Case BriefsSupreme Court

Supreme Court: The Division Bench of S. Abdul Nazeer and Krishna Murari, JJ., addressed a pertinent issue of whether the rent act would come to the aid of a “tenant in sufferance”.

Instant appeals were directed against the Orders passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai rejecting the application filed by the appellant for restraining HDFC Bank, the first respondent from taking possession of the property in the appellant’s possession.

Financial Facility of Rs 5,50,00,000 was granted by HDFC Bank Limited to respondents 2 and 3 (the borrowers). Borrowers had mortgaged a property (Secured Asset) in favour of the Bank with an intention to secure the said credit facility.

Later, the Borrowers accounts were declared at non-performing assets, the Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to the Borrowers.

Appellant submitted that he is the tenant of the Secured Asset and has been paying rent regularly to his landlord since inception of his tenancy.

Appellant approached the Magistrate seeking protection of his possession of the Secured Asset as the Magistrate was ceased with the petition under Section 14 of SARFAESI Act filed by the respondent 1 – Bank. Though the magistrate had dismissed the registered tenancy placed on record by the appellant.

Analysis, Law and Decision

Bench noted that the appellant’s case was that he is a tenant of the Secured Asset and has paid the rent in advance.

However, in the detailed representation sent in response to the notice issued under Section 13(2) of the SARFAESI Act, the Borrowers did not claim that any tenant was staying at the Secured Asset.

The appellant provided a rent receipt claiming tenancy after the date of creation of mortgage.

Procedural mechanism for taking possession of the Secured Asset was provided under Section 14 of the SARFAESI Act.

Section 17 of the SARFAESI Act provides for the right of appeal to any person including the borrower to approach Debt Recovery Tribunal (DRT). Section 17 has been amended by Act No. 44 of 2016 providing for challenging the measures to recover secured debts. Under the Amendment, possession can be restored to the borrower or such other aggrieved person.

 In the Supreme Court decision of Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd., (2014) 6 SCC 1, it was held that the right of appeal is available to the tenant claiming under the borrower.

In Kanaiyalal Lalchand Sachdev v. State of Maharashtra, (2011) 2 SCC 782, this Court has held that DRT can not only set aside the action of the secured creditor but even restore the status quo ante.

Court stated that in view of the appeal being in pendency from 2016, this Court proposes to examine the case on merits without directing the appellant to avail the alternative remedy.

A Three­ Judge Bench of this Court in Bajarang Shyamsunder Agarwal v. Central Bank of India, (2019) 9 SCC 94, after considering almost all decisions of this Court, in relation to the right of a tenant in possession of the secured asset, has held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, such tenant’s possession cannot be disturbed by the secured creditor by taking possession of the property. If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65­A of the Transfer of Property Act, 1882. If a tenant claims that he is entitled to possession of a Secured Asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the said decision of this Court, it was clarified that in the absence of a registered instrument, if the tenant only relies upon an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under the provisions of the Transfer of Property Act.

While noting the above discussion, Bench held that,

“…Rent Act would not come to the aid of a “tenant­-in-­sufferance” vis­à­vis SARFAESI Act due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act.”

In the present matter, there was doubt as to the bona fide of the tenant, as there was no good or sufficient evidence to establish the tenancy of the appellant.

The pleading of tenancy was not supported by any registered document, and adding to this, the appellant himself stated that he was a “tenant-in-sufferance”, therefore, he is not entitled to any protection of the Rent Act.

Another point expressed by the Court, was that even if the tenancy had been claimed to be renewed in terms of Section 13(13) of the SARFAESI Act, the Borrower would be required to seek the consent of the secured creditor for transfer of the Secured Asset by way of sale, lease or otherwise, after issuance of the notice under Section 13(2) of the SARFAESI Act and, admittedly, no such consent has been sought by the Borrower.

In view of the above, appeal were dismissed. [Hemraj Ratnakar Salian v. HDFC Bank Limited, 2021 SCC OnLine SC 611, decided on 17-08-2021]

Case BriefsHigh Courts

Bombay High Court: The Division Bench of Sunil B. Shukre and Anil S. Kilor, JJ., held that mandate of Section 34 leaves a party aggrieved by the action of the Bank taken under Section 13 of the SARFAESI Act with only one forum to raise its grievance before it. This would further underline the need for any Debts Recovery Tribunal to be careful in denying urgent hearings to the parties.

Petitioner was aggrieved by the notice issued under Section 32 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), whereby two mortgaged properties creating a security interest in favour of respondent 1/Bank towards repayment of a loan granted to petitioner 2/company were put on auction sale.

Petitioners had filed an application under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal, Nagpur questioning the said sale notice.

As per the sale notice, the petitioner had to pay the outstanding dues amounting to Rs 5,87, 10,380.23 together with applicable interest and costs within15 days, failing which the notice informed that the respondent 1/bank would be constrained to sell the secured assets for realization of the dues.

Further, it was noted that the petitioners did not question the said notice for its validity immediately after its receipt and almost about 25 days thereafter, chose to knock at the doors of Debts Recovery Tribunal.

Petitioner’s request for an urgent hearing was also declined by the DRT.

Right of Hearing

Contention of the petitioners was that the petitioners were being denied the right of hearing by the Debts Recovery Tribunal, the only forum available for redressal of grievances arising from the measures taken under Section 12 of the SARFAESI Act which affected the fundamental rights of the petitioners.

There is a difference between refusal to hear a matter on a particular date and refusal to hear the matter at all. 

In the present matter, DRT had not said that it would not hear the application and thus the request for grant of urgent hearing had not been altogether rejected by the DRT, Nagpur. Also, the rejection came from the Registrar of the DRT and not from the Presiding Officer of DRT.

High Court in view of the above facts and circumstances, stated that the Registrar of the Debts Recovery Tribunal, instead of taking a decision himself, ought to have placed the request for urgent hearing before the Presiding Officer of the Debts Recovery Tribunal and allowed the Presiding Officer to take appropriate decision in the matter.

