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2013 DIGILAW 2752 (ALL)

Shalini Asha Chopra v. State Bank Of India

2013-11-08

SUNIL AMBWANI, SURYA PRAKASH KESARWANI

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JUDGMENT : 1. We have heard Shri Ajai Bhanot assisted by Shri Aarohi Bhalla and Shri Raj Kumar Tiwari for the petitioners. Shri Satish Chaturvedi appears for respondent No. 1. Shri Om Prakash Misra appears for respondent No. 2. In this writ petition the petitioners have prayed for following reliefs: (a) issue a writ/direction in the nature of certiorari quashing the deed of assignment dated 29.3.2006 executed by and between respondent No. 1 (State Bank of India) and respondent No. 2 (Kotak Mahindra Bank); and (b) Issue a writ/direction in the nature of mandamus thereby restraining respondent No. 2 (Kotak Mahindra Bank) to take any coercive steps for recovery of amount from the petitioners; and (c) Issue a writ/direction in the nature of mandamus thereby directing respondent Nos. 1 and 2 to provide correct account details of the loan account and fixed deposits of the petitioners and details as to how the OTS amount of Rs.87,83,973.88 is arrived at; and (d) Direct respondent No. 1 (State Bank of India) to decide the OTS proposal filed by the petitioners before it within a specific period of time; and them including other transactions, if any; and (e) Direct respondent Nos. 3 and 4 to initiate proper inquiry against the respondent Nos. 1 and 2 regarding the fraud committed by them including other transactions, if any; and (f) Issue any other order/direction, which this Hon’ble Court may deem fit and proper in the interest of justice. 2. The recovery of dues of the State Bank of India, which was sought to be recovered by the Bank by filing a suit in Debts Recovery Tribunal, was challenged by the petitioners in several writ petitions, the last of which was decided by this Court on 3.9.2012 in Shalini Asha Chopra and Others Vs. Chairperson, Debts Recovery Appellate Tribunal, Allahabad and Others, (2013) 2 BC 678. The challenge to the assignment of the dues of the State Bank of India to Kotak Mahindra Bank was not accepted. The Court held in paragraphs 30 to 33 as follows: 30. Chairperson, Debts Recovery Appellate Tribunal, Allahabad and Others, (2013) 2 BC 678. The challenge to the assignment of the dues of the State Bank of India to Kotak Mahindra Bank was not accepted. The Court held in paragraphs 30 to 33 as follows: 30. Thus, u/s 5 of the Securitisation Act, any securitisation company or reconstruction company can acquire financial assets of any Bank by issuing a debenture bond or any other security or by entering into an agreement with such Bank for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them. Sub-section (4) of Section 5 further provides that if on the date of acquisition of financial asset any suit filed by the Bank relating to the said financial asset is pending, the same shall not abate by reason of acquisition of financial asset by the securitisation company and can be continued, prosecuted and enforced by the securitisation or reconstruction company. In the present case, the deed of assignment was executed between State Bank of India and Kotak Mahindra Bank and thus also, in view of the provisions of Section 5(4) of the Securitisation Act, the suit could be continued, prosecuted and enforced by the securitisation or reconstruction company even if the assignment deed was executed during the pendency of the Transfer Application before the Debts Recovery Tribunal. 31. In view of the aforesaid discussion, the decision of the Supreme Court in Jugalkishore Saraf (supra) will not come to the aid of the petitioners and the Debts Recovery Tribunal and the Debts Recovery Appellate Tribunal committed no illegality in allowing the application filed by Kotak Mahindra Bank. 32. Reliance placed by the learned Senior Counsel on the order dated 10th May, 2006 by which the Debts Recovery Tribunal rejected the application filed by the petitioners for dismissal of the Transfer Application as the State Bank of India had executed the assignment deed in favour of the Kotak Mahindra Bank and had no interest left cannot also be accepted. Kotak Mahindra Bank was not a party in the said application and had not been heard by the Debts Recovery Tribunal when it passed the said order and, therefore, cannot be bound by the said order. Even otherwise, the said order cannot preclude Kotak Mahindra Bank from filing an application for substitution of its name in the recovery certificate. Kotak Mahindra Bank was not a party in the said application and had not been heard by the Debts Recovery Tribunal when it passed the said order and, therefore, cannot be bound by the said order. Even otherwise, the said order cannot preclude Kotak Mahindra Bank from filing an application for substitution of its name in the recovery certificate. 33. There is, therefore, no merit in this petition. It is, accordingly, dismissed. 3. We are informed by learned Counsel appearing for the petitioners, that a SLP was filed against the judgment in the Supreme Court of India, which was withdrawn by the petitioners. 