IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 2639 of 2012 For Approval and Signature:
HONOURABLE THE CHIEF JUSTICE MR.BHASKAR BHATTACHARYA HONOURABLE MR.JUSTICE J.B.PARDIWALA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= PUSHPABEN BABUBHAI GURJAR & 3 - Petitioner(s) Versus GANESHAN & 5 - Respondent(s) ========================================================= Appearance :
MR KANUBHAI I PATEL for Petitioner(s) : 1 - 4. NOTICE UNSERVED for Respondent(s) : 1,3 - 4. MR NARENDRA KHARE for Respondent(s) : 2, MS MAITHILI MEHTA, AGP for Respondent(s) : 5, MR MRUGEN K PUROHIT for Respondent(s) : 6, ========================================================= HONOURABLE THE CHIEF JUSTICE CORAM :
MR.BHASKAR BHATTACHARYA and HONOURABLE MR.JUSTICE J.B.PARDIWALA Date : 8/11/2012 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE J.B.PARDIWALA) This writ-petition under Article 226 of the Constitution of India is at the instance of the legal heirs of a debtor of respondent no.2 Bank, praying for the following reliefs :
“(A) Your Lordships may be pleased to admit and allow this Special Civil Application;
(B) Your Lordships may be pleased to issue writ of certiorari or a writ of mandamus or in the nature of mandamus or any other appropriate writ, order or direction against the respondents and be pleased to cancel and set aside the impugned action of the respondent nos.1 and 2 of taking possession of the petitioners' factory and selling and transferring the said factory to respondent nos.3 and 4 and be pleased to direct the respondents to handover and return back the possession of the factory to the petitioners in the original condition after settling the dues with the petitioners and be pleased to further direct them to stay/cancel the judgment and order of Hon'ble Debt Recovery Tribunal No.1, Ahmedabad dated 7-2-2012 in O.A. No.04/2010 till further order of this Hon'ble High Court;
(C) Your Lordships may be pleased to declare ultra vires and unconstitutional the following provisions of law :
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Sections 37, 13(3-A) proviso No.1 and 2, 13(2), 13(4), 13(10), 18(1) proviso 1 and 2, 18(2): Security Interest (Enforcement) Rules, 2002: Rules 8(5), 8(8) and 13(2): Recovery of Debts due to Banks and Financial Institutions Act, 1993: Section 19(1) First Proviso: Debts Recovery Appellate Tribunal (Procedure) Rules, 1994 : Rules 8(2), 9 and 16.
(D) Your Lordships may be pleased to direct the respondent nos. 5 and 6 – The State Government of Gujarat and the Union of India to consider to shift the office of the Appellate Tribunal of DRT from Mumbai to Ahmedabad or Gandhinagar or to constitute the separate Appellate Tribunal for Gujarat State at Ahmedabad or Gandhinagar in the interest of the people of Gujarat and in the interest of justice on the grounds and facts stated as above; as it causes gross injustice to the people of Gujarat which amounts to denial of justice.
(E) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to grant interim relief to the petitioners directing the respondent nos.1 to 4 not to make any change and not to transfer in any manner the nature of the property i.e. factory of the petitioners located at Saij, Taluka Kalol, District Gandhinagar and not to transfer the same in any manner whatsoever and Your Lordships may be pleased to stay the implementation of the judgment and order of Debts Recovery Tribunal, Ahmedabad in O.A. No.04/2010 dated (3-7-2012) 7.2.2012 till final disposal of this Special Civil Application; or till the appeal is filed and heard finally before the Appellate Tribunal as the learned presiding officer of DRT at Ahmedabad has refused to accept the application to stay his order till appeal period.
(F) The cost of this petition may please be awarded.
(G) Any other and further relief/s may please be granted in view of the special facts and circumstances of the case and in the interest of justice deemed proper to Your Lordships.”
Facts shortly stated be thus :
(1) One Shri Babubhai Gurjar, a proprietor of M/s.Leon Pharmaceuticals, was extended credit facilities by the respondent no.2 Bank in the year 1996. The request was favourably considered by the Bank and initially the credit facilities amounting to Rs.7.5 lac were sanctioned and disbursed in March 1996. Thereafter, an additional amount of Rs.12.5 lac was sanctioned in the same year, and upon execution of security document dated 8th June 1996, the said limit was also disbursed. The aggregate credit limit of Rs.20 lac was increased to Rs.50 lac and upon execution of the security document for the additional limit of Rs.30 lac, dated 9th September 1996, the said amount was also disbursed in favour of the proprietary concern.