Adding to the above, Bench noted that If the said auction sale was to go ahead and finalization of the sale of the properties in the auction had indeed taken place, it would have resulted into adversely affecting the rights of the petitioners even without hearing the petitioners and the further consequence would have been another grievance of violation of principles of natural justice.

High Court referred to the Supreme Court decision in Mardia Chemicals Ltd. Etc. v. Union of India, (2004) 4 SCC 311, wherein it was held that the central theme of the provisions made in the SARFAESI Act is of fairness and transparency in the procedure adopted while taking such drastic measures as taking over of the possession of the secured assets and they being sold in realization of the dues payable to the banks, without any intervention of any judicial authority.

Section 34 of the SARFAESI Act raises an embargo upon the power of the Civil Court to grant injunction in respect of any action. Taken or to be taken in pursuance of the powers conferred by under this Act or under the Recovery of Debts and Bankruptcy Act, 1993.

Opportunity of Hearing

 Court expressed that the opportunity of hearing is an integral part of our constitutional philosophy and it is well embedded in Articles 14 and 21 of the Constitution of India.

Since the Registrar of the Debts Recovery Tribunal failed to perform his duty in the matter, therefore, the order passed by him denying the hearing would have to be held as illegal.

While partly allowing the petition, Court directed the Debts Recovery Tribunal to hold an urgent hearing. [Aruna DTS Moorthy v. UCO Bank, 2021 SCC OnLine Bom 1537, decided on 30-7-2021]


Advocates before the Court:

S.S.Sanyal, Advocate for the petitioners.

Sau. Supriya Puntambekar, Advocate for respondent 1. Shri C. Deopujari, Advocate h/f Aurangabadkar, ASGI for respondent 2.

Case BriefsHigh Courts

Telangana High Court: The Division Bench of A. Rajasheker Reddy and T. Vinod Kumar, JJ., dismissed a petition challenging the sale notice issued by the respondent Bank pursuant to proceedings under the SARFAESI Act.

In the present matter, respondent 2 — Company had borrowed a term loan from respondent 1 – Bank.

Petitioners are the guarantors. Respondent defaulted in payment of loan instalments and hence the loan account was declared as NPA due to which the recovery proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (SARFAESI Act).

Demand notice was issued to the petitioners and 2nd respondent under Section 13(2) of the SARFAESI Act and thereafter since the amount still remained unpaid, possession notice was issued under Section 13(4) of the SARFAESI Act.

Petitioners submitted that the bank did not follow the procedure prescribed under sub-rules 1 and 2 of Rule 8 of the Security Interest (Enforcement) Rules, 2002.

Further, during the course of recovery proceedings, respondent 1 – Bank issued a sale notice dated under Rule 8(6) of the Rules of 2002. The said notice has been challenged by the petitioners by the present petition.

Petitioner’s main grievance was that they were not served with sale notice under Rule 8(6) of the Rules of 2002, and the period of 30 days under the said provision was not given to them to exercise the right of redemption under Section 13(8) of the SARFAESI Act, and there was also no separate gap of 30 days between the sale notice, and the publication of sale notice, as envisaged under Rule 9(1) of the Rules of 2002, hence the sale notice was illegal and arbitrary to the law laid down in the Supreme Court decision of Mathew Varghese v. M. Amritha, (2014) 5 SCC 610.

Analysis, Law and Decision

Bench on perusal of Rule 8(6) of Security Interest (Enforcement) Rules, 2002 noted that:

the authorized officer of the Bank shall serve on the borrower a notice of 30 days for sale of immovable property and that if the sale of such secured assets is by way of public auction, the Bank / secured creditor, shall cause publication of such notice in two leading newspapers, one in vernacular, language having sufficient circulation in the locality by setting the out the terms of sale, mentioned in the said provision; and under sub-rule (1) of Rule 9, such sale of immovable of property under these Rules shall not take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6), or notice of sale has been served to the borrower.

Under Section 13(8) of SARFAESI Act, If the amounts due by secured creditor is paid by the borrower before the date of publication of notice for public auction, the secured asset shall be sold or transferred by the modes mentioned in the said provision.

Hence, petitioners are entitled to a 30 day notice period enabling them to clear the loan and redeem the property as envisaged under Section 13(8) of the SARFAESI Act and if they fail to repay the amount within a stipulated period, the secured creditor is entitled to issue publication of sale notice under Rule 9(1), and that on publication of such notice, the right of the borrower to redeem the property stands extinguished.

Adding to the above, Court also observed that since the respondent – Bank sent notices to the correct addresses of the petitioners as mentioned in the loan agreement, it has to be presumed to have been served, unless the petitioners prove that they were not really served and that they were not responsible for such non-service.

In view of the facts and circumstances, and the law laid down by the Supreme Court in T.N. Parameswaran Unni v. G. Kannan, (2017) 5 SCC 737, Court held that there was clear compliance with Rule 8(6) of the Rules of 2002.

Petitioners camouflaged the grievance by merely stating that they were not served with sale notice under Rule 8(6) of the Rules of 2002 and that they were not provided with 30 days time fixed under the said provision to clear the loan and to redeem the property, to give an impression to this Court, the action of the respondent –bank being in violation of principles of natural justice.

Thus there was clear suppression of material facts with regard to filing of securitization applications.

In Court’s opinion, Bank did follow the procedure as envisaged under provisions of SARFAESI Act and the Rules of 2002 and further, the petitioners suppressed the material facts with regard to filing of securitization applications before the Debts Recovery Tribunal and the facts and circumstances manifestly disclosed that they were resorting to dilatory and subterfuge tactics, to see that the recovery proceedings initiated by the Bank, were defeated in view of the Supreme Court decision in KD. Sharma v. SAIL, (2008) 12 SCC 481.

