counsels at length.

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The Counsel for the petitioners mainly contended that the

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impugned docket order under challenge passed by the 2^nd respondent is illegal and it is totally in violation of principles of natural justice. When the principles of natural justice are violated, this Court can exercise its power under Article 226 of the Constitution of India and accordingly, when alternative remedy is available, this Court cannot deny any relief under Article 226 of the Constitution of India. Therefore, this Court is competent to exercise extraordinary power under Article 226 of the Constitution of India and pass appropriate order.

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Per contra, learned counsel for the respondents contended that the petitioner/creditor or the sureties can approach the appellate authority under Section 18 of the SARFAESI Act, when the effective, efficacious and alternative statutory remedy is available to the petitioners, against the docket order passed by the 2^nd respondent, which is under challenge, this Court cannot exercise its power under Article 226 of Constitution of India and prayed to dismiss the writ petition.

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Considering the rival contentions and perusing the material available on record, the points that arise for consideration are as follows :

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1. Whether the 2^nd respondent passed the impugned order dated 11-02-2014 in I.A.No.4030 of 2013 in S.A.No.738 of 2013 in utter violation of principles of natural justice ?

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2. Whether any effective, efficacious, statutory, alternative remedy is available to the petitioners to challenge the docket order dated 11-02-2014 in I.A.No.4030 of 2014 in S.A.No.738 of 2013. If so, whether this Court can exercise extraordinary power of Judicial review under Article 226 of Constitution of India against the said order ?

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POINT NO.1 :

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The writ petition is filed challenging the impugned order passed by 2^nd respondent dated 11-02-2014 in I.A.No.4030 of 2013 in S.A.No.738 of 2013 which is as follows :

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The petitioners/Applicants filed the present I.A.No.4030/2013 seeking stay of all further proceedings, including the auction sale of the schedule property on 12-12-2013, in pursuance of the Sale Notice dt.01.11.2013. The Respondent Bank has also filed its Counter opposing the stay petition.

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This Tribunal after hearing the Ld. Counsels on both sides, on 09.12.2013 permitted the Respondent Bank to receive the tenders/bids through online as per schedule and directed the Respondent Bank not to open such tenders/bids and confirm the same till 19.12.2013 and posted the matter to the said date i.e., 17.12.2013 for passing the orders. However, the matter was reposted to further dates from time to time and finally today the Respondent Bank filed a Memo bringing to the notice of this Tribunal that the auction schedule to be held on 12.12.2013 could not be held for want of bidders. Since no bids have been received and the auction sale of the schedule property could not be held by the Respondent Bank on 12.12.2013, the present stay petition i.e., I.A.No.4030/2013 has become in fructuous and accordingly the same is closed.

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A bare look at the impugned order passed by the 2^nd respondent, it is evident that the prayer in the petition is vague and rejection to register the Interlocutory application, giving liberty to the petitioner herein to file separate Second appeal, and seek necessary relief.

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According to the settled principles of law, undoubtedly, if the order passed by the 2^nd respondent is against the principles of natural justice, certainly, this Court, exercising power under Article 226 of the Constitution of India, can interfere with the orders of the 2^nd respondent. In fact, a perusal of the entire affidavit filed along with this petition shows that there is no allegation that the impugned docket order in I.A.No.4030 of 2013 dated 11-02-2014 was passed by the 2^nd respondent against principles of natural justice.

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In Para 23 of the affidavit a specific allegation is made which is as under :

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I submit that, under these circumstances, where the 2^nd respondent has not considered any stay of proceedings vis-à-vis the

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scheduled property and the Petitioners seek to desperately stop the 1^st respondent bank from indulging in any further illegalities and irregularities, the petitioners are left with no other alternative remedy except to invoke the Extraordinary Jurisdiction of this Hon’ble Court under Article 226 of the Constitution of India, and further submit that the petitioners have not filed any other writ, suit or any other proceedings before any Court of Law or authority for the relief or reliefs sought for hereunder.

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The allegations extracted above clearly shows that the 2^nd respondent did not consider the stay proceedings etc., and refused to stop further proceedings showing indulgence. But on the other hand, permitted the 1^st respondent to commit further irregularities.

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The petitioners did not challenge the impugned order on the ground that it was passed in violation of principles of Natural Justice. Principles of Natural Justice means affording reasonable opportunity basing on Audi Alterum Paretam and no one can hear the matter in which he has got interest.

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In the instant case on hand, the 2^nd respondent passed an order affording reasonable opportunity. But while considering registration of the I.A., the Tribunal need not go into the merits of the I.A. and allegations made in the affidavit. Since the relief claimed in the I.A., is vague, the 2^nd respondent declined to register the I.A., giving opportunity to the petitioner to file appropriate Second Appeal before the 2^nd respondent. The order under challenge is not passed in violation of principles of natural justice, prima facie, since a reasonable opportunity was given to the petitioner at the time of considering the I.A.No.4030 of 2013.

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No doubt the order was not challenged on the ground of principles of natural justice. This court considered the allegations made in the affidavit annexed to the writ petition but strangely a different argument is advanced by the counsel for the petitioners before this Court regarding passing the

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impugned order in I.A.No.4030 of 2013 dated 11-02-2014, totally in utter disregard of principles of natural justice which is not borne out from the affidavit. Therefore, we find no merit in this contention and it is not based on any allegations made in the affidavit or material brought on record. Hence, we find that the impugned order passed by the 2^nd respondentTribunal is not in violation of principles of natural justice. Hence, we find it is not a fit case to exercise extra ordinary power under Article 226 of the Constitution of India to set aside the impugned order under challenge in I.A.No.4030 of 2013 in S.A.No.738 of 2013 dated 11.02.2014, on the ground of violation of principles of natural justice.

