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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF SEPTEMBER, 2020
BEFORE
THE HON'BLE MR.JUSTICE P. B. BAJANTHRI WRIT PETITION NO.760/2020 (GM - RES)
BETWEEN:
MR.VENU, S/O VENKATESH. M., AGED ABOUT 45 YEARS, NO.24, 2ND FLOOR, SNS CHAMBERS 239, SANKEY ROAD, SADASHIVANAGAR, BANGALORE – 560 080.
MR.VENKATESH.M., S/O LATE MUNIVENKATAPPA, AGED ABOUT 79 YEARS, NO.24, 2ND FLOOR, SNS CHAMBERS 239, SANKEY ROAD, SADASHIVANAGAR, BANGALORE – 560 080. Benefit of Senior Citizen not claim
MS.KALAVATHI, D/O VENKATESH. M., AGED ABOUT 54 YEARS, NO.410, 12TH CROSS, SADASHIVANAGAR, BANGALORE – 560 080. ... PETITIONERS
(BY SRI.D.R.RAVISHANKAR AND LEX NEXUS, ADVOCATES)
2 AND:
THE RESERVE BANK OF INDIA NRUPATHUNGA ROAD, BENGALURU – 560 001, REP BY ITS GENERAL MANAGER
THE REGISTRAR OF COOPERATIVE SOCIETY NO.1, ALI ASKAR ROAD, BANGALORE – 560 052. REPT. BY ITS REGISTRAR
KARNATAKA STATE SOUHARDA FEDERAL COOPERATIVE LTD. DR. RAJKUMAR ROAD, 1ST BLOCK, RAJAJINAGAR, BANGALORE – 560 010. REPT BY ITS CHAIRMAN.
THE COMMISSIONER OF POLICE, NO.1, INFANTRY ROAD, OPP: SPARSHA HOSPITAL, BANGALORE – 560 001.
CORPS OF DETECTIVES (ECONOMIC OFFENCE WING), REPT BY ITS DIRECTOR,GENERAL OF POLICE, KARNATAKA STATE POLICE DEPARTMENT, VIDHANA SOUDHA, DR. B.R.AMBEDKAR VEEDHI, BENGALURU – 560 001.
CENTRAL BUREAU OF INVESTIGATION, OFFICE OF SUPERINTENDENT OF POLICE, NO.36, BELLARY RD, KGH LAYOUT, GANGANAGAR, BENGALURU – 560 032.
SHUSHRUTI SOUHARDA SAHAKARA BANK NIYAMITA, H.O. AT NO.68,
3 SHUSHRUTI NAGAR, ANDRAHALLI MAIN ROAD, PEENYA 2ND STAGE,BANGALORE – 560 091. REPT BY ITS MANAGER. ... RESPONDENTS
(BY SRI. K.V. LOKESH, ADVOCATE FOR C/R7; (CP NO. 2641/19) SRI. JAI PRAKASH REDDY M., ADVOCATE FOR R3; SRI. P. PRASANNA KUMAR, ADVOCATE/SPP FOR R6; (MA FILED) SRI. KIRAN KUMAR, HCGP FOR R4)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE PROCEEDINGS IN C.MISC.NO.5080/2019 ON THE FILE OF THE 8TH ADDL. CHIEF METROPOLITAN MAGISTRATE BANGALORE, IS PRODUCED AS ANNEXURE-J, C.MISC.NO.5772/2019 ON THE FILE OF THE 8TH ADDL. CHIEF METROPOLITAN MAGISTRATE BANGALORE, IS PRODUCED AS ANNEXURE-H1 AND C.MISC.NO.3379/2018 ON THE FILE OF THE 7TH ADDL CHIEF METROPOLITAN MAGISTRATE BANGALORE PRODUCED AS ANNEXURE-K1.