Hence, in view of the above discussion, the petition was dismissed.[K V V Prasad Rao Gupta v. SBI, 2021 SCC OnLine TS 328, decided on 12-02-2021]

Case BriefsHigh Courts

Kerala High Court: T.V. Anilkumar, J., dismissed the present Appeal against the impugned order of Additional District Court whereby the Court refused to order attachment of disputed land and machineries.

In the instant case, the appellant purchased some scrap and machineries from the respondent company under Memorandum of Understanding (MoU) dated 31-01-2017. Although the appellant paid a substantial amount, some amount was still outstanding towards the purchase price. The appellant claimed that, some of the goods kept in the disputed land were yet to be removed. The appellant contended that, the respondent had withheld the goods and proposed to sell them along with the disputed land. It was stated that the appellant had suffered a huge loss due to the alleged breach of contract committed by the respondent.

Stand taken by the respondent was that all the goods purchased by the appellant were already removed from the premises and some amount towards value of goods was outstanding due. The respondent set up a rival claim of loss and sought damages from the appellant.

The contention of the appellant was that until the claim for damages is determined by the Arbitral Tribunal, the disputed land, machineries etc. had to be kept intact or else, the appellant might not be in a position to recover the loss from the respondent. The appellant submitted that the court below refused to grant reliefs in respect of the scrap and machineries only for the reason that they were not scheduled in the petition. Therefore, the matter may be remitted back to the Court below and appellant may be given an opportunity to incorporate the property in the original petition.

The respondent argued that the appellant had not made out any prima facie case also the Court below had dismissed the Original Petition (Arb) on the ground that the material facts were suppressed by the appellant. Regarding physical possession of the land, the respondent had already approached another Bench of this Court seeking liberty to be reserved with it for sale of the property for settling its liabilities. The respondent opposed prayer for remittance of the case to the Court below and contended that, sole Arbitrator had already been appointed after the impugned order was passed, there is a legal bar under Section 9(3) of the Arbitration and Conciliation Act, 1996 (“the Act”) which precludes the court below from granting any interim measure of protection.

The Court opined that attachment of land as sought by the appellant could not be granted as the said land had already become the secured asset of Edelweiss Asset Reconstruction Company, Mumbai. Under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2016 (“SARFAESI Act”), the physical possession of the property was already taken over by Chief Judicial Magistrate.  In view of the appointment of sole Arbitrator, the Court said that, it is up to the learned Arbitrator to consider the question as to whether the appellant would be entitled to claim any interim measure of protection under Section 17 of the Act.

The Court dismissed the appeal, holding that there was no reason to interfere with the impugned order passed by the court below. [K.K. Ibrahim v. Cochin Kagaz Ltd, 2020 SCC OnLine Ker 7755, decided on 01-12-2020]

Case BriefsHigh Courts

Kerala High Court: A.M. Badar J., allowing the present petition, quashes the attachment made by the State authorities to recover tax dues.

Background

Counsel appearing for the petitioner argued that for repayment of loan availed by its borrower, the property comprised in Mannanchery village was mortgaged by the borrower. As the loan account became irregular, by following due process of law, it was declared as Non-Performing Asset and demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) came to be issued on 02-07-2015. Standing Counsel further submitted that as the borrower failed to settle the loan amount by repayment, physical possession of the mortgaged property was taken by the petitioner bank on 30-11-2019. It is to be further noted that, on 22-02-2019, the respondents had attached the said property alleging to have the ‘First Charge’ over the secured assets for recovery of sales tax dues. This act of the State, as per the Standing Counsel, is grossly illegal, arbitrary and misconstrued. Prayer sought by the petitioner, therefore, seeks to quash the aforementioned attachment made by the respondent authorities and further set aside the related communication letters.

Decision

Allowing the present petition, the Court relied on Travancore Devaswom Board v. Local Fund Audit, 2020 (3) KLT 296 and State Bank of India v. State of Kerala, 2019 (4) KLT 521, both of which, make it clear that, Section 26E of the SARFAESI Act and Section 31B of the RDB Act create a ‘First Charge’ by way of a priority to the Banks/Financial Institutions to recover and satisfy their debts, notwithstanding any statutory ‘First Charge’ in favour of the Revenue.

[Bank of Baroda v. State of Kerala, 2020 SCC OnLine Ker 7152, decided on 15-12-2020]


Sakshi Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Kerala High Court: A.M. Badar, J., while addressing the instant matter held that, demand notices under Section 13(2) of the SARFAESI Act can be challenged before the Debt Recovery Tribunal (DRT).

The instant petition was filed by four Cashew Processing Units.

Petitioners were impugning demand notices issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to petitioners 1 to 3 directing them to repay to the secured creditor the outstanding amount of loan within the prescribed statutory period.

Petitioners Counsel argued that as Cashew Processing Units in the State were in crisis and at the verge of closure, respondent 2–State of Kerala constituted a Cashew Revival Committee.

Further, a Revival Scheme for Cashew Processing Industries came to be formulated as per the decision taken by the Government of Kerala as well as the State Level Bankers Committee. Cashew Processing Units prima facie found liable for revival were referred to concerned Banks for taking up the restructuring process.

Respondent 1-Bank failed to check stock statements, balance sheets etc. and started taking steps under SARFAESI Act by issuing notices under Section 13(2) of the said Act.

Analysis and Decision

Bench stated that a Committee was constituted by the State for assessing the viability of Cashew Processing Unit facing crisis.

It was noted that though the cases of two of the petitioners were recommended for additional finance, the duly sworn statement of respondent 1 — bank made it clear that petitioners 1 to 3 failed to produce documents necessary for viability study.

Court noted that the instant writ petition has been filed to stop SARFAESI proceedings by virtually challenging demand notices issued under Section 13(2) thereof.

Supreme Court in the decision of Authorised Officer, State Bank of Travancore v. Mathew K.C., 2018 (1) KLT 784,  held that:

“5. …….The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in CIT v. Chhabil Dass Agarwal, (2014) 1 SCC 603.

