Research › Search › Judgment

Rajasthan High Court · body

2016 DIGILAW 967 (RAJ)

Parmeshwar Agrwal v. State Bank of India

2016-07-08

ARUN BHANSALI

body2016
JUDGMENT : Mr. Arun Bhansali, J. 1. This writ petition has been filed by the petitioners aggrieved against pre-possession notice dated 15.03.2014, demand notice dated 10.12.2013 and order dated 26.03.2014 passed by the Debts Recovery Tribunal, Jaipur (‘DRT’) and seeking further directions to the respondent Bank to restructure the outstanding amount calculated after undertaking the thorough exercise in a fair, transparent and objective manner relating to rate of interest, which is to be charged in respect of all the three accounts of petitioners. 2. The petitioner Nos.1 to 5 are guarantors/mortgagors in connection with the credit facilities availed by petitioner No.6 - PC Care 247 Solutions Pvt. Ltd. from respondent-Bank. It is claimed in the writ petition that petitioner No. 6 Company falls under Small and Medium Enterprises (‘SME’) Sector and, therefore, entitled to protection available under MSMED Act, 2002 and directions/guidelines issued by Reserve Bank of India from time to time; in respect of the credit facilities granted to the Company the petitioner Nos.1 to 5 received communication dated 10.12.2013 under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’), wherein, a demand for Rs. 3,60,36,513.72 P. as on 09.12.2013 was made. A reply dated 30.12.2013 to the notice was submitted and the liability set out by the Bank was denied. The reply given by the petitioners was rejected by communication dated 02.01.2014 and a possession notice dated 18.02.2014 was issued, against which, petitioners preferred a Securitisation Application (‘the S.A.’) under Section 17 of the SARFAESI Act before the DRT. 3. After filing of the S.A., the respondents on 26.02.2014 withdrew the possession notice dated 18.02.2014 and thereafter again issued notice dated 15.03.2014 titled pre-possession notice calling upon the petitioner to hand over possession by 31.03.2014 and threatening that if the possession was not handed over, on or after 02.04.2014 the same shall be taken over and police authorities were also informed in this regard. 4. The petitioners filed application before the DRT seeking amendment in the S.A. in order to challenge the subsequent notice dated 15.03.2014. 5. The respondent Bank had also filed an application for dismissal of the S.A. alleging the same to be merit less and premature, which application was opposed by the petitioners. 6. 4. The petitioners filed application before the DRT seeking amendment in the S.A. in order to challenge the subsequent notice dated 15.03.2014. 5. The respondent Bank had also filed an application for dismissal of the S.A. alleging the same to be merit less and premature, which application was opposed by the petitioners. 6. The DRT by its order dated 26.03.2014 (Annexure-19) took up the application filed by the Bank first and on account of withdrawal of possession notice dated 18.12.2014, while imposing cost of Rs. 1,00,000/-, disposed of the securitisation application in terms of the said order and noticing that as the S.A. has been disposed of, dismissed the application for amendment as having become infructuous. 7. The petitioners have thereafter made submissions regarding proposals for reasonable realization of the outstanding to the Bank and besides questioning the action of the DRT in dismissing the securitization application filed by the petitioners, have questioned the very issuance of the pre-possession notice and have sought relief regarding the outstanding indicated by the Bank. 8. During pendency of the writ petition, by order dated 02.04.2014 a Co-ordinate Bench of this Court directed the respondent Bank not to take any coercive action pursuant to the pre-possession notice dated 15.03.2014 on petitioners depositing Rs. 50 lakhs with the Bank and further undertaking regarding deposit of the refunded amount of service tax; where after in response to the various submissions made during the pendency of the writ petition and more specifically the circulars issued by the Reserve Bank of India pertaining to the wilful defaulters and emphasis laid by counsel for the petitioners regarding directions of the Reserve Bank to put in place loan policies governing extension of credit facilities, Restructuring/Rehabilitation policy for revival of potentially viable sick unit/enterprises and non-discretionary One Time Settlement Scheme for recovery of non-performing loans for the MSE Sector, with the approval of the Board of Directors as contained in Clause 4.14.6 of the Circular dated 01.07.2013 (Annexure-2). 9. Further submissions were made regarding various proposals made by the petitioners during the pendency of the writ petition and the fact that during pendency of the writ petition, the petitioners have besides complying with the interim order of this Court has based on its unilateral proposal paid a substantial amount towards the outstanding. 10. 9. Further submissions were made regarding various proposals made by the petitioners during the pendency of the writ petition and the fact that during pendency of the writ petition, the petitioners have besides complying with the interim order of this Court has based on its unilateral proposal paid a substantial amount towards the outstanding. 