THIS WRIT PETITION COMING ON FOR ORDERS THROUGH VIDEO CONFERENCE THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
In the instant petition, petitioners have sought for the following reliefs: “(i) Issue a writ in the nature of certiorari to quash the proceedings in C.Misc.No.5080/2019 on the file of the 8th Addl. Chief Metropolitan Magistrate Bangalore, is produced as Annexure-J, C.Misc.No.5772/2019 on
4 the file of the 8th Addl.Chief Metropolitan Magistrate Bangalore, is produced as Annexure-H1, and C.Misc.No.3379/2018 on the file of the 7th Additional Chief Metropolitan Magistrate Bangalore produced as Annexure-K1;
(ii) Issue a writ in the nature of mandamus directing the respondent No.1 to 3 to consider the representations given to them respectively as per Annexure-L to L3 and to pass such other orders as deemed appropriate in the ends of justice.
(iii) Issue a writ in the nature of mandamus directing the respondent No.4, 5 and 6 to investigate into the affairs of the respondent No.7-Bank.”
The learned counsel for the petitioners was asked to address the arguments relating to maintainability of the present petition in respect of initiation of proceedings in C.Misc.No.5080/2019 on the file of the VIII Additional Chief Metropolitan Magistrate, Bengaluru, C.Misc.No.5772/2019 on the file of the VIII Additional Chief Metropolitan
5 Magistrate, Bengaluru and C.Misc.No.3379/2018 on the file of the VII Additional Chief Metropolitan Magistrate, Bengaluru in terms of Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘SARFAESI Act’, 2002).
Petitioners had approached respondent No.7 – Co-operative bank for mortgage loan of Rs.70.00 lakhs in the year 2013 in respect of the property situated at Nagashettyhalli, whereas petitioner had obtained loan of Rs.30.00 lakhs by deposit of title deeds being a registered document was executed. Petitioners have availed two more loans relating to Malleshwaram property and Sadashivnagar Property to the tune of Rs.20.00 lakhs each. Thus, overall petitioner has borrowed Rs.70.00 lakhs while mortgaging 3 properties. Respondent/bank have classified non-performing asset. In respect of the
6 aforesaid properties, demand notice was issued by the respondents which were the subject matter of S.A.22/2019 disposed of on 14.11.2019, S.A.153/2017 of Malleshwaram property of which the litigation is still pending and S.A.317/2018 of Sadashivnagar Property and the matter is pending consideration before the Debt Recovery Tribunal, Bengaluru. Respondent/bank initiated criminal proceedings before the jurisdictional magistrate while invoking Section 14 of the SARFAESI Act, 2002. Thus, petitioners have questioned the validity of initiation of criminal proceedings before the jurisdictional Magistrate.
The learned counsel for the petitioners vehemently submitted that petitioners are already before the Debt Recovery Tribunal, Bengaluru in respect of possession of the schedule properties
7 pursuant to the newspaper notice published in the Indian Express dated 02.01.2019. Therefore, petitioners shall not be driven to the Debt Recovery Tribunal, Bengaluru once again in respect of challenge to the proceedings initiated in C.Misc.No.5080/2019 on the file of the VIII Additional Chief Metropolitan Magistrate, Bengaluru, C.Misc.No.5772/2019 on the file of the VIII Additional Chief Metropolitan Magistrate, Bengaluru and C.Misc.No.3379/2018 on the file of the VII Additional Chief Metropolitan Magistrate, Bengaluru. The Learned counsel for the petitioners vehemently contended that Apex Court in the case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited and others reported in (2014) 6 SCC 1 in paragraph 29 has held as under:- “29. Sub-Section (3) of Section 14 of the SARFAESI Act provides that no act of the Chief Metropolitan Magistrate or the District Magistrate or any officer authorized
8 by the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of Section 14 shall be called in question in any Court or before any authority. The SARFAESI Act, therefore, attaches finality to the decision of the Chief Metropolitan Magistrate or the District Magistrate and this decision cannot be challenged before any Court or any authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an authority excluding the power of any other authority or Court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution. To quote, the observations of this Court in Columbia Sportswear Co. V. Director of Income Tax12: (SCC p. 234, para 17)
“17. Considering the settled position of law that the powers of this Court under Article 136 of the Constitution and the powers of the High Court under Articles 226 and 227 of the Constitution could not be affected by the provisions made in a statute by the legislature making the decision of the tribunal final or conclusive, we hold that sub-section(1) of Section 245- S of the Act insofar as it makes the advance ruling of the authority binding on the applicant, in respect of the transaction and on the Commissioner and Income Tax Authorities subordinate to him, does not
9 bar the jurisdiction of this Court under Article 136 of the Constitution or the jurisdiction of the High Court under Articles 226 and 227 of the Constitution to entertain a challenge to the advance ruling of the authority.” In our view, therefore, the decision of the Chief Metropolitan Magistrate or the District Magistrate can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenged is made, the High Court can examine the decision of the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, in accordance with the settled principles of law.”
