TMI Blog2022 (1) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the year 2016, the application for vacating the interim order has not been decided and disposed of. It is required to be noted that it is the case on behalf of the appellant that as such the communication dated 13.08.2015 cannot be said to be a notice under Section 13(4) of the SARFAESI Act at all. According to the appellant, after the notice under Section 13(2) of the SARFAESI Act was issued in the year 2013 and thereafter despite the Letter of Acceptance dated 27.02.2015, no further amount was paid, the appellant called upon the borrowers to make the payment within two weeks failing which a further proceeding under Section 13(4) of the SARFAESI Act was proposed. Thus, according to the appellant, it was a proposed action. Therefore, the writ petitions filed against the proposed action under Section 13(4) of the SARFAESI Act was not maintainable and/or entertainable at all. It appears that the High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriousl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the borrowers / respondents in repayment of the outstanding dues, in the month of April, 2013, the account of the borrowers / respondents were classified as a Nonperforming Asset (NPA) by the Bank. As the borrowers / respondents failed and neglected to repay the outstanding dues of the Bank, the Bank issued a notice dated 01.06.2013 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as SARFAESI Act ). It appears that in the month of March, 2014, the NPA account of the borrowers / respondents with respect to the credit facilities availed by them was assigned by the Bank in favour of the appellant Phoenix ARC Private Limited vide registered Assignment Agreement dated 28.03.2014. 2.2 Pursuant to the assignment of the NPA account in favour of the appellant, the borrowers approached the appellant with a request for restructuring the repayment of outstanding dues. A Letter of Acceptance dated 27.02.2015 was executed between the parties, wherein the borrowers / respondents acknowledged and admitted the liability to repay the entire outstanding dues. However, the borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te original applications against the borrowers before the Debt Recovery Tribunal, Bangalore for recovery of the outstanding dues. Thereafter, the High Court again vide order dated 27.03.2018 extended the earlier ex-parte interim-order dated 26.08.2015 on condition that the borrowers deposit a further sum of ₹ 1 crore. 2.7 Feeling aggrieved and dissatisfied with the aforesaid interim orders / extension of the interim orders and entertaining the writ petitions, the appellant Phoenix ARC Private Limited, the original respondent has preferred the present appeals. 3. Shri V. Giri, learned Senior Advocate has appeared on behalf of the respective appellants and Shri Basavaprabhu S. Patil, learned Senior Advocate has appeared on behalf of the original writ petitioners borrowers. 4. Shri V. Giri, learned Senior Advocate appearing on behalf of the appellant(s) has vehemently submitted that in the present case the borrowers are liable to pay to the appellant ARC / secured creditor an amount of ₹ 117,31,68,487/-. It is submitted that for recovery of the amount due and payable, initially in the year 2003, notice under Section 13(2) of the SARFAESI Act was issued and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3 It is submitted that the High Court has not at all appreciated that as such there was no occasion to interfere in exercise of the powers under Article 226 of the Constitution of India against a private party and a non- State actor like the appellant Phoenix ARC. It is submitted that the writ petitions under Article 226 of the Constitution of India for the relief sought in the writ petitions shall not be maintainable and that too against a private party. It is submitted that, however, the Hon ble High Court has not only entertained the writ petitions but also passed an ex-parte adinterim order dated 26.08.2015, which has been continued from time to time directing to maintain the status quo with regard to the SARFAESI action (possession of the secured assets). It is submitted that this effectively resulted in staying of all further proceedings under the SARFAESI Act. It is submitted that despite the application(s) for vacating the ex-parte ad-interim relief, the High Court extended the exparte interim order dated 26.08.2015 on condition that the borrowers pay further sum of ₹ 1 crore only. 4.4 It is submitted that even in the subsequent order dated 27.03.2018, though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that despite the fact that there is a stay of operation of the impugned order passed by the High Court since 06.08.2018, thereafter no further steps have been taken by the appellant against the borrowers under the provisions of the SARFAESI Act. 5.1 Now, so far as the maintainability of the writ petition against the Assets Reconstruction Company (ARC) is concerned, it is submitted that the writ petition is filed against the ARC complaining of infraction of Rule 8. It is submitted that the said rule imposes a statutory duty on the secured creditor - the ARC to act fairly while dealing with the security so as to secure the interest of the borrower as well as public at large (depositors). In support of aforesaid submission, reliance is placed on the decision of this Court in the case of J. Rajiv Subramaniyan and Anr. Vs. Pandiyas and Ors., (2014) 5 SCC 651. It is therefore submitted that as in the present case as the ARC has not performed the statutory duty cast upon it and there is a contravention of the statutory duty imposed under the Security Interest (Enforcement) Rules, 2002, a writ would lie against ARC against such an illegal action. 