1 wp 3625-2010 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL WRIT PETITION NO. 3625 OF 2010 Kotak Mahindra Bank Limited ...Petitioner vs. State of Maharashtra & Ors. ..Respondents Mr.Kishore Jain with with Ms.Abha Gupta i/b. Mr.Tushar Goradia for the Petitioner. Ms.M.H. Mhatre, APP for the Respondent. Ms.Mallika A. Ingale for Respondent No.2. Mr.V. Mishra i/b. M/s.V.Mishra & Co. for Respondent Nos.3 and 4. CORAM : B.H. MARLAPALLE & U.D. SALVI, JJ. JUNE 10, 2011 ORAL JUDGMENT (PER B.H. MARLAPALLE, J.) :- 1 Heard. Rule. Respondents waive service. The petition is heard finally by consent of the parties. 2 This petition filed under Articles 226 and 227 of the Constitution of India prays for 2 wp 3625-2010 directions to respondent no.2 to forthwith implement the order dated 14th June, 2010 passed by the learned Chief Metropolitan Magistrate so as to take the physical possession of the secured assets from whosoever found in possession and if necessary, with the assistance of the police and by breaking open the locks and handover the same to the authorised officer of the petitioner. 3 The petitioner is a banking company as defined in Clause 5 of the Banking Regulation Act, 1949 and registered under the Indian Companies Act, 1956. It claims to have a recovery of Rs.204,67,34,100/- along with other Working Capital Bankers and the claims are pending before the Debts Recovery Tribunal at Ahmedabad. On 6th March, 2009, a Demand Notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( the Act for short), was issued by the petitioner to respondent no.3, which 3 wp 3625-2010 is a guarantor and mortgagor, to pay an amount of Rs.85,16,64,243/- due and payable to the petitioner as on 4th September, 2003 within a period of 60 days with further interest at the rate of 15% p.a. from the date of the notice. On 6th July, 2009, the authorised officer of the petitioner along with representative of the secured creditors visited the secured assets being the Unit of the respondent no. 3 and demanded the possession of the mortgaged property. Possession was not handed over. The authorised officer filed an application before the Chief Metropolitan Magistrate under Section 14 of the Act. The learned Chief Metropolitan Magistrate passed an order directing the Assistant Registrar, Borivali Centre of Courts (respondent no.2) to take possession of the mortgaged assets along with accounts and handover the same to the authorised officer of the petitioner. 4 On 18th June, 2010, respondent no.2 issued a notice to respondent no.3 informing the 4 wp 3625-2010 date fixed for possession of the secured assets, consequent to the order passed by the learned Chief Metropolitan Magistrate on 14th June, 2010. When the respondent no.2 visited the premises for implementation of the order dated 14th June, 2010, a copy of the order passed by the Small Causes Court in RAD Suit No.973/2009 on 11th August, 2010 was submitted and it was claimed that the order passed by the learned Chief Metropolitan Magistrate could not be implemented so long as the order passed by the Small Causes Court continued to operate. Respondent no.2, therefore, submitted a report to the Chief Metropolitan Magistrate about her inability to implement the order passed on 14th June, 2010. It is in these circumstances this petition came to be filed and a Show Cause Notice was issued to respondent no.2 by this Court, for not complying the order passed on 14th June, 2010 by the learned Chief Metropolitan Magistrate. 5 On 25th April, 2011, this Court directed 5 wp 3625-2010 respondent no.2 to appear before the Chief Metropolitan Magistrate on 26th April, 2011 and the learned Chief Metropolitan Magistrate was expected to deal with the issue. Accordingly, the learned Chief Metropolitan Magistrate passed an order on 2nd May, 2011. He referred to the order passed by the Small Causes Court and directed the petitioner company to seek appropriate orders from the Civil Court in appropriate proceedings. 6 Hence the short question before us, as of now, is whether the interlocutory order passed by the Small Causes Court at Mumbai on 11th August, 2010 would come in the way of execution of the order passed on 14th June, 2010 by the learned Chief Metropolitan Magistrate under Section 14(2) of the Act. 7 It appears from the record that after the demand notice dated 6th March, 2009 under Section 13(2) of the Act was issued to respondent no.3, 6 wp 3625-2010 possession was not handed over within the stipulated period of 60 days and therefore, on 6th July, 2009, the authorised officer visited the premises of respondent no.3 to take physical possession of the secured assets and that was denied. Subsequently on 8th July, 2009, RAD