In Union Bank of India v. Panchanan Subudhi, (2010) 15 SCC 552, further proceedings under Section 13(4) were stayed in the writ jurisdiction subject to deposit of Rs. 10,00,000/- leading this Court to observe as follows :

“7. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one-time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act.”

Concluding the decision, Court held that the petitioners have the most efficacious remedy of challenging demand notices under Section 13(2) of the SARFAESI Act before the Debt Recovery Tribunal.

Adding to the above, Court stated that, it is not case of petitioners that the Bank has not acted in accordance with the provisions of the SARFAESI Act or in defiance of the fundamental principles of judicial procedure.

Bench held that no case for breach of principles of natural justice is made out in the present case.

In view of the above, the petition was dismissed. [Sunitha Roy v. Canara Bank,  2020 SCC OnLine Ker 5120, decided on 13-11-2020]

Case BriefsHigh Courts

Orissa High Court: Biswajit Mohanty J., dismissed the petition being non-maintainable.

The facts of the case are such that the petitioner took loan from opposite party 1, a Non-Banking Financial Company i.e. NBFC recognized by Reserve Bank of India and is understood as such under the provisions of the SARFAESI Act, 2002. The petitioner is paying its EMI regularly, however, due to high-interest rate i.e. 12% on a floating basis approached the ICICI Bank Home Loan for taking over of the existing loan with the opposite parties which was later sanctioned by the ICICI Bank. However, the opposite party 2 vide an email declined the request of foreclosure of loan account on the ground that since the loan is under lock-in period, the aforesaid loan cannot be closed. Aggrieved by the same, the present writ petition has been filed for issuance of direction to the opposite parties to foreclose its loan account with the opposite party.

The present issue is regarding maintainability of the writ petition as the opposite party is a private banking company. On being queried the same, Counsel Mr Pal brought the attention of the Court towards the fact is a non-banking financial institution recognized by the Reserve Bank of India and is a financial institution as understood under the provisions of the SARFAESI Act and as such amendable to the jurisdiction of the Court.

Maintainability of the writ petition vis-a vis Opposite Party i.e. Private Banking Company

RBI ACT, 1934

A reading of Sub-Section (c), (e) & (f) of Section 45-I of the Reserve Bank of India Act, 1934 show that a nonbanking financial company/institution mainly deals with advancing of loans, acquisition of share, stock, bonds, debentures and marketable securities, letting or delivering of goods to a hirer under a hire purchase agreement, carrying on insurance business, managing & supervising of chits and collecting monies in lumpsum by way of sale of units and awarding prizes and gifts etc. All these make it clear that non-banking financial companies deal with ordinary commercial activities having no monopoly status. Therefore, such activities cannot be classified as discharging of public function/public duties/statutory duties.

SARFAESI Act, 2002

Chapter-II of the SARFAESI Act, 2002 deals with regulation of securitization and reconstruction of financial assets of banks and financial institutions. Section 12 of the Act deals with power of Reserve Bank to determine policy and issue directions which are in public interest or to regulate financial system of the country. Thus, merely because opposite party 1 is understood as financial institution under the SARFAESI Act and merely because R.B.I. also regulates its activities, it cannot be said that it is discharging public duties.

The Court further relied on judgment titled Federal Bank Ltd. v. Sagar Thomas, (2003) 10 SCC 733 and stated that

“A writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State (Govt.); (ii) Authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positive obligation of public nature (viii) a person or a body under liability to discharge any function under any Statute, to compel it to perform such a statutory function.”

The Court further observed that banking is a kind of profession and a commercial activity and the primary motive behind it is to earn returns and profits. It works like any other private company in the banking business having no monopoly status. These companies have been voluntarily established for their own purpose and interest but their activities are kept under check so that their activities may not go way ward and harm the economy in general. Merely because the Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability, it does not mean that private companies carrying on the business of banking, discharge any public function or public duty. Non-banking financial companies only indulge in ordinary business or commercial activities which cannot be described as akin to governmental function.

In view of the authoritative pronouncement and observations laid above, the court held that these private companies would normally not be amenable to the writ jurisdiction unless these violate statutory provisions. When there is no violation of any statutory provisions, a writ may not be issued at all.

Note: No pleadings were made to show that either the opposite party 1 is a “State” within the meaning of Article 12 of the Constitution of India or is under an obligation to discharge any statutory function.

 In view of the above, petition dismissed.[Radhakrishna v. Aditya Birla Finance Ltd., 2020 SCC OnLine Ori 189, decided on 03-04-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

Jharkhand High Court: Rajesh Shankar, J. dismissed the petition on grounds of non-maintainability.

The facts of the case are such that the petitioner took a loan to the tune of Rs 4, 25,000 from the respondent bank namely Allahabad Bank. Due to default in payment of money, a notice was issued under Section 13(2) of the Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 [“SARFAESI Act”] to pay the outstanding amount of Rs 7, 89, 420 within 60 days from the date of the notice, failing which, the respondent-Bank will exercise the power conferred under Section 13(4) of the SARFAESI Act. There has been another notice dated 28-11-2019 issued for possession of her property by the Respondent Bank and cautioned the public in general to not deal with the property under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (“Rules, 2002”) by the respondent 2. Aggrieved by the same, instant petition in the nature of certiorari has been filed to quash both the notices.

Counsel for the petitioner Rajiv Nandan Prasad submitted that the petitioner is a disabled lady and also the owner of the property in question in one of the impugned notice, she took a loan and has already paid Rs 8, 00,000 inclusive of the interest but later a huge amount was spent on her treatment at Vellore and as such, she was not able to pay EMI of the said home loan due to which her loan account became irregular and was subsequently declared as N.P.A.

Counsel for the respondent P.A.S. Pati raised an objection on grounds of maintainability as an alternative remedy under Section 17 of the SARFAESI Act is available.

 ISSUE 1: Availability of Alternative Remedy

  The Court relied on the judgment titled United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 which held:

“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.”

 The Court also relied on the judgment titled Standard Chartered Bank v. Noble Kumar, (2013) 9 SCC 620 which held:

“The “appeal” under Section 17 is available to the borrower against any measure taken under Section 13(4).”

