Dynamic Sales Vs District Magistrate Solan & Ors (Himachal Pradesh High Court)
Himachal Pradesh High Court dismissed the petition stating that writ petition assailing initiation of proceedings under section 13(4) of SARFAESI Act is not maintainable as aggrieved party has a remedy of an appeal under Section 17 of SARFAESI Act to approach the Debt Recovery Tribunal.
Facts- The petitioner has preferred the present petitioner for grant of the relief with an appropriate writ or direction or order in the nature of certiorari to quash/set aside all the actions undertaken under provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act, 2002”), against the petitioner purportedly issued by respondent No. 2 u/s. 13(2), SARFAESI Act, 2002 and notices purportedly issued by respondent No. 2 u/s. 13(4) SARFAESI Act, 2002.
Notably, the moot question, involved here is whether the writ petition filed by the petitioner assailing the action of the Bank in issuing notice u/s. 13(2) and thereafter u/s. 13(4) of the SARFAESI Act is maintainable or not.
Conclusion- Hon’ble Supreme Court, in G. Vikram Kumar vs. State Bank of Hyderabad, has held that the writ petition assailing the action of the Bank under Section 13(4) of the Act is not maintainable and the aggrieved party has a remedy of an appeal under Section 17 to approach the Debt Recovery Tribunal. It was further held that the High Court erred in entertaining writ petition since statutory alternative remedy was available.
Held that the instant petition is not maintainable and is accordingly dismissed leaving open to the petitioner-firm to avail remedy under Section 17 of the SARFAESI Act as and when Section 13(4) thereof is invoked by the respondent-Bank.
FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT
The instant petition has been filed for grant of the following substantive reliefs:-
a) That the Hon’ble Court may kindly be pleased to issue writ in the nature of mandamus directing respondent No. 2 to place the Loan Account of the petitioner to respondent No. 3-Designated Committee constituted under Framework for Revival and Rehabilitation of Micro Small and Medium Enterprises MSMEs, seeking restructuring of the said Loan Account, in accordance with the RBI Circular dated 17.03.2016 (Annexure P/2).
b) Issue an appropriate writ/order/direction especially in nature of mandamus for directing respondents No. 2 & 3 for implementing the Framework for Revival and Rehabilitation (MSMEs) issued by the RBI (Annexure P-2) in true letter and spirit.
c) Issue an appropriate writ or direction or oder to respondent No. 2 for setting aside the order or direction declaring the Loan Account of the petitioner as NPA, since the same is contrary to settled principles of law and with the further prayer to treat the said Loan Account as standard as on date.
d) Issue an appropriate writ or direction or order in the nature of certiorari to quash/set aside all the actions undertaken under provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act, 2002”), against the petitioner including but not limited to: Notices dated 04.03.2023 purportedly issued by respondent No. 2 under Section 13(2), SARFAESI Act, 2002 (Ann. P/3), notices dated 25.04.2023 (Ann. P/4) and 18.05.2023 (Ann.P/7) purportedly issued by respondent No. 2 under Section 13(4) SARFAESI Act, 2002.
e) Set aside all measures initiated/undertaken by respondent No. 3 Bank under Sections 13 & 14 of SARFAESI Act, 2002 read with the Security Enforcement Rules, 2002, pursuant and subsequent to which the impugned notices were issued.
f) Grant stay on the operation of all coercive action(s) against the petitioner undertaken by respondent No. 3 in relation to the Loan Account o the petitioners, including the proposed sale, during the pendency of the present writ petition.
g) That the present civil writ petition may be allowed with cost to the tune of Rs. 50 lakh in favour of the petitioner.
1(a). Learned counsel for respondent No. 2 Shri Arvind Sharma, Advocate, has raised preliminary objection regarding maintainability of the instant petition. He would argue that once proceedings under the SARFAESI Act have been initiated, then the party aggrieved has to avail of the remedy under SARFAESI Act itself and no writ petition would lie or be maintainable much less entertainable. He would further contend that the instant case not only the proceedings under Section 13(2) but proceedings under Section 13(4) of the SARFAESI Act stand initiated and if at all the petitioner has any grievance then it is required to approach the concerned Debt Recovery Tribunal under Section 17 of the SARFAESI Act in terms of the settled Law.
