Gujarat State Financial Corporation v. Debt Recovery Tribunal, Ahmedabad
2022-04-05
BHARGAV D.KARIA
body2022
DigiLaw.ai
JUDGMENT : 1. Leave to amend the prayer clause. 2. Heard learned advocate Mr. S.M.Gohil for the petitioner and learned advocate Ms.Harshada K. Darji for respondent Nos. 2-5, 6.1-6.3, 7 and 8. 3. Rule returnable forthwith. Learned advocate Ms. Harshada Darji for respondents waives service of notice of rule. Though served, no one appears for respondent Nos. 1 and 9 to 11 and therefore, rule is not required to be served upon them. 4. By this petition under Article 227 of the Constitution of India the petitioner has prayed for the following reliefs: “a. This Hon’ble Court be pleased to admit and allow the present application; B. This Hon’ble Court be Pleased to Issue a Writ in the nature of Certiorari and/or any other appropriate writ, Order and/or Direction quashing an setting aside the Order dated 21/08/2019 below Exhibit 08 passed by the Hon’ble Debts Recovery Tribunal-II, Ahmedabad - the Respondent no. 1 in Securitisation Application No. 353 of 2018 qua the direction to pay Rs. 50,000/- only; C. That pending hearing and Final disposal of the to present Petition, this Hon’ble Court be pleased to Stay the Implementation of the Order dated 21/08/2019 below Exhibit 08 passed by the Hon’ble Debts Recovery Tribunal - II Ahmedabad - the Respondent no. 1 in Securitisation Application No. 353 of 2018 qua the direction to pay Rs. 50,000/- only; D. That Bx Parte Ad-Interim Reliefs in terms of Para C above may kindly be granted and confirmed after notice to the Respondents; E. Be pleased to pass any such further other reliefs that in the facts and circumstances, may be deemed fit in the interests of justice. 5. Brief facts of the case are that the petitioner sanctioned loan of Rs. 63.10 lacs in the year 1993 to respondent No.2. The respondent No.2 defaulted in making payment and therefore, the petitioner initiated proceedings under sections 13 and 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [‘SARFESAI Act’ for short]. The respondents-thereafter preferred Securitization Application No. 353 of 2018 before the Debt Recovery Tribunal (‘Tribunal’ for short). 6. According to the petitioner the initiation of proceedings under the SARFESAI Act, was riddled with bone fide technical errors for service of notice upon the dead person which was not within the knowledge of the petitioner. 7.
The respondents-thereafter preferred Securitization Application No. 353 of 2018 before the Debt Recovery Tribunal (‘Tribunal’ for short). 6. According to the petitioner the initiation of proceedings under the SARFESAI Act, was riddled with bone fide technical errors for service of notice upon the dead person which was not within the knowledge of the petitioner. 7. The petitioner therefore sought permission before the Tribunal to withdraw the notice issued under section 13(2) of the SARFESAI Act. 8. The Tribunal passed the following order on 12.09.2019: “Ms. Harshada’ Darji, Ld. Counsel for Applicant. Shri V.N. Sevak Ld. counsel for Respondent bank. Counsel for the Respondent Financial Institution submitted that Respondent Financial Institution intends to withdraw its Securitisation process owing to some technical reasons. Whereas counsel for the Applicant strongly opposed the contentions raised on behalf of Respondent Financial Institution and submitted that the Respondent Financial Institution has no right to proceed against Applicants -in this loan account as action of Respondent Financial Institution has become barred by limitation. I have considered the rival contentions of both the parties as Respondent Financial Institution intends to withdraw its Securitisation process in its own discretion, practically this Securitisation - Application has become infructuous. If law permits Respondent Financial Institution may proceed in accordance with law subject to all legal and factual rights of Applicants to Challenge and question validity of said process including limitation. Respondent Financial Institution is directed not to debit any expenses incurred on withdrawn process in the account of borrower. Further apart from above Respondent Financial Institution is directed to pay Rs. 50,000/-that is half of the court fee paid by the Applicants to them to compensate the Applicants regarding expenses incurred for filing this Securitisation Application before proceeding further. This Securitisation Application is accordingly disposed off. Let copies be supplied as per rules.” 9. The petitioner is aggrieved by the aforesaid order directing the petitioner to pay Rs. 50,000/- i.e. half of the Court fees paid by the respondents-borrowers as compensation towards expenses for filing Securitization Application before proceeding further. 10. Learned advocate Mr. Gohil appearing for the petitioner submitted that the Tribunal could not have directed the petitioner to pay Rs.
