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TMI Blog2012 (9) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... the dues of the respondent-Bank, proceedings under under sections 13(2) and 13(4) of the the SARFAESI Act were initiated by the Bank proposing to sell mortgaged properties and hypothecated goods. The petitionercompany proposed to sell off the mortgaged properties in order to fetch the best price of the same and make payment to the Bank. For this purpose, the petitioner-company approached the Bank for settlement of loan facility under One Time Settlement scheme(OTS). Copy of the proposal dated 25.3.2010 submitted by the petitionercompany is at Annexure P.1 with the petition. The said proposal was finally approved by the bank vide letter dated 22.1.2011. The Bank granted permission to the petitioner-company for selling the alleged mortgaged properties for a total sale consideration of Rs. 250 lacs. The petitioner-company thereafter entered into an agreement for sale of the property. It deposited Rs. 50 lacs in terms of the settlement but was unable to pay the remaining amount of Rs. 200 lacs by 22.3.2011. The petitioner-company sought extension of time from the Bank. In the meantime, father of petitioner Nos. 2 and 3 expired and due to family circumstances, the balance amount could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt.Periyakkal and others v. Smt.Dakshyani, (1983) 2 SCC 127; iv)M/s Sardar Associates and others v. Punjab and Sind Bank and others, (2009) 8 SCC 257; v) United Bank of India v. Satyawati Tondon and others, (2010)8 SCC 110; vi)Federal Bank Limited v. Sagar Thomas and others, (2003) 10 SCC 733; vii)Punjab and Sind Bank v. Debts Recovery Appellate Tribunal and others, 2008(1) PLR 203 (P&H); viii)Mardia Chemicals Limited v. Union of India, (2004) 4 SCC 311; ix)ICICI Bank v. Shanti Devi Sharma and others, (2008) 7 SCC 532. 4. Learned counsel for the respondents raised a preliminary objection in view of the judgment in Federal Bank Limited's case (supra) to contend that the writ petition against private Bank was not maintainable. Another preliminary objection was raised with regard to delay and laches and prayer for dismissal of the writ petition was made on that ground. Refuting the contentions of the learned counsel for the petitioners, it was submitted by learned counsel for the respondents that the petitioners did not avail statutory remedy of filing objections under section 13(3A) of the Act against notice issued under Section 13(2) of the SARFAESI Act on 6.6.2009 and, thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheduled Banks. For the aforementioned purpose, the Reserve Bank is entitled to issue guidelines from time to time. 10. The Parliament enacted the Banking Regulation Act, 1949 (in short, 'the 1949 Act') to consolidate and amend the law relating to banking. Section 5(l) of the 1949 Act defines "Reserve Bank" to mean the Reserve Bank of India constituted under Section 3 of the 1934 Act. By reason of various provisions of the 1949 Act, the Reserve Bank is empowered to control and supervise the functioning of the Scheduled Banks. 11. Section 21 of the 1949 Act authorises the Reserve Bank to control advances by banking companies. Section 21 thereof reads as under: "21 - Power of Reserve Bank to control advances by banking companies -(1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the banking company; or require an officer of the banking company to discuss any such matter with an officer of the Reserve Bank; (ii) depute one or more of its officers to which the proceedings at any meeting of the Board of directors of the banking company or of any committee or of any other body constituted by it; require the banking company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Reserve Bank; (iii) require the Board of directors of the banking company or any committee or any other body constituted by it to give in writing to any officer specified by the Reserve Bank in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it; (iv) appoint one or more of its officers to observe the manner in which the affairs of the banking company or of its offices or branches are being conducted and make a report thereon; (v) require the banking company to make, within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured creditor for enforcement of security interest. This sub-section provides that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non-performing asset, then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice with an indication that if he fails to do so, the secured creditor shall be entitled to exercise all or any of its rights in terms of Section 13(4). Subsection (3) of Section 13 lays down that notice issued under Section 13(2) shall contain details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank or financial institution. Sub-section (3- A) of Section 13 lays down that the borrower may make a representation in response to the notice issued under Section 13(2) and challenge the classification of his account as non-performing asset as also the quantum of amount specified in the notice. If the bank or financial institution comes to the conclusion that the representation/objection of the borrower is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are five unnumbered provisos to Section 13(9) which deal with pari passu charge of the workers of a company in liquidation. The first of these provisos lays down that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529-A of the Companies Act, 1956. The second proviso deals with the case of a company being wound up on or after the commencement of this Act. If the secured creditor of such company opts to realise its security instead of relinquishing the same and proving its debt under Section 529(1) of the Companies Act, then it can retain sale proceeds after depositing the workmen's dues with the liquidator in accordance with Section 529-A. The third proviso requires the liquidator to inform the secured creditor about the dues payable to the workmen in terms of Section 529-A. If the amount payable to the workmen is not certain, then the liquidator has to intimate the estimated amount to the secured creditor. The fourth proviso lays down that in case the secured creditor deposits the estimated amount of the workmen's dues, then such creditor shall be liable to pay the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Sub-section (2) of Section 17 casts a duty on the Tribunal to consider whether the measures taken by the secured creditor for enforcement of security interest are in accordance with the provisions of the Act and the Rules made thereunder. If the Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that the measures taken by the secured creditor are not in consonance with subsection (4) of Section 13, then it can direct the secured creditor to restore management of the business or possession of the secured assets to the borrower. On the other hand, if the Tribunal finds that the recourse taken by the secured creditor under subsection (4) of Section 13 is in accordance with the provisions of the Act and the Rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor can take recourse to one or more of the measures specified in Section 13(4) for recovery of its secured debt. Sub-section (5) of Section 17 prescribes the time-limit of sixty days within which an application made under Section 17 is required to be disposed of. The proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or governed and also to companies or corporations to carry out duties placed on them by the statutes authorising their undertakings.........." 