Suit No. 973/2009 came to be filed by respondent no.4 claiming to be a tenant of the mortgaged premises and the petitioner and respondent no.3 were impleaded as defendants. In the said suit, respondent no.4 prayed for a declaration that it is a tenant of the office premises admeasuring 32000 sq.ft. or thereabout on the ground, first and second floor of the building known as 16B at Village Mohile (Andheri-Kurla Road), Samhita Industrial Estate and which is the secured assets with the petitioner by respondent no.3 as the guarantor. By way of interim relief, the plaintiff prayed for an injunction against the defendants not to take forcible possession of the suit premises and without due process of law. The learned Judge 7 wp 3625-2010 of the Small Causes Court on 11th August, 2010 passed an interim order below Exhibit 27 in RAD Suit No.973/2009. The operative part of the said order reads thus :- During pending the hearing of this notice, the defendants, their servants, agents and any other person or persons claiming through them or on their behalf are hereby restrained from obtaining the possession of the suit premises from the plaintiffs without following due procedure of law. 8 Respondent nos.3 and 4 have filed their affidavit-in-reply and have contended that the mortgaged premises cannot be taken over by respondent no.2 pursuant to the order passed under Section 14 of the Act by the learned Chief Metropolitan Magistrate so long as the stay order passed by the Small Causes Court continued to operate and they have also relied upon the subsequent order passed by the learned Chief Metropolitan Magistrate on 2nd May, 2011. However, 8 wp 3625-2010 admittedly on 9th August, 2010 both respondent nos.3 and 4 have presented separate appeals under Section 17 of the Act before the DRT at Mumbai against the order passed on 14th June, 2010 by the Chief Metropolitan Magistrate for taking possession of the secured assets and the said appeals are pending and without any stay order in favour of the applicants. 9 It was submitted by the learned Counsel for the petitioner that the view taken by the learned Chief Metropolitan Magistrate that the petitioner has to approach the civil court with an appropriate application and obtain orders and only thereafter, the order dated 14th June, 2010 would be implemented, is erroneous and contrary to the scheme of the Act. He submitted that the only remedy against the order passed under Section 14 is to file an appeal under Section 17 of the Act and which remedy has already been resorted to by respondent nos.3 and 4 and in any case, any order 9 wp 3625-2010 passed by any other court would not come in the way of implementation of the order passed under Section 14 of the Act unless the implementation of the same was stayed by the DRT. 10 The learned Counsel for respondent nos.3 and 4 invited our attention to Section 32 of the Act and submitted that respondent no.3 is not a borrower and no proceedings including criminal proceedings can lie against the said firm. He submitted that so long as the order passed by the Small Causes Court continues to operate, no party including the Bank, which is second defendant in the suit, is entitled to take possession till the suit is decreed or interim order passed by the Small Causes Court is set aside by the competent court. He reiterated his reliance on the decision of the Karnataka High Court in the case of Hutchison Essar South Ltd. vs. Union of India and Anr., AIR 2008 Karnataka 14(1). The Karnataka High Court held that if a bonafide tenant has been 10 wp 3625-2010 inducted into the secured premises by the borrower, such a tenant cannot be thrown out by the bank pursuant to the order passed under Section 14 of the Act and the Bank can only take symbolic possession of the premises. 11 In the instant case, after the notice dated 6th March, 2009 under Section 13(2) of the Act was received by respondent no.3, as per the petitioner, no reply has been given to the same and on 6th July, 2009 when the authorised officer visited the premises to take possession, he was not intimated in writing that the tenant had been inducted. We are also informed that respondent no. 3 approached the Gujarat High Court and the Gujarat High Court directed it to approach the DRT. At no point of time, the petitioner bank was informed in writing by respondent no.3 that the premises were in possession of the tenant either prior to the notice dated 6th March, 2009 or any time before respondent no.3 became a guarantor. Based on these 11 wp 3625-2010 facts, it was submitted by the learned Counsel for the petitioner that respondent no.4 does not fall in the category of a bonafide tenant as of now and the