(2) The record reveals that Shri Babubhai Gurjar, the proprietor of M/s.Leon Pharmaceuticals, passed away on 22nd November 2007. Late Shri Babubhai Gurjar was unable to repay the amount of loan to the respondent Bank and accordingly the respondent Bank initiated proceedings for recovery of Rs.71,41,417=90 together with further interest at the rate of 12.5% till the date of full and final realization by filing O.A. No.4 of 2010 against the petitioners herein. Petitioner no.1 is the wife of late Shri Babubhai Gurjar, petitioner nos.2 and 3 are the son and daughter of late Shri Babubhai Gurjar, and petitioner no.4 is one of the guarantors.
(3) The record also reveals that the Debts Recovery Tribunal- I, Ahmedabad adjudicated the O.A. No.4 of 2010 and passed the following order on 7th February 2012:
“OPERATIVE ORDER
1. Original Application No.04 of 2010 is allowed and the debt is determined with cost against the defendants and it is hereby ordered that the applicant bank is entitled to recover from the defendants the debt amount to the tune of Rs.71,41,417.90 with further interest @ 12% per annum for the period of pendente lite and future, i.e., till realization of the total due amount of the applicant bank.
2. Liability of the defendants No.1(i to iii), i.e. the Legal Heirs, shall be restricted to the value of the assets only inherited from deceased defendant no.1.
3. The defendants are restrained from transferring; alienating, encumbering or disposing of other properties and assets belonging to him/them till the aforesaid adjudicated debt amount is recovered from the defendants.
4. Let the certificate of recovery be drawn up forthwith in Form No.31 and put up for signature in terms of the provision contained in Section 19(22) of the RDDB Act for issuance.
5. The Recovery Officer shall realize the amount as per the Recovery Certificate from the defendants according to the Law and shall report compliance with remittance of recovery proceedings file for final withdrawal of the certificate by the bank and for consideration of return of documents by the Registry.
The judgment was corrected and pronounced in the open court on 07.02.2012.
Place : Ahmedabad (Krishnehndu Ghose) Date : 07.02.2012 PRESIDING OFFICER”
(4) The order referred to above was passed by the Debts Recovery Tribunal under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for short, 'RDDB Act').
(5) The record further reveals that in the past the petitioners being aggrieved against the action of the respondent Bank under Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 (for short, 'SARFAESI Act')had preferred a writ-petition being Special Civil Application No.2920 of 2011. The said writ-petition was disposed of by a Division Bench of this Court vide order dated 28th March 2011. The order reads as under :
“As it appears that the petitioner is aggrieved against the action taken by the respondent – Bank under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 he should first avail the remedy of appeal under Section 17 of the said Act.
If any appeal is preferred by the petitioner within three weeks along with the petition for interim relief, the Debt Recovery Tribunal shall consider the same in accordance with law and on merit. The petition stands disposed of. No cost.”
We have been informed by Mr.K.I.Patel, the learned counsel appearing for the petitioner, that no appeal was preferred by his clients against the action of the respondent Bank taken under the provisions of the SARFAESI Act.
Thus, it is apparent that this is the second round of litigation once again with a grievance as regards the action taken by the respondent Bank under the provisions of the SARFAESI Act.
So far as the present petition is concerned, the reliefs prayed for could be divided into three parts. One, to set-aside the impugned action of the Bank in taking over the possession of the factory premises and selling & transferring the said factor premises to respondent nos.3 and 4. It is also prayed that the respondents be directed to handover the possession of the factory premises to the petitioners in the original condition, after settling the dues. The second challenge is to the order passed by the DRT-I, Ahmedabad dated 7th February 2012 under the provisions of the RDDB Act. Third and the last part of the challenge is to the constitutional validity of various provisions of the SARFAESI Act as well as the RDDB Act.
Mr.K.I.Patel, the learned counsel appearing for the petitioners vehemently submitted that the respondent Bank has acted in a very highhanded and arbitrary manner in proceeding against the late Shri Babubhai Gurjar, as a result of which, Shri Babubhai Gurjar passed away on account of severe stress and pressure exerted by the Bank.