4. The Kotak Mahindra Bank in the meanwhile as assignee of the loan initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) after giving notice to the petitioner on 19.3.2013 for recovery of the outstanding amount with interest of Rs. 35,16,91,250/-. An application was filed u/s 14 to the District Magistrate, Allahabad, who has passed an order on 24.6.2013 directing the delivery of possession of the mortgaged property namely house No. 17/23 Kamla Nehru Road, Allahabad area 4888.94 square metres to the Bank. The District Magistrate directed the Deputy Inspector General of Police, Allahabad and the Additional City Magistrate (1st), Allahabad as well as Inspector General of Police, Allahabad to provide sufficient police force for peaceful delivery of the possession of the property. 5. The petitioners have challenged the notice issued by Kotak Mahindra Bank under the SARFAESI Act by filing an application u/s 17 in Debt Recovery Tribunal. The application is pending and in which an adjournment was sought to file this writ petition challenging the assignment of the loan to Kotak Mahindra Bank. 6. Shri Ajai Bhanot has pressed following grounds in support of the prayers made in the writ petition: A. Because Hon’ble Supreme Court in the case of Express Newspapers Pvt. Ltd. and Others Vs. Union of India (UOI) and Others, AIR 1986 SC 872 , has clearly held that ‘fraud vitiates all transactions known to the law however high a degree of solemnity’. This principle of law has been subsequently followed by Hon’ble Supreme Court as well as many other Courts in the country, time and again. Union of India (UOI) and Others, AIR 1986 SC 872 , has clearly held that ‘fraud vitiates all transactions known to the law however high a degree of solemnity’. This principle of law has been subsequently followed by Hon’ble Supreme Court as well as many other Courts in the country, time and again. B. Because various High Courts in the country (Gujarat High Court, Delhi High Court and Lucknow Bench of this Hon’ble High Court) have clearly found and noted the mischief and fraud played by respondent Nos. 1 and 2, who are also guardian of public money and passed orders quashing the deeds of assignment involved therein C. Because admittedly the Deed of Assignment was for Rs.1.10 crore but in the letter dated 19.3.2013 the Kotak Mahindra Bank raised a demand of Rs.35 crores which is completely irrational and arbitrary. It is to be noted that the Deed of Assignment was executed in the year 2006, in relation to a loan account which was allegedly became irregular in the year 1986, and the maximum amount involved was Rs.87,83,973.88. However, within a period of seven years the said amount/demand has been raised to more than Rs.35 crores which itself shows that the letter dated 19.3.2013 has been passed mechanically and in an arbitrary manner. This approach of the Kotak Bank clearly shows that the only intention is to recover money by exaggerating the amount involved by harassing the genuine clients. D. Because both respondent Nos. 1 and 2 have deliberately suppressed the fact that the deed of assignment dated 29.3.2006 is not a registered document nor is property stamped. Therefore, this document is void and has no legal sanctity. E. Because various High Courts in the country have held that the deed of assignment is a compulsorily document and non-registration of the same has resulted in quashing of that document. Therefore, the deed of assignment in question dated 29.3.2006 is liable to be quashed. F. Because despite of the order of learned DRT, Allahabad dated 22.5.2008 directing the Kotak Bank to provide account details and the details as to how the figure of OTS has been arrived at, no steps have been taken by both the respondent Banks. Further, an irrational demand of Rs.35 crores has been raised without even giving the details. 7. F. Because despite of the order of learned DRT, Allahabad dated 22.5.2008 directing the Kotak Bank to provide account details and the details as to how the figure of OTS has been arrived at, no steps have been taken by both the respondent Banks. Further, an irrational demand of Rs.35 crores has been raised without even giving the details. 7. It is submitted by Shri Ajai Bhanot that the questions raised in the writ petition, namely the quashment of the assignment of the loan to Kotak Mahindra Bank on the grounds that the assignment deed is insufficiently stamped and is not registered, cannot be decided by the Debt Recovery Tribunal and thus he has rushed to the High Court to seek reliefs against the proceedings of recovery under the provisions of SARFAESI Act. 8. Mr. Om Prakash Misra, appearing for Kotak Mahindra Bank submits that the question of assignment of loan to Kotak Mahindra Bank and all other connected issues, which were raised, were decided on 3.9.2012 by learned Single Judge in Writ Petition No. 38143 of 2012 between the parties. He submits that the questions now raised are barred by constructive res judicata. The decision of Kotak Mahindra Bank to adopt proceedings under the SARFAESI Act would not make any difference as the recovery is being challenged on the same grounds, which were raised and decided between the parties, when the proceedings were pending in the suit filed by Kotak Mahindra Bank in Debts Recovery Tribunal. Any new ground of challenge against recovery would be barred by constructive res judicata as such ground could or ought to have been raised in the earlier writ petition. 