The petitioner is aggrieved by the aforesaid order directing the petitioner to pay Rs. 50,000/- i.e. half of the Court fees paid by the respondents-borrowers as compensation towards expenses for filing Securitization Application before proceeding further. 10. Learned advocate Mr. Gohil appearing for the petitioner submitted that the Tribunal could not have directed the petitioner to pay Rs. 50,000/- as compensation to the borrowers as being the one half of the Court fees before proceeding further in absence of any provision under the SARFESAI Act giving jurisdiction to the Tribunal to pass such order of payment of Rs. 50,000/- by the financial institution to the borrower. 11. It was submitted that section 19 of the SARFESAI Act authorizes the Tribunal to pass an order of compensation if the Tribunal holds that the possession of the secured assets by the secured creditor is not in accordance with the provisions of the SARFESAI Act and the Rules made thereunder. 12. Therefore it was submitted that there is no provision under the SARFESAI Act giving jurisdiction to the Tribunal to direct the Financial Institution to pay any compensation if the procedure under the SARFESAI Act is withdrawn by the Financial Institution during the pendency of the Securitization Application. 13. On the other hand learned advocate Ms. Darji raised preliminary objection with regard to maintainability of this petition in view of the alternative efficacious remedy available under section 18 of the SARFESAI Act as the petitioner is aggrieved by the order passed by the Tribunal and therefore, the petitioner is required to approach the Tribunal Appellate Tribunal. 14. Reliance was placed on the decision of the Hon’ble Supreme Court in case of United Bank of India Vs Satyawati Tondon and others. reported in AIR 2010 SC 3413 . 15. It was submitted that as per the provisions of section 19 of the SARFESAI Act, compensation can be paid to the borrower as the petitioner had taken symbolic possession as per the possession notice dated 30.06.2017. It was therefore submitted that the order passed by the Tribunal is legal and valid as the petitioner himself has withdrawn the notice issued under the SARFESAI Act. 16. Learned advocate Ms.
It was therefore submitted that the order passed by the Tribunal is legal and valid as the petitioner himself has withdrawn the notice issued under the SARFESAI Act. 16. Learned advocate Ms. Darji further relied upon the following averments made in the affidavit-in-reply filed on behalf of the respondent-borrowers: “(d) The Respondent further states that the Petitioner has made various false, misconceived and vexatious allegations in the subject petition which are without any merit and substance. The issuance of the fresh notice u/s. 13(2) after the expiry of period of limitation and demanding the alleged outstanding amount of about Rs.24,79,31,534/- as against the alleged sanctioned of Rs. 63,10,000/in the year 1994 and that too, after giving credit of Rs. 30,14,786/- (this sale amount is very less compared to its value at that point of time on 20.03.2002) recovered from the sale of alleged mortgaged property of the Respondent No.2 and the subsidy of Rs. 17,50,000/as well as deposit of about 15 lakhs by the Respondents from time to time. The Respondent further submits that Petitioner is seeking recovery in crores as against peanuts sanctioned amount though almost the entire amount was recovered at that time and now making hue and cry over the cost of Rs. 50,000/- levied by the Hon'ble Tribunal. This writ petition is just an attempt to cause delay in payment the cost imposed by the Hon'ble Tribunal. Hence the subject petition be dismissed with heavy cost. 4. It is most respectfully submitted that the Order dated 21.08.2019 is perfect, legal and justifiable. It is in fact in the public interest also that Petitioner cannot keep on issuing the fresh notice u/s, 13 (2) of the SARFAESI Act every year at their whims and wishes. In fact, the Petitioner do not have any locus - standi to file the subject Petition and the principles of equity and justice are required to be Protected, by rejecting the subject Petition.” 17. It was also pointed out that section 37 of the SARFESAI Act refers to the applicability of the Recovery of Debts and Bankruptcy ACT, 1993 (for short ‘Act, 1993’)in the proceedings under the SARFESAI Act and as per sub-section (25) of section 19 of Act, 1993 the Tribunal has inherent powers to pass an order to secure the ends of justice.