It has also been submitted by Mr.Patel that property worth crore of rupees was disposed of by the Bank for a sum of Rs.77,98,000=00 in favour of the respondent no.3.
Mr.Patel further submitted that the proceedings undertaken by the Bank under the provisions of the SARFAESI Act were not in accordance with law and, therefore, the entire sale of the mortgaged property deserves to be set-aside. Mr.Patel submitted that after the demise of late Shri Babubhai Gurjar, the family members have landed up in great difficulty and it is beyond their means to prefer any appeal before the appellate tribunal as it is not possible for them to deposit 75% of the amount of debt due to the bank.
In the circumstances, according to Mr.Patel, the petitioners are left with no other alternative but to challenge the constitutional validity of the various provisions of the SARFAESI Act as well as the RDDB Act.
Mr.Narendra Khare, the learned counsel appearing for the respondent Bank vehemently opposed this petition. He has submitted that this is a second round of litigation as identical grievance was redressed by the petitioners in Special Civil Application No.2920 of 2011 and at that relevant point of time the Division Bench of this Court had refused to entertain the petition on the ground that the petitioners should first avail the remedy of appeal under Section 17 of the SARFAESI Act. Mr.Khare also submitted that the allegations levelled by the petitioners as regards the highhanded and arbitrary action on the part of the respondent Bank are baseless and without any foundation. Mr.Khare also submitted that there is no substance in the challenge of the petitioners so far as the constitutional validity of various provisions of the SARFAESI Act is concerned, more particularly, after the judgment of the Supreme Court in the case of Maradia Chemicals Limited v/s. Union of India and others, reported in AIR 2004 SC 2371. Mr.Khare, therefore, urged that there being no merit in this petition, the same be dismissed.
Having heard the learned counsel for the respective parties and having gone through the materials on record, the only question that falls for our determination in this petition is, as to whether the petitioners are entitled to any of the reliefs prayed in this second round of litigation.
At the very outset, we may state that at the time of issuing notice upon the respondent, this Court had passed the following order :
“Respondents No.1 and 2 are directed to file affidavits disclosing as to whether the procedure for sale of mortgaged property as provided under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and rules framed thereunder have been complied with for the purpose of sale of secured property in the case. They will also disclose as to how the secured property has been sold at the price of Rs.77,98,000/- when the upset price of the property was fixed at Rs.1,20,00,000/-.”
In response to the notice, the respondent Bank filed a detailed affidavit-in-reply explaining as to how the steps were taken under the various provisions of the SARFAESI Act.
We deem fit to reproduce few paragraphs of the affidavit- in-reply so as to make the picture more clear :
“ I say that the Petitioners have deliberately attempted to misrepresent and misguide this Hon'ble Court for the reasons best known to them by saying that the secured property has been sold at the price of Rs.77.98 lac when the upset price of the property was fixed at Rs.120 lac. Fact of the matter, however, is that against the reserve price of Rs.120 lac cumulatively for movable and immovable properties, the Authorized Officer of the secured creditor has sold the same for total consideration of Rs.125 lac which is Rs.5 lac more than the reserve price. The foregoing table under Points 17 & 18 clearly bring out this fact of the matter wherein it would be observed that the aggregate amount recovered by way of sale of movable and immovable properties is Rs.125 lac which is Rs.5 lac more than the reserve price of Rs.120 lac.”
Thus, the affidavit-in-reply of the Bank makes it abundantly clear that the movable and immovable properties mortgaged with the Bank were sold for the sum of Rs.125 lac and not as asserted by the petitioners that the properties were sold for the sum of Rs.77.98 lac when the upset price of the properties was fixed at Rs.120 lac.
On 20th July 2012, this Court passed the following order :
“The respondent - Bank is directed to file supplementary affidavit, annexing the valuation report submitted by the Valuer before fixing of the reserve price. They will also explain in their supplementary affidavit, why existence of huge structure as appearing from the photographs annexed at p.130 was not disclosed in the advertisement for sale. In the affidavit the Bank will also disclose the 'jantri' price of the locality at the relevant point of time.”
