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2023 DIGILAW 2629 (PNJ)

Vikram Malhotra v. State of Punjab

2023-08-31

LISA GILL, RITU TAGORE

body2023
JUDGMENT Mrs. Lisa Gill, J. (Oral) Challenge in this writ petition is to declaration of loan account of the petitioner as Non Performing Asset (NPA), besides notice dated 31.07.2019, under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'SARFAESI Act') as well as notice dated 05.02.2020, Annexure P-2 and notice dated 04.08.2022, Annexure P-4 and further proceedings taken under the SARFAESI Act pursuant thereto by the respondent-Financial Institution against the petitioner. 2. We heard learned counsel for the parties and went through the file as well as the documents presented in Court. 3. It is submitted that petitioner availed housing loan facility to the tune of Rs. 2,26,37,831/- on 08.05.2018, however due to some temporary deficiency in the account, it was declared NPA on 01.02.2019. Notice under Section 13(2) of the SARFAESI Act was issued by Dewan Housing Finance Limited (DHFL) (Now Piramal Capital and Housing Finance Limited). Possession notice was issued on 05.02.2020, allegedly in violation of Rule 8 (1) of the Security Interest (Enforcement) Rules, 2002 (for short 'the Rules'). Insolvency proceedings were initiated on an application by Reserve Bank of India (RBI) in its capacity as Appropriate Regulator against DHFL under the Insolvency and Bankruptcy Code, 2016 (for short 'Insolvency Code') read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority), Rules, 2019 (for short 2019 Rules). Vide order dated 03.12.2019, passed by the National Company Law Tribunal, Mumbai Bench (NCLT), moratorium as defined under Section 14 of the Insolvency Code, was directed to commence with effect from the date of application i.e., 29.11.2019. 4. Learned counsel for the petitioner vehemently argued that once insolvency proceedings had commenced and moratorium was imposed vide order dated 03.12.2019, no proceedings qua the petitioner could have been initiated by DHFL or its authorized officers as the company was no longer in existence. Therefore, any proceedings undertaken by DHFL under the SARFAESI Act are absolutely illegal and arbitrary. It is contended that notice issued on 05.02.2020, Annexure P-2 and thereafter filing of application under Section 14 of the SARFAESI Act in the name of DHFL on 15.06.2021 on the basis of which order dated 04.08.2022 was passed by respondent no.2 is unsustainable. Therefore, any proceedings undertaken by DHFL under the SARFAESI Act are absolutely illegal and arbitrary. It is contended that notice issued on 05.02.2020, Annexure P-2 and thereafter filing of application under Section 14 of the SARFAESI Act in the name of DHFL on 15.06.2021 on the basis of which order dated 04.08.2022 was passed by respondent no.2 is unsustainable. The Magistrate could not have passed the order under Section 14 of the SARFAESI Act on 04.08.2022 in favour of the DHFL. It is thus prayed that this writ petition be allowed. 5. Though, no written statement has been filed, learned counsel for respondents no.3 and 4 while repelling arguments raised on behalf of the petitioner vehemently argued that this writ petition itself is not maintainable as respondent no.4 is a private Non Banking Financial/Housing Institution. Moreover, petitioner has an efficacious alternate remedy to approach the Debt Recovery Tribunal for redressal of his grievance rather than approaching this Court by way of the present writ petition. It is further submitted that NCLT, Mumbai, had doubtlessly admitted the petition filed by the RBI against DHFL under Section 226 read with Section 39 (2) (2K) of the Insolvency Code and Rules 5 and 6 of the 2019 Rules. Reference is made to para 7.4 of order dated 03.12.2019 passed by the NCLT, Mumbai, wherein it is directed that 'on commencement of "Moratorium" the institution of any Suit or continuation of proceedings or execution of any decree against the Financial Service Provider (DHFL) shall be prohibited. Likewise, transferring, alienating or disposing of any asset of the FSP is hereby forbidden. Further, any action to foreclose, recover or enforce any security interest created by FSP in respect of its properly is also debarred. However, supply of essential goods or services to FSP shall continue uninterrupted and not to be terminated or suspended during 'Moratirum' by the supplier. As prescribed under section 14(4) of the Order of Moratorium" shall have effect till the completion of Insolvency Process". Therefore, action taken against the petitioner, it was submitted was not prohibited. 