W.P.(C)No.[SECTION]03/2016 Page 1 of 10 AFR HIGH COURT OF CHHATTISGARH, BILASPUR Writ Petition (C) No.[SECTION]03 of 2016 Order reserved on: 25-[SECTION]-2017 Order delivered on: 5-12-2017 MAN Industries (India) Limited, (A Company incorporated under the Companies Act, 1[SECTION]56), having registered office at Man House, 101, S.V. Road, Vile Parle (West), Mumbai-400 056, through its Authorized signatory Mr. Ketan Vaidya. Petitioner Versus 1. [ENTITY] (A body corporate, constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1[SECTION]70) having Branch Office at Anathalaya Marg, Near Kewadwadi Bus Stand, Near Telegraph Office, Raigarh, District Raigarh (C.G.) 2. Authorized Officer, [ENTITY], Near Kewadwadi Bus Stand, Near Telegraph Office, Raigarh Branch (C.G.) 3. M/s Scan Ispats Ltd., (a Company incorporated under the Companies Act, 1[SECTION]56) having office at Hospet Road, Ginigera, Tehsil and District Koppal, Karnataka, Through its Director. 4. [ENTITY], (a body corporate, constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1[SECTION]70), Rourkela Branch, District Rourkela, Orissa. Respondents
For Petitioner: Mr. [ENTITY] and Mr. [ENTITY], Advocates.
For Respondents No.1 and 2: -
Mr. [ENTITY] and Mr. [ENTITY], Advocates.
For Respondent No.3: Mr. [ENTITY], Advocate. For Respondent No.4: Mr. [ENTITY] and Mr. [ENTITY], Advocates.
Hon'ble Shri Justice [ENTITY] C.A.V. Order
1. Invoking extraordinary jurisdiction under [SECTION] of the [ACT], the petitioner herein, which is a company registered and incorporated under the Companies Act, 1[SECTION]56, calls in question legality, validity and correctness of public notice dated 4-10-2013 and confirmation of sale dated 21-12-2013 and also confirmation of sale dated 2[SECTION]-1-2014 seeking declaration that such confirmation of sale is illegal and bad in law and not binding on the petitioner.
2. The aforesaid reliefs have been claimed on the following factual backdrop: -
3. [ENTITY] ([ENTITY]) being a lead Bank had initiated a proceeding under the provisions of the [ACT] (for short, 'the [ACT]') and thereafter, secured asset was put to auction on 22-11-2013 and secured asset was ultimately sold. The petitioner is auction purchaser in whose favour the bid was finally knocked down for 31 crores.
Sale certificate was issued in favour of the petitioner on 2[SECTION]-1- 2014, but physical possession of the subject property could not be delivered to the petitioner for which the petitioner made correspondences with respondents No.1 and 2 Bank for last two years up to June, 2016, but no physical possession of the subject property was delivered and ultimately, the petitioner decided to file this petition for setting aside the public notice, sale and confirmation of sale dated 2[SECTION]-1-2014 as unsustainable and bad in law. The principal ground raised in the writ petition is that the factory is situated outside the mortgaged area and that has not been mortgaged with the respondent Bank and therefore the Bank is not able to deliver the vacant and peaceful possession of the said factory to the petitioner. It is the stand of the Bank that the petitioner should dismantle the factory from the non- mortgaged area and affix to the area which has been mortgaged. Therefore, a writ be issued to set aside the sale as the entire auction is based on misrepresentation about the details of the property. It has been prayed that the auction shall be set aside and the amount of 31 crores along with interest be refunded to the petitioner.
4. Mr. [ENTITY] assisted by Mr. [ENTITY], learned counsel appearing for the respondent [ENTITY], filed return opposing the writ petition stating inter alia that alternative remedy under [SECTION] of the [ACT] is available to the petitioner as such, the writ petition as framed and filed is not maintainable. The Bank has only sold plant and machinery to the petitioner as mentioned in the auction notice on "as is where is basis" and there is no concept of factory in the action notice. The petition involves disputed question of facts as well as suffers from delay and laches as auction has been confirmed on 2[SECTION]-1- 2014 and the writ petition has been filed on 14-7-2016 and inordinate delay of two years has not been explained satisfactorily to invoke the equitable jurisdiction. Despite request by the Bank, the petitioner is not taking possession of the subject property and has filed this petition. Therefore, the writ petition as framed and filed is not maintainable under law and deserves to be dismissed.
5. Mr. [ENTITY], learned counsel appearing for respondent No.3, would also submit that the writ petition as framed and filed is not maintainable, the petitioner has alternative remedy of invoking the jurisdiction of Debts Recovery Tribunal and the petitioner has not come with clean hands.
6. Mr. [ENTITY], learned counsel appearing for respondent No.4 - [ENTITY], would submit that the writ petition is not maintainable, the remedy is elsewhere, unnecessarily the writ petition is filed, whereas factual dispute is involved in the instant case and in the present writ petition, factual disputes cannot be gone into by this Court and it can be settled competently by the DRT. He would finally submit that the petitioner was knowing the nature of property as such, the writ petition deserves to be dismissed.
7. I have heard learned counsel for the parties and considered their rival submissions made herein-above and went through the records with utmost circumspection.