In response to the said order, once again the Bank filed a detailed affidavit-in-reply. We quote few relevant paragraphs of the reply :
“(i) Valuation Certificate: (a) 2006: At the request of the Answering Respondent, a Chartered Architect and Registered Estate Valuer Shri Purushottam U.Patel furnished his valuation certificate dated 12/4/2006. This valuation certificate was supported by detailed analysis as to the manner in which valuation was done and the valuation amount was arrived at. Under this valuation certificate, the value of mortgaged plot of land admeasuring about 6177 sq.mtrs. (and not 11000 sq.mtrs. as was falsely projected by the petitioner during the course of arguments held on 20/7/2012 when this Hon'ble Court even calculated the approximate cost @ Rs.263/- per sq.meter at the valuation figure of Rs.29.65 lac for land valued subsequently during 2007) was valued at Rs.9,26,550=00 with value of buildings and structures being a sum of Rs.50,74,270=00 and value of plant and machineries, electrifications, etc. being a sum of Rs.24,93,000=00 aggregating to a sum of Rs.84,93,820=00. This valuation was obtained in view of the fact that the borrowal account where the aforesaid securities were offered as security had already started showing red signals in its conduct.
(b) 2007: Thereafter, upon issuance of notice under Sec.13(2) of the Securitisation Act and in compliance to the directions contained under Rule 8(5) of Security Interest (Enforcement) Rules 2002, the Authorized Officer of the Respondent Bank obtained fresh valuation of the property constituting secured assets from an approved valuer in order to fix the reserve price in consultation with the secured creditor. For that purpose, the work of valuation was assigned to the panel valuer Shri Thakorlal H.Shah who is a Government Registered Valuer. As per the valuation report dated 25/8/2007 furnished by the said Shri Thakorlal H.Shah, the valuation has been shown as under :-
(1) Land Rs.29,65,000=00*
(2) Building Rs.48,33,000=00
(3) Services Rs. 1,71,000=00
(4) Plant and Machineries Rs.41,71,000=00 Rs.121,40,000=00
• Land valued @ Rs.480/- per sq.meter.
(ii) Reserve Price : I say that on the basis of the aforesaid valuation and as per the authority vested in the Authorized Officer, the reserve price was determined in consultation with the secured creditor which was initially decided to be Rs.110 lac as per the notice of sale dated 18/10/2007 (page no.155 of the petition). However, not a single bid was received in response to this notification. Thereafter, another notice of sale was published on 7/2/2008 wherein the reserve price was increased by Rs.10 lac to an amount of Rs.120 lac for movable and immovable properties put together. In response to this sale notice, only one bidder came forward who, upon negotiations, increased his offer to Rs.125 lac (Page Nos.163 to 165 of the petition).
(iii) Jantri: In compliance to the directions contained in the said order dated 20/7/2012, request has been made to the Sub-Registrar, Kalol to make available an official copy of 'Jantri' applicable during the relevant period. The respondent bank is yet to receive reply. The copy of request letter dated 23/7/2012 is annexed as Annexure 'B' hereto. It has, however, been stated by the Valuer (2007 Valuation) that 'Guideline rate from the Registrar's Office is not available'. As such the said Valuer adopted PMR (Prevalent Market Rate) and arrived at the rate of Rs.480/- per sq.mtr.
(iv) Construction of Building: The Hon'ble Court has further directed to explain as to why the existence of huge structure as appearing on page 130 of the petition was not disclosed in the sale notice. In reply thereto, it may be respectfully submitted that the details of the immovable properties as a matter of routine were drawn from the mortgage documents where the sale deeds of the plots of land totally admeasuring about 6177 sq.mtrs. (7385 sq.yards) were deposited to create mortgage thereon by declaring the survey numbers, name of village, Taluka and District impliedly also meaning the buildings constructed thereon. It may be further submitted that no additional construction has been made after the date of valuation in the year 2007. I say that under the terms and conditions of sale notice it has been clearly stated that the properties will be sold on “as is where is basis” and in the valuation report, the details of the constructed structures were duly incorporated and it was further mentioned that for further details, Canara Bank, Bhadra, Ahmedabad may be contacted during office hours on any working day. I, therefore, submit that no material fact was concealed and sale transaction was carried out in an open and transparent manner through a public auction.
