IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF AUGUST, 2019 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA WRIT PETITION Nos.39472-39476/2016 & 40625-40640/2016(GM-RES) BETWEEN:
1. MR. RACHIT GARG S/O AMRISH KUMAR AGARWAL AGED ABOUT 32 YEARS HAVING ADDRESS AT GMTCI, CREATOR ITPL, WHITEFIELD MAIN ROAD BANGALORE-560066.
2. MR. GAURAV GUPTA, S/O MR. ASHOK KUMAR GUPTA AGED ABOUT 35 YEARS RESIDING AT 3A-303, AWHO SOCIETY GURJINDER VIHAR, SECTOR CHI-1 POCKET-5, GREATER NOIDA-201308 REPRESENTED BY HIS POA HOLDER MR GAURAV MAHESHWARI (PETITIONER NO.10 HEREIN) 3. VASIM AHMED SIDDQUI S/O MR. NASEEM AHMED SIDDIQUI AGED 42 YEARS RESIDING AT 108, TRANQUIL TOWERS 2-91/81/TT, SY NO.09 WHITE FIELD KONDAPUR, HYDERABAD-500084.
4. MR. VIDYASAGAR NOOKALA S/O SATYANARAYANA NOOKALA AGED ABOUT 35 YEARS SYNOPSIS INDIA PVT LTD TOWER A, RMZ INFINITY 3RD FLOOR, OLD MADRAS ROAD BANGALORE-560016 REPRESENTED BY HIS POA MR. PRASHANT GUPTA (PETITIONER NO.5 HEREIN) 5. MR. PRASHANT GUPTA S/O MR. PRABHAKARRA GUPTA AGED ABOUT 35 YEARS RESIDING AT C35, TRIVENI GILBERT HILL ROAD, ANDHERI WEST, MUMBAI-400058.
6. MR. ANISH THOMAS S/O P. G. THOMAS AGED ABOUT 37 YEARS RESIDING AT #302, USHA KIRAN APARTMENT #25 HAUDIN ROAD BANGALORE-560042.
7. MR. KRISHNAN PARAMESHWARAN S/O K. PARAMESWARAN AGED ABOUT 43 YEARS RESIDING AT NO.997, 5TH A CROSS 1ST BLOCK, RING ROAD SERVICE ROAD KALYANANAGAR BANGALORE-560043 8. MR RAJNISH KUMAR S/O D N P BURNWAL AGED ABOUT 35 YEARS J-204, KEERTHI HARMONY APTS NEAR RAGHVENDRA CIRCLE KALKERE, RAMMURTHY NAGAR BANGALORE-560016.
9. MR. RAVI SHANKAR PRASAD S/O LALAN PRASAD AGED ABOUT 33 YEARS SYNOPSIS INDIA PVT. LTD., TOWER A, RMZ INFINITY 3RD FLOOR, OLD MADRAS ROAD, BANGALORE-560016.
REPRESENTED BY HIS POA HOLDER MR. RAJNISH KUMAR (PETITIONER NO.8 HEREIN) 10. MR. GAURAV MAHESHWARI S/O M. M. MAHESHWARI AGED ABOUT 34 YEARS A2-SAI ANNEX, PAI LAYOUT 1ST MAIN, 16TH CROSS, BANGALORE-560016.
11. MR. VISHAL RATHI, S/O OMPRAKASH RATHI AGED ABOUT 34 YEARS SYNOPSIS INDIA PVT. LTD., TOWER A, RMZ INFINITY 3RD FLOOR, OLD MADRAS ROAD BANGALORE-560016.
REPRESENTED BY HIS POA HOLDER MR. GAURAV MAHESHWARI (PETITIONER NO.10 HEREIN) 12. MR. SIDDHARTH VERMA, S/O LATE SH.JAYANT KUMAR VERMA AGED ABOUT 33 YEARS, RESIDING AT 10252, CAMINO RUIZ APT 85 SAN DIEGO, CA, USA-92126 REPRESENTED BY HIS POA HOLDER MR. GAURAV MAHESHWARI (PETITINER NO.10 HEREIN) 13. MR TAPESH MAHESHWARI S/O LATE H S MAHESHWARI AGED ABOUT 33 YEARS 404, KEERTHI RESIDENCY PAI LAYOUT, KR PURAM NEAR OLD MADRAS ROAD BANGALORE-560016 14. MR SUBHARNAB MAJUMDAR S/O KAJAL KANTI MAJUMDAR AGED ABOUT 38 YEARS RESIDING AT FLAT S2, ADINIDHI RESIDENCY AMAR REGENCY LAYOUT, HORAMAVU, BANGALORE-560043.