“We are of the opinion that by whatever manner the secured creditor obtains possession either through the process contemplated under Section 14 or without resorting to such a process obtaining of the possession of a secured asset is always a measure against which a remedy under Section 17 is available.”

 ISSUE 2: Invoking Writ Jurisdiction in Matters relating to Realization of Loans

The Court relied on the judgment titled Authorized Officer, State Bank of Travancore v. Mathew K.C. (2018) 3 SCC 85 which held :

“Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.”

Taking into account the provisions of the SARFAESI Act and judicial pronouncements, the Court held the petition to be non-maintainable directing liberty to the petitioner to take recourse before the appropriate forum.

In view of the above, petition stands dismissed. [Uma Pandey v. Allahabad Bank, 2020 SCC OnLine Jhar 819, decided on 18-06-2020]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsSupreme Court

Supreme Court: The bench of Sanjay Kaul and KM Joseph, JJ. has held that electricity dues, where they are statutory in nature under the Electricity Act and as per the terms & conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically Section 56 of the Electricity Act, 2003, in pari materia with Section 24 of the Electricity Act, 1910, and cannot partake the character of dues of purely contractual nature.

The Court was hearing the case of an auction-purchaser of a unit owned by SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under SARFAESI Act, 2002. The Court was called upon to decide whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.

The Auction Notice showed that the unit was being sold on “as is where is, what is there is and without any recourse basis”, as per Rules 8 & 9 of the Security Interest (Enforcement) Rules, 2002. The total outstanding dues were much larger, but the reserve price fixed was lower, and the actual sale consideration of the successful auctioneer was Rs.9,18,65,000, which is approximately Rs.10 lakh more than the minimum reserve price. The holistic reading of all the clauses showed that the auction notice provided for a reserve price, with a bid being made about Rs.10 lakh over and above that, and certain nature of charges, lien, encumbrances, including electricity dues were clearly beyond the sale consideration paid.

Relying on the decision in Dakshin Haryana Bijli Vitran Nigam Ltd. v. Paramount Polymers (P) Ltd., (2006) 13 SCC 101, the bench noticed that in such a scenario if a transferee desires to enjoy the service connection, he shall pay the outstanding dues, if any, to the supplier of electricity and a re-connection or a new connection shall not be given to any premises where there are arrears on account of dues to the supplier unless they are so declared in advance.

The Court noticed that the facts of the present case are more explicit in character as there is a specific mention of the quantification of dues of various accounts including electricity dues. The respondent was, thus, clearly put to notice in this behalf. It, hence, said,

“as an auction purchaser bidding in an “as is where is, whatever there is and without recourse basis”, the respondent would have inspected the premises and made inquiries about the dues in all respects.”

It, further, noticed that if any statutory rules govern the conditions relating to sanction of a connection or supply of electricity, the distributor can insist upon fulfillment of the requirements of such rules and regulations so long as such rules and regulations or the terms and conditions are not arbitrary and unreasonable. A condition for clearance of dues cannot per se be termed as unreasonable or arbitrary.

[Telangana State Southern Power Distribution Company Limited v. Srigdhaa Beverages, 2020 SCC OnLine SC 478, decided on 01.06.2020]

Case BriefsSupreme Court (Constitution Benches)

Supreme Court: The 5-judge bench of Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah and Aniruddha Bose, JJ has held that

“’banking’ relating to co­operatives can be included within the purview of Entry 45 of List I, and it cannot be said to be over inclusion to cover provisions of recovery by co­operative banks in the SARFAESI Act.”

The judgment of the Court came in a reference made in view of conflicting decisions in Greater Bombay Coop. Bank Ltd. v. United Yarn Tex (P) Ltd., (2007) 6 SCC 236, Delhi Cloth & General Mills Co. Ltd. v. Union of India, (1983) 4 SCC 166, T. Velayudhan Achari v. Union of India, (1993) 2 SCC 582 and Union of India v. Delhi High Court Bar Association, (2002) 4 SCC 275.

Holding that Co­operative bank’s entire operation and activity of banking are governed by a law enacted under Entry 45 of List I, i.e., the BR Act, 1949, and the RBI Act under Entry 38 of List I, the bench said,

“recovery of dues would be an essential function of any banking institution and the Parliament can enact a law under Entry 45 of List I as the activity of banking done by co­operative banks is within the purview of Entry 45 of List I. Obviously, it is open to the Parliament to provide the remedy for recovery under Section 13 of the SARFAESI Act.”

The Court further explained that the main aspect of the activity of the cooperative bank relating to banking was covered by the BR Act, 1949, and the Reserve Bank of India Act, which legislations are related to Entries 45 and 38 of List I of the Seventh Schedule. The aspects of ‘incorporation, regulation and winding up’ are covered under Entry 32 of List II of the Seventh Schedule.

“In our opinion, the activity of banking by such bankers is covered by Entry 45 of List I considering the Doctrine of Pith and Substance, and also considering the incidental encroachment on the field reserved for State is permissible.”

It further said that by enacting the SARFAESI Act, Parliament does not intend to regulate the incorporation, regulation, or winding up of a corporation, company, or co­operative   bank/cooperative society. It provides for recovery of dues to banks, including co­operative banks, which is an essential part of banking activity. The Act, hence,  in no way trenches on the field reserved under Entry 32 of List II and is a piece of legislation traceable to Entry 45 of List I.

