KAIZEN REFINERS vs. CANARA BANK

1 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 14TH DAY OF NOVEMBER, 2018 BEFORE THE HON’BLE MR. JUSTICE R DEVDAS W.P. NO.106578/2018 & W.P. NOS.106758/2018 & 106759/2018 (GM-RES)

BETWEEN:

AND:

2 2. THE AUTHORIZED OFFICER/ CHIEF MANAGER, CANARA BANK, ASSET RECOVERY MANAGEMENT BRANCH, CIRCLE OFFICE BUILDING, FIRST FLOOR, BALMATTA ROAD, MANGALURU-575 001. ... RESPONDENTS (BY SRI.A.P.KAMOJI, ADVOCATE FOR R1 & R2)

THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE DATED:13.08.2018, BEARING NO.REF:CB; ARM:FILE NO.172:SARFAESI:2018:VBP, ISSUED BY THE RESPONDENT NO.2, UNDER SECTION 13(2) OF SARFAESI ACT, 2002, VIDE ANNEXURE-C.

THESE WRIT PETITIONS COMING ON FOR FURTHER CONSIDERATION THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER R.DEVDAS J., (ORAL):

By order dated 12.10.2018, this Court, while directing issuance of notice to the respondent-Bank, directed the respondent-Bank not to precipitate the matter till the next date of hearing. On the next date of hearing i.e. on 25.10.2018, the respondent-Bank entered appearance through its counsel and submitted that the Hon’ble Apex Court in Civil Appeal Nos.10243-

3 10250/2018 in the case of ICICI Bank Limited Etc. Vs. Umakanta Mohapatra Etc., passed an order as follows: “Delay condoned. Leave granted. Despite several judgments of this Court, including a judgment by Hon’ble Mr. Justice Navin Sinha, as recently as on 30.01.2018, in authorized Officer, State Bank of Travancore and Anr. Vs. Mathew K.C., (2018) 3 SCC 85, the High Courts continue to entertain matters which arise under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), and keep granting interim orders in favour of persons who are Non- Performing Assets (NPAs). The writ petition itself was not maintainable, as a result of which, in view of our recent judgment, which has followed earlier judgments of this Court, held as follows:- “18. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. Vs. Prem Heavy Engineering Works (P) Ltd. And Another, (1997) 6 SCC 450, observing:- “32. When a position, in law, is well settled as a result of judicial

4 pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops.” ” The writ petition, in this case, being not maintainable, obviously, all orders passed must perish, including the impugned order, which is set aside. The appeals are allowed in the aforesaid terms.” 2. In the light of the directions issued by the Hon’ble Apex Court, this Court vacated the interim order that was granted earlier. However, liberty was

5 reserved to the petitioners to make submissions regarding interim relief at the time of hearing the petitioners on the maintainability of the writ petitions. 3. In the light of the above, the learned counsels were called upon to make their submissions on the maintainability of the writ petitions. 4. Sri.Santhosh Pujari, learned counsel appearing for the petitioners submits that subsequent to the order dated 05.10.2018 in the case of ICICI Bank Limited Etc. Vs. Umakanta Mohapatra Etc., the Hon’ble Supreme Court has passed a judgment in the case of M/s Hindon Forge Private Limited and Another Vs. The State of Uttar Pradesh Through District Magistrate Ghaziabad and Another in Civil Appeal No.10873/2018 which was decided on 01.11.2018, whereby it is declared that the borrower/debtor can approach the Debts Recovery Tribunal under Section 17 of the Act at the stage of the possession notice referred to in Rule

6 8(1) and 8(2) of the Security Interest (Enforcement) Rules, 2002 (for short, ‘2002 Rules’). In the light of this judgment, the learned counsel for the petitioners submits that it is still open for this Court to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India since this is a case where the respondent-Bank has issued notice under Section 13(2) for the second time, which is impermissible under law. 5. The learned counsel also places reliance on the judgments of the Hon’ble Supreme Court which are as follows: i) Noor Mohammed Vs. Jethanand and Another reported in (2013) 5 SCC 202. ii) Commissioner of Income Tax and Others Vs. Chhabil Dass Agarwal reported in (2014) 1 SCC 603. iii) Authorized Officer, State Bank of Travancore and Another Vs. Mathew K.C. reported in (2018) 3 SCC 85.