18. In Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Survarna Jayanti Mahotsav Smarak Trust and others v. V.R.Rudani and others, AIR 1989 Supreme Court 1607, the Supreme Court clearly laid down the principles in the following words:- "19. The term "authority" used in Article 226, in the context, must receive a liberal meaning unlike the term in Article 12. Article 12 is relevant only for the purpose of enforcement of fundamental rights under Art. 32. Article 226 confers power on the High Courts to issue writs for enforcement of the fundamental rights as well as nonfundamental rights. The words "Any person or authority" used in Article 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation .owed by the person or authority to the affected p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The jurisdiction conferred on the High Court under Article 226 is very wide. However, it is an accepted principle that this is a public law remedy and it is available against a body or person performing public law function. Before considering the scope and ambit of public law remedy in the light of certain English decisions, it is worthwhile to remember the words of Subha Rao J. expressed in relation to the powers conferred on the High Court under Article 226 of the Constitution in Dwarkanath Vs. Income Tax Officer 1965 (3) SCR 536 at pages 540-41: "This article is couched in comprehensive phraseology and it ex facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England; but the scope of those writs also is widened by the use of the expression "nature", for the said expression does not equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart, Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be any general definition of public authority or public action. The facts of each case decide the point." 21. A Full Bench of this Court in Miss Ravneet Kaur v. The Christian Medical College, Ludhiana, (1997) 2 PLR 320 delving into the scope of Article 226 of the Constitution of India and issuance of 'Prerogative writs' in para 59 thereof had summarized as under:- "59. In view of the above, we hold that :-- (i) Powers of the High Courts under Article 226 of the Constitution are wider than those of the Court of King's Bench in England. (ii) The power of the High Courts is not confined to the issue of prerogative writs as initially understood in England. The procedural restrictions which had been imposed on the Courts in England do not bind the High Courts in this country. The High Courts are empowered to issue not only writs in the nature of certiorari, mandamus etc. but also orders and directipns to enforce fundamental rights or for any other purpose. (iii) The power under Article 226 of the Constitution is not confined to the enforcement of fundamental rights like the power under Article 32. Still further, the High Courts can issue writs, orders or directions even to any per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respondent No. 6 Bank and its returning officer respondent No. 7 by virtue of the provisions of S. 37. It is true that the returning officer is also a private individual, because in the Rules Regarding Electing Members of the Board of Directors, framed by respondent No. 6, a returning officer is required to be appointed by the Board of Directors. Nevertheless, the Act casts certain statutory duties and obligations on a returning officer as well as on respondent No. 6. For the enforcement of these statutory duties and obligations, a writ would lie. As observed by the Supreme Court in the case of Praga Tools Corpn. v. C. V. Imanual, - ".....It is, however, not necessary that the person or the authority on whom the statutory duty is imposed need be a public official or an official body. A mandamus can be issued, for instance, to an official of a society to compel him to carry out the terms of the statute under or by which the society is constituted or governed and also to companies or corporations to carry out duties placed on them by the statutes authorising their undertakings....." (p. 1309). A writ is, therefore, maintainable." 23. A Division Bench of Delhi High Court in Rahul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinction between public law and private law based on the public or private character of the institution was no longer clear-cut. Therefore, it was no longer safe to rely solely upon the character of the institution to decide whether it was amenable to writ jurisdiction or not. For instance, where there is a dispute of a purely contractual nature (not being a statutory contract), it does not matter that one of the parties is the "State" or a "statutory body" or "instrumentality of the State", such a matter falls within the arena of private law and judicial review under article 226 would not lie. And, the converse would be equally true. In other words, a dispute in which the State is not directly involved may yet be a public law issue if a public duty or a public function is performed by a private body. 8. Governments have ventured into the private arena and private bodies, likewise, have undertaken public duties or public functions. There is a degree of overlap and the distinction is no longer clear-cut or watertight. The law must be alive to these dynamics. Accordingly, the question of maintainability of a writ petition must not be addressed from the standpoint of amenability. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily mean that the petitioners would be entitled to the orders, directions or writs that they seek. That will have to be examined on merits." 25. The learned counsel for the petitioners had relied upon the following observations in Federal Bank's case (supra) where the Hon'ble Apex Court had broadly laid down the following principles relating to maintainability of writ petition:- "A writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State Government; (ii) an 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 a public duty or positive obligation of a public nature; and (viii) a person or a body under a liability to discharge any function under any statute, to compel it to perform such statutory function. It is no doubt true that a mandamus can be issued to any person or authority performing public duty, owing positive obligation to the affected party." It was further noticed as under:- "27. Such private companies would normally not be amenable to the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the Scheduled Bank to which the provisions of SARFAESI Act are applicable and have been invoked by it, it shall be immune from the extraordinary writ jurisdiction of this Court. 27. Now adverting to the cases on which reliance had been placed by learned counsel for the respondent-Bank, the question in the Federal Bank's case (supra) was relating to employer-employee dispute for which the employee had sought to approach writ Court for exercise of extraordinary jurisdiction under Article 226/227 of the Constitution of India. It was in those circumstances, it was held that writ petition under Article 226 was not maintainable. However, Satyawati Tandon and Tamil Nadu Industrial Investment Corporation Limited's cases (supra) being different on facts do not advance the case of the respondents. 28. From the above, it is concluded that ordinarily no writ would lie against a private Bank. However, where the Bank is a Scheduled Bank under Reserve Bank of India Act, 1934 and is governed by the provisions of Banking Regulation Act, 1949, it shall be amenable to writ jurisdiction of this Court where the Scheduled Bank takes recourse to the provisions of SARFAESI Act. 29. Now taking up t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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