In a 159-pages long verdict, the 5-judge concluded,

  • The co­operative banks registered under the State legislation and multi­State level co­operative societies registered under the Multi­State Co­operative Societies Act, 2002 (MSCS Act, 2002) with respect to ‘banking’ are governed by the legislation relatable to Entry 45 of List I of the Seventh Schedule of the Constitution of India.
  • The co­operative banks run by the co­operative societies registered under the State legislation with respect to the aspects of ‘incorporation, regulation and winding up’, in particular, with respect to the matters which are outside the purview of Entry 45 of List I of the Seventh Schedule of the Constitution of India, are governed by the said legislation relatable to Entry 32 of List II of the Seventh Schedule of the Constitution of India.
  • The co­operative banks involved in the activities related to banking are covered within the meaning of ‘Banking Company’ defined under Section 5(c) read with Section 56(a) of the Banking Regulation Act, 1949, which is a legislation relatable to Entry 45 of List I. It governs the aspect of ‘banking’ of co­operative banks run by the co­operative societies. The co­operative banks cannot carry on any activity without compliance of the provisions of the Banking Regulation Act, 1949 and any other legislation applicable to such banks relatable to ‘Banking’ in Entry 45 of List I and the RBI Act relatable to Entry 38 of List I of the Seventh Schedule of the Constitution of India.
  • The co­operative banks under the State legislation and multi­State co­operative banks are ‘banks’ under section 2(1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The recovery is an essential part of banking; as such, the recovery procedure prescribed under section 13 of the SARFAESI Act, a legislation relatable to Entry 45 List I of the Seventh Schedule to the Constitution of India, is applicable.
  • The Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 with respect to cooperative banks. The provisions of Section 2(1)(c)(iva), of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, adding “ex abundanti cautela”, ‘a multi­State co­operative bank’ is not ultra vires as well as the notification dated 28.1.2003 issued with respect to the cooperative banks registered under the State legislation.

[Pandurang Ganpati Chaugale v. Vishwasrao Patil Murgud Sahakari Bank Ltd,  2020 SCC OnLine SC 431 , decided on 05.05.2020]

Case BriefsHigh Courts

Madras High Court: A Bench of V.K.Tahilramani, CJ and M. Duraiswamy, J. dismissed a writ petition filed under Article 226 seeking to quash the subject Sale Certificate issued by the Authorised Officer of IDBI Bank.

The petition committed default in repaying the loan amount to IDBI Bank. Consequently, his property was auctioned and a Sale Certificate was issued in favour of the purchaser. The petitioner, represented by his counsel R. Amardeep, challenged the Sale Certificate contending that an insolvency petition on the file of Principal Sub Court. Salem filed by one Raji (Respondent 1) was pending and therefore the said certificate had to be set aside.

The High Court relied on Supreme Court decisions in State Bank of Travancore v. Mathew K.C.,(2018) 3 SCC 85Agarwal Tracom (P) Ltd. v. Punjab National Bank, (2018) 1 SCC 626 and ICICI Bank Ltd. v. Umajanta Mohapatra, 2018 SCC OnLine SC 2349 to hold that the present writ petition was not maintainable. It was clear from the cases relied on that the aggrieved parties cannot challenge the proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) directly by filing a writ petition under Article 226 of the Constitution without exhausting the appeal remedy available to them. Accordingly, the Court held, “Since the petitioner has not challenged the Sale Certificate before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, the writ petition cannot be entertained.”The writ petition was thus dismissed. [Rajagopal v. Raji, 2019 SCC OnLine Mad 733, dated 11-03-2019]

Case BriefsHigh Courts

Madras High Court: P.T. Asha, J., held that Section 8 of the Arbitration Conciliation Act, 1996 clearly indicate that the role of judicial authority to refer parties to arbitration arises only upon an application being made by a party to the arbitration agreement.

The High Court was faced with a very interesting question: “Whether the Civil Court can act at the threshold in returning/rejecting a Plaint without numbering the suit on the ground that the parties have entered into an Agreement to refer the disputes to arbitration?”

In the present case, there existed a Lease Agreement between the parties. As per Clause 19 of the Agreement, all disputed arising between the parties were to be resolved under the A&C Act. Subsequently, a dispute arose between the parties. The petitioner filed a suit before the District Munsif who returned the suit at the very threshold, observing on the basis of Clause 19 that “this Court does not have jurisdiction to entertain this suit. Hence, this plaint is returned.” Aggrieved thereby, the petitioner approached the High Court.

The High Court referred to Section 9 CPC (courts to try all suits unless barred) and observed Civil Court have to try all suits of civil nature except those suits which have been specifically barred under provisions of some Acts or impliedly barred. Therefore, the Court perused Section 8 of the A&C Act (power to refer parties to arbitration where there is an arbitration agreement). Relying on the decision in P. Anand Gajapathi Raju v. P.V.G. Raju, 2000 (4) SCC 539 and Ameet Lalchand Shah v. Rishabh Enterprises, 2018 SCC OnLine SC 487, the Court observed, “a reading of Section 8 would clearly indicate that the role of the Judicial authority to refer parties to arbitration will arise only upon an application being made by a party to the arbitration agreement or a person claiming under or through him. This window is given only to enable the defendant who is not desirous of having the dispute settled by arbitration to waive his right for having the dispute referred to arbitration. Therefore, from a reading of the above, it is very clear that a Judicial authority cannot suo moto return/reject a suit on the ground that the parties to the suit have agreed to refer all their disputes to arbitration at the threshold when the case is filed.” It was further observed that under the A&C Act, there is no total ouster of jurisdiction of Civil Courts unlike in cases arising under the SARFAESI Act, Motor Vehicles Act, etc. Resultantly, the petition was disposed of by directing the District Munsif to number the suit forthwith on the petitioner resubmitting the returned papers along with the copy of orders. [Convinio Shopping Nine 2 Nine v. Olympia Opaline Owners Assn., 2019 SCC OnLine Mad 646, Order dated 04-03-2019]

Case BriefsHigh Courts

Punjab and Haryana High Court: This petition was filed before a Division Bench of Amit Rawal and Arun Kumar Tyagi, JJ. against the impugned order passed by the Debts Recovery Tribunal-II, Chandigarh whereby an application for condonation of delay accompanied by Securitization Application was dismissed, being barred by 52 days.

