Allahabad Bank vs The State of Jharkhand and Others

Aparesh Kumar Singh, J.—Heard learned counsel for the parties. The petitioner, is a Bank, who has preferred this writ application seeking quashing of an order contained in letter no. 329 dated 11th October, 2012 (Annexure-4) issued by the District Authorities, whereby it has directed the petitioner-Bank to release the two flats which were earlier sealed in execution of SARFAESI proceeding in exercise of powers conferred u/s 13(4) read with Section 14 of the SARFAESI Act, 2002, to the private respondent nos. 4 & 5, who are the flat owners of the said flats in question.

The background of the instant case which are necessary to be noticed are given hereunder. The properties comprised of the land and building situated on R.S. Plot No. 193, Sub Plot No. 193/3, Khata No.-74, Thana No. 186, at Village-Chiroundi, P.S.- Bariyatu, District-Ranchi, Area -6 Katha. Bounded as under: North-R.S. Plot No. 195; South- 14 Ft. Wide Road and part of Pot No.-193. East-Plot No.-193 and Part of Sub Plot No. 2. West-Plot No. 193 and Part of Sub Plot No. 4 were the subject matter of equitable mortgage in respect of a loan advanced to M/s. Mattress World by the petitioner-Bank, which was subsequently enhanced to Rs. 60 lakhs. The Proprietor of M/s. Mattress World is Smt. Jayanti Devi wife of Sri Tribhuwan Nath Tiwari. Sri Vikaram Kumar Tiwary, son of Tribhuwan Nath Tiwari was the guarantor of the account. As per the sanction letter equitable mortgage of immovable property as described hereinabove standing in the name of Sri Vikaram Kumar Tiwari was the collateral security for the said loan apart from other security extended by the borrower. The borrower subsequently became defaulter and the account was classified as non-performing asset on 28th April, 2012, on which date an amount of Rs. 63,67,718/- was due against the borrower. Accordingly, on 30th April, 2012, notice u/s 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter to be referred as the SARFAESI Act) was issued on the borrower and the guarantor. Both filed their objection, which was duly replied by the Bank through letter dated 2nd July, 2012. Thereafter, in exercise of powers u/s 13(4) possession notice was issued on 30th August, 2012 under the provisions of the said Act and pasted in the premises of the aforesaid mortgage property on the same date and was published in the Newspaper on 2nd September, 2012.

The borrower being aggrieved preferred appeal being SARFAESI Appeal no. 101/2012 u/s 17 of the aforesaid Act of 2002, wherein the petitioner-Bank appeared on notice and filed its objection. Thereafter the petitioner-Bank made an application before the Deputy Commissioner, Ranchi for providing police force for taking physical possession of the property through a request letter dated 25th September, 2012 (Annexure-3). On such application, upon the direction of the Deputy Commissioner /District Certificate Officer deputed the force for taking physical possession of the property on 4th October, 2012. On that day in presence of the Magistrate and the police the physical possession of the property was taken by the petitioner-Bank. The property comprised multi-storied building including the land, in which there were nine flats, out of which two were occupied by the respondent nos. 4 and 5. The respondent nos. 4 & 5 thereafter preferred a representation before the Deputy Commissioner, Ranchi on 9th October, 2012, raising several grievances relating to the action of the petitioner-Bank in taking physical possession of the property. On that representation, the impugned order dated 11th October, 2012 was passed by the Deputy Commissioner, Ranchi, issued under the signature of the District Certificate Officer, Ranchi, which is impugned in the present writ application. On the representation of the respondent nos. 4 & 5, it was observed in the said letter addressed to the Branch Manager of the petitioner-Bank that sealing of flats of these persons were improper, as the application was made for taking physical possession of the property of one Vikaram Kumar Tiwary. Therefore, the flats standing in the name of these respondents who were applicants before the Deputy Commissioner be unsealed and the Deputy Commissioner be informed of the same.

Initially when the writ petition was filed, vide an order dated 15th October, 2012, the impugned order dated 11th October, 2012 was stayed by this Court. Thereafter, the respondent nos. 4 & 5 appeared and preferred an interlocutory application being I.A. No. 3338 of 2012 for vacation of the interim order. On such application vide order dated 22nd November, 2012, the interim order dated 15th October, 2012 was vacated by learned Single Judge of this Court. Thereafter, the petitioner-Bank went in appeal before the Division Bench of this Court in L.P.A. No. 541 of 2012. The private respondents herein were also heard and thereafter the Letters Patent Appeal was disposed of by requesting the learned Single Judge to decide the writ application expeditiously after taking the note of all subsequent events so that the multiplicity of proceedings and passing of conflicting orders may be avoided. In the meantime, an important development had taken place. On the basis of order dated 22nd November, 2012, the Deputy Commissioner wrote to the petitioner-Bank to hand over possession of the flats to the private respondents in compliance with the interim order passed by this Court. The possession of the flats was restored to the private respondents after deputation of police force as per the statement of the petitioner-Bank on 14th December, 2012. One more development had taken place in the meantime as the private respondent nos. 4 & 5 preferred SARFAESI Appeal invoking Section 17 of the Act, 2002 on 6th November, 2012 being SARFAESI Appeal No. 124 of 2012 on being aggrieved by the action of the petitioner-Bank in taking the physical possession of the property in execution of its right under the provisions of the SARFAESI Act. During the pendency of the writ application, the said SARFAESI Appeal was also heard in presence of the petitioner-Bank who was the respondent therein and on 15th November, 2012 an interim order was passed. The operative portion of the order is quoted as under:

As such, the authorized Officer of the respondent bank is directed to remain in possession of the question immovable properties till disposal of the captioned SARFAESI Appeal and were the authorized Officer shall not proceed further in selling out the questioned immovable properties including passing of order on confirmation of sale upon the questioned immovable properties including two units of flats claimed by the appellants till disposal of the said SARFAESI Appeal S.A. No. 124 of 2012 and accordingly the interim application on stay of the Recovery Proceedings by the petitioners on 06.11.2012 is allowed herewith in the matter.

Thereafter, on account of the direction of the learned Division Bench, this matter was taken up on 11th June, 2013. On that day on the request of the private respondents, the matter was adjourned for filing response to supplementary affidavit filed by the petitioner-Bank a day before. It was informed that the SARFAESI Appeal is pending before the concerned Tribunal and the next date fixed is 17th June, 2013. However, on 17th July, 2013, the State-Respondents sought one last indulgence to file response in the matter and the private respondents had also not filed their affidavit, though time was granted by way of last indulgence. Therefore, the matter was posted for 28th June, 2013, on which date the counter affidavit was filed by the respondent-State and therefore the matter has been fixed under the heading for final disposal. The parties were asked to co-operate in the proceeding before the Appellate Forum.

Today the matter has been argued by the learned counsels for the petitioner-Bank, respondent nos. 4 & 5 and the State, Mr. Ajit Kumar, A.A.G.

Learned counsel for the petitioner after referring to the aforesaid chronology of events, which have been narrated herein above, made specific submission that the Deputy Commissioner under the provisions of SARFAESI Act, does not have any adjudicatory role. He is enjoined to come to the aid of the secured creditor as provided u/s 14 in order to ensure taking over possession of the secured assets and documents by deputation of such force as may be necessary. It is further submitted that u/s 17 of the SARFAESI Act, any person including a borrower aggrieved by the measures taken by the secured creditor under the provisions of the SARFAESI Act, u/s 13(4), can prefer an appeal before the Debt Recovery Tribunal within a specified period. Under Sub-Section (3) of Section 17, the Debt Recovery Tribunal has all the powers to declare the action of the secured creditor invalid and if necessary, restore possession of the secured assets to the borrower or to the aggrieved person.

In the aforesaid background of the statutory provisions, the respondent nos. 4 and 5 apart from the borrower have already preferred SARFAESI Appeal before the concerned Tribunal and the matter could have been well adjudicated after hearing the parties. The Deputy Commissioner therefore acted wholly without jurisdiction by ordering restoration of the possession to the private respondents on their representations.

Learned counsel for the petitioner has relied upon the judgment of Hon''ble Supreme Court rendered in the case of Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, . By relying upon the aforesaid judgment, it is submitted on behalf of the petitioner-Bank that Debt Recovery Tribunal does have jurisdiction to adjudicate the events post the action u/s 13(4) of the SARFAESI Act as has been held therein and the private respondents have an efficacious alternative remedy under the prevailing fiscal statute which they have already invoked. However, they have earlier approached the Deputy Commissioner on a representation, which is enclosed to the counter affidavit of the respondents-State and as per which they were aware of their rights to invoke the appellate jurisdiction before the Tribunal concerned u/s 17 of the Debt Recovery Tribunal. The respondents authorities of the State should not have therefore acted in an adjudicatory manner in a matter relating to a proceeding under the SARFAESI Act, which provides for adequate remedy to aggrieved person like the private respondents. The impugned order passed by the Deputy Commissioner/District Certificate Officer, Ranchi is, therefore, wholly without jurisdiction and amounts to interference in the proceedings under the SARFAESI Act, which is impermissible in law. It is further submitted that because of the subsequent event, the possession of the property needs to be restituted in order to ensure that the rights of the Bank do not get affected because of illegal acts of the respondents-district authorities.