15. MR. PARTHA SARATHI GHOSH S/O NIROD BARAN GHOSH AGED ABOUT 38 YEARS RESIDING AT 96 MIRABELLI CIR SAN JOSE, CALIFORNIA, USA-95134 REPRESENTED BY HIS POA HOLDER MR. SUBHARNAB MAJUMDAR (PETITIONER NO.14 HEREIN) 16. ARIJITH GHOSH, S/O PULAK GHOSH AGED 34 YEARS RESIDING AT 28C PNS LAYOUT KULLAPPA CIRCLE, BANGALORE-560043.
17. MR. GAURAB DEY, S/O GAUTAM PRASAD DEY AGED ABOUT 36 YEARS SAMHITA AMRIT, FLAT NO.201 SHIRDISAI TEMPLE ROAD MUNNEKULALA, MARATHALLI, BANGALORE-560037.
18. MR. PRAMOD KUMAR S/O RAMACHANDRA NAIDU AGED ABOUT 45 YEARS 44/28, 3RD CROSS, 4TH BLOCK, KUMARA PARK WEST, SHESHADRIPURAM, BANGALORE-560020.
REPRESENTED BY HIS POA, MR. B. K. NAGESWAR, S/O LATE MR. B. S. KRISHNASWAMY AGED 67 YEARS RESIDING AT C-311, 3RD FLOOR SENA VIHAR, KAMMANAHALLI MAIN ROAD KALYAN NAGAR P.O., BANGALORE-560043.
19. MR. SUJI KUMAR DHAR S/O D. C. DHAR, AGED ABOUT 71 YEARS, G-2 SHAKTI PRIDE APARTMENTS, 4-D CROSS, 2ND MAIN KASTURINAGAR, BANGALORE-560043.
20. MR. PRAMOD T P S/O PRABHAKARAN T. K. AGED ABOUT 39 YEARS HAVING ADDRESS AT 9TH FLOOR, DU PARC TRINITY, NO.17 MG ROAD TRINITY CIRCLE, BANGALORE-560001.
21. MR. SRIVATHSA K S/O SRINIVASA RAO K AGED ABOUT 36 YEARS #129, 5TH CROSS T G EXTENSION, HOSKOTE BANGALORE-562114.
... PETITIONERS (BY SRI H. N. NARENDRA DEV., ADVOCATE ) AND:
1. RESERVE BANK OF INDIA, WITH ITS REGIONAL OFFICE AT NO.10/3/8, NRUPATUNGA ROAD, BANGALORE-560001.
REPRESENTED BY THE GOVERNOR 2. CHIEF GENERAL MANAGER, DEPARTMENT OF BANKING SUPERVISION/CENTRAL OFFICE PRIVATE SECTOR BANKS MONITORING DIVISION, RESERVE BANK OF INDIA WORLD TRADE CENTRE, CENTRE I CUFFE PARADE, COLABA, MUMBAI-400005.
3. DEPUTY GENERAL MANAGER, RESERVE BANK OF INDIA, DEPARTMENT OF BANKING SUPERVISION 10/3/8, NRUPATHUNGA ROAD, BANGALORE-560001.
4. KARNATAKA BANK LIMITED, KORAMANGALA BRANCH, NO.652, 17TH MAIN,3RD BLOCK, KORAMANGALA LAYOUT, BANGALORE-560034.
REPRESENTED BY ITS CHIEF MANAGER, 5. SOVEREIGN DEVELOPERS & INFRASTRUCTURE LTD., A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT NO.16, 2ND AND 3RD FLOOR NEW BEL ROAD, JALADHARSHINI LAYOUT BANGALORE-560054.
REPRESENTED BY ITS MANAGING DIRECTOR 6. PHOENIX ARC PRIVATE LIMITED., A COMPANY INCORPORATED UNDER THE COMPANIES ACT HAVING ITS OFFICE AT 7TH FLOOR, DANI CORPORATE PARK 158, CST ROAD, KALINA, SANTA CRUZ EAST, MUMBAI-400098.