6. Learned counsel for the respondent further submitted that in terms of Rule 5 and 6 of 2019 Rules, it is provided that during pendency of interim moratorium and during process of CIRP, license or registration which authorizes the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled. 6. Learned counsel for the respondent further submitted that in terms of Rule 5 and 6 of 2019 Rules, it is provided that during pendency of interim moratorium and during process of CIRP, license or registration which authorizes the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled. Resolution plan submitted by the Piramal Capital and Housing Finance Limited was approved in the manner that reverse merger of Piramal into DHFL was allowed. Therefore, the new combined entity continued with the name of DHFL as per order dated 07.06.2021, passed by the NCLT, Mumbai. Accordingly, notice under Section 13(4) of the Act was issued by the DHFL on 25.02.2020. At the time of issuance of notice under Section 13(2) of the SARFAESI Act, there was no moratorium. Application under Section 14 of the SARFAESI Act was thereafter filed in accordance with law and order therein was passed by the Additional District Magistrate, Amritsar on 15.06.2021. It is thus contended that there is no merit in this writ petition which should be dismissed. 7. It is to be noted at this stage that Annexure P-4 is a notice dated 04.08.2022, issued by Duty Magistrate-cum-Tehsildar, Amritsar-1, and not an order under Section 14 of the SARFAESI Act passed by the District Magistrate. It is pointed out that order under Section 14 of the SARFAESI Act, passed on 15.06.2021, is not under challenge and it is the notice by Duty Magistrate-cum-Tehsildar, Amritsar, issued to the petitioner pursuant to order dated 15.06.2021, which has been challenged by the petitioner mentioning it to be an order passed by the District Magistrate. The same could not be denied by learned counsel for the petitioner. 8. Learned counsel for respondents no.3 and 4, informed that the petitioner on 06.09.2022 submitted an undertaking before the Tehsildar, Amritsar-1 to the effect that he would repay the loan amount by 10.08.2022 with most of the loan amount to be deposited by 30.09.2022. However, no amount has been deposited by the petitioner since 2019 and the only endeavour of the petitioner is to delay proceedings who otherwise does not deny his liability to deposit the amount due. Photocopy of said undertaking dated 06.09.2022 submitted by the petitioner produced at the time of hearing was taken on record subject to just exceptions. However, no amount has been deposited by the petitioner since 2019 and the only endeavour of the petitioner is to delay proceedings who otherwise does not deny his liability to deposit the amount due. Photocopy of said undertaking dated 06.09.2022 submitted by the petitioner produced at the time of hearing was taken on record subject to just exceptions. Learned counsel for respondents no.3 and 4 relies upon judgement of the Hon'ble Supreme Court in Standard Chartered Bank v. V. Noble Kumar and others, 2013(9) SCC 620 and judgement of High Court of Delhi at New Delhi in SSMP Industries Limited v. Perkan Food Processors Private Limited, (2019) 177 DRJ 473, to submit that this writ petition wherein the petitioner has been enjoying interim relief since September 2022 should be dismissed. Amount due and outstanding on 28.07.2019, as per notice under Section 13(2) of the SARFAESI Act, was Rs. 2,44,19,568/-. 9. It is to be noticed that present writ petition was filed on 05.09.2022 and it came up for hearing before this Court on 06.09.2022 when notice of motion was issued and it was directed that petitioner would not be dispossessed from the secured asset. There is no denial by the petitioner, than loan facility had been availed by him in May 2018 and there has been default on his part due to which proceedings under the SARFAESI Act were initiated against him, though the same are claimed to be unsustainable being illegal. Petitioner has admittedly not paid/deposited a single paisa since 2019 towards discharge of his liability. In respect to his undertaking given before Tehsildar, Amritsar-1, learned counsel for the petitioner stated that it was given by the petitioner having no other choice at that time and that interim order was passed in favour of the petitioner on 06.09.2022 itself. The amount due as on 28.07.2019 was Rs. 2,44,19,568/- and as of now has understandably swelled. 10. After careful consideration of the arguments addressed by learned counsel and purusing the file and documents on record, including order dated 03.12.2019 passed by the NCLT, Mumbai Bench, we do not feel that present is a matter which calls for interference by this Court in exercise of jurisdiction under Article 226 of the Constitution of India, at this stage. 10. After careful consideration of the arguments addressed by learned counsel and purusing the file and documents on record, including order dated 03.12.2019 passed by the NCLT, Mumbai Bench, we do not feel that present is a matter which calls for interference by this Court in exercise of jurisdiction under Article 226 of the Constitution of India, at this stage. Though, a valiant attempt was made by learned counsel for the petitioner to submit that a jurisdictional issue is involved in this matter which necessitates this Court's interference while referring to order dated 03.12.2019 passed by NCLT, Mumbai Bench, however said plea is devoid of any merit, hence rejected. In our considered opinion all the arguments raised by learned counsel for the petitioner can very well be raised and adjudicated upon by the learned tribunal. 