In view of the aforesaid Apex Court decision, writ is maintainable against impugned action. It was also contended that Section 14(3) read with Section 17 under the SARFAESI Act, 2002, petitioner has a remedy before this Court. He has also pointed out certain factual aspects of the matter relating to dates and events like non-performing assets on 27.11.2017, date of loan application dated 05.10.2018 and action of the respondent-Bank.
Per contra, learned counsel for respondent No.7-Bank submitted that the cited decision on behalf of the petitioners namely Harshad Govardhan Sondagar’s case supra has no assistance to the petitioners in view of paragraph Nos.23,26 and 27. Paragraph Nos.23, 26 and 27 reads as under:- “23. We may now look at the provisions of Section 14 of the SARFAESI Act to find out whether it confers any power on the Chief Metropolitan Magistrate or the District Magistrate to assist the secured creditor in taking possession of the secured asset which is in lawful possession of the lessee under a valid lease.
The opening words of sub- section (1) of Section 14 of the SARFAESI Act also provides that if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of the act, the secured creditor may take the assistance of the Chief Metropolitan Magistrate or the District Magistrate. Where, therefore, such a request is made by the secured creditor and the Chief Metropolitan Magistrate or the District Magistrate finds that the secured asset is in possession of a lessee but the lease under which the lessee claims
11 to be in possession of the secured asset stands determined in accordance with Section 111 of the Transfer of Property Act, the Chief Metropolitan Magistrate or the District Magistrate may pass an order for delivery of possession of secured asset in favour of the secured creditor to enable the secured creditor to sell and transfer the same under the provisions of SARFASI Act. Sub-section (6) of Section 13 of the SARFAESI Act provides that any transfer of secured asset after taking possession of secured asset by the secured creditor shall vest in the transferee all rights in, or in relation, the secured assets transferred as if the transfer had been made by the owner of such secured asset. In other words, the transferee of a secured asset will not acquire any right* in a secured asset under sub-section (6) of Section 13 of the SARFAESI Act, unless it has been effected after the secured creditor has taken over possession of the secured asset. Thus, for the purpose of transferring the secured asset and for realizing the secured debt, the secured creditor will require the assistance of the Chief Metropolitan Magistrate or the District Magistrate for taking possession of a secured asset from the lessee where the lease stands determined by any of the modes mentioned in Section 111 of the Transfer of property Act. 27. We may now deal with the remedies available to the lessee where he is threatened to be dispossessed by any
12 action taken by the secured creditor under Section 13 of the SARFAESI Act. Sub-rules (1) and (2) of the Rule 8 of the Security Interest (Enforcement) Rules, 2002 provide for a possession notice where the secured asset is an immovable property.”
