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2007 DIGILAW 110 (CAL)

HIND SPECTRON MANUFACTURERS PVT. LTD. v. UCO BANK

2007-02-21

DIPANKAR DATTA

body2007
( 1 ) CHALLENGE in this writ petition is to a sale notice issued by the respondent bank dated 3. 11. 06, in pursuance of an action taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest act, 2002 (hereafter the Act ). ( 2 ) MR. Chatterjee, learned Senior Counsel appearing for the petitioner has submitted that pursuant to receipt of a notice under section 13 (2) of the Act dated 28. 11. 05, the petitioners had given certain proposals for restructuring of the accounts and/or revision of the credit facilities by letters dated 1. 1. 05 and 24. 1. 05 but on both occasions, the proposals were turned down by the respondent bank by its letters dated 3. 12. 05 and 30. 1. 06 without furnishing any reason and by recording that the proposals were not acceptable to it. He submits that by these two letters, the Bank conveyed only the "conclusion" and not the reasons leading to such "conclusion". He further submits that in terms of section 13 (3a) of the Act, the respondent Bank is under a statutory obligation to disclose reasons while disposing of the objection raised by the borrowers after receipt of notice under section 13 (2) and since there has been a failure on the part of the respondent Bank to discharge its statutory obligations, this Court ought to hold all further actions taken by the respondent Bank to be illegal and without jurisdiction. ( 3 ) HE has also submitted before this Court that the petitioners have since filed an application under section 391 (1) of the Companies Act, 1956 before this Hon'ble Court being C. P. No. 627/06 and that the said application is pending. In this connection, he has placed before this Court an order dated 12. 12. 06 passed by a learned Single Judge of this Court on the said application whereby 19. 2. 07 has been fixed as the date for a meeting of the unsecured creditors, and he submits on the basis thereof that this Court ought to restrain the respondent bank from taking any further adverse action against the petitioners till such time a decision is arrived at in the said meeting. 2. 07 has been fixed as the date for a meeting of the unsecured creditors, and he submits on the basis thereof that this Court ought to restrain the respondent bank from taking any further adverse action against the petitioners till such time a decision is arrived at in the said meeting. He submits that after all efforts are being made to revive the company and if the properties of the company which have been put up for sale by the respondent Bank are disposed of, it would stand as an impediment in the matter of reviving the company. ( 4 ) MR. Mitra. learned Counsel appearing for the respondent Bank, at the outset, has raised a preliminary objection with regard to the maintainability of the writ petition. He has submitted that if the petitioners are aggrieved by any action of the respondent Bank, the Act provides an alternative remedy under section 17 (1) thereof and the petitioners ought to be relegated to the forum created by the Act. In support of his contention he has relied on the following decisions: 1. 2001 (6) SCC 569 : Punjab National Bank vs. O. C. Krishnan; 2. 2007 (135) Comp. Case 1 (SC): Transcore vs. Union of India; 3. 2005 (126) Comp. Case 630 : Digivision Electronics Ltd. vs. Indian bank; and 4. 2006 (132) Comp. Case 803 : D. Ravichandran vs. Manager, Indian overseas Bank. ( 5 ) HE has also submitted that having regard to the provisions of the Act which would have overriding effect on all other statutory provisions including the Companies Act, mere pendency of the application before the Company Court cannot be a reason for restraining the respondent Bank from taking action which is otherwise authorised by the provisions of the Act. He has also submitted that in the event this Court relegates the petitioners to the forum created by section 17 (1) of the Act, the respondent bank would waive the point of limitation in approaching the said forum. ( 6 ) LEARNED Senior Counsel appearing for the petitioners, in reply, submitted that existence or availability of an alternative forum is not an absolute bar for maintaining a writ petition. He submits that it is well-settled that if there be a violation of principles of natural justice, despite existence of an efficacious alternative remedy, the Writ Court may entertain a writ petition. He submits that it is well-settled that if there be a violation of principles of natural justice, despite existence of an efficacious alternative remedy, the Writ Court may entertain a writ petition. In the present case, he submits, there has been gross violation of the principles of natural justice inasmuch as the respondent bank has not disclosed the reasons for which it found the proposals of the petitioners as not acceptable and this is good reason for not relegating the petitioners to the forum created by section 17 (1) of the Act. With regard to the other submission of Mr. Mitra regarding special laws having overriding effect over general laws, he submits that such submission is neither here nor there. The relevant point for consideration before Court is as to whether a Court of competent jurisdiction being in seisin of an issue pertaining to revival of the company, the respondent bank should be allowed to proceed with the sale of the mortgaged properties. He submits that having regard to the pendency of the petition before the Company Court, the respondent bank must be directed to await a decision on it prior to proceeding for sale of the mortgaged properties. ( 7 ) HAVING heard the learned Counsel for the parties, this Court is of the considered view that the preliminary objection raised by learned Counsel for the respondent bank deserves to be upheld. ( 8 ) IT is not in dispute that existence of an alternative efficacious remedy is not an absolute bar for maintaining a writ petition. As has been held in 1998 (8) scc 1 , Whirlpool Corpn. vs. Registrar of Trade Marks, a writ petition would be maintainable if an aggrieved party complains of i) infringement of fundamental rights; or ii) violation of principles of natural justice; or iii) an authority acting wholly without jurisdiction, or a statutory provision is ultra vires. ( 9 ) LEARNED Senior Counsel for the petitioner has strenuously urged that there has been gross violation of principles of natural justice in the present case and hence this petition would be maintainable. This submission has to be considered in the light of the factual developments subsequent to the orders of the respondent bank conveying that the proposals offered by the petitioners were not acceptable to it. ( 10 ) MR. This submission has to be considered in the light of the factual developments subsequent to the orders of the respondent bank conveying that the proposals offered by the petitioners were not acceptable to it. ( 10 ) MR. Mitra, learned Counsel for the respondent bank has, in course of hearing, invited the attention of this Court to a letter dated 11. 