It was therefore submitted that as the petitioner has realized that the proceedings under the SARFESAI Act is not maintainable in view of the technical errors, as per the petitioner, the same were sought to be withdrawn with liberty to initiate fresh proceedings and therefore, the Tribunal has rightly passed the impugned order awarding compensation of Rs. 50,000/- to the borrowers- applicants before the Tribunal. 18. It was therefore, submitted that no interference is required to be made while exercising extraordinary powers under Article 227 of the Constitution of India. 19. Having heard the learned advocates for the respective parties, it appears that the Tribunal has exercised the jurisdiction not vested in it and therefore, this petition is entertained under Article 227 of the Constitution of India in view of the decision of the Supreme Court in case of Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai reported in (1998) 8 SCC 1 wherein it is held as under: “14. The power to issue prerogative writs under Article 226 of the Constitution if plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for “any other purpose. 15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.
There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the filed.” 20. The Hon’ble Supreme Court has also in case of Commissioner of Income Tax vs. Chhabil Dass Agarwal reported in (2014) 1 SCC 603 held as under: “15.Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy, i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titagarh Paper Mills case and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.” 21. In view of the above legal position, the preliminary objection raised on behalf of the respondents-borrowers is not tenable. 22. The impugned order passed by the Tribunal is challenged only qua imposition of cost of Rs. 50,000/- upon the petitioner. The Tribunal can award the compensation under section 19 of the SARFESAI Act which reads as under: “19.
In view of the above legal position, the preliminary objection raised on behalf of the respondents-borrowers is not tenable. 22. The impugned order passed by the Tribunal is challenged only qua imposition of cost of Rs. 50,000/- upon the petitioner. The Tribunal can award the compensation under section 19 of the SARFESAI Act which reads as under: “19. Right of borrower to receive compensation and costs in certain cases.— If the Debts Recovery Tribunal or the Court of District Judge, on an application made under section 17 or section 17A or the Appellate Tribunal or the High Court on an appeal preferred under section 18 or section 18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the 2 [concerned borrowers or any other aggrieved person, who has filed the application under section 17 or section 17A or appeal under section 18 or section 18A, as the case may be, the borrower or such other person] shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in section 18B.” 23. Section 19 comes into operation on adjudication of the application by the Tribunal under section 17. The adjudication as provided in sub-section (3) of section 17 of the SARFESAI Act reads as under: “17.
Section 19 comes into operation on adjudication of the application by the Tribunal under section 17. The adjudication as provided in sub-section (3) of section 17 of the SARFESAI Act reads as under: “17. Application against measures to recover secured debts:- … … … … … (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,— (a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and (b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and (c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.” 24. After adjudication under sub-section (3) of section 17, right of borrowers to receive compensation and costs arises as per section 19 if the Tribunal holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of the Act and the Rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers. In the facts of the present case, the petitioner- Financial Institution voluntarily has withdrawn the proceedings under the SARFESAI Act and therefore, there is no adjudication by the Tribunal that the possession of the secured assets was not in accordance with the provisions of the Act and the Rules made thereunder. 25. A contention is raised on behalf of the respondent-borrowers that the provision of section 37 of the SARFESAI Act is in addition to the provisions of the RDDB Act, 1993 and therefore sub-section (25) of section 19 would be applicable in the facts of the case. Subsection (25) of Section 19 reads as under: “19.
