Research › Search › Judgment

Madhya Pradesh High Court · body

2010 DIGILAW 1050 (MP)

Suryakant Jagtap v. State Bank Of Indore

2010-10-13

S.K.GANGELE

body2010
ORDER : S.K. Gangele, J. Heard. The Petitioner has filed this petition challenging the notification, Annexure-P/1 in regard to auction of certain land of Survey No. 618, area 0.115 hectare, situated at Village Ghoshipura, Guna. 2. The Respondents Nos. 2 and 3 obtained a term loan (mortgaged loan) of Rs. 10,00,000/- on 2.6.2008 from the Respondent Bank. As a security of loan, they executed a mortgage deed. The Respondent Nos. 2 and 3 did not deposit the amount regularly, hence, the account was declared as NPA by the Bank. Thereafter the Bank published a notice u/s 13(2) of the SRFAESI Act, 2002. When no objection was raised, the Bank had taken possession of the land and thereafter the Bank issued the impugned notification-cum-advertisement in regard to auction of the land. 3. The Petitioner has questioned the auction proceedings on the ground that he along with his brother Dilip is in possession of the land bearing Survey No. 611 area 0.042 hectare and Survey No. 618 area 0.115 hectare situated at Guna and earlier his father was in possession over the land. His possession is also recorded in the revenue record. They have filed a civil suit No. 24-A/2008 for declaration and injunction, that suit is pending before the trial Court. The Petitioner has submitted that the Petitioner is the owner of the land, hence, the land could not be auctioned by the Respondent-Bank. 4. From the facts of the case and perusal of the civil suit filed by the Petitioner, it is clear that the Petitioner has claimed ownership of the land on the basis of adverse possession. Admittedly, the Petitioner is not the owner of the land and he is claiming right of the ownership on the basis of adverse possession. No Court has granted decree in favour of the Petitioner. In such circumstances, the Petitioner has no legal right to challenge the proceedings initiated by the Respondent-Bank. 5. Apart from this Hon'ble Supreme Court in the case of United Bank of India Vs. Satyawati Tondon and Others, AIR 2010 SC 3413 , has held that the proceedings initiated by the Bank under the SRFAESI Act could not be challenged before the High Court under Article 226 of the Constitution of India. The Hon'ble Supreme Court has held as under: 34. Satyawati Tondon and Others, AIR 2010 SC 3413 , has held that the proceedings initiated by the Bank under the SRFAESI Act could not be challenged before the High Court under Article 226 of the Constitution of India. The Hon'ble Supreme Court has held as under: 34. In the counter affidavit filed on behalf of the Appellant, it was pleaded that action initiated against Respondent No. 1 was consistent with the provisions of SRFAESI Act and writ Petitioner (Respondent No. I herein) was bound to discharge her obligations to pay the outstanding dues and there was no merit in her challenge to the notices issued under Sections 13(2) and 13(4) or the order passed u/s 14. It was further pleaded that the writ petition is liable to be dismissed because an alternative remedy is available to the Petitioner u/s 17 of the SRFAESI Act. 35. The Division Bench of the High Court did not even advert to the Appellant's plea that the writ petition should not be entertained because an effective alternative remedy was available to the writ Petitioner u/s 17 of the SRFAESI Act and passed the impugned order restraining the Appellant from taking action in furtherance of notice issued u/s 13(4) of the SRFAESI Act. The reason which prompted the High Court to pass the impugned interim order and operative portion thereof are extracted below: Learned Counsel for the Petitioner has urged that the loan was taken by Respondent No. 4 for opening a colour lab at 50/43, Raj Complex, K..P. Kakkar Road, Allahabad, but the loan has not been repaid by Respondent No. 4 and the Bank is proceeding against the Petitioner who is the guarantor of the loan. It is not clear from the documents produced by learned Counsel for the Bank as to what steps have been taken by the Bank against the borrower of the loan and merely issuance of notice u/s 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against the borrower is not sufficient. The Bank should have proceeded against the borrower and exhausted all the remedies against him and thereafter the Bank could have proceeded against the guarantor. The Bank should have proceeded against the borrower and exhausted all the remedies against him and thereafter the Bank could have proceeded against the guarantor. Until further orders of this Court, the Respondents are restrained from proceeding u/s 13(4) of the Act, 2002 with regard to Petitioner's property who was the guarantor of the loan, However, if any possession has been, taken by the Bank then the property shall not be sold to any one else and the Petitioner shall be continued in possession of the property. 