5.2 Shri Patil, learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 13 of the SARFAESI Act to file an application to the Debts Recovery Tribunal is not available to the borrowers in the instant case. It is further submitted that there is no compliance with Rule 8(1) and 8(2) of the Rules, 2002. It is submitted that as held by this Court in the case of Mathew Varghese Vs. M. Amritha Kumar and Ors., (2014) 5 SCC 610 on a detailed analysis of Rules 8 and 9 that any sale effected without complying with the same would be unconstitutional and, therefore, null and void. It is submitted therefore that the High Court has rightly entertained the writ petitions. 5.6 Making the above submissions and relying upon the decision of this Court in the case of J. Rajiv Subramaniyan and Anr. (supra), it is urged that the High Court has not committed any error in entertaining the writ petitions. 5.7 It is further submitted by Shri Patil, learned Senior Advocate appearing on behalf of the respondents borrowers that even otherwise considering the fact that the present appeals are against the interim order granted by the High Court, the same may not be entertained. Reliance is also placed on the decision of this Court in the case of United Commercial Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the dues of approximately ₹ 117 crores. 7.1 It is the case on behalf of the appellant that the writ petitions against the communication dated 13.08.2015 proposing to take further action under Section 13(4) of the SARFAESI Act and that too against a private Assets Reconstructing Company (ARC) shall not be maintainable. It is also the case on behalf of the appellant that assuming that the communication dated 13.08.2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in view of the alternative statutory remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. 7.2 While considering the issue regarding the maintainability of and/or entertainability of the writ petitions by the High Court in the instant case, a few decisions of this Court relied upon by the learned Senior Advocate appearing on behalf of the appellant ARC are required to be referred to. 7.3 In the case of Satyawati Tondon Ors. (supra), it was observed and held by this Court that the remedies available to an aggrieved person against the action taken under section 13(4) or Section 14 of the SARFAESI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. 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 [AIR 1969 SC 556], Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] and Harba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failing which a further proceeding under Section 13(4) of the SARFAESI Act was proposed. Thus, according to the appellant, it was a proposed action. Therefore, the writ petitions filed against the proposed action under Section 13(4) of the SARFAESI Act was not maintainable and/or entertainable at all. 10. Assuming that the communication dated 13.08.2015 can be said to be a notice under Section 13(4) of the SARFAESI Act, in that case also, in view of the statutory remedy available under Section 17 of the SARFAESI Act and in view of the law laid down by this Court in the cases referred to hereinabove, the writ petitions against the notice under Section 13(4) of the SARFAESI Act was not required to be entertained by the High Court. Therefore, the High Court has erred in entertaining the writ petitions against the communication dated 13.08.2015 and also passing the ex-parte ad-interim orders directing to maintain the status quo with respect to possession of secured properties on the condition directing the borrowers to pay ₹ 1 crore only (in all ₹ 3 crores in view of the subsequent orders passed by the High Court extending the exparte ad-interim order dated 26.08.2015) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission on behalf of the borrowers that in exercise of the powers under Article 226 of the Constitution, this Court may not interfere with the interim / interlocutory orders is concerned, the decision of this Court in the case of Mathew K.C. (supra) is required to be referred to. 13.1 In the case of Mathew K.C. (supra) after referring to and/or considering the decision of this Court in the case of Chhabil Dass Agarwal (supra), it was observed and held in paragraph 5 as under:- 5. We have considered the submissions on behalf of the parties. Normally this Court in exercise of jurisdiction under Article 136 of the Constitution is loath 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 availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of Court. It appears that the High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed. 14. In view of the above and for the reasons stated above, present appeals succeed. The Writ Petition Nos. 35564 to 35566 of 2015 before the High Court are dismissed. Consequently, the ex-parte ad-interim order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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