11. Without commenting upon merits of the matter, we find that the petitioner has an alternate efficacious remedy for redressal of the grievance raised by him. Gainful reference in this regard can be made to the judgements of Hon'ble Supreme Court in Union Bank of India v. Satyawati Tandon and others, 2010(8) SCC 110 and M/s South Indian Bank Limited and others v. Naveen Mathew Philip and another, 2023(1) RCR (Civil) 771. It has been held by Hon'ble the Supreme Court in Satyawati Tandon's case (supra) as under:- "17...... 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. 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. 18. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. 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. 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 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 AIR 1969 SC 556 , Whirlpool Corporation v. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1 and Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and others (2003) 2 SCC 107 and some other judgements, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order. " 12. Hon'ble the Supreme Court in M/s South Indian Bank (supra) while reiterating its earlier decisions held as under: - "13.... We may, however, reiterate the settled position of law on the interference of the High Court invoking Article 226 of the Constitution of India in commercial matters, where an effective and efficacious alternative forum has been constituted through a statute. xx xx xx xx 14. A writ of certiorari is to be issued over a decision when the Court finds that the process does not conform to the law or statute. In other words, courts are not expected to substitute themselves with the decision-making authority while finding fault with the process along with the reasons assigned. Such a writ is not expected to be issued to remedy all violations. When a Tribunal is constituted, it is expected to go into the issues of fact and law, including a statutory violation. xx xx xx xx 15. The object and reasons behind the Act 54 of 2002 are very clear as observed by this Court in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311 . While it facilitates a faster and smoother mode of recovery sans any interference from the Court, it does provide a fair mechanism in the form of the Tribunal being manned by a legally trained mind. The Tribunal is clothed with a wide range of powers to set aside an illegal order, and thereafter, grant consequential reliefs, including repossession and payment of compensation and costs. The Tribunal is clothed with a wide range of powers to set aside an illegal order, and thereafter, grant consequential reliefs, including repossession and payment of compensation and costs. Section 17(1) of the SARFAESI Act gives an expansive meaning to the expression "any person", who could approach the Tribunal. xx xx xx xx 18. While doing so, we are conscious of the fact that the powers conferred under Article 226 of the Constitution of India are rather wide but are required to be exercised only in extraordinary circumstances in matters pertaining to proceedings and adjudicatory scheme qua a statute, more so in commercial matters involving a lender and a borrower, when the legislature has provided for a specific mechanism for appropriate redressal." 13. Learned counsel for the petitioner is unable to point out any exceptional or extraordinary circumstance which calls for interference in exercise of jurisdiction under Article 226 of the Constitution of India. All the arguments and pleas raised are very well within the ambit of consideration by the learned tribunal. 14. At this stage, it is also to be noted that respondent no.4 is a Private Non Banking Financial Institution, therefore, no interference in any case is called for in exercise of jurisdiction under Article 226 of the Constitution of India, especially keeping in view the judgement of Hon'ble Supreme Court in Phoenix ARC Private Limited (Supra), wherein it has been held as under:- "Even otherwise, it is required to be noted that a writ petition against the private financial institution - ARC - appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in the cases of Praga Tools Corporation v. Shri C.A. Imanual, (1969) 1 SCC 585 and Ramesh Ahluwalia v. State of Punjab, (2012) 12 SCC 331 relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers." 15. We deliberately refrain from expressing any opinion on the merits of the matter as has been raised before us. Such consideration, needless to say, shall be within the realm of consideration by the learned tribunal under the SARFAESI Act. 16. Last but not the least, we also reject the argument raised by learned counsel for the petitioner that hearing of the writ petition should be postponed with interim order being directed to be continued as a formal written statement has not been filed by the respondents. In our considered opinion, in the given factual matrix where the facts which have been placed before us are not disputed by the petitioner, non-filing of written statement as such, cannot be a bar or impediment in deciding the writ petition. 17. Keeping in view the facts and circumstances as above, this writ petition is dismissed with liberty to the petitioner to avail the remedy/remedies as available to him in accordance with law. Pending application/s, if any, stand disposed of accordingly.