36. We have heard learned Counsel for the Appellant and perused the record. Normally, this Court does not interfere with the discretion exercised by the High Court to pass an interim order in a pending matter but, having carefully examined the matter, we have felt persuaded to make an exception in this case because the order under challenge has the effect of defeating the very object of the legislation enacted by the Parliament for ensuring that there are no unwarranted impediments in the recovery of the debts, etc. due to Banks, other financial institutions and secured creditors. 37. The question whether the Appellant could have issued notices to Respondent No. 1 u/s 13(2) and (4) and filed an application u/s 14 of the SRFAESI Act without first initiating action against the borrower i.e., Respondent No. 2 for recovery of the outstanding dues is no longer res integra. In Bank of Bihar Ltd. Vs. Dr. Damodar Prasad and Another, AIR 1969 SC 297 , this Court considered and answered in affirmative the question whether the Bank is entitled to recover its dues from the surety and observed: 6. ...It is the duty of the surety to pay the decretal amount. On such payment he will be subrogated to the rights of the creditor u/s 140 of the Indian Contract Act, and he may then recover the amount from the principal. The very object of the guarantee is defeated if the creditor, is asked to postpone his remedies against the surety. In the present case the creditor is Banking company. A guarantee is a collateral security usually taken by a Banker. The security will become useless if his rights against the surety can be so easily cut down. 38. In State Bank of India Vs. Messrs. In the present case the creditor is Banking company. A guarantee is a collateral security usually taken by a Banker. The security will become useless if his rights against the surety can be so easily cut down. 38. In State Bank of India Vs. Messrs. Indexport Registered and others, AIR 1992 SC 1740 , this Court held that the decree-holder Bank can execute the decree against the guarantor without proceeding against the principal borrower and then proceeded to observe: 10. ...The execution of the money decree is not made dependent on first applying for execution of the mortgage decree. The choice is left entirely with the decree-holder. The question arises whether a decree which is framed as a composite decree, as a matter of law, must be executed against the mortgage property first or can a money decree, which covers whole or part of decretal amount covering mortgage decree can. be executed earlier. There is nothing in law which provides such a composite decree to be first executed only against the principal debtor. 39. In Industrial Investment Bank of India Ltd. Vs. Biswanath Jhunjhunwala, (2010) 1 CompLJ 96, this Court again held that the liability of the guarantor and principal debtor is co-extensive and not in alternative and the creditor/decree-holder has the right to proceed against either for recovery of dues or realization of the decretal amount. 40. In view of the law laid down in the aforementioned cases, it must be held that the High Court completely misdirected itself in assuming that the Appellant could not have initiated action against Respondent No. 1 without making efforts for recovery of its dues from the borrower-Respondent No. 2. 41. The facts of the present case show that even after receipt of notices u/s 13(2) and (4) and order passed u/s 14 of the SRFAESI Act, Respondent Nos. 1 and 2 did not bother to pay the outstanding dues. Only a paltry amount of Rs. 50,000/- was paid by Respondent No. 1 on 29.10.2007. She did give an undertaking to pay the balance amount in instalments but did not honour her commitment. 1 and 2 did not bother to pay the outstanding dues. Only a paltry amount of Rs. 50,000/- was paid by Respondent No. 1 on 29.10.2007. She did give an undertaking to pay the balance amount in instalments but did not honour her commitment. Therefore, the action taken by the Appellant for recovery of its dues by issuing notices under Sections 13(2) and 13(4) and by filing an application u/s 14 cannot be faulted on any legally permissible ground and, in our view, the Division Bench of the High Court committed serious error by entertaining the writ petition of Respondent No. 1. 42. There is another reason why the impugned order should be set aside. If Respondent No. 1 had any tangible grievance against the notice issued u/s 13(4) or action taken u/s 14, then she could have availed remedy by filing an application u/s 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 u/s 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 SRFAESI 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 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 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. 6. As per aforesaid principle law laid down by the Hon'ble Supreme Court, there is no merit in this petition. It is hereby dismissed. No order as to costs.