10. The respondent Bank in its submissions in response has disputed and refuted the submissions made on behalf of the petitioners and the emphasis laid is that as the petitioner Company/its guarantors are in a position to otherwise pay the outstanding, they are not entitled to be offered any one time settlement by the respondent Bank and various proposals made by them have been rejected on account of their financial capacity to repay the entire outstanding. 11. Learned counsel for the petitioners submitted that in view of the law laid down by Hon’ble Supreme Court in Sardar Associates and Ors. v. Punjab & Sind Bank & Ors. (2009) 8 SCC 257 the Tribunal and the Appellate Tribunal can enforce the guidelines of RBI while exercising powers under SARFAESI Act and the RBI is entitled to issue guidelines from time to time and such guidelines are bound to be followed by the Banks. It is submitted that the action of the respondents in not following the guidelines and refusing to offer one time settlement despite the directions of the RBI as contained in Circular dated 01.07.2013, cannot be sustained. 12. It was further submitted that the petitioners had questioned the issuance of possession notice dated 18.02.2014, which was withdrawn by letter dated 26.02.2014 and subsequent thereto pre-possession notice dated 15.03.2014 was issued to the petitioners qua which the petitioners filed application seeking amendment in the pending application under Section 17 of the SARFAESI Act, however, the DRT instead of first dealing with the application seeking amendment, chose to dismiss the S.A. on account of withdrawal of the notice and rejected the application seeking amendment as infructuous, which procedure is wholly illegal and has resulted in grave injustice to the petitioners. 13. 13. It was submitted that from the conduct of the petitioners prior to filing of the petition, wherein, on account of difficult business circumstances, the petitioners defaulted in making payment of the dues of the Bank and during pendency of the present writ petition, wherein, the petitioners on account of interim order granted by this Court have made substantial payment, the attitude of the respondent Bank in repeatedly rejecting the petitioners’ proposal for offering one time settlement is contrary to the various Circulars issued by the RBI including Circulars dated 01.07.2015 as well as the Circular relied on by the Bank dated 01.07.2014. It is emphasized by learned counsel that the refusal of the Bank on account of alleged capacity of petitioner Nos.1 to 5, who are guarantors to make payment of the outstanding dues cannot by itself be a reason for refusing to offer one time settlement, which policy of the Bank is ex facie contrary to the specific directions issued by the RBI. 14. It was prayed that the order passed by the DRT be set aside and as now the entire subject matter of the dispute is before this Court, the pre-possession notice dated 15.03.2014 and demand notice dated 10.12.2013 itself be quashed and the Bank be directed to restructure outstanding amount based on one time settlement scheme and/or the proposals put forward by the petitioners. 15. Vehemently opposing the submissions, learned counsel for the respondent Bank submitted that the submissions made by the petitioners other than questioning the order of the DRT are ex facie beyond the scope of the writ petition as the petitioners have failed to make out any case for mandamus regarding providing for one time settlement scheme for SME even for cases of substandard debts, which is claimed to be the case of the petitioners; a sum of Rs. 1.47 lakhs is still outstanding in the petitioners and it is not open for the petitioners to question the liability as the petitioners have already failed to raise any issue in this regard in its response to the notices issued; it was further submitted that even otherwise mandamus cannot be sought without issuance of prior notice, which the petitioners have failed to give. 16. 16. The judgment in the case of Sardar Associates (supra) was sought to be distinguished with reference to the Circular that there is no direction by the RBI in this regard. 17. Another objection was raised that appeal should have been filed by the petitioners against the order passed by the DRT, if the petitioners are aggrieved against the said order. 18. In rejoinder, learned counsel for the petitioners submitted that petitioners have raised ground F and prayer 4 qua the Circulars issued by the RBI and in the application before the DRT, similar reliefs were sought. Regarding the alternative remedy, it was submitted that the Court having considered the submissions on merit, the objection of alternative remedy cannot be sustained, the remedy of appeal was not efficacious, inasmuch as, the DRT rejected the pending proceedings on 26.03.2014 and 30 and 31st March were Saturday and Sunday and as the petitioners were threatened dispossession through Police, the remedy of appeal was rendered meaningless and, therefore, this Court was approached; it was further submitted that petitioners’ settlement proposal was pending, counter proposal was given by the Bank and in view of the provisions of various Circulars pertaining to wilful defaulters, which provides for OTS for all NPAs, the writ petition deserves to be allowed. 