suit had been filed before the Small Causes Court with malafide intentions so as to obstruct or defeat the right of the petitioner bank to take over the physical possession of the secured assets. It was also pointed out that after the notice dated 6th March, 2009 was issued, respondent nos.3 and 4 created documents so as to show that respondent no. 4 is a tenant of respondent no.3. It is further alleged that respondent nos.3 and 4 are not separate establishments and in support of these allegations, our attention was drawn to the affidavits filed in this petition on behalf of respondent nos.3 and 4. The affiant for respondent no.4 is the daughter of the affiant for respondent no.3 and both the firms are being represented by the very same Counsel. 12 So far as the order passed by the Small 12 wp 3625-2010 Causes Court is concerned, in para 6 of the said order, the learned Judge stated :- So far as the reliefs claimed in the present notice against the order of the Hon'ble Chief Metropolitan Magistrate is concerned, the present court cannot grant any such relief against the said order so far as prayer clause (a) is concerned. This observation would itself indicate that the Small Causes Court was aware about the limitations of its jurisdiction and that it would not have jurisdiction to stay any such order passed by the Chief Metropolitan Magistrate. The decision of the Karnataka High Court in the case of Hutchison Essar South Ltd. (supra) would not also come in the way of implementation of the order passed under Section 14(2) of the Act even at this stage. In the United Bank of India vs. Satyawati Tondon {JT 2010 (7) SC 651}, the Supreme Court in para 17 stated thus :- 17. There is another reason why 13 wp 3625-2010 the impugned order should be set aside. If respondent No.1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression  any person' used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 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 SARFAESI Act are both expeditious and effective. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution 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 code 14 wp 3625-2010 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, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. 13 In the case of Authorised Officer, Indian Overseas Bank and Another vs. Ashok Saw Mill, JT 2009 (9) SC 491, the Supreme Court has dealt with the powers of appeal available to the DRT under Section 17 of the Act and in para 36, it stated, The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee. 15 wp 3625-2010 14 In view of the scheme of Sections 13, 14 and 17 of the Act, it is clear that the possession of the secured property can be taken over either from the borrower/guarantor or any other person and the right of appeal under Section 17 against the order passed under Section 14(2) of the Act is available to any such party. Section 34 of the Act bars the jurisdiction of any civil court. Hence, there is no impediment as of now to take possession of the secured premises in the instant case and the pendency of the RAD Suit No.973/2009 will not come in the way of execution of the order passed by the learned Chief Metropolitan Magistrate under Section 14(2) of the Act. The order passed by the Small Causes Court on 11th August, 2010 and relied upon by the respondent nos.3 and 4 has itself made it clear that by following the due process of law, the possession of the suit properties can be taken over from the plaintiff and the order which is sought to be implemented has been passed by the competent 16 wp 3625-2010 authority under Section 14 of the Act and therefore, it is an order by the due process of law. 15 Hence, the petition succeeds and the same is hereby allowed. Rule is made absolute in terms of prayer clause (a). 16 We make it clear that the pending appeals filed by respondent nos.3 and 4 will be considered by the DRT on their own merits and without being influenced by any observations made by us in this judgment. 17 If respondent no.2 has retired by now, order dated 14th June, 2010 shall be implemented by the successive officer without any further delay so as to handover the possession of the secured premises/properties to the petitioner. 17 wp 3625-2010 18 Shri Mishra, the learned Counsel submitted an oral application before us for respondent no.4 to stay the effect of this order for a period of four weeks. The oral application is hereby rejected. 19 All the applications filed in this petition are disposed off with liberty to apply to the DRT in the appeals presently pending, for the same reliefs. 20 Parties to act on the authenticated copy of this order. (U.D. SALVI, J) (B.H. MARLAPALLE, J)