The private respondents have argued that the Bank has selectively chosen to exercise its power under the SARFAESI Act against the properties mortgaged by the guarantor without first taking recourse to other secured assets of the borrower. It is further submitted on his behalf that the respondents had purchased the said flats, in question, through sale deed dated 21st March, 2012 and 30th March, 2012 respectively before account was classified as non-performing asset by the Bank. Therefore, it is not a case that after the declaration of the said account as non-performing asset the property was encumbered by transferring the said flats to these private respondents. It is further submitted that the private respondents therefore approached the Deputy Commissioner as the Bank has misrepresented itself by taking the physical possession of the property of these private respondents, though what was represented before the Deputy Commissioner was that the property is of the guarantor Vikaram Kumar Tiwary. In these circumstances, these private respondents without being heard had been dispossessed from their property and therefore the Deputy Commissioner has rightly requested the Bank to restore the said possession to them. It is further submitted that the learned Tribunal has proceeded in a haste and concluded its proceeding on 1st July, 2013, in the said SARFAESI Appeal without giving enough opportunity to the private respondents to adduce their case and taking into account all such issues of facts and documents which were raised in their behalf. It is, therefore, submitted that acts of the Deputy Commissioner are in the nature of protection granted to the private respondents on being informed that incorrect properties had been taken into physical possession by the petitioner Bank. It is submitted that therefore the action of the Deputy Commissioner cannot be fault in the eye of law.

Learned A.A.G., Mr. Ajit Kumar appearing on behalf of State has taken a stand that they have on the representation of the private respondents taken into account these facts that the application of the Bank was for taking possession of the physical possession of the properties of the guarantor, Vikaram Kumar Tiwari, instead the flats of the private respondents had been taken possession of. After vacation of the earlier interim order by order dated 22nd November, 2012, the Deputy Commissioner requested the Bank to restore the said possession to the private respondents. The same has been done in presence of the official of the Bank on 14.12.2012, therefore, the action of the Respondent-District Authorities is bona fide.

I have heard learned counsel for the parties at length and gone through the relevant materials on record including the judgment relied upon by petitioner.

The events which have been narrated in detail in the aforesaid paragraphs show that in a SARFAESI Proceeding the Bank had requested the Deputy Commissioner to provide force invoking Section 14 of the SARFAESI Act to take physical possession of certain properties of the guarantor namely, Vikaram Kumar Tiwari. The multi-storied flats standing thereupon including two flats of these private respondents were taken into physical possession by the petitioner Bank. The private respondents however preferred SARFAESI Appeal before the Debt Recovery Tribunal where an aggrieved person apart from a borrower has a remedy to challenge the action of the secured creditor like the petitioner Bank where such action invoking the provisions of Section 13(4) are undertaken. The Deputy Commissioner in these backgrounds, was only acting under the provisions of Section 14 of the SARFAESI Act to provide aid and assistance to the Bank in executing its right to take physical possession of the property in question. The Deputy Commissioner, however, after the aforesaid exercise had already been undertaken, acted in a manner wholly without jurisdiction by issuing the impugned order upon the representation of the private respondents to direct the Bank to restore the physical possession of the properties to the private respondents. The impugned action of the Deputy Commissioner, therefore, is not within the confines of the statutory provisions under the SARFAESI Act, especially Section 14 of the Act, 2002. The private respondents being conscious of their right had also invoked the provisions of Section 17 of the Act, 2002 by preferring SARFAESI Appeal before the Debut Recovery Tribunal. The events after the action taken u/s 13(4) can also be the subject matter of proceedings u/s 17 of the SARFAESI Act of 2002. The aforesaid issue has already been addressed by Hon''ble Supreme Court rendered in the case of Kanaiyalal Lalchand Sachdev and others-Vs.-State of Maharashtra and others as referred to Supra. An interim order was also passed by the Tribunal on 15th November, 2012 in the terms narrated herein above.

In these circumstances, therefore, this Court does not want to comment upon the merits of the contentions raised by the private respondents vis-�-vis, the right of the petitioner-Bank to exercise its powers under the SARFAESI Act, 2002. These are the subject matters of the appeal where the private respondents have already appeared and raised their grievances. However, the action of the Deputy Commissioner was wholly without authority of law as he could not have acted in an adjudicatory role. Even if the Bank may have acted illegally the remedy lay before the concerned Tribunal u/s 17 of the Act, 2002, which the private respondents have themselves availed.

In these circumstances, the impugned order dated 11th October, 2012 cannot be sustained in the eye of law and it is accordingly quashed. Since the subject matter of the properties in question is in seisin of the Tribunal, it is open to the Debt Recovery Tribunal to take proper decision in accordance with law so far as physical possession of the property is concerned and issue suitable direction in respect of handing over of the property in question to the concerned party on being satisfied with the rival contention of the parties and after arriving at a decision. Since it is informed that the Tribunal has concluded its proceeding on 1st July, 2013, the parties shall inform the order/judgment passed by this Court today to the concerned Debt Recovery Tribunal, Ranchi, so that it can take into account the aforesaid judgment rendered by this Court while passing necessary order in accordance with law in the SARFAESI Appeal preferred by the respondent nos. 4 and 5 being S.A. No. 124 of 2012. Accordingly, this writ petition is allowed in the aforesaid terms.