19. I have considered the submissions made by learned counsel for the parties and have perused the material available on record. 20. It is not in dispute that in the securitisation application filed by the petitioners under Section 17 of the SARFAESI Act before the DRT, petitioners had challenged the notice dated 10.12.2013 under Section 13(2) of the SARFAESI Act and possession notice dated 18.02.2014. The possession notice dated 18.02.2014 was withdrawn by letter dated 26.02.2014 (Annexure-14) and a fresh pre-possession notice dated 15.03.2014 (Annexure-15) was issued. The petitioners sought amendment of the pending application under Section 17 of the SARFAESI Act seeking to challenge the validity of pre-possession notice dated 15.03.2014 as well. Another application was filed by the Bank seeking dismissal of the S.A. on account of withdrawal of the possession notice, to which, the petitioners filed a detailed reply on account of subsequent developments. 21. The DRT by its order dated 26.03.2014 while rejecting the S.A. on account of withdrawal of possession notice, dismissed the application seeking amendment as having been rendered infructuous. The order dated 26.03.2014 reads as under:- 22. 21. The DRT by its order dated 26.03.2014 while rejecting the S.A. on account of withdrawal of possession notice, dismissed the application seeking amendment as having been rendered infructuous. The order dated 26.03.2014 reads as under:- 22. “The Applicant has filed the above S.A. on 24.02.2014 for quashing the demand notice dated 10.12.2013 and possession notice dated 18.02.2013. 23. As per Section 17(1) of SARFAESI Act, 2002, A person aggrieved by any of the measures referred to in Sub Section 4 of Section 13 taken by the secured creditor or his authorised officer under this chapter may make an application along with such fee as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within 45 days from the date of such measure had been taken. 24. The applicant has challenged the possession notice dated 18.02.2013, which is one of the measures U/s 13(4) of SARFAESI Act, 2002. The Respondent Bank has during pendency of the S.A. has filed one I.A. No.101/14 in the S.A. No.27/2014 and submitted that it has withdrawn the possession notice dated 18.02.2014 vide letter dated 26.2.2014 and therefore, no cause of action subsists to the Applicant and therefore, the S.A. filed by the Applicant may be dismissed with cost. 25. The counsel for the Applicant opposes the said I.A. and submits that during the pendency of the S.A. when the measures U/s 13(4) i.e. possession notice dated 18.02.2014 is under examination, the Bank cannot unilaterally withdraw the possession notice dated 18.2.2014. 26. I am of the considered view that the Respondent Bank can withdraw the possession notice dated 18.2.2014 at any time, therefore, I allow the I.A. As the Respondent Bank has withdraw the possession notice dated 18.2.2014 vide letter dated 26.02.2014 after filing of the S.A. on 24.02.2014, the Respondent Bank is liable to pay the cost of the S.A. I, therefore, impose a cost of Rs. 1.00 Lac on the Respondent Bank to be paid to the Applicant and the S.A. is disposed of in terms of the above order. As the S.A. has been disposed of the I.A. No. 123/2014 filed by the Applicant for amendment of the S.A. has become infructuous. 27. This S.A. is disposed of accordingly. Copy of the order be given free to both the parties. File be put up before the Registrar for compliance. After compliance file be consigned to record.” 28. As the S.A. has been disposed of the I.A. No. 123/2014 filed by the Applicant for amendment of the S.A. has become infructuous. 27. This S.A. is disposed of accordingly. Copy of the order be given free to both the parties. File be put up before the Registrar for compliance. After compliance file be consigned to record.” 28. A perusal of the order reveals that the DRT without even considering the fact that subsequent to the withdrawal of possession notice dated 18.02.2014, another notice dated 15.03.2014 had been issued by the Bank, merely on account of withdrawal of the notice dated 18.02.2014, which was under challenge in the securitisation application, decided the application while imposing a cost of Rs. 1 lakhs on the respondent Bank and thereafter went on to dismiss the application seeking amendment based on subsequent developments as having been rendered infructuous. The action of the DRT in not deciding the application filed by the petitioners for amendment in the S.A., wherein, the petitioners have sought amendment on account of subsequent developments, which happened after withdrawal of the possession notice dated 18.02.2014 i.e. another prepossession notice dated 15.03.2014 was issued by the Bank and deciding the original application in ignorance of the subsequent development, cannot be sustained. 29. In a pending matter where an application is filed seeking amendment and the nature of amendment is such, which would have implication on the life of the litigation itself i.e. development of the nature, wherein, though an order under challenge has been withdrawn but another action has been initiated, it was incumbent on the DRT to first decide the application seeking amendment and then to pass the order as to whether the S.A. was rendered infructuous; if on consideration of the amendment application the DRT would have found no reason to grant amendment, the S.A. also could have been dismissed but the action of the DRT in putting the cart before the horse by first deciding the unamended petition and then dismissing the application seeking amendment is wholly illegal and against settled procedure and the same, therefore, cannot be sustained. 