9. Mr. Om Prakash Misra also submits that the reliance on the judgment of Gujarat High Court is not valid inasmuch as the judgment was set aside by the Supreme Court in ICICI Bank Limited Vs. Official Liquidator of APS Star Industries Ltd. and Others, AIR 2011 SC 1521 , Civil Appeal No. 8393 of 2010 decided on September 30, 2010 of which the conclusions in Paras 23 and 24 are quoted as below: 23. As stated above, by the impugned judgment, the Division Bench of the Gujarat High Court upheld the order of the Company Court only on one ground, namely, assignment of debts by the Banks inter se is an activity which is impermissible under the Banking Regulation Act, 1949. As stated above, by the impugned judgment, the Division Bench of the Gujarat High Court upheld the order of the Company Court only on one ground, namely, assignment of debts by the Banks inter se is an activity which is impermissible under the Banking Regulation Act, 1949. However, the Division Bench did not go into other issues which arose for determination before the Company Court, including applicability of the provisions of the Registration Act, 1908. 24. In the circumstances, we set aside the impugned judgment(s) on the question of assignment of debts as an activity permissible under the Banking Regulation Act, 1949. However, we remit these matters to the Division Bench of the High Court(s) for consideration of other issues raised in this batch of cases. Subject to above, the impugned judgments) is set aside and the civil appeals are allowed with no order as to costs. 10. Mr. Om Prakash Misra further submits that not only the deed of assignment has been properly stamped, the deed is also registered in the office of Sub-Registrar, Ahmedabad, and in any case these questions could be raised in the writ petition, which was decided by this Court inter-party on 3.9.2010. He submits that this is the 11th writ petition between the parties in respect of the same loan in the High Court unsuccessfully filed by the petitioners. 11. In Mardia Chemicals Ltd. Vs. Union of India (UOI) and Others Etc. Etc., AIR 2004 SC 2371 , the Supreme Court upheld the constitutional validity of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) as well as Security Interest (Enforcement) Rules, 2002, except the deposit of 75% as pre-condition of filing the appeal in Debts Recovery Tribunal u/s 17 of the Act. It was held that the proceedings u/s 17 are not an appellate proceedings but rather an initial action, which is brought before a forum prescribed under the Act and is like a suit under the CPC in the Court of first instance. 12. In Transcore Vs. Union of India (UOI) and Another, AIR 2007 SC 712 , following Mardia Chemical’s case the Supreme Court held that it was not necessary to withdraw the DRT application before proceeding under the SARFAESI Act (NPA Act). 12. In Transcore Vs. Union of India (UOI) and Another, AIR 2007 SC 712 , following Mardia Chemical’s case the Supreme Court held that it was not necessary to withdraw the DRT application before proceeding under the SARFAESI Act (NPA Act). The object behind both Section 13 of the SARFAESI Act, and Section 17 read with Section 19 of the DRT Act is the same, namely for the recovery of debts. There is no inherent or implied inconsistency between the remedies provided under the two Acts. 13. In United Bank of India Vs. Satyawati Tondon and Others, AIR 2010 SC 3413 , the Supreme Court reminded the High Court not to interfere with the proceedings under the SARFAESI Act, in view of alternative remedy provided u/s 17(1) of the Act, in which expression ‘any person’ includes even guarantor or any other person, who may be affected by the action taken u/s 13(4) or Section 14 of the Act. 14. In Indian Bank Vs. Blue Jaggers Estates Ltd. and Others, AIR 2010 SC 2980 the Supreme Court did not interfere with 19.89% agreed interest with quarterly rest, on the grounds that it is unconscionable, ex-proprietary and contrary to law, and held that when the agreement has been signed with open eyes and was abided with upto the time, when the defaults were made, the Bank rightly initiated action under the SARFAESI Act. 15. In Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, (2010) 1 BC 698 decided on February 7, 2011, the Supreme Court once again cautioned the High Courts not to interfere in such matters under Article 226 of the Constitution of India. 16. We find that the petitioners have already approached the Debts Recovery Tribunal u/s 17 of the SARFAESI Act and that the questions raised and the objections to such questions, can be considered by the Debts Recovery Tribunal in the pending proceedings. We do not agree with the contention of Shri Ajay Bhanot that the relief of quashment of the deed of assignment cannot be considered by the Debts Recovery Tribunal. It can be raised as a ground of challenge subject to objections of the plea of constructive res judicata taken by the Bank. 17. We do not agree with the contention of Shri Ajay Bhanot that the relief of quashment of the deed of assignment cannot be considered by the Debts Recovery Tribunal. It can be raised as a ground of challenge subject to objections of the plea of constructive res judicata taken by the Bank. 17. The petitioners are already pursuing the remedies against the proceedings under the SARFAESI Act drawn by Kotak Mahindra Bank in Debt Recovery Tribunal and thus we do not propose to interfere in the matter. The writ petition is dismissed.