25. A contention is raised on behalf of the respondent-borrowers that the provision of section 37 of the SARFESAI Act is in addition to the provisions of the RDDB Act, 1993 and therefore sub-section (25) of section 19 would be applicable in the facts of the case. Subsection (25) of Section 19 reads as under: “19. Application to the Tribunal:- (25) The Tribunal may made such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.” 26. On perusal of the above provision, it is clear that the Tribunal may make such orders and give directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice under sub-section (25) of section 19. However, the Tribunal cannot pass an order of compensation while invoking subsection (25) of section 19. Learned advocate Mr. Gohil for the petitioner in this context has placed reliance upon the decision of the Apex Court in case of Standard Chartered Bank vs. Dharminder Bhohi and others reported in (2013) 15 SCC 341 wherein the Apex Court in context of inherent powers of the Tribunal under section 19(25) held as under: “29. Presently to the spectrum of jurisdiction. Section 17 of the SARFAESI Act allows any person, including a borrower, aggrieved by any of the measures referred to in sub- section (4) of section 13 taken by secured creditor to submit an application to the DRT having jurisdiction in the manner within 45 days from the date of such measures have been taken. Subsection (3) of Section 17 empowers the DRT to question the action taken by the secured creditor and the transaction entered into by virtue of Section 13(4) of the SARFAESI Act. It has been held in Ashok Saw Mill (supra) that the legislature by virtue of incorporation of sub-section (3) in Section 17 has gone to the extent of vesting the DRAT with authority to set aside a transaction including sale and to restore possession to the borrower in appropriate cases. Section 18 of the SARFAESI Act makes provision for an appeal to the appellate authority from any order made by the Debts Recovery Tribunal.
Section 18 of the SARFAESI Act makes provision for an appeal to the appellate authority from any order made by the Debts Recovery Tribunal. The Debts Recovery Tribunal, needless to say, has the same jurisdiction as conferred under Section 17 of the RDB Act. 30. In this context, Section 19 of the SARFAESI Act is worth reproducing:- “19. Right of borrower to receive compensation and costs in certain cases. – If the Debts Recovery Tribunal or the Court of District Judge, on an application made under section 17 or section 17A or the Appellate Tribunal or the High Court on an appeal preferred under section 18 or section 18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in section 18B.” 31. We have reproduced the aforesaid section to point out that the legislature has brought in this provision by way of substitution by Act 30 of 2004 with effect from 11.11.2004 to confer jurisdiction on the DRT and DRAT to entertain a plea of the borrower for grant of compensation and costs. 32. At this juncture, we may clarify that we do not intend to dwell upon the subtle distinction between the compensation and damages as canvassed at the Bar as that is not needed in this case. The thrust of the matter is whether DRAT has the jurisdiction to grant any liberty and, more so, in a case when the borrower and the auction purchaser have entered into a compromise. As has been stated earlier, the bank was not a party to the compromise. 33. Section 19 of the RDB Act, occurring in Chapter IV of the Act, deals with procedure of tribunals.
As has been stated earlier, the bank was not a party to the compromise. 33. Section 19 of the RDB Act, occurring in Chapter IV of the Act, deals with procedure of tribunals. Sub-section (25) of Section 19 reads as follows: - “(25) The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.” The aforesaid provision makes it quite clear that the tribunal has been given power under the statute to pass such other orders and give such directions to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. Thus, the tribunal is required to function within the statutory parameters. The tribunal does not have any inherent powers and it is limpid that Section 19(25) confers limited powers. 34. In this context, we may refer to a three-Judge Bench decision in Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi) Saharanpur Light Rly. Co. Ltd., wherein it has been held that when the tribunal has not been conferred with the jurisdiction to direct for refund, it cannot do so. The said principle has been followed in Union of India v. Orient Paper and Industries Limited.” 27. In view of the above conspectus of law, the Tribunal has exceeded its jurisdiction by awarding compensation by directing the petitioner to pay Rs. 50,000/- being one half of the Court fees paid by the borrowers for filing Securitization Application before proceeding further as the same would not be within the domain of the Tribunal as the Tribunal has limited jurisdiction. 28. For the foregoing reasons, the petition is allowed and the impugned order of the Tribunal which directs the petitioner-Bank to pay Rs. 50,000/- before proceeding further to the borrowers is hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to cost.