Amar Bal vs Chief Manager-Cum-Authorized Officer

S.K. Sahoo, J.—The petitioner in this writ application challenges the impugned letter No. SME/2014-15/965 dated 13.2.2015 issued by the Chief Manager-Cum-Authorized Officer, State Bank of India, Bhadrak Branch, Bhadrak (hereafter ''the opp. Party'') in exercise of the power under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter in short ''SARFAESI Act, 2002'') and taking over physical possession of secured assets mortgaged to Bank by the father of the petitioner namely Kapil Charan Bal and guarantor M/s. Mahavir Stone Crusher situated at Mouza-Apartibindha, Tahasil/P.S./Dist-Bhadrak, Khata No. 791/1436, Plot No. 309/3218, Area Ac 0.080 dec.

The case of the petitioner is that he was the Proprietor of a Crusher Unit in the name and style of M/S. Mahavir Stone Crusher situated in the district of Bhadrak which is running since 2008. The petitioner applied for both Term Loan and Cash Credit in the State Bank of India, Bhadrak Branch. The bank sanctioned a term loan of Rs. 45,00,000/- and Cash Credit of Rs. 10,00,000/- in favour of the petitioner. It is the further case of the petitioner that in the year 2012, an enhanced Cash Credit worth of Rs. 15,00,000/- was sanctioned in favour of the petitioner so also housing loan of Rs. 17,00,000/-. The petitioner is stated to have mortgaged the landed properties standing in the name of his father and also that of him in lieu of the loan sanctioned from the bank. It is the further case of the petitioner that though he was regularly repaying the installments of the loan amount along with interest till 31.3.2012 but due to downfall in the business in the crusher unit and ill health of his father which needed major surgical operation, the petitioner could not pay the further installments. It is the further case of the petitioner that the bank/opposite party issued demand notice on dated 25.3.2013 under section 13 (2) of the SARFAESI Act, 2002 wherein the outstanding liabilities of the petitioner to the bank was mentioned as Rs. 93,46,789/-. It is the further case of the petitioner that after receipt of the demand notice dated 25.3.2013, he sent a letter on 25.4.2013 to the opposite party to intimate him regarding the overdue i.e., the irregular amount till that date and to allow him to pay the same in suitable installments. It is the case of the petitioner that in spite of such communication by the petitioner dated 25.4.2013, the opposite party did not pay any heed to his request and came up with a possession notice under section 13(4) of the SARFAESI Act, 2002 and letter of request for vacation/peaceful delivery of possession of the secured assets on dated 1.8.2013.

The petitioner being aggrieved by the possession notice issued by the opposite party on dated 1.8.2013, approached this Court in W.P.(C) No. 20364 of 2013 which was disposed of on 24.3.2014. The following order was passed:--

"24.3.2014- This petition seeks direction against initiation of coercive measures by the Bank for recovery of loan under the provisions of the SARFAESI Act, 2002.

Learned counsel for the petitioner submits that the petitioner is willing to repay the loan subject to decision of his application to the Bank for grant of time and extending benefit under the One Time Settlement Scheme, if applicable. Learned counsel further states that the petitioner is willing to pay a sum of Rs. 20,00,000/- (rupees twenty lakhs) within two months from today along with the proposal for repayment for consideration of the Bank.

Without expressing any opinion on merits, we direct that if the petitioner makes deposit as aforesaid and files an application for consideration of the Bank, the Bank may take decision thereon in accordance with law within two months and, till such decision is taken, the Bank may not take coercive measures.

The petition is disposed of.

It is made clear that if the petitioner defaults in making the deposit, this petition will be treaded to have been dismissed.

Sd/- A.K. Goel, C.J.

Sd/- A.K. Rath, J."