It was further contended that Harshad Govardhan Sondagar’s case supra was examined by a co-ordinate bench of this Court in Vimala Bhushan vs. The Authorised Officer, Yes Bank Limited and others in W.P.No.6594/2018 referred and discussed the aforesaid decision in paragraphs 10. Relevant paragraphs 5, 10 and 11 reads as under:- 5. On the other hand, learned counsel for the petitioner has invited the attention of this Court to Section 14(3) of the Act and has submitted that the aforesaid provision attaches finality to the order passed by the Chief Metropolitan Magistrate under Section 14 of the Act and therefore, the petitioner does not have the remedy under Section 17 of the Act. It is submitted that the effect of Section 14(3) has not been considered by the Supreme Court in the decisions in ‘UNITED BANK OF INDIA VS. SATYAVATI TONDON AND ORS.’, (2010) 8 SSCC 110, ‘KANAIYALAL
13 LALCHAND SACHDEV AND OTHERS VS. STATE OF MAHARASHTRA AND OTHERS’, (2011) 2 SCC 782 and ‘AUTHORIZED OFFICER, STATE BANK OF TRAVANCORE AND ANOTHER VS. MATHEW K.C’, (2018) 3 SCC 85. It is pointed out that Supreme Court in ‘HARSHAD GOVARDHAN SONDAGAR VS. INTERNATIONAL ASSETS RECONSTRUCTION COMPANY LIMITED AND OTHERS’, (2014) 6 SCC 1 by taking note of Section 14(3) of the Act has held that decision of the Chief Metropolitan Magistrate/District magistrate can be challenged before high Court under Articles 226 & 227 of the Constitution of India. Therefore, the reliance placed on HARSHAD GOVARDHAN SONDAGAR supra is of no assistance to the petitioner. Apart from this, the law laid down by the Supreme Court is binding on this Court in view of Article 141 of the Constitution of India. It is further submitted that decisions in the cases of ‘UNITED BANK OF INDIA, KANAIYALAL LALCHAND SACHDEV AND OTHERS and AUTHORIZED OFFICER, STATE BANK OF TRAVANCORE AND ANOTHER supra are per incuriam has in the aforesaid decisions the Supreme Court has not taken into account the effect of Section 14(3) of the Act and in respect of decisions which are rendered per incuriam it cannot be said that the Supreme Court has declared the law on a given subject matter. In this connection reliance has been placed on ‘HYDER CONSULTING (UK) LTD., VS. STATE OF ORISSA, (2015) 2 SCC 189.
“10. The contention of the petitioner that the aforesaid decisions of the Supreme Court are per incuriam cannot be accepted. It is pertinent to note that in the aforesaid decision, the Supreme Court was dealing with the claim of the tenants against whom an order under Section 14 of the Act was passed and the provisions of Amendment Act of 2016 had not come into force. Now, Section 17(4)(A) of the Act specifically provides for a remedy to a tenant or a lessee. Therefore, the said decision has no application to the obtaining factual matrix of the case. The ratio of the aforesaid decisions is that an aggrieved party has the remedy against an order under Section 13(4) of the Act and an order under Section 14(1) of the Act, under Section 17 of the Act. The aforesaid ratio is binding on this Court in view of Article 141 of the Constitution of India and merely because Section 14(3) of the Act which has no bearing on the issue involved in this petition, it cannot be said that the aforesaid decisions of the Hon’ble Supreme Court are per incuriam. It is pertinent to mention here that reliance in this regard has been placed on a stray sentence mentioned in the minority view of the Supreme Court in HYDER CONSULTING (UK) LTD supra which is not the ratio of the case. Therefore, the aforesaid decision is of no assistance to the petitioner. So far as reliance placed in the case of HARSHAD GOVARDHAN SONDAGAR supra is
15 concerned suffice it to say that the said decision is an authority for the proposition that decision of Chief Metropolitan Magistrate or District Magistrate can be challenged before this Court under Articles 226 & 227 of the Constitution of India by any aggrieved party.”
In view of preceding analysis, it is held that against an order under Section 14 of the Act the aggrieved person has a remedy under Section 17 of the Act and in the fact situation of the case the petitioner has the remedy to challenge the impugned order dated 12.02.2018 under Section 18 of the Act. The petitioner is at liberty to avail off the aforesaid alternative remedy under Section 18 of the Act.
This Court in Vimala Bhushan’s case supra has held that in view of incorporation of Section 17(4)(A) of the SARFAESI Act, 2002, which was inserted subsequent to the Harshad Govardhan Sondagar’s case supra, writ is not maintainable. Accordingly, it has been distinguished while holding that petitioners therein challenged the proceedings of the Chief Metropolitan Magistrate, Bengaluru, thus, it
16 is concluded that petitioner has remedy before the Debt Recovery Tribunal, Bengaluru with reference to Section 17 read with Section 18 of the SARFAESI Act, 2002.