... RESPONDENTS (BY SRI R.V.S. NAIK, SENIOR COUNSEL A/W MS. RASHMI SUBRAMANYA, ADVOCATE FOR R1 TO R3; SRI UDAY HOLLA, SENIOR COUNSEL ALONG WITH SRI Y.P. GOKUL, ADVOCATE FOR R4;
SRI S.S. NAGANAND, SENIOR COUNSEL ALONG WITH MS. SHRIVIDYA ZIRALI, ADVOCATE FOR R6;
SRI HARISH KUMAR M.S., ADVOCATE FOR R5(ABSENT)) …… THESE WRIT PETITIONS ARE FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER DATED 17.03.2016 PASSED BY RESPONDENT-2 AT ANNEXURE-A AND DIRECT RESPONDENT-1 TO INITIATE REQUISITE PROCEEDINGS AGAINST RESPONDENT-4 FOR VIOLATION OF THE PROVISIONS OF THE MASTER CIRCULARS DETAILED IN PARAGRAPH 14 OF THE INSTANT WRIT PETITION;
THESE WRIT PETITIONS COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER Though the matter is listed for hearing on interlocutory applications, with the consent of the learned counsel for both the parties, the matter is heard at length for final disposal. The fifth respondent, though served and represented, learned counsel has remained absent and has not filed statement of objections.
2. These writ petitions are filed by the petitioners who are the agreement holders to purchase individual flats from the fifth respondent/developer seeking to set- aside the Order dated 17.03.2016 passed by the second respondent as per Annexure-A; for a writ of mandamus directing the respondent No.1 to initiate requisite proceedings against the respondent No.4 for violation of the provisions of Master Circulars detailed in paragraph 14 of the writ petitions; to declare the Assignment Agreement dated 29.03.2016 executed between the respondent No.4 bank and respondent No.6 for assignment of the financial assistance granted to the respondent No.5 together with underlying security interest to Phoenix Trust-FY 16-15 Scheme B, vide Annexure-Z4 as null and void; for a writ of mandamus directing the respondent No.1 to initiate requisite actions against respondent Nos.2 and 3 for dereliction of their duties; and for a writ of mandamus directing the respondent No.4 Bank to issue final NOCs to the petitioners.
I Facts of the Case 3. It is the case of the petitioners that they are the allottees of apartments in the project known as Sovereign Unnathi, being developed and constructed by the respondent No.5/Sovereign Developers and Infrastructure Limited. On 27.04.2010, the respondent No.4/Karnataka Bank Limited issued a Loan Sanction Letter to the respondent No.5/builder for their project known as Sovereign Unnathi. On 17.05.2010, the respondent No.5 executed the Term Loan Agreement with the respondent No.4 for availing loan facility for the aforesaid project. The petitioners, who are flat allottees in the said project, learnt at a later point of time that, the respondent No.5 had mortgaged the project land in addition to the entire constructed area proposed to be built, with the respondent No.4 and did not disclose the said factum to the allottees, including the petitioners. On 05.10.2014, the Association of allottees of the said project i.e., Sovereign Unnathi Apartment Allottees Welfare Association (SUAAWA) submitted a complaint to the respondent No.1/Reserve Bank of India with regard to some of the statutory violations committed by the respondent Nos.4 and 5 which adversely affected the interests of the allottees. Another complaint dated 15.12.2014 with regard to certain other violations by the respondent Nos.4 and 5 was submitted by SUAAWA to the respondent No.1. Aggrieved by the failure on the part of the respondent No.1 to act on the said complaints, SUAAWA and the petitioners herein along with other allottees filed W.P.No.60457/2014 and W.P. Nos.27002-182/2015 seeking to direct the Reserve Bank of India to consider the complaints/ representations made by the petitioners dated 05.10.2014 and 15.12.2014, within the time to be stipulated by this Court and to conduct enquiry with regard allegations made in the representations. The respondents filed objections to the said writ petitions.
4. The learned single Judge, after considering the entire material on record, by the Order dated 29.10.2015, disposed off the writ petitions directing Reserve Bank of India to consider the representations made through SUAAWA to take action forthwith on the representation, if it is found to be validly made. In pursuance of the said Order passed by this Court, the respondent No.2, proceeded to pass the impugned Order dated 17.03.2016, as per Annexure-A, holding that the 4th respondent has not committed any irregularities and directed that the systems and controls in 4th respondent bank need to be strengthened to ensure and sustain compliance with the instructions contained in RBI Circular dated 27.08.2009. The 4th respondent was also cautioned that any failure to do so will be viewed very seriously and may result in penal action. It was further stated that the issuance of the said order was without prejudice to such other action as the RBI may consider necessary in the matter. Aggrieved by the said Order the present writ petitions are filed for the relief sought for.