The learned counsel for the petitioner submitted that the total outstanding principal amount of the loan incurred as on 16.2.2015 is Rs. 71,54,126/- and alongwith interest, it comes to Rs. 1,00,63,273/-. The learned counsel for the petitioner further urged that though the petitioner gave a compromise proposal to the opposite party on 23.2.2015 with regard to the loan incurred and payment thereof but without considering the same, the opposite party has issued the impugned letter dated 13.2.2015 which is not only harsh and illegal but it has rendered the petitioner in such a miserable condition that his small children and other family members are undergoing untold miseries and mental agony.

The petitioner while praying to quash the aforesaid letter dated 13.2.2015 also prayed not to take any coercive action pursuant to such letter and to allow him to reside in the house situated over Plot No. 309/3218, Area Ac.0.080 dec. of Khata No. 791/1436, Mouza- Apartibindha in the district of Bhadrak. It is further prayed to grant permission to the petitioner to dispose of the collateral securities mortgaged with the bank in order to repay the loan amount by installments.

The learned counsel for the opp. Party Mr. D.K. Mishra, while raising preliminary objection regarding maintainability of the writ petition submitted that right to appeal is provided under section 17 of the SARFAESI Act, 2002 against any measures taken by the secured creditor or his authorized officer under Sub-section (4) of section 13 of the said Act. The petitioner has not availed such right and therefore since alternative efficacious remedy is available to the petitioner, writ petition filed by the petitioner should not be entertained. He further submits that it is at the instance of the petitioner to pay a sum of Rs. 20 lakhs within two months, the order dated 24.3.2014 was passed in W.P.(C) No. 20364 of 2013 but the petitioner did not comply the order and he has only deposited a sum of Rs. 1 lakh. He further contended that since the petitioner has not complied the order dated 24.3.2014, the opposite party was constrained to take action by taking over the physical possession of the secured assets mortgaged with the bank in exercise of its power conferred under section 13 (4) SARFAESI Act, 2002 vide letter dated 13.2.2015.

Section 13 of SARFAESI Act, 2002 which comes in Chapter-III under the heading of Enforcement of Security Interest deals with in detail as to how any security interest created in favour of any secured creditor has to be enforced. Section 13(4) of SARFAESI Act, 2002 is quoted herein below:--

"13(4). In case the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:--

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset;

(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset:

Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:

Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt."

Section 17 of the SARFAESI Act, 2002 gives a right to any person (including borrower) who is aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorized officer to make an application to the Debts Recovery Tribunal having jurisdiction in the matter and the Debts Recovery Tribunal has been fully authorized to consider whether the measures taken by the secured creditor for enforcement of security are in accordance with the provisions of SARFAESI Act, 2002 and the rules made thereunder. A detailed procedure has been laid down under section 17 for adjudication of the appeal.

In the case of United Bank of India Vs. Satyawati Tondon and Others, AIR 2010 SC 3413 : (2010) 3 BC 495 : (2010) 3 CompLJ 585 : (2010) 7 SCALE 696 : (2010) 8 SCC 110 : (2010) 9 SCR 1 : (2010) 9 UJ 4395 : (2010) AIRSCW 7049 : (2010) AIRSCW 5267 , it is held as follows:--

"17. There is another reason why the impugned order should be set aside. If respondent No. 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 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. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

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. 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. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari Vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar, AIR 1969 SC 556 : (1971) 2 SCC 489(1) : (1969) 1 SCR 518 ; Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others, AIR 1999 SC 22 : (1998) 7 JT 243 : (1998) 5 SCALE 655 : (1998) 8 SCC 1 : (1998) 2 SCR 359 Supp : (1998) AIRSCW 3345 : (1998) 8 Supreme 176 and Harbanslal Sahnia and Another Vs. Indian Oil Corpn. Ltd. and Others, AIR 2003 SC 2120 : (2002) 10 JT 561 : (2003) 2 SCC 107 : (2003) AIRSCW 126 : (2003) 1 Supreme 446 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order."

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"27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act, 2002 and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection."

Let us see what are those exceptions carved out in the three decisions of the Hon''ble Supreme Court referred to above.

