SARFAESI: Default in repayment of outstanding dues – Accounts of borrowers/respondents classified as Non Performing Asset – Bank issued notice u/s. 13(2) – NPA account of the borrowers / respondents with respect to the credit facilities availed by them assigned by the Bank in favour of appellant – Borrowers failed to repay outstanding dues – Appellant issued letter intimating borrowers that they would proceed to take possession of the mortgaged properties after expiry of 15 days from the date of the said letter – Against the said communication/letter dated 13.08.2015, the borrowers/respondents filed writ petitions before the High Court on the ground that communication/letter dated 13.08.2015 was a possession notice under s.13(4) of the SARFAESI Act, which was against the Security I nteres t (Enforcement) Rules, 2002 – High Court entertained the writ petitions under Art.226 against the appellant and passed an interim ordered directing for maintaining status quo with regard to SARFAESI action (possession of secured assets) – In the instant appeals, case of the appellant was that communication dated 13.08.2015 cannot be said to be a notice under s.13(4) of the SARFAESI Act at all; that after the notice under s.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, therefore, the borrowers were called upon to make the payment within two weeks failing which a further proceeding under s.13(4) of the SARFAESI Act was proposed and therefore, writ petitions against the proposed action under s.13(4) of the SARFAESI Act was not maintainable and/or entertainable at all – Held: In view of the statutory remedy available under s.17 of the SARFAESI Act, writ petitions against the notice under s.13(4) of the SARFAESI Act was not required to be entertained by the High Court – Therefore, High Court erred in entertaining the writ petitions against 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 Rs. 1 crore only (in all Rs.3 crores in view of the subsequent orders passed by the High Court extending the exparte ad- interim order dated 26.08.2015) against the total dues of approximate Rs.117 crores – Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of Court – High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons – 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.
Writ jurisdiction: Writ petition against the private financial institution – appellant under Art.226 of the Constitution of India against the proposed action/actions under s.13(4) of the SARFAESI Act – Maintainability of – Held: Not maintainable – In the instant case, appellant proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor – Appellant as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities – During the course of a commercial transaction and under the contract, the bank/ appellant lent the money to the borrowers and therefore the said activity of the bank/appellant cannot be said to be as performing a public function which is normally expected to be performed by the State authorities – If proceedings are initiated under the 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, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable – SARFAESI Act. Allowing the appeal, the Court
HELD: 1. Assuming that 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, 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 exparte ad-interim orders directing to maintain the status quo with respect to possession of secured properties on the condition directing the borrowers to pay Rs. 1 crore only (in all Rs. 3 crores in view of the subsequent orders passed by the High Court extending the ex parte ad-interim order dated 26.08.2015) against the total dues of approximate Rs.117 crores. Even the High Court ought to have considered and disposed of the application for vacating the ex-parte ad interim relief, which was filed in the year 2016 at the earliest considering the fact that a large sum of Rs. 117 crores was involved. [Para 10][966-D-G] J. Rajiv Subramaniyan and Anr. v. Pandiyas and Ors. (2014) 5 SCC 651 : [2014] 3 SCR 1140 – referred to.
2. Even otherwise, it is required to be noted that a writ petition against the private financial institution – appellant under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed 21 by the State authorities. If proceedings are initiated under the 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. [Para 12][967-B-E]
Praga Tools Corporation v. Shri C.A. Imanual and Ors. (1969) 1 SCC 585 : [1969] 3 SCR 773; Ramesh
Ahluwalia v. State of Punjab and Ors. (2012) 12 SCC
331 : [2012] 12 SCR 315 – held inapplicable.
3. 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). Even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs. 1 crore only (in all Rs. 3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs.117 crores. The ad-interim relief has been continued since 2015 and the secured creditor 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. [Para 13.2][968-G-H; 969-A-D]
United Bank of India v. Satyawati Tondon & Ors., (2010)
8 SCC 110 : [2010] 9 SCR 1; General Manager, Sri Siddeshwara Cooperative Bank Limited & Anr. v. Ikbal & Ors. (2013) 10 SCC 83 : [2013] 8 SCR 532;
Kanaiyalal Lalchand Sachdev & Ors. v. State of Maharashtra & Ors., (2011) 2 SCC 782 : [2011] 2 SCR 602; Authorized Officer, State Bank of Travancore & Anr. v. Mathew K.C. (2018) 3 SCC 85 : [2018] 1 SCR 233; City and Industrial Development Corpn. v. Dosu Aardeshir Bhiwandiwala (2009) 1 SCC 168 : [2008] 16 SCR 28; Sadhana Lodh v. National
insurance Co. Ltd. and Anr. (2003) 3 SCC 524 : [2003]
1 SCR 567; Surya Dev Rai v. Ram Chander Rai and Ors. (2003) 6 SCC 675 : [2003] 2 Suppl. SCR 290 – relied on.
Agarwal Tracom Private Limited v. Punjab National Bank& Ors., (2018) 1 SCC 626 : [2017] 11 SCR 164; Radha Krishnan Industries v. State of Himachal Pradesh & Ors. (2021) 6 SCC 771; Mathew Varghese v. M. Amritha Kumar and Ors. (2014) 5 SCC 610 : [2014] 2 SCR 736; United Commercial Bank v. Bank of India and Ors. (1981) 2 SCC 766 : [1981] 3 SCR 300; State Bank of India v. Allied Chemical Laboratories and Anr. (2006) 9 SCC 252 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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