II Statement of objections filed by the Respondent Nos.1 to 3 5. The respondent Nos.1 to 3 filed statement of objections and contended that the present writ petitions filed for the relief sought for are not maintainable and liable to be dismissed in limine. It is contended that the respondent Nos.1 to 3 have not violated any law of the land and have not violated any fundamental right or legal right of the petitioners or any citizens of India nor acted in unconstitutional, illegal, arbitrary and high handed manner. In the absence of any orders passed in violation of the rights and interest of the petitioners and in the absence of any action in a fashion that might be detrimental to the same, the writ petitions are not maintainable and liable to be dismissed.
6. It is further contended that in pursuance of the directions issued by this Court in W.P.No.60457/2014 and connected matters stated supra, respondent Nos.1 to 3, considering the entire material on record, have passed the impugned Order. The allegations made by the petitioners at paragraph 14-G(ii) of the memorandum of writ petitions are false and baseless and paragraph 3 of the Master Circular on Willful defaulters dated 01.07.2015 provides for a mechanism for identification of willful defaulters. In terms of the said guidelines, it is for the bank concerned to declare an account as a willful defaulter. On the basis of Annual Financial Inspection of the Head Office of respondent No.4 conducted with reference to the financial position as on 31.03.2014, the risk based supervision report with reference to the financial position as on 31.03.2015, the scrutiny note dated 23.12.2014 and 18.09.2015 and the statements/ documents furnished by the Head Office of respondent No.4, it could not be concluded that the credit facility was utilized for purpose other than the ones for which it was sanctioned and/or that the account was a willful defaulter and a fraud, as alleged. As such, it could not be concluded that the account involved a willful default in terms of the guidelines issued by the RBI. With regard to the allegations made in paragraph 14-H(iv) of the memorandum of writ petitions, it is contended that the same are false, incorrect and baseless. In para 1.2.1 of the Master Circular on Frauds dated 01.07.2015, the fraud risk management, fraud monitoring and fraud investigation function must be owned by the bank’s CEO, Audit Committee of the Board and the Special Committee of the Board. Paragraph 2 of the said Circular provides for areas under which frauds can be classified.
7. It is further contended that the Head Office of respondent No.4 -bank had not identified the instant case as a fraud and it had stated in its letter dated 23.05.2016 addressed to the respondent No.1 that, grounds for declaring the account as fraud as enumerated in paragraph 2.1 of the Circular did not exist in this case. In the instant case, no deficiency was reported or an adverse comment was made in the inspection reports in respect of the Head Office of respondent No.4 leading to the account being classified as fraud. Therefore, it could not be concluded that this account was a fraud. The selling of the account to the ARC was in terms of internal guidelines of the bank and paragraphs 6.3 and 6.4 of the RBI Master Circular on Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, dated 01.07.2015. The reasons given by the petitioners are not the ones which prohibit the bank to sell an account to an ARC in terms of extant regulatory guidelines.
8. It is further contended that the guidelines issued by the first respondent sets out to define broad guidelines and the banks are expected to follow the same while dealing with individual cases. The impugned Order dated 17.03.2016 is a well reasoned, sound and legally tenable order as the same was passed by taking into account all relevant factors and RBI guidelines. All the complaints made by the petitioners were examined by the RBI from regulatory and supervisory angles. RBI has taken appropriate and suitable action at the relevant time on all the e-mails, letters and RTI applications filed by the petitioners. Therefore, there is no dereliction of duty on the part of any official or employee of RBI. Therefore, sought to dismiss the writ petitions.
III Statement of objections filed by the Respondent No.4 – Karnataka Bank 9. The respondent No.4/Karnataka Bank Limited, filed objections to the writ petitions and contended that the very writ petitions filed for the relief sought for are misconceived, untenable and liable to be rejected in limine and contended that the writ petitions are not maintainable against the respondent No.4 as it is not “State” within the meaning of Article 12 of the Constitution of India. The respondent No.4 is a scheduled bank under the Reserve Bank of India Act and is not aided by the State. In terms of the directions issued by this Court dated 29.10.2015 made in W.P.No.