In the case of Baburam Prakash Chandra Maheshwari Vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar, AIR 1969 SC 556 : (1971) 2 SCC 489(1) : (1969) 1 SCR 518 it is held as follows:--

"4. .........In view of the allegations of the appellant that the taxing provisions are ultra vires and that there was violation of the principles of natural justice, we think that the High Court was in error in summarily dismissing writ petition on the ground that the appellant had an alternative remedy of statutory appeal."

In the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others, AIR 1999 SC 22 : (1998) 7 JT 243 : (1998) 5 SCALE 655 : (1998) 8 SCC 1 : (1998) 2 SCR 359 Supp : (1998) AIRSCW 3345 : (1998) 8 Supreme 176 , it is held as follows:--

"14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of Habeas Corpus, Mandamus, Prohibition, Quo Warranto and Certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose".

Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.

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Much water has since flown beneath the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation."

In the case of Harbanslal Sahnia and Another Vs. Indian Oil Corpn. Ltd. and Others, AIR 2003 SC 2120 : (2002) 10 JT 561 : (2003) 2 SCC 107 : (2003) AIRSCW 126 : (2003) 1 Supreme 446 , it is held as follows:--

"7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed, suffice it to observe that the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies: -

(i) where the writ petition seeks enforcement of any of the Fundamental Rights;

(ii) where there is failure of principles of natural justice; or

(iii) where the orders or proceedings are wholly without jurisdiction or the ultra vires of an Act and is challenged."

In the present case, it is clear that the petitioner had approached this Court previously in W.P.(C) No. 20364 of 2013 challenging the issuance of possession notice and letter of request for vacation/peaceful delivery of possession of secured assets dated 1.8.2013 and this Court vide order dated 24.3.2014 considering the willingness of the petitioner to pay a sum of Rs. 20 lakhs within two months, directed him to make such deposit and to file an application for proposal for repayment for consideration of the bank and it was clearly stipulated in the order that if the deposit of Rs. 20 lakhs is made and an application is filed then the bank has to take a decision on such application in accordance with law within two months and till taking of any decision, the bank might not take coercive measures. The petitioner has not complied with the order dated 24.3.2014 of this Court and therefore no fault can be found with the opposite party for not acting upon the compromise proposal stated to have been given by the petitioner on 23.2.2015. In this writ application there is no averment regarding infringement of any of the Fundamental Rights or there is any failure of principles of natural justice or that the letter dated 13.2.2015 was issued without jurisdiction.

In case of Thansingh Nathmal and Others Vs. A. Mazid, Superintendent of Taxes, AIR 1964 SC 1419 : (1964) 6 SCR 654 : (1964) 15 STC 468 , it is held as follows:--

"7.......The jurisdiction of the High Court under Art. 226 of the Constitution is couched in wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions which are expressly provided in the Articles. But the exercise of the jurisdiction is discretionary: it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain self-imposed limitations. Resort to that jurisdiction is not intended as an alternative remedy for relief which may be obtained in a suit or other mode prescribed by statute. Ordinarily the Court will not entertain a petition for a writ under Art. 226, where the petitioner has an alternative remedy, which without being unduly onerous, provides an equally efficacious remedy. Again the High Court does not generally enter upon a determination of questions which demand an elaborate examination of evidence to establish the right to enforce which the writ is claimed. The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Art. 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Art. 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up."

Considering the submissions made by the respective parties, we are of the view that when an alternative remedy under section 17 of the SARFAESI Act, 2002 is available to the petitioner to prefer an appeal before the Debts Recovery Tribunal against the impugned letter dated 13.2.2015, we are not inclined to entertain this writ application.

The petitioner is at liberty to take steps in consonance with section 17 of the SARFAESI Act, 2002 before the appropriate authority against impugned letter dated 13.2.2015 of the opposite party and if any such application is made, the same is to be adjudicated in accordance with law. We make it clear that we have not expressed any opinion on the merits of the claim of the petitioner.

Writ application is disposed of.

Vinod Prasad, J.

I agree.