Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 1281 OF 2018
(Arising out of SLP (C) No.24610 of 2015)
AUTHORIZED OFFICER, STATE BANK OF
TRAVANCORE AND ANOTHER ..........Appellant(s)
VERSUS
MATHEW K.C. ......Respondent(s)
JUDGMENT
NAVIN SINHA, J.
Leave granted.
2. The present appeal assails an interim order dated
24.04.2015 passed in a writ petition under Article 226 of the
Constitution, staying further proceedings at the stage of
Section 13(4) of the Securitisation and Reconstruction of
Signature Not Verified
Financial Assets and Enforcement of Security Interest Act,
Digitally signed by
VISHAL ANAND
Date: 2018.01.30
15:38:03 IST
Reason:
2002 (hereinafter referred as the ‘SARFAESI Act’), on deposit of
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Rs.3,50,000/-within two weeks. An appeal against the same
has also been dismissed by the Division Bench observing that
counter affidavit having been filed, it would be open for the
Appellant Bank to seek clarification/modification/variation of
the interim order.
3. Shri H.P. Raval, learned Senior Counsel appearing for the
Appellants, submits that the loan account of the Respondent
was declared a Non-Performing Asset (NPA) on 28.12.2014.
The outstanding dues of the Respondent on the date of the
institution of the writ petition was Rs.41,82,560/-. Despite
repeated notices, the Respondent failed and neglected to pay
the dues. Statutory notice under Section 13(2) of the
SARFAESI Act was issued to the Respondent on 21.01.2015.
The objections under Section 13(3A) were considered, and
rejection was communicated by the Appellant on 31.3.2015.
Possession notice was then issued under Section 13(4) of the
Act read with Rule 8 of The Security Interest (Enforcement)
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Rules, 2002 (hereinafter referred to as ‘the Rules’) on
21.04.2015.
4. The SARFAESI Act is a complete code by itself, providing
for expeditious recovery of dues arising out of loans granted by
financial institutions, the remedy of appeal by the aggrieved
under Section 17 before the Debt Recovery Tribunal, followed
by a right to appeal before the Appellate Tribunal under
Section 18. The High Court ought not to have entertained the
writ petition in view of the adequate alternate statutory
remedies available to the Respondent. The interim order was
passed on the very first date, without an opportunity to the
Appellant to file a reply. Reliance was placed on United Bank
of India vs. Satyawati Tandon and others , 2010 (8) SCC
110, and General Manager, Sri Siddeshwara Cooperative
Bank Limited and another vs. Ikbal and others , 2013 (10)
SCC 83. The writ petition ought to have been dismissed at the
threshold on the ground of maintainability. The Division
Bench erred in declining to interfere with the same.
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5. Shri Roy Abraham, learned Counsel for the Respondent,
submitted that it was desirous to repay the loan, and merely
sought regularisation of the loan account. The inability to
service the loan was genuine, occasioned due to market
fluctuations causing huge loss in business, beyond the control
of the Respondent. The failure of the Bank to consider the
request for regularisation of the loan account, the absence of a
right to appeal under Section 17 against the order passed
under Section 13(3A), the Respondent was left with no option
but to prefer the writ application as the Respondent genuinely
desired to discharge the loans. The collateral security offered
included agricultural lands also, which had to be excluded
under Section 31 of the SARFAESI Act. There had been
violation of the principles of natural justice. A large number of
similar writ applications are pending before the High Court
preferred by the concerned borrowers, but the Bank has
singled out the present Respondent alone for a challenge.
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6. We have considered the submissions on behalf of the
parties. Normally this Court in exercise of jurisdiction under
Article 136 of the Constitution is loathe to interfere with an
interim order passed in a pending proceeding before the High
Court, except in special circumstances, to prevent manifest
injustice or abuse of the process of the court. In the present
case, the facts are not in dispute. 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 Commissioner of Income Tax and Others vs.
Chhabil Dass Agarwal, 2014 (1) SCC 603, as follows:
“15. Thus, while it can be said that this Court
has recognised some exceptions to the rule of
alternative remedy i.e. where the statutory
authority has not acted in accordance with the
provisions of the enactment in question, or in
defiance of the fundamental principles of
judicial procedure, or has resorted to invoke
the provisions which are repealed, or when an
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order has been passed in total violation of the
principles of natural justice, the proposition
laid down in Thansingh Nathmal case,
Titaghur Paper Mills case and other similar
judgments that the High Court will not
entertain a petition under Article 226 of the
Constitution if an effective alternative remedy
is available to the aggrieved person or the
statute under which the action complained of
has been taken itself contains a mechanism for
redressal of grievance still holds the field.
Therefore, when a statutory forum is created
by law for redressal of grievances, a writ
petition should not be entertained ignoring the
statutory dispensation.”