7 The learned counsel would also place reliance on the decision of the Jharkhand High Court in the case of Amit Raj Enterprises and Others Vs. UCO Bank and Others reported in (2008) 1 AIR Jhar R 5 and in the case of Midex Global Private Limited Vs. Managing Director, State Bank of India and Others reported in AIR 2014 MP 123, a judgment of Madhya Pradesh High Court. 6. While referring to all these judgments the learned counsel for the petitioners would submit that the power of the High Court under Article 226 of the Constitution of India cannot be curtailed and this Court can always exercise its extraordinary jurisdiction in matters where there is arbitrariness and the action of the respondent is clearly opposed to the provisions of law. It is the submission of the learned counsel that it is manifestly clear that the respondent-Bank, has approached the Debts Recovery Tribunal and the petitioners herein have filed an application under

8 Sections 340 and 195(1)(b)(i) of the Code of Criminal Procedure read with Section 193 of the Indian Penal Code in O.A.No.975/2017 praying for initiation of action against the officials of the respondent-Bank on the premise that they have submitted false documents before the Tribunal. The learned counsel would further submit that in spite of the application being made by the petitioners before the Debts Recovery Tribunal, the respondent-Bank has not filed its objections to the application and the Debts Recovery Tribunal is constrained not to pass orders since the respondent- Bank has not filed its objections. The learned counsel would further reiterate that the action of the respondent-Bank in issuing a second notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short, ‘SARFAESI’ Act) is clearly without jurisdiction and therefore, this Court can exercise its extraordinary jurisdiction.

9 7. Per contra, the learned counsel for the respondent-Bank submits that in the light of the clear direction being issued by the Hon’ble Supreme Court by order dated 05.10.2018 in the case of ICICI Bank Limited Etc. Vs. Umakanta Mahopatra Etc., these writ petitions are not maintainable. 8. Having given anxious consideration to the submissions at the bar, this Court is of the opinion that in the light of the authoritative direction issued by the Hon’ble Supreme Court in the case of ICICI Bank Limited Etc. Vs. Umakanta Mohapatra Etc., this Court cannot entertain matters which arise under the SARFAESI Act nor can interim orders be granted in favour of persons who are Non-Performing Assets. The judgments cited by the learned counsel for the petitioners have either been considered by the Hon’ble Supreme Court while issuing the directions on 05.10.2018 or if not considered, by implication all the

10 earlier judgments or directions issued by the Hon’ble Supreme Court stand considered impliedly and by virtue of Article 141 of the Constitution of India this Court is bound by the directions issued by the Hon’ble Supreme Court. The decision in ICICI Bank Limited Etc. Vs. Umakanta Mohapatra Etc. (Supra) is the latest decision and direction issued to the High Courts cannot be ignored. 9. In the latest decision of the Hon’ble Supreme Court in the case of M/s Hindon Forge Private Limited and Another which was cited by the learned counsel for the petitioners, the Hon’ble Supreme Court has declared that the borrower/debtor can approach the Debts Recovery Tribunal under Section 17 of the Act at the stage of the possession notice referred to in Rule 8(1) and 8(2) of 2002 Rules. Therefore, if the petitioners are aggrieved it is still open for the petitioners to approach

11 the Debts Recovery Tribunal with the same submissions that were made before this Court. 10. At this stage, the learned counsel for the petitioners submits that in view of the petitioners approaching this Court and there being an order of stay against the notice issued under Section 13(2) by the respondent-Bank the petitioners did not cause a reply to the notice since it would prejudice the interest of the petitioners. Now that the stay has been vacated and this Court has held that the writ petitions are not maintainable, liberty should be granted to the petitioners to reply to the notice issued by the respondent-Bank. 11. Acceding to this request, the petitioners are permitted to cause a reply to the notice under Section 13(2) which has been questioned in these writ petitions within a period of seven days from the date of receipt of a certified copy of this order.

12 12. Since this Court has held that the writ petitions are not maintainable, the writ petitions stand dismissed. No order as to costs.

Sd/- JUDGE