30. 30. So far as the merits of the amendment application filed by the petitioners is concerned, admittedly the petitioners had questioned the validity of the possession notice dated 18.02.2014 on account of its principal challenge to the demand notice dated 10.12.2013 and the pre-possession notice dated 15.03.2014 was also issued based on the demand notice dated 10.12.2013 only and, therefore so far as the principal challenge of the petitioners was concerned, the same continued before the DRT and as on account of submissions of learned counsel for the respondent Bank as technically the notice dated 18.02.2014 was not incorrect on account of issuance without giving prepossession notice, the same was withdrawn and a fresh notice dated 15.03.2014 was issued, the application seeking amendment, deserves acceptance. The said determination has been made as no useful purpose would be served in remanding the matter to the DRT to first decide the application for amendment and then decide the S.A. filed by the petitioners on merits. 31. So far as the various submissions made by learned counsel for the parties regarding the applicability of the Circulars, failure on part of the respondent Bank in complying with the directions of the RBI, the various proposals moved by the petitioners and not exceeded to by the respondent Bank for the reasons disclosed by it, all those aspects in view of the law laid down by Hon’ble Supreme Court in the case of Sardar Associates (supra) can be considered by the DRT, wherein, it was specifically laid down by Hon’ble Supreme Court that besides the fact that the guidelines/circulars issued by the RBI are binding on the Bank, the same can be enforced in terms of the provisions of the Act by the DRT and, therefore, in the opinion of this Court instead of deciding the said aspects, it would be appropriate that the matter is remanded back to the DRT for considering the S.A. No. 27/2014 as amended in terms of orders passed hereinbefore by the DRT. 32. So far as the grant of interim order by this Court is concerned, it would be in the interest of justice if the interim orders granted by this Court from time to time including order dated 28.04.2016 passed on the second stay application, remains in force till the stay application is taken up by the DRT. 32. So far as the grant of interim order by this Court is concerned, it would be in the interest of justice if the interim orders granted by this Court from time to time including order dated 28.04.2016 passed on the second stay application, remains in force till the stay application is taken up by the DRT. It is expected of the DRT to deal with the matter as expeditiously as possible without in any manner getting prejudiced by either the dismissal order passed by it earlier and/or any of the observations made by this Court hereinbefore. 33. It would be open for the parties to bring on record of the DRT the events subsequent to passing of the order dated 26.03.2014 and during pendency of the present writ petition by way of appropriate applications. 34. So far as the submissions made by counsel for the respondent Bank regarding availability of alternative remedy is concerned, in view of the fact that the DRT, apparently only with a view to dispose of the S.A. pending before it, chose not to decide the application seeking amendment in the original application of the petitioners on merits, which action of the DRT has been found to be illegal and against settled procedure, the objection regarding availability of alternative remedy cannot be countenanced. It is besides the fact that the matter was decided on 26.03.2014 by the DRT and the petitioners were left with hardly any time before expiry of the last date as indicated in the notice dated 15.03.2014, the action of the petitioners approaching this Court cannot be faulted on that count. 35. In view of the above discussion, the writ petition filed by the petitioners is allowed. The order dated 26.03.2014 (Annexure-19) passed by the DRT is quashed and set aside. The S.A. No.27/2014 as amended by order of this Court passed hereinbefore is restored back to the file of the DRT and it is directed to deal with the said S.A. as expeditiously as possible in terms of the directions issued by this Court hereinbefore. It is further ordered that interim orders passed by this Court from time to time including order dated 28.04.2016 passed on the second stay application filed by the petitioners shall remain in force till the stay application is taken up by the DRT. The parties shall appear before the DRT on 18.07.2016. It is further ordered that interim orders passed by this Court from time to time including order dated 28.04.2016 passed on the second stay application filed by the petitioners shall remain in force till the stay application is taken up by the DRT. The parties shall appear before the DRT on 18.07.2016. No order as to costs.