Heard the learned counsel for the parties.
Question for consideration in the present case is, “Whether present writ petition is maintainable against the initiation of proceedings by the respondent No.7-Bank before the Chief Metropolitan Magistrate, Bengaluru under Section 14 of the SARFAESI Act, 2002?” The factual aspects relating to filing of petition before Debt Recovery Tribunal, Bengaluru in respect of possession notice and other aspects have not been disputed by the parties. Respondent No.7-Bank has initiated proceedings under Section 14 of the SARFAESI Act, 2002 before the Chief Metropolitan
17 Magistrate, Bengaluru. In terms of the co-ordinate bench decision in Vimala Bhushan’s case supra in paragraph 10,it is crystal clear that on an order passed under Section 14 of the SARFAESI Act, 2002, the aggrieved person has a statutory remedy under Section 17 of SARFAESI Act, 2002.
Apex court consistently laid down the law in respect of proceedings which are initiated Under SARFAESI Act, 2002 holding that a writ petition under Article 226 of the Constitution of India ought not to be entertained if alternative statutory remedy is available. Apex court in the following cases has laid down the law about alternative remedy available to a person who is dissatisfied against the proceedings initiated under SARFAESI Act, 2002 a) Authorized officer, State Bank of Travancore & Another, vs- Mathew K.C. – (2018) 3 SCC 85
18 b) ICICI Bank Ltd. Etc. Etc. vs- Umakantha Mohapatra Etc. Etc. Special Leave to Appeal (c) No.(S). 9145-9152/2014
c) Hindon Forge Private Limited & Another vs- State of Uttar Pradesh. through District Magistrate Ghaziabad & Another (2019) 2 SCC 198.
Section 17(4A) was inserted in SARFAESI Act, 2002 by Act No.44 of 2016 with effect from 01.09.2016 which provides for an alternative remedy available against the enforcement of security interest by the bank or concerned financial institution by filing appropriate application under Section 17 of the SARFAESI Act, 2002 before the Debt Recovery Tribunal having jurisdiction over the said secured assets. The provisions of Section 17 with its changed heading from “Right to Appeal” to “Application against measures to recover secured debts” in particular Section 17(4-A) inserted with effect from 01/09/2016 reads as under:-
Section 17: Application against measures to recover secured debts (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
(1A)…………………….
(2)……………………...
(3)………………………..
(4)………………………..
(4-A) where-
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the
20 purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,- (a) has expired or stood determined; or (b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or (c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.
Petitioners have an effective alternative remedy under Section 17(4A) of the SARFAESI Act, 2002 where the Debt Recovery Tribunal can go into the question relating to initiation of proceedings against the petitioner under Section 14 of the SARFAESI Act, 2002
21 by the 7th respondent – bank with liberty and direction to the petitioners to file application before the concerned Debt Recovery Tribunal under Section 17(4A) of SARFAESI Act, 2002.
In view of these facts and circumstances and the fact that Section 17(4)(A) of the Act has been incorporated subsequent to the judgment of Harshad Govardhan Sondagar’s case supra, the aforesaid decision do not assist the petitioners so as to entertain the present petition. Accordingly, petitioners have not made out a case so as to entertain the present petition on the score that they have a statutory remedy under Sections 17 and 18 of the SARFAESI Act, 2002.
At this juncture, learned counsel for the petitioners submitted that in respect of relief Nos.2 and 3 are concerned, petitioners are to be given
22 liberty to approach appropriate forum in accordance with law. Liberty sought for is granted.
Further, learned counsel for the petitioners submitted that insofar as challenge to Annexure-H1 and Annexure-K1, the present petition do not survive for consideration in view of later development that respondent No.7- Bank is stated to have withdrawn.
The aforesaid statement of the petitioner is taken on record. Present petition do not survive in so far as challenge to Annexure – H1 and Annexure – K1. Accordingly, Writ Petition is dismissed.
Sd/- JUDGE
KPS/Brn