Petitioner submitted that an order passed by this court held that DRT had jurisdiction to entertain an application for condonation of delay lest accompanied with Securitization Application. It was viewed that the explanation provided in the application was reasonable. The DRT should not have dismissed the application and decided the same in limine. The case of Esha Bhattacharjee v. Raghunathpur Nafar Academy, (2013) 12 SCC 649 was referred to wherein the principles applicable to an application for condonation of delay were given.

High Court observed that the securitization application filed against the measures taken under Section 13(4) of the SARFAESI Act was dismissed being barred by 52 days. DRT’s jurisdiction under S. 5 of the Limitation Act was not disputed and it should not have adopted harsh approach by not condoning the delay as per the principles laid down in Esha Bhattacharjee case. Therefore, the impugned order was set aside and the DRT (II), Chandigarh was directed to decide the case on merits. [Ajmer Enterprises v. Debt Recovery Tribunal, 2019 SCC OnLine P&H 4, decided on 04-01-2019]

Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench comprising of Devan Ramachandran, J. dismissed a civil writ petition calling into question the statutory competence of a Chief Judicial Magistrate (CJM) to act under the provisions of Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002.

Learned Senior Counsel on behalf of the petitioner, Mr. K.P. Dandapani, submitted that Section 14 of SARFAESI Act vests jurisdiction to assist the secured creditor in taking possession of a secured asset, only with a Metropolitan Magistrate or a District Magistrate, within whose jurisdiction any such secured asset is situated or found. Since Ernakulam district was not a metropolitan area under the provisions of the Code of Criminal Procedure, 1973, therefore, the CJM would not have jurisdiction to act under Section 14 of SARFAESI Act.

The Court noted that the present issue was pending consideration of Supreme Court in a case titled P.M. Kelukutty v. Young Mens Christian Association numbered as SLP No. 4665 of 2016. However, relying on the judgments of Division Bench of this Court in Muhammed Ashraf v. Union of India, 2008 SCC OnLine Ker 201 and Radhakrishnan V.N. v. State of Kerala, ILR 2008 (4) Ker 863 it was held that a Chief Judicial Magistrate is also authorized by law to act under the provisions of Section 14 of the SARFAESI Act.

In view of the above, the petition was dismissed and petitioners were granted liberty to approach the competent statutory forum for invoking alternative remedies as per law.[Pouly v. Union of India,2018 SCC OnLine Ker 5415, decided on 15-11-2018]

 

Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench comprising of Devan Ramachandran, J. was seized of a civil writ petition filed by a defaulter challenging proceedings initiated by the respondent bank against him under Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act).

The Court took note of the financial constraints and burden pleaded by the petitioner and in the interest of saving time, disposed of the petition granting petitioner an opportunity to repay the loan in installments.

At the outset, the Court opined that it was jurisdictionally proscribed from considering the legality impugned proceedings in view of binding judicial pronouncements of the Apex Court in United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110. Therefore, it refused to consider any of the contentions raised by the petitioner on merits. However, counsels for the petitioner Sri Saiju S. and Smt Rubeena Hilal prayed that notwithstanding jurisdictional limitations, the petitioner may be granted leniency to enable him to pay off respondent’s loan in installments.

It was noted that banks are only interested in recovering and not in pursuing pending litigations for recovery; and on respondent bank’s submission to that effect, petitioner was granted an opportunity to pay the entire outstanding amount to respondent in installments.

The Court clarified that in case of any default by the petitioner, a benefit granted to him under its judgment would stand vacated and the bank would be at liberty to recover entire amount from him by continuing proceedings under SARFAESI Act from the stage as it was on the date of this judgment.[Wills I v. Kerala State Co-operative Bank Ltd., 2018 SCC OnLine Ker 5227, decided on 10-12-2018]

 

 

 

Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench of Dama Seshadri Naidu, J., decided a writ petition wherein it held that the jurisdiction of Article 226 of the Constitution of India does not go to the extent of altering the terms of a contract.

As per the facts of the case, the petitioner took a loan of Rs 9 lakhs from the respondent bank and defaulted in making the repayment due to financial problems. As a result, the respondent bank initiated proceedings under the SARFAESI Act. The petitioner submitted that despite his best efforts, could not repay the loan because of his financial difficulties. Therefore, he approached the High Court to direct the respondent Bank to receive the outstanding loan amount in installments.

The High Court observed that its jurisdiction under Article 226 of the Constitution of India does not go to the extent of altering the contractual terms, especially in a financial transaction involving public money and, to compel the respondent bank to accept repayment in installment. The Court based on the bank’s concession to accept the repayment of the loan in twelve equal monthly installments directed the petitioner to pay the accumulated dues accordingly. The Court gave liberty to the respondent bank to proceed with recourse to the Court if the petitioner fails to pay any two consecutive installments within the stipulated time. The petition was accordingly disposed of.[Muhammed Saleem M.T v. State of Kerala,2018 SCC OnLine Ker 2998, dated 01-08-2018]

Case BriefsHigh Courts

Madhya Pradesh High Court: A petition filed against the possession notice issued under Rule 8 of the Security Interest (Enforcement) Rules 2002 was dismissed by a Division Bench comprising of Hemant Gupta, CJ and Vijay Kumar Shukla, J.

Argument of the petitioner was that earlier, the concerned Bank initiated proceedings against the petitioner under Section 13 of the SARFAESI Act, 2002. The petitioner invoked the jurisdiction of Debts Recovery Tribunal under Section 17 of the Act. However, such notice was withdrawn. Therefore, the petitioner contended that the Bank was estopped to issue fresh notice to the petitioner.