(06) Under the circumstances, I respectfully submit that reserve price was fixed having due regard to the valuation carried out by the qualified and experienced professionals in that field purely in the interest of recovery of public money and the petitioners are now raising the issue of valuation through a writ petition filed under Article 226 after a lapse of more than four years from the date of auction sale presumably to avoid payment of balance amount lawfully recoverable from them. This petition, therefore, suffers from delay and laches too. Had they really felt aggrieved in this regard, they could have availed the lawfully available remedy under Securitisation Act within the permissible time limit.
The petitioners not only did not bother to repay the debt and/or avail the said remedy during the relevant period of time but they also ignored the directions given by this Hon'ble Court in its order dated 28/3/2011 (page 76G) and it was only belatedly on 9/1/2012 that they filed an appeal (page 73) and when the said appeal is still pending at DRT, the petitioners gave false declaration on oath (para 25 of petition). In view of the foregoing, I submit that the present petition is not maintainable in law and needs to be rejected.”
We are fully convinced by the reply of the respondent no.2 Bank in so far as the valuation of the property is concerned.
As a matter of fact, we need not go into all these issues because all these issues were raised by the petitioners in the earlier round of litigation being Special Civil Application No.2920 of 2011 disposed of by the Division Bench of this Court on 28th March 2011, directing the petitioners to avail of the remedy of appeal under Section 17 of the SARFAESI Act.
So far as the challenge to the legality and validity of the order dated 7th February 2012 passed by the DRT-I, Ahmedabad in O.A. No.4 of 2010 is concerned, we may only say that under the RDDB Act, a provision of appeal has been provided under Section 20 to the appellate tribunal. Since there is an alternative efficacious remedy available to the petitioners, we do not propose to examine the legality and validity of the impugned order, more particularly, after the pronouncement of the judgment by the Supreme Court in the matter of United Bank of India v/s. Satyawati Tondon and others, reported in AIR 2010 SC 3413, wherein the Supreme Court in paragraphs 17 and 27 passed the following observations :
“17. 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. 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.”
“27. 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.”
We are also not impressed by the submission of Mr.Patel that Section 18 of the SARFAESI Act and Section 20 of the RDDB Act which provide for appeal to the appellate tribunal could not be said to be an alternative efficacious remedy as the petitioners would have to deposit 75% of the amount of debt due to a bank or a financial institution.
We are also not impressed by the submission of Mr.Patel that Section 18 of the SARFAESI Act and Section 20 of the RDDB Act are ultra vires and violative of Article 14 of the Constitution of India.
It is now a well-settled principle of law that right of appeal is a creature of a statute. Legislature can impose conditions under which it is to be exercised. Without a statutory provision creating such a right, a person aggrieved is not entitled to prefer an appeal. Legislature, while granting right of appeal, can impose conditions which it think reasonable. Such conditions merely regulate the exercise of right of appeal so that the same is not abused by a recalcitrant party, and there is no difficulty in the enforcement of the order appealed against in case the appeal is ultimately dismissed. As held by the Division Bench of this High Court in Babu Ganesh Singh
essential, so that frivolous appeals would not be filed. Ultimately, if the appeal is dismissed, the aggrieved party can always seek refund of the amount deposited and, therefore, he is not in any way aggrieved. Further, the third proviso to Section 18(1) of the SARFAESI Act also enables the appellate tribunal, for the reasons to be recorded in writing, to reduce the amount to not less than 25% of the debt referred to in the second proviso. In the same manner, the proviso to Section 21 of the RDDB Act also empowers the appellate tribunal, for the reasons to be recorded in writing, to waive or reduce the amount to be deposited under Section 21 of the Act, which is 75% of the amount of debt due to a bank or a financial institution.
As such, we are not inclined to consider the challenge to the constitutional validity of other provisions of the SARFAESI Act as well as the RDDB Act at the instance of the petitioners in this second round of litigation, more particularly, after the pronouncement of the Supreme Court in the case of Maradia Chemicals Limited (supra). By just adding prayers challenging the constitutional validity of various provisions of the Act a litigant cannot have a second round of litigation, more particularly, when for the same cause of action the petition was earlier preferred and not entertained by the Division Bench of this Court.
For the foregoing reasons, we do not find any merit in this petition, and consequently, the same is rejected. However, in the facts and circumstances of the case, there shall be no order as to costs.
(BHASKAR BHATTACHARYA, CJ.)
/MOIN
(J.B.PARDIWALA, J.)