7. The pleadings in the writ petition are very bald and
contain no statement that the grievances fell within any of the
well defined exceptions. The allegation for violation of
principles of natural justice is rhetorical, without any details
and the prejudice caused thereby. It harps only on a desire
for regularisation of the loan account, even while the
Respondent acknowledges its own inability to service the loan
account for reasons attributable to it alone. The writ petition
was filed in undue haste in March 2015 immediately after
disposal of objections under Section 13(3A). The legislative
scheme, in order to expedite the recovery proceedings, does
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not envisage grievance redressal procedure at this stage, by
virtue of the explanation added to Section 17 of the Act, by
Amendment Act 30 of 2004, as follows :-
“ Explanation .—For the removal of doubts, it
is hereby declared that the communication of
the reasons to the borrower by the secured
creditor for not having accepted his
representation or objection or the likely action
of the secured creditor at the stage of
communication of reasons to the borrower
shall not entitle the person (including the
borrower) to make an application to the Debts
Recovery Tribunal under this sub-section.”
8. The Section 13(4) notice along with possession notice
under Rule 8 was issued on 21.04.2015. The remedy under
Section 17 of the SARFAESI Act was now available to the
Respondent if aggrieved. These developments were not
brought on record or placed before the Court when the
impugned interim order came to be passed on 24.04.2015.
The writ petition was clearly not instituted bonafide, but
patently to stall further action for recovery. There is no
pleading why the remedy available under Section 17 of the Act
before the Debt Recovery Tribunal was not efficacious and the
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compelling reasons for by-passing the same. Unfortunately,
the High Court also did not dwell upon the same or record any
special reasons for grant of interim relief by direction to
deposit.
9. The statement of objects and reasons of the SARFAESI
Act states that the banking and financial sector in the country
was felt not to have a level playing field in comparison to other
participants in the financial markets in the world. The
financial institutions in India did not have the power to take
possession of securities and sell them. The existing legal
framework relating to commercial transactions had not kept
pace with changing commercial practices and financial sector
reforms resulting in tardy recovery of defaulting loans and
mounting non-performing assets of banks and financial
institutions. The Narasimhan Committee I and II as also the
Andhyarujina Committee constituted by the Central
Government Act had suggested enactment of new legislation
for securitisation and empowering banks and financial
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institutions to take possession of securities and sell them
without court intervention which would enable them to realise
long term assets, manage problems of liquidity, asset liability
mismatches and improve recovery. The proceedings under the
Recovery of Debts due to Banks and Financial Institutions Act,
1993, (hereinafter referred to as ‘the DRT Act’) with passage of
time, had become synonymous with those before regular
courts affecting expeditious adjudication. All these aspects
have not been kept in mind and considered before passing the
impugned order.
10. Even prior to the SARFAESI Act, considering the
alternate remedy available under the DRT Act it was held in
Punjab National Bank vs. O.C. Krishnan and others ,
(2001) 6 SCC 569, that :-
“6. The Act has been enacted with a view to
provide a special procedure for recovery of
debts due to the banks and the financial
institutions. There is a hierarchy of appeal
provided in the Act, namely, filing of an appeal
under Section 20 and this fast-track procedure
cannot be allowed to be derailed either by
taking recourse to proceedings under Articles
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226 and 227 of the Constitution or by filing a
civil suit, which is expressly barred. Even
though a provision under an Act cannot
expressly oust the jurisdiction of the court
under Articles 226 and 227 of the Constitution,
nevertheless, when there is an alternative
remedy available, judicial prudence demands
that the Court refrains from exercising its
jurisdiction under the said constitutional
provisions. This was a case where the High
Court should not have entertained the petition
under Article 227 of the Constitution and
should have directed the respondent to take
recourse to the appeal mechanism provided by
the Act.”
11. In Satyawati Tandon (supra), the High Court had
restrained further proceedings under Section 13(4) of the Act.
Upon a detailed consideration of the statutory scheme under
the SARFAESI Act, the availability of remedy to the aggrieved
under Section 17 before the Tribunal and the appellate remedy
under Section 18 before the Appellate Tribunal, the object and
purpose of the legislation, it was observed that a writ petition
ought not to be entertained in view of the alternate statutory
remedy available holding :-
“43. Unfortunately, the High Court overlooked
the settled law that the High Court will
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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 a code unto themselves
inasmuch as they not only contain
comprehensive procedure for recovery of the
dues but also envisage constitution of
quasi-judicial bodies for redressal of the
grievance of any aggrieved person. Therefore,
in all such cases, the High Court must insist
that before availing remedy under Article 226
of the Constitution, a person must exhaust the
remedies available under the relevant statute.
*
55. 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 the SARFAESI Act 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.”
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12. In Union Bank of India and another vs. 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.”