9. 06 written by the petitioners to the respondent bank. By this letter, inter alia, a request was made on behalf of the petitioners to the respondent bank to sympathetically consider the proposal for one time settlement for a total sum of Rs. 2 crores. After receipt of the said proposal, the respondent bank by its letter dated 15. 9. 06 had conveyed to the petitioners that they were required to deposit in a No Lien account 25 % of the offered amount as per NPA Management policy, as a pre-condition for taking up the matter with the competent authority for an appropriate decision on the prayer of the petitioners for one time settlement. He has asserted that despite receipt of such request from the respondent bank, the petitioners did not care to deposit 25% of the offered amount. e. Rs. 50,00,000/- in a No Lien Account. It is not in dispute that the petitioners did not deposit this amount. ( 11 ) IN terms of section 13 (3a) of the Act, it was the duty of the respondent bank to give reasons while rejecting the proposals of the petitioners [given after receipt of notice under section 13 (2) of the Act] as to why the same were not acceptable. However, admittedly no such reason was given. The petitioners had a statutory right to receive the reasons. However, the petitioners chose not to challenge the orders passed by the respondent bank on 3. 12. 05 and 30. 1. 06. On the contrary, they proposed for one time settlement by their aforesaid letter dated 11. 9. 06. Request was made by the respondent bank to deposit 25% of the offered amount (vide letter dated 15. 9. 06) which was not complied with. ( 12 ) PRIOR to approaching this Court with the present writ petition, oh 7. 12. 06 the petition before the Company Court was moved. Though the company had sought a meeting of all the creditors, a learned Single Judge of this Court by the order dated 12. 9. 06) which was not complied with. ( 12 ) PRIOR to approaching this Court with the present writ petition, oh 7. 12. 06 the petition before the Company Court was moved. Though the company had sought a meeting of all the creditors, a learned Single Judge of this Court by the order dated 12. 12. 2006 permitted only a meeting of the unsecured creditors. Thereafter, the present petition was filed on 19. 12. 06. ( 13 ) IT has been held in the decision of the Apex Court reported in 1994 (4) scc 422 , Krishanlal vs. State of J. and K. , that the question as to whether an order passed in breach of the principles of natural justice is a nullity would depend upon as to whether the requirement of the statutory provision in question is one which is for the benefit of the individual concerned or to serve a public purpose. If it be the former, the same can be waived; if it be the latter, it cannot be. Keeping in view the above principle, this Court would proceed to ascertain as to whether the requirements of giving reasons as ordained by section 13 (3a) of the Act can be waived or not. ( 14 ) IN the considered view of this Court, the petitioners had a statutory right under section 13 (3a) of the Act to receive reasons but by their subsequent conduct, they have waived their statutory right protected by section 13 (3a ). Section 13 (3a) of the Act though mandatory, is definitely designed in the interest of the borrowers and, therefore, the requirement to give reasons could be waived; and as appears from the facts on record, was waived. Therefore, the orders passed by the respondent bank dated 13. 12. 05 and 30. 1. 06, though bereft of any reasons as was mandatorily required, cannot be held to be a nullity and; cannot afford ground to the petitioners to maintain the present petition despite existence of an efficacious alternative remedy on the specious ground that natural justice has been violated in the instant case. ( 15 ) THERE is thus no merit in the submission on behalf of the petitioners that principles of natural justice have been violated in the present case. ( 15 ) THERE is thus no merit in the submission on behalf of the petitioners that principles of natural justice have been violated in the present case. Since none of the exceptions based on which a Writ Court may entertain a writ petition despite availability of efficacious alternative remedy is satisfied in the present case, judicial prudence requires this Court to refrain itself from allowing the procedure contemplated in the Act to be derailed by recourse to a proceeding under Article 226 of the Constitution. ( 16 ) ANOTHER reason for which this Court is not inclined to entertain this writ petition is that there is no equity in favour of the petitioners. After all, the petitioners had borrowed money from the respondent bank which they have failed to repay. The borrower is under obligation to return the money with interest. Writ being a discretionary remedy, the Court under Article 226 of the constitution may not interfere even if there be a technical violation of law. It is settled law that for the purpose of securing a writ in their favour, the petitioners must not only show that law is in their favour, but they also have to show that equity is in their favour [see : Digivision Electronics (supra)]. ( 17 ) WITH regard to the other submission of pendency of an application under the Companies Act before the learned Company Judge, this Court is of the further view that the mere fact of pendency thereof cannot be sufficient ground for this Court to pass any direction on this writ petition, having found that the petitioners do not deserve exercise of discretion in their favour. ( 18 ) FOR the reasons aforesaid, the writ petition stands dismissed. ( 19 ) IT would be open to the petitioners to approach the Debts Recovery tribunal having jurisdiction under section 17 of the Act. As has been fairly submitted by Mr. Mitra, learned Counsel for the respondent bank, that the point of limitation would stand waived if the petitioners approach the Tribunal under section 17 of the Act, it is hereby directed that if an application is filed before the concerned Tribunal by the petitioners within 3 weeks from date with requisite fees, the same shall be considered on its merits and in accordance with law, uninfluenced by any observation made hereinabove. ( 20 ) URGENT xerox certified copy of this judgment, if applied for, be furnished to the parties within three days from date of putting in the requisites therefor. Writ petition dismissed.