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TMI Blog2023 (7) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the Plaintiff is an MSME within the meaning of the MSMED Act of 2006 and the notification S.O. 1432(E) dated 29.5.2015 issued by the Central Government under Section 9 thereof, as also the circulars and guidelines issued by the Reserve Bank of India under Section 10 thereof, which provides for a mechanism of resolution of stress and that no proceedings for recovery under the SARFAESI Act, RDB Act or the IBC will lie, as much as the MSMED Act being a special law qua the aforesaid Acts, and a later law in relation to the RDB Act and the SARFAESI Act, its provisions will prevail over the aforesaid enactments; (b) declare that the respondent Bank is vested of no enforceable cause of action, right or remedies as against the Petitioner/Principal Borrower since the loss and injury caused to the Principal is far in excess of the claim of the Respondent Bank as against the Principal Borrower/ Petitioner Guarantor, in other words, the Petitioner/ Principal Borrower owe no amounts to the respondent Bank, the claim of the Bank being set-off/adjusted against the claim of the petitioner for damages and compensation; (c) To grant a writ in the nature of mandamus in favour of Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and footwear (for short "the said Company"). The Respondent No. 4 (Kiwi International) was a supplier of footwear to the said Borrower Company. As per Respondent No. 4, inspite of reminders, payments were not made, therefore on 25 September, 2018 they invoked proceedings under the Insolvency and Bankruptcy Code against the said Borrower Company, claiming an amount of Rs .97,10,749/- along with interest @ 18% p.a. as dues, claiming to be an Operational Creditor under Section 9 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP). 3.2 The National Company Law Tribunal (NCLT) by its order dated 11 September, 2019 admitted petition filed under section 9 by Respondent No. 4 and declared a moratorium in terms of Section 14 of the Code. The NCLT also appointed Respondent No. 9 as Interim Resolution Professional (IRP). 3.3. In the meanwhile, as the account of Borrower Company was declared as N.P.A., Respondent No. 3/ Bank filed a Securitisation Application No. 117/SA/2020 before the Chief Metropolitan Magistrate. The Respondent No. 5/Chief Metropolitan Magistrate passed an order on 19 April, 2022, in Securitisation Application No. 117/SA/2020, appointing Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the MSME Act will prevail over the SARFAESI Act and that the Principal Borrower being an MSME is not covered by the SARFAESI Act and is entitled to the protection of the MSME Act and in particular the Notification S.O.1432(E) dated 29.5.2015 which provides for a scheme of resolution of stress akin to IBC, nay, far more benevolent than IBC and therefore the action of the Respondent Bank under section 13(2), 13(4), and 14 of the SARFAESI Act, 2002 is null and void ab initio; (b) declare that the respondent Bank is vested of no enforceable cause of action, right or remedies as against the Petitioner/Principal Borrower since the loss and injury caused to the Principal is far in excess of the claim of the Respondent Bank as against the Principal Borrower/ Petitioner Guarantor, in other words, the Petitioner/ Principal Borrower owe no amounts to the respondent Bank, the claim of the Bank being set-off/adjusted against the claim of the petitioner for damages and compensation; (c) To grant a writ in the nature of mandamus in favour of Applicant restraining and preventing the Respondent Bank their agents, servants, officers, representatives and/or anyone else purportedly acting on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that after the introduction of GST and due to demonetization, the Borrower Company was severally hampered in its business. He further submitted that there was a gross breach of the contract, culpable negligence and malicious and tortious action the most important of which being the denial of the benefits which the Principal Borrower was entitled to in terms of the MSMED Act and the various notifications issued by the Government and by the Reserve Bank of India. He further submitted that due to pandemic, the Borrower and the Guarantor suffered a lot. He submitted that the Borrower had sought one time restructuring of the credit facilities from the respondent Bank. He further submitted that the financial difficulties faced were mainly due to micro economical factor which were beyond the control of Borrower and/or the Guarantor. He further submitted that even if the provisions of SARFAESI Act is to be applied with regard to the loan account of the Borrower, the relationship between the Borrower and the Bank would be governed by the provisions of MSMED Act being the later law and the last legislation, would override the earlier law in respect of adjudicating upon the relationship b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Borrower, pending in City Civil Court at Bombay for hearing. (ii) Writ Petition (L) No. 2001 of 2021 filed by Petitioner along with Borrower, pending in this Court for Admission. (iii) Securitisation Application No. 92 of 2022 filed by Petitioner along with Borrower, pending in D.R.T. at Bombay for Orders. (iv) Writ Petition No. 644 of 2023 filed by Petitioner, in this Court which was disposed of by Order dated 13 February 2023. (v) Present Writ Petition (L) No. 9116 of 2023 filed by Petitioner, in this Court. 