The High Court did not find any merit in the contention of the petitioner and held that the withdrawal of notice under Section 13(4) did not discharge the petitioner’s debt. The Bank was a secured creditor and a mortgagee and therefore, by withdrawal of earlier notice, the debt did not stand discharged. The Bank continued to be a creditor and petitioner a debtor. Thus, the possession notice could have been issued under the provisions of the Act. Further, the petitioner had an alternate efficacious remedy under Section 17 before the DRT. Accordingly, the petition was dismissed while the petitioner was given a liberty to approach DRT. [Devarshi Kirana Store v. Authorised Officer, 2018 SCC OnLine MP 354, dated 18-5-2018]

Case BriefsHigh Courts

Allahabad High Court: A Full Bench comprising of Dilip B. Bhosale, CJ, and Devendra Kumar Arora and Vivek Chaudhary, JJ., sat to decide a reference by the learned Single Judge, wherein it was inter alia held that the remedy of an application under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is available only after the measures under Section 13(4) have been taken by the Bank/Financial Institutions against the borrower.

The reference arose in light of divergent opinions expressed by two Division Benches of the Court on the question whether the proceedings before the Debts Recovery Tribunal under Section 17 of the Act would be maintainable before the actual possession of the assets of the defaulting borrower is taken.

In order to settle the controversy, the High Court perused the two decisions concerned of the Division Bench and also other various decisions of the Supreme Court. After a detailed consideration of all decisions referred to and various provisions of the SARFAESI Act, the Court culled out the upshot of legal position regarding the question concerned; which inter alia stated as follows:

· A remedy of an application under Section 17(1) is available only after the measures under Section 13(4) have been taken by the Bank/FIs against the borrower.

· No recourse to an application under Section 17 (1) is available at the stage of issue of notice under Section 13(2).

· The borrower against whom measures under Section 13(4) are likely to be taken, has a right to know as to why his objections have not been accepted.

· The Bank/FIs have been conferred with powers to take physical (actual) possession of the secured assets without interference of the Court and the only remedy open to the borrower is to approach DRT challenging such an action/measure and seeking appropriate relief.

· The borrower is not entitled to challenge the reasons communicated or likely measure, to be taken by the secured creditor under Section 13(4) of the Act, unless his right to approach DRT, as provided for under Section 17(1), matures.

· If Debts Recovery Tribunal (DRT), after examining the facts and circumstances of the case and on the basis of evidence produced by the parties, comes to the conclusion that any of the measures referred to in Section 13(4), taken by the secured creditor is not in accordance with the provisions of the Act, it may by order declare that the recourse taken to any one or more measures is invalid and restore possession to the borrower.

· No remedy under Section 17(1) can be taken by the borrower unless he loses actual (physical) possession of the secured assets. In other words, before losing actual possession or unless the secured creditor obtains physical possession of the secured asset under Section 13(4), it is not open to the borrower to take a remedy under Section 17(1) of the Act.

In the instant case, the bank concerned issued a notice for taking possession of the properties of the defaulting petitioner; and in such notice it was clearly mentioned that a ‘symbolic possession’ of the immovable properties of the petitioner was taken. The High Court was of the opinion that ‘symbolic possession’ could not be equated with ‘actual possession’; it only means constructive/paper possession. Taking symbolic possession could not be treated as a measure taken under Section 13(4) of the Act, and therefore, the borrower-petitioner could not file an application under Section 17(1) at that stage. It was held that the judgment of the Division Bench in Sushila Steels v. Union Bank of India, 2014 SCC OnLine All 15639 laid down the correct law; whereas the judgment in Aum Jewels v. Vijaya Bank (Writ-C No. 13476 of 2017, decided on 30.3.2017) did not enunciate the correct law. The reference was disposed of accordingly. [NCML Industries Ltd. v. Debts Recovery Tribunal,  2018 SCC OnLine All 176, dated 06-02-2018]

Case BriefsHigh Courts

Allahabad High Court: A civil writ petition was dismissed by a Single Judge Bench comprising of Ram Surat Ram Maurya, J., on the ground that the petitioner had an alternate remedy of appeal under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

The petitioner filed the instant petition being aggrieved by the proceedings initiated by the respondent-Bank under SARFAESI Act, whereunder the petitioner’s account was declared as ‘non-performing account’ and his property was auctioned. The petitioner claimed that the proceedings against him were malafide and he was being wrongly deprived of his property in a high-handedness manner. Learned counsel for the respondent contended that the writ petition was not maintainable as the petitioner had an alternative remedy of appeal under Section 18 of the Act. The petitioner submitted that if he was to file an appeal under the Act, he will have to submit 35% of the outstanding amount and he was not in a condition to deposit the same.

The High Court gave due consideration to the submissions made on behalf of the parties and also adverted to a Supreme Court decision cited by the respondent wherein the Court deprecated the practice of the High Courts to entertain a writ petition, ignoring the statutory alternative remedy of appeal. The High Court was of the view that it is well settled that writ jurisdiction has to be exercised according to the provisions of law and not bypassing the provisions of law. If the legislature imposed a condition for entertaining the appeal, to deposit 35% of the amount, then the Court in exercise of writ jurisdiction, should not ignore that condition.

Since the appellant had equal efficacious remedy of appeal under the SARFAESI Act, the Court dismissed the petition. [Anil Kumar Sharma v. Punjab National Bank,  2018 SCC OnLine All 146, order dated 08-02-2108]

Case BriefsHigh Courts

High Court of Himachal Pradesh: A Division Bench comprising of Dharam Chand Chaudhary and Vivek Singh Thakur, JJ., dismissed a civil writ petition observing that no proceedings should be entertained against action taken under SARFAESI Act, 2002.

The petitioner Society filed the petition praying that Respondent 3 Bank be restrained from taking physical possession of petitioner’s institute under Section 13(2) and (4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

While dealing with the prayer made by the petitioner, the High Court perused the reply filed on behalf of the Respondent 3 and found that the petitioner became irregular in repayment of loan amount and it even failed to deposit the outstanding amount in its account despite opportunities granted. The petitioner failed to adhere to the terms of compromise as entered into between the parties. The Court also observed that it is a settled legal principle that no proceeding including that under Article 226 of the Constitution of India should be entertained against any action taken under the SARFAESI Act.

Accordingly, the petition was dismissed as the Court found it to be sans merit. [Awasthi Education Society v. State of H.P., 2016 SCC OnLine HP 4201, order dated 23.12.2016]