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2011 DIGILAW 2223 (HP)

Manu Goel v. Tarsem Chand Jain

2011-06-15

RAJIV SHARMA

body2011
JUDGMENT Rajiv Sharma, J. OMP No. 566 of 2010. 1. The plaintiffs have instituted the present suit for the following reliefs:-that the suit may kindly be decreed in favour of the plaintiffs and against the defendants jointly and severally by passing a decree of declaration that the reconstituted partnership deeds dated 9.2.2007, 10.9.2007, 15.12.2007 and 17.12.2007 entered into between the plaintiffs and defendant No. 1 are wrong, illegal and are result of fraud played upon the plaintiffs by defendants No. 1 and 2 and as such these aforesaid reconstituted partnership deeds are not binding on the plaintiffs with further declaration that the plaintiffs are in fact partners of defendant No. 3 and with a prayer for decree of possession directing the defendants No. 1 and 2 to handover the vacant and peaceful possession of the property of defendant No. 3 to the plaintiffs free from all encumbrances by declaring the plaintiffs as partners of defendant No. 3 with further declaration that pledging of sale deed dated 27.9.2003, property of defendant No. 3 with defendant No. 4 is wrong, illegal and is a result of fraud played upon plaintiffs. With a further decree of permanent prohibitory injunction restraining the defendant No. 1, 2 and 4 from alienating or transferring or selling the property of defendant No. 3 and in alternative for recovery of Rs. 2,52,41,000/- on account of principal amount and Rs. 75,82,000/- (Rs. 1,05,82,000/- Rs. 30,00,000/-) after adjusting Rs. 30 lacs received by the plaintiffs, on account of interest @ 18% per annum on the principal amount upto 30.11.2010, total amounting to Rs. 3,28,23,000/ - along with further interest at the agreed rate of 18% per annum, from the date of filing of the suit till the date of its realization. 2. Written statements have been filed on behalf of defendants No. 1 to 4. 3. The plaintiffs have also moved an application under Order 39 Rules 1 and 2 for restraining defendants No. 1, 2 and 4 from alienating, transferring, selling and changing the nature of the property and assets of respondent/defendant No. 3 during the pendency of the suit. This. Court passed the following interim order on 27.12.2010:- I have gone through the pleadings, including the grounds taken in the application. There is a prima face case in favour of the plaintiffs and the balance of convenience is also in their favour. This. Court passed the following interim order on 27.12.2010:- I have gone through the pleadings, including the grounds taken in the application. There is a prima face case in favour of the plaintiffs and the balance of convenience is also in their favour. Plaintiffs will suffer irreparable loss and injury, if ad-interim order is not granted in their favour. 2. Accordingly, the respondents are restrained from selling, transferring, encumbering and changing the nature of the suit property, as detailed in para 2 of the plaint, in any manner whatsoever, till further orders. The plaintiffs shall comply with provisions of order 39 rule 3 of the Code of Civil Procedure accordingly. 4. Defendant No. 4 has filed detailed reply to the application filed by the plaintiffs under Order 39 Rules 1 and 2 of the Code of Civil Procedure. 5. Mr. Sanjeev Gupta, learned Counsel appearing on behalf of defendant No. 4 has strenuously argued that in view of Sections 17, 34 and 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as "the SARFAESI Act" for brevity sake), the Civil Court has no jurisdiction to entertain any suit or proceedings in respect of any matter which a Tribunal or Appellate Tribunal is empowered to determine. In other words, his submission is that the plaintiffs have alternative remedy available to them to approach the learned Debt Recovery Tribunal. 6. Mr. Bimal Gupta, learned Counsel for the plaintiffs has vehemently argued that the present suit is maintainable and the plaintiffs cannot be relegated under Section 17 of the SARFAESI Act to approach the Debt Recovery Tribunal. 7. Mr. Arvind Sharma, learned Counsel representing defendants No. 1, 2 and 3 has argued that at present all the assets of defendant No. 3 are in possession of defendant No. 4 under the SARFAESI Act and this Court has no jurisdiction to entertain and try the suit. 8. I have heard the learned Counsel for the parties and gone through the pleadings carefully. 9. Defendants No. 1 to 3 had deposited with defendant No. 4-Bank the original title deed dated 29.9.2003 on 8.1.2008. Confirmation letter dated 10.1.2008 in this respect had also been executed by defendants No. 1 to 3 with defendant No. 4. 8. I have heard the learned Counsel for the parties and gone through the pleadings carefully. 9. Defendants No. 1 to 3 had deposited with defendant No. 4-Bank the original title deed dated 29.9.2003 on 8.1.2008. Confirmation letter dated 10.1.2008 in this respect had also been executed by defendants No. 1 to 3 with defendant No. 4. The notice was issued to defendant No. 1, 2 and 3 by defendant No. 4 under Section 13(2) of the Act, dated 29.9.2010, 60 days time was granted to defendants No. 1 to 3 to repay the outstanding liabilities to the tune of Rs. 7,16,23,313.27 including interest upto June, 2010. Thereafter the defendant No. 4-Bank took possession of the mortgaged property on 9.12.2010 under Section 13(4) of the Act. The possession-cum-sale notice was issued on 15.12.2010. It was delivered to defendants No. 1 and 2 and also affixed on the conspicuous place of the suit property and was also published in two leading newspapers in compliance to SARFAESI Act and Rules framed thereunder. The sale by inviting offers in sealed covers was invited on or before 15.1.2011. The same was to be opened on 17.1.2011. The plaintiffs have not filed any reply to the notice issued under Section 13(4) of the Act. 10. However, Mr. Bimal Gupta, learned Counsel for the plaintiffs has strenuously argued that defendants No. 1 and 2 have played fraud upon the plaintiffs and have illegally grabbed the property of defendant No. 3 and they have further fraudulently deposited the title deed of the property of defendant No. 3 as security/guarantee of some loan raised by them. 11. Mr. Sanjeev Gupta, learned Counsel appearing on behalf of defendant No. 4-Bank has relied upon Mardia Chemicals Ltd. and others v. Union of India and others, (2004) 4 SCC 311 and United Bank of India v. Satyawati Tondon and others, (2010) 8 SCC 110 in support of his submission that the plaintiffs should have filed appeal under Section 17 of the Act before the Debt Recovery Tribunal. 