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POINT NO.2 :

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One of the main contentions raised by the learned counsel for the respondents is that against the order passed in S.A.No.738 of 2013 dated 11-02-2014, rejecting I.A.I.R.No.610 of 2014, the appeal would lie to appellate Tribunal under Section 18 of SARFAESI Act, which reads as follows :

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Appeal to Appellate Tribunal – (1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, may prefer an appeal along with such fee, as may be prescribed to an Appellate Tribunal within thirty days from the date of receipt of the order of the Debts Recovery Tribunal :

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Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower.

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Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less :

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Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso.

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The language used under Section 18 (1) of the SARFAESI Act is unambiguous which permits a person aggrieved by any order passed by the Debt Recovery Tribunal under Section 17 of the SARFAESI Act to prefer an appeal to the appellate Tribunal within 30 days. The second appeal is filed before the 2^nd respondent and an Interlocutory application i n I.R, was filed with a specific prayer. The 2^nd respondent passed the impugned order rejecting to register the I.A.I.R. Therefore, the order under challenge is within the ambit of “any order” made by the Debt Recovery Tribunal under Section 17 as specified in Section 18 of the SARFAESI Act. Therefore, an effective, efficacious, alternative, statutory remedy by way of appeal is available to the petitioners. But without approaching the statutory authority under Section 18 of the SARFAESI Act, the petitioners approached this Court requesting to exercise its extra-ordinary power of judicial review under Article 226 of the Constitution of India, which is impermissible under law.

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The learned counsel for the respondents in support of his contention placed reliance in a judgment reported in Narayan Chandra Ghosh Vs UCO Bank and Others^[1] wherein the apex Court held in Para 8 as follows :

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It is well-settled that when a statute confers a right of appeal, while granting the right, the legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions, rendering the right almost illusory. Bearing in mind the object of the Act, the conditions hedged in the said proviso cannot be said to be onerous. Thus, we hold that the requirement of pre-deposit under sub-section (1) of Section 18 of the Act is mandatory and there is no reason whatsoever for not giving full effect to the provisions contained in Section 18 of the Act. In that view of the matter, no court, much less the Appellate Tribunal, a creature of the Act itself, can refuse to give full effect to the provisions of the statute. We

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have no hesitation in holding that deposit under the second proviso to Section 18 (1) of the Act being a condition precedent for preferring an appeal under the said section, the Appellate Tribunal had erred in law in entertaining the appeal without directing the appellant to comply with the said mandatory requirement.”

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I n Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others^[2] , the Apex Court in Para 23 held as follows :

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“In our opinion therefore, 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”.

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In another decision reported in United Bank of India Vs Satyawati Tandon and others^[3] the Apex Court held in Para Nos.42 to 45 as follows :

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There is another reason why the impugned order should be set aside. If Respondent 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 the 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.

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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 of India, if an effective, remedy is available to the aggrieved person and that this rule applies with greater rigour in

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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 a 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, the 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.

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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.

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In all the above three decisions, the Apex Court consistently held that when an appeal is provided which is more effective and efficacious remedy in the statute itself, the High Court cannot exercise its jurisdiction under Article 226 of Constitution of India.

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In the instant case on hand, against the impugned order under Challenge in I.A.I.R.No.610 of 2014 dated 11-02-2014, an effective, efficacious, alternative, statutory remedy is available under Section 18 of the SARFAESI Act, against the order passed under Section 17, this court cannot exercise its power under Article 226 of Constitution of India. In a recent decision reported in Commissioner of Income Tax and others Vs. Chhabil Dass Agarwa l^[4] , it was held as follows:

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"Non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. It is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy, however, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. However, when a statutory forum is created by law for redressal of grievances, a Writ Petition should not be entertained ignoring the statutory dispensation. In the instant case, the Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to invoke the writ jurisdiction when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). Assessee in the instance case neither described the available alternative remedy under the Act as ineffectual and non-efficacious nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of instant case. Writ Court accordingly, as held, should not have entertained the Writ Petition."

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In view of the principles laid down in the above judgments, when the

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alternative remedy is non-efficacious and statutory remedy under the Act is ineffective and that the petitioners made out a substantial case to exercise power under Article 226 of Constitution of India, the Court can exercise its power under Article 226 of Constitution of India. But in the instant case, on hand there is no whisper in the entire affidavit that the statutory remedy is non-efficacious and ineffective, and apart from that, whatever the contentions urged before this Court can be urged before the appellate authority, as provided under Section 18 of the SARFAESI Act, and seek the same relief before the appellate authority. In such case, this Court cannot exercise its extra-ordinary power under Article 226 of the Constitution of India. Therefore, on this ground, we are unable to accept the contention of the petitioners and since the impugned order passed by the 2^nd respondent in I.A.I.RNo.610 of 2014 dated 11.02.2014, is not in violation of principles of natural justice and that apart an efficacious, alternative, statutory remedy is available to the petitioner under Section 18 of the SARFAESI Act, without availing such remedy, the petitioners are not entitled to challenge the impugned order under Article 226 of the Constitution of India.

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Hence, we find no merits in the writ petition and it deserves to be dismissed.

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Accordingly, the writ petition is dismissed. Miscellaneous Petitions pending, if any, shall stand closed. There shall be no order as to costs.

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_________________________ ASHUTOSH MOHUNTA,J.

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_________________________________ M. SATYANARAYANA MURTHY,J.

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Date : 17-02-2014 Rds

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