8. The question relating to availability of remedy under [SECTION] of the [ACT] to the auction purchaser is no longer res integra and stands determined authoritatively by a recently delivered decision of the Supreme Court in the matter of [PRECEDENT] v. [ENTITY] and others1 in which Their Lordships have formulated a question in paragraph [SECTION] of the judgment as under: -
"[SECTION]. The short question that arise for consideration in this appeal is whether the High Court was justified in holding that the remedy of the appellant (auction purchaser) lies in challenging the action of the secured creditor ([ENTITY]) in forfeiting the deposit by filing an application under [SECTION] of the [ACT] before the DRT or the remedy of auction purchaser is in filing the writ petition under [SECTION] of the [ACT] to examine the legality of such action."
[SECTION]. Answering the issue, Their Lordships held that the expression "any person" occurring in [SECTION] of the [ACT] includes auction purchaser and succinctly observed as under: -
"27. Reading of the aforementioned Sections and the Rules and, in particular, [SECTION] and [SECTION] would clearly go to show that an action of secured creditor in forfeiting the deposit made by the auction purchaser is a part of the measures taken by the secured creditor under [SECTION].
28. The reason is that [SECTION] empowers the Tribunal to examine all the issues arising out of the measures taken under [SECTION] including the measures taken by the secured creditor under [SECTION] and [SECTION] for disposal of the secured assets of the borrower. The expression "provisions of this Act and the Rules made thereunder" occurring in [SECTION] clearly suggests that it includes the action taken under [SECTION] as also includes therein the action 1 2017 [CASE NUMBER] taken under [SECTION] and [SECTION] which deal with the completion of sale of the secured assets. In other words, the measures taken under [SECTION] would not be completed unless the entire procedure laid down in [SECTION] and [SECTION] for sale of secured assets is fully complied with by the secured creditor. It is for this reason, the Tribunal has been empowered by [SECTION] to examine all the steps taken by the secured creditor with a view to find out as to whether the sale of secured assets was made in conformity with the requirements contained in [SECTION] read with the Rules or not?
2[SECTION]. We also notice that [SECTION] confers express power on the secured creditor to forfeit the deposit made by the auction purchaser in case the auction purchaser commits any default in paying installment of sale money to the secured creditor. Such action taken by the secured creditor is, in our opinion, a part of the measures specified in [SECTION] and, therefore, it is regarded as a measure taken under [SECTION]. In our view, the measures taken under [SECTION] commence with any of the action taken in clauses (a) to (d) and end with measures specified in [SECTION].
30. In our view, therefore, the expression "any of the measures referred to in [SECTION] taken by secured creditor or his authorized officer" in [SECTION] would include all actions taken by the secured creditor under the Rules which relate to the measures specified in [SECTION].
31. The auction purchaser (appellant herein) is one such person, who is aggrieved by the action of the secured creditor in forfeiting their money. The appellant, therefore, falls within the expression "any person" as specified under [SECTION] and hence is entitled to challenge the action of the secured creditor ([ENTITY]) before the DRT by filing an application under [SECTION] of the [ACT].
32. Learned counsel for the appellant placed reliance on the decision of the Division Bench of High Court of Bombay in [PRECEDENT] which, according to him, supports his submission. We have gone through the decision and unable to agree with the view taken therein. Their Lordships, while holding that [SECTION] does not apply to auction purchaser and, therefore, writ petition filed by him can be entertained in such cases, did not notice the Rules, which deal with the measures taken under [SECTION] and nor considered its effect on the measures.
33. In [PRECEDENT], this Court had the occasion to examine in detail the provisions of the [ACT] and the question regarding invocation of the extraordinary power under [SECTION] in challenging the actions taken under the [ACT]. Their Lordships gave a note of caution while dealing with the writ filed to challenge the actions taken under the [ACT] and made following pertinent observations which, in our view, squarely apply to the case on hand:
"42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under [SECTION] or action taken under [SECTION], then she could have availed remedy by filing an application under [SECTION]. The expression "any person" used in [SECTION] is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under [SECTION] or [SECTION]. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under [SECTION] and [SECTION] and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the [ACT] are both expeditious and effective.
43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under [SECTION] of the [ACT] if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under [SECTION] of the [ACT], a person must exhaust the remedies available under the relevant statute.
44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under [SECTION] of the [ACT] to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by [SECTION] or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under [SECTION] of the [ACT].
45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under [SECTION] of the [ACT] and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance."
34. In the light of foregoing discussion, we are of the considered opinion that the Writ Court as also the Appellate Court were justified in dismissing the appellant's writ petition on the ground of availability of alternative statutory remedy of filing an application under [SECTION] of [ACT] before the concerned Tribunal to challenge the action of the [ENTITY] in forfeiting the appellant's deposit under [SECTION]. We find no ground to interfere with the impugned judgment of the High Court.
35. The appellant is, accordingly, granted liberty to file an application before the concerned Tribunal (DRT) under [SECTION] of the [ACT], which has jurisdiction to entertain such application within 45 days from the date of this order. In case, if the appellant files any such application, the Tribunal shall decide the same on its merits in accordance with law uninfluenced by any of the observations made by this Court and the High Court in the impugned judgment."
10. In view of the principle of law laid down in the above-stated judgment {[PRECEDENT] (supra)}, I am of the considered opinion that the petitioner auction purchaser has a remedy of filing appeal under [SECTION] of the [ACT] before the Debts Recovery Tribunal questioning the confirmation of auction and other proceeding. Therefore, this writ petition is disposed of granting liberty to the petitioner to file an application before the DRT under [SECTION] of the [ACT]. If such an application is filed within 45 days, the DRT would decide it expeditiously in accordance with law. All the contentions are kept open to be decided by the DRT. No order as to cost(s).
([ENTITY]) Judge [ENTITY]