12. Mr. Bimal Gupta, learned Counsel for the plaintiffs has also relied upon few observations made in Mardia Chemicals Ltd. and others v. Union of India and others, (2004) 4 SCC 311 in support of his contention that a civil suit can be filed within the scope of very limited grounds. 12. Mr. Bimal Gupta, learned Counsel for the plaintiffs has also relied upon few observations made in Mardia Chemicals Ltd. and others v. Union of India and others, (2004) 4 SCC 311 in support of his contention that a civil suit can be filed within the scope of very limited grounds. He then contended that the plea raised by the plaintiffs can only be adjudicated upon in the present suit and the same cannot be adjudicated upon by the Debt Recovery Tribunal. 13. Their Lordships of Hon'ble Supreme Court in Mardia Chemicals Ltd. and others v. Union of India and others, (2004) 4 SCC 311 have categorically laid down that a mechanism has been provided under Section 17 of the Act to approach Debts Recovery Tribunal and the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to conditions it may deem fit and proper to impose. Their Lordships of Hon'ble Supreme Court have held as under (paras 45, 46, 47 and 48):-- In the background we have indicated above, we may consider as to what forums or remedies are available to the borrower to ventilate his grievance. The purpose of serving a notice upon the borrower under subsection (2) of Section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under sub-section (4) of Section 13 in case of noncompliance of notice within 60 days. The creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. There may be some meaningful consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under sub-section (4) of Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it would only be conducive to the principles of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon them before proceeding to take measures under sub-section (4) of Section 13. Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. It will only be In fulfillment of a requirement of reasonableness and fairness in the dealings of institutional financing which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavoury steps contained under subsection (4) of Section 13. At the same time, more importantly we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why his objections have not been accepted by the secured creditor who intends to resort to harsh steps of taking over the management/ business of viz. secured assets without intervention of the Court. Such a person in respect of whom steps under Section 13(4) of the Act are likely to be taken cannot be denied the right to know the reason of nonacceptance and of his objections. It is true, as per the provisions under the Act, he may not be entitled to challenge the reasons communicated or the likely action of the secured creditor at that point of time unless his right to approach the Debt Recovery Tribunal as provided under Section 17 of the Act matures on any measure having been taken under sub-section (4) of Section 13 of the Act. We are holding that it is necessary to communicate the reasons for not accepting the objections raised by the borrower in reply to notice under Section 13(2) of the Act more particularly for the reason that normally in the event of noncompliance with notice, the party giving notice approaches the Court to seek redressal but in the present case, in view of Section 13(1) of the Act the creditor is empowered to enforce the security himself without intervention of the Court. Therefore, it goes with logic and reason that he may be checked to communicate the reason for not accepting the objections, if raised and before he takes the measures like taking over possession of the secured assets etc. This will also be in keeping with the concept of right to know and lender's liability of fairness to keep the borrower informed particularly of the developments immediately before taking measures under sub-section (4) of Section 13 of the Act. It will also cater the cause of transparency and not secrecy and shall be conducive in building an atmosphere of confidence and healthy commercial practice. Such a duty, in the circumstances of the case and the provisions is inherent under Section 13(2) of the Act. The next safeguard available to a secured borrower within the framework of the Act is to approach the Debt Recovery Tribunal under Section 17 of the Act. Such a right accrues only after measures are taken under sub-section (4) of Section 13 of the Act. 14. Their Lordships of Hon'ble Supreme Court in United Bank of India v. Satyawati Tondon and others, (2010) 8 SCC 110 have reiterated that the expression "any person" used in Section 17(1) 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 13(4) or Section 14. Their Lordships have further held that both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Section 17 and 18 and are required to decide the matters within a fixed time schedule. Their Lordships have held as under (paras 42, 45, 46 and 55):- There is another reason why the impugned order should be set aside. Their Lordships have further held that both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Section 17 and 18 and are required to decide the matters within a fixed time schedule. Their Lordships have held as under (paras 42, 45, 46 and 55):- There is another reason why 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. 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 Article 226 of the Constitution 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. It must be remembered that stay of an action initiated by the State and/ or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the economy. of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad, Whirlpool Corporation v. Registrar of Trade Marks and Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. 15. Mr. Bimal Gupta, learned Counsel for the plaintiffs has also relied upon Indian Bank v. ABS Marine Products Pvt. Ltd., 2006(5) SCC 72. However, this judgment is not applicable to the facts and circumstances of the present case, since notice had already been issued to defendants No. 1 to 3 under Section 13 of the Act. 16. Accordingly, in view of above discussion and the definitive law laid down by their Lordships of the Hon'ble Supreme Court, the plaintiffs have the alternative remedy available to them under Section 17 of the Act to approach the Debt Recovery Tribunal. It shall be open to the plaintiffs to take all the pleas which are available under law before the Debt Recovery Tribunal. 17. Consequently, in view of the observations and discussion made hereinabove, the present application is dismissed. Interim order dated 27.12.2010 is vacated.