1(b). In substance, the moot question, at this stage, is whether the writ petition filed by the petitioner assailing the action of the Bank in issuing notice under Section 13(2) and thereafter under Section 13(4) of the SARFAESI Act is maintainable or not.
2. Identical issue came up before this Court for consideration in CWP No. 4831 of 2023, titled as M/s Kartik Food vs. State of H.P. & Anr., wherein it was held that if the proceedings have been initiated under Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short ‘SARFAESI Act’) and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable, save and except, to limited extent as indicated in para 18 of the Judgment rendered by the Hon’ble Supreme Court in M/s South Indian Bank Ltd. & ors. vs. Naveen Mathew Philip & anr. 2023 6 SCALE 224.
3. It shall be apt to reproduce paras 13 to 17 of the Judgment rendered by this Court in M/s Kartik Food case (supra), which read as under:-
13. The Hon’ble Supreme Court has repeatedly held that the writ petition involving private individuals over a financial transaction is not maintainable and such parties cannot defeat the objectives of the Act by approaching the High Court and seeking its interference. The alternative remedy being effective and efficacious, the extraordinary jurisdiction under Article 226 of the Constitution of India, either be a writ of certiorari or mandamus, ought not to have been invoked.
14. Equally settled is the position of law that where an effective and efficacious Forum in commercial matter has been constituted through a statute, then the interference by the High Court under Article 226 of the Constitution is not permissible.
15. The objects and reasons behind the Act are very clear and were considered in Chemicals Ltd.’s case (supra) and all these aspects have been duly taken note by the Hon’ble Supreme Court in its very recent judgment in M/s South Indian Bank Ltd. & ors. vs. Naveen Mathew Philip & anr. 2023 6 SCALE 224. It shall be apt to reproduce paras 15 to 18 thereof, which read as under:-
“15. The object and reasons behind the Act 54 of 2002 are very clear as observed by this Court in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311. While it facilitates a faster and smoother mode of recovery sans any interference from the Court, it does provide a fair mechanism in the form of the Tribunal being manned by a legally trained mind. The Tribunal is clothed with a wide range of powers to set aside an illegal order, and thereafter, grant consequential reliefs, including re-possession and payment of compensation and costs. Section 17(1) of the SARFAESI Act gives an expansive meaning to the expression “any person”, who could approach the Tribunal.
16. Approaching the High Court for the consideration of an offer by the borrower is also frowned upon by this Court. A writ of mandamus is a prerogative writ. In the absence of any legal right, the Court cannot exercise the said power. More circumspection is required in a financial transaction, particularly when one of the parties would not come within the purview of Article 12 of the Constitution of India.When a statute prescribes a particular mode, an attempt to circumvent shall not be encouraged by a writ court. A litigant cannot avoid the noncompliance of approaching the Tribunal which requires the prescription of fees and use the constitutional remedy as an alternative. We wish to quote with profit a recent decision of this Court in Radha Krishan Industries v. State of H.P., (2021) 6 SCC 771,
“25. In this background, it becomes necessary for this Court, to dwell on the “rule of alternate remedy” and its judicial exposition. In Whirlpool Corpn. v. Registrar of Trade Marks (1998) 8 SCC 1, a two-Judge Bench of this Court after reviewing the case law on this point, noted: (SCC pp. 9-10, paras 14-15)
“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”. 15. 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. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field”.
(emphasis supplied)
26. Following the dictum of this Court in Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1], in Harbanslal Sahnia v. Indian Oil Corpn. Ltd. [(2003) 2 SCC 107], this Court noted that: (Harbanslal Sahnia case, SCC p. 110, para 7)
“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 is concerned, 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 vires of an Act is challenged. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1].)
The present case attracts applicability of the first two contingencies. Moreover, as noted, the appellants’ dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.”
(emphasis supplied)
27. The principles of law which emerge are that: 27.1. The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well.
27.2. The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where:
(a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution;
(b) there has been a violation of the principles of natural justice;
(c) the order or proceedings are wholly without jurisdiction; or
(d) the vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion.
27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with.”
17. We shall reiterate the position of law regarding the interference of the High Courts in matters pertaining to the SARFAESI Act by quoting a few of the earlier decisions of this Court wherein the said practice has been deprecated while requesting the High Courts not to entertain such cases.