13. The same view was reiterated in Kanaiyalal Lalchand
Sachdev and others vs. State of Maharashtra and others ,
2011 (2) SCC 782 observing:
“23. In our opinion, therefore, the High Court
rightly dismissed the petition on the ground
that an efficacious remedy was available to the
appellants under Section 17 of the Act. It is
well settled that ordinarily relief under Articles
226/227 of the Constitution of India is not
available if an efficacious alternative remedy is
available to any aggrieved person. (See
Sadhana Lodh v. National Insurance Co. Ltd.;
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Surya Dev Rai v. Ram Chander Rai and SBI v.
Allied Chemical Laboratories.)”
14. In Ikbal (supra), it was observed that the action of the
Bank under Section 13(4) of the ‘SARFAESI Act’ available to
challenge by the aggrieved under Section 17 was an efficacious
remedy and the institution directly under Article 226 was not
sustainable, relying upon Satyawati Tandon (Supra),
observing :
“27. No doubt an alternative remedy is not an
absolute bar to the exercise of extraordinary
jurisdiction under Article 226 but by now it is
well settled that where a statute provides
efficacious and adequate remedy, the High
Court will do well in not entertaining a petition
under Article 226. On misplaced
considerations, statutory procedures cannot be
allowed to be circumvented.
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28…….In our view, there was no justification
whatsoever for the learned Single Judge to
allow the borrower to bypass the efficacious
remedy provided to him under Section 17 and
invoke the extraordinary jurisdiction in his
favour when he had disentitled himself for
such relief by his conduct. The Single Judge
was clearly in error in invoking his
extraordinary jurisdiction under Article 226 in
light of the peculiar facts indicated above. The
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Division Bench also erred in affirming the
erroneous order of the Single Judge.”
15. A similar view was taken in Punjab National Bank and
another vs. Imperial Gift House and others, (2013) 14 SCC
622, observing:-
“3. Upon receipt of notice, the respondents filed
representation under Section 13(3-A) of the
Act, which was rejected. Thereafter, before any
further action could be taken under Section
13(4) of the Act by the Bank, the writ petition
was filed before the High Court.
4. In our view, the High Court was not justified
in entertaining the writ petition against the
notice issued under Section 13(2) of the Act
and quashing the proceedings initiated by the
Bank.”
16. It is the solemn duty of the Court to apply the correct law
without waiting for an objection to be raised by a party,
especially when the law stands well settled. Any departure, if
permissible, has to be for reasons discussed, of the case falling
under a defined exception, duly discussed after noticing the
relevant law. In financial matters grant of ex-parte interim
orders can have a deleterious effect and it is not sufficient to
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say that the aggrieved has the remedy to move for vacating the
interim order. 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. The caution required, as expressed in
Satyawati Tandon (supra), has also not been kept in mind
before passing the impugned interim order:-
“46. 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 ( sic will) ultimately
prove detrimental to the economy of the nation.
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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
v. Antarim Zila Parishad , Whirlpool Corpn. v.
Registrar of Trade Marks and Harbanslal
Sahnia v. Indian Oil Corpn. Ltd. and some other
judgments, then the High Court may, after
considering all the relevant parameters and
public interest, pass an appropriate interim
order.”
17. The writ petition ought not to have been entertained and
the interim order granted for the mere asking without
assigning special reasons, and that too without even granting
opportunity to the Appellant to contest the maintainability of
the writ petition and failure to notice the subsequent
developments in the interregnum. The opinion of the Division
Bench that the counter affidavit having subsequently been
filed, stay/modification could be sought of the interim order
cannot be considered sufficient justification to have declined
interference.
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18. We cannot help but disapprove the approach of the High
Court for reasons already noticed in Dwarikesh Sugar
Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd.
and Another , 1997 (6) SCC 450, observing :-
“32. When a position, in law, is well settled as
a result of judicial pronouncement of this
Court, it would amount to judicial impropriety
to say the least, for the subordinate courts
including the High Courts to ignore the settled
decisions and then to pass a judicial order
which is clearly contrary to the settled legal
position. Such judicial adventurism cannot be
permitted and we strongly deprecate the
tendency of the subordinate courts in not
applying the settled principles and in passing
whimsical orders which necessarily has the
effect of granting wrongful and unwarranted
relief to one of the parties. It is time that this
tendency stops.”
19. The impugned orders are therefore contrary to the law
laid down by this Court under Article 141 of the Constitution
and unsustainable. They are therefore set aside and the
appeal is allowed.
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20. All questions of law and fact remain open for
consideration in any application by the aggrieved before the
statutory forum under the SARFAESI Act.
……………………………….J.
(Rohinton Fali Nariman )
…….………………………..J.
(Navin Sinha)
New Delhi,
January 30, 2018
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