8. The Borrower Company defaulted in repaying the Loan Amount due to Respondent No. 3 Bank, as such, the Respondent No. 3 declared the Loan Account of Borrower Company as Non-Performing Asset ("NPA") on 31 March 2019. The Respondent No. 3 Bank, recalled the entire Loan Amount vide a Demand Notice dated 25.04.2019 under S. 13(2) of the ("SARFAESI"). 9. Respondent No. 3 Bank, through Respondent No. 5, took symbolic possession of the Secured Asset, vide Possession Notice dated 23.09.2019 under S. 13(4) of the SARFAESI. As peaceful and vacant possession of the Secured Asset was not handed over, the Respondent No. 3 approached the Chief Metropolitan Magistrate, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 13(2) and 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as null and void, being in violation of the principles of natural justice, and further to restrain and prohibit the respondent Bank from taking physical possession of the property of the plaintiffs, under section 14 of the SARFAESI Act, 2002 vide the ex-part order to be issued by the Learned Chief Metropolitan Magistrate, Esplanade Court, Mumbai. (f) To grant an order of ad-interim mandatory and /or prohibitory injunction in favour of the Plaintiffs and against Respondent Nos. 5, 7 and 8, from proceeding in furtherance of the order dated 11th September, 2019 (Exhibit "A") passed by the Hon'ble NCLT. (g) Pass such further and other orders as the nature and circumstances of the case may require. 11. In the Suit, Petitioner also filed Notice of Motion for urgent reliefs. As per records, none of the reliefs sought were passed in the Notice of Motion and the suit. The Notice of Motion and Plaint are pending for hearing before the City Civil Court at Bombay. 12. Petitioner and Borrower also preferred Second Proceeding by filing in this Court Writ P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter for order on 09/06/2023. 4. The date of 07/06/2023 is hereby cancelled." 19. Petitioner himself has filed a Securitisation Application under S. 17 of the SARFAESI before the Debts Recovery Tribunal -1, Mumbai, being S.A./92/2022. On 08.05.2023 hearing was held before DRT and the matter is posted for orders on all I.As and the S.A. 92 of 2022. 20. The Petitioner has not disputed Borrower having availed the Loan Amount or charge being created over the Secured Assets, but the Petitioner has challenged the Legal Steps taken by the Respondent Bank under the provision of the SARFAESI. 21. Supreme Court in the matter of Authorized Officer, State Bank of Travancore and Ors. Vs. Matthew K.C. (30.01.2018): (2018) 3 SCC 85 held that if statutory remedies under the DRT Act and the SARFAESI Act is available, High Court should not exercise its jurisdiction under Article 226 for passing orders. Paragraph Nos. 4 and 55 of the judgment reads as under: "4. The SARFAESI Act is a complete code by itself, providing for expeditious recovery for dues arising out of loans granted by financial institutions, the remedy of appeal by the aggrieved under section 17 before the Debt Recovery Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that subsequently an application for vacating the ex-parte ad-interim order has been filed in the year 2016, the application for vacating the interim order has not been decided and disposed of. On the contrary, the High Court thereafter has further extended the ex-parte ad-interim order dated 26.08.2015 on condition that the borrowers should deposit a further sum of Rs. 1 crore. Thus, in all the borrowers are directed to deposit Rs. 3 crores only against the dues of approximately Rs.117 crores. ......................................................................... 13.2. Applying the law laid down by this Court in Mathew K.C. [State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85 : (2018) 2 SCC (Civ) 41] to the facts on hand, we are of the opinion that filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the court. The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13-8-2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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