60457/2014 and connected matters, the first respondent passed the impugned Order, after holding enquiry. The present writ petitions are filed only with an intention to harass the fourth respondent/Bank and the petitioners have not come to the Court with clean hands and have suppressed the material facts of the case.
10. It is further contended that the fourth respondent bank has given no objection certificates to the first petitioner on 02.06.2011 as per Annexures-R25 and R26, second petitioner on 13.09.2010 as per Annexure- R27, fifth petitioner on 02.11.2010 as per Annexure- R28, seventh petitioner on 02.11.2010 as per Annexure- R29 & 30; fifth petitioner on 28.07.2010 as per Annexure-R31; fourteenth petitioner on 21.07.2010 and 01.09.2010 as per Annexures-R32 and 33; fifteenth petitioner on 02.06.2011 and 06.06.2011 as per Annexures-R34 and 35. It is further contended that the fourth respondent has given NOC to nearly about 600 flat buyers for obtaining housing loan and they are all aware of the mortgage made by the fifth respondent in favour of the fourth respondent. The fact that the fourth respondent is holding mortgage of the property in question is well within the knowledge of petitioner Nos.1,2,5,7,8,14 and 15 and they have not come to the Court with clean hands. Therefore, the writ petitions are liable to be dismissed for suppression of material facts.
11. It is further contended by the fourth respondent that the project was stalled and needed further investment/loan for completion and the fourth respondent could not give the same. Hence the account was sold by the fourth respondent to the sixth respondent-M/s Phoenix ARC Private Limited. After assignment, the sixth respondent lent `5 crores for completion of the project and also helped in securing materials on credit. There was necessity of finding business solution to the problem rather than legal approach and litigations. Business solution is found in sale of the account of the said ARC. It is contended that the fourth respondent has published about the loan transaction between the fourth and fifth respondents. The same was also published in the office of the fifth respondent and brochure produced by the fifth respondent clearly depicts that the project of the fifth respondent was mortgaged with fourth respondent for credit facilities sanctioned by them. The promoters will provide NOC/Permission for sale of flat whenever required.
12. It is further contended that the fifth respondent also acknowledged that they have displayed the bank name at the site. The petitioners have entered into agreement with builder to purchase individual flats at their own risk and hence, fourth respondent cannot be blamed. Therefore, sought to dismiss the writ petitions.
IV Statement of objections filed by the Sixth respondent 13. The sixth respondent also filed objections and contended that the sixth respondent is the assignee of the debt of the fifth respondent. It is contended that Clause 2.2.1 of the Master Circular on Frauds, Classification and Reporting, 2016, classifies the frauds. The present petitioners have not made out any case as contemplated under the Circular and further the assignment of loan account of the fifth respondent to the sixth respondent is in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (‘SARFAESI Act’ for short) and subsequent to the assignment, the rights and liabilities of the fourth respondent have legitimately been passed on to the sixth respondent. The reference to the alleged nefarious intention of the fourth respondent as stated are false and untenable and therefore, sought for dismissal of the writ petitions.
14. I have heard the learned counsel for the parties to the lis.
V Arguments advance by the learned Counsel for Petitioners 15. Sri H.N.Narendra Dev, learned counsel for the petitioners contended that the fourth respondent-bank has not followed the guidelines issued by the first respondent while sanctioning the loan to the fifth respondent. The petitioners who intended to purchase flats have entered into agreements. Accordingly, booking was done in the month of May-June 2010 and agreement to sale came to be executed in favour of the petitioners and others by the fifth respondent in the year 2010-11. The fourth respondent has not intimated to the petitioners about the mortgage of the property.
The respondent Nos.4 and 5 colluded together and affected the rights of the petitioners who are not aware of the transaction between the respondent Nos.4 and 5. The first respondent failed to appreciate that the fourth respondent is involved in the acts and omissions that violates several Master Circulars which are serious violations of Banking Regulations Act, particularly, violations of Sections 21 and 35A of the Banking Regulations Act, 1949.
16. He further contended that the impugned order passed by the first respondent fails to take into consideration the various misleading statements made by the fourth respondent, although the same are glaringly evident and such conduct of the first respondent smacks of collusion to favour the fourth respondent. It is further contended that when the petitioners applied for encumbrance certificate in respect of properties in question, the jurisdictional Sub Registrar issued encumbrance certificate for the period from 01.04.2008 to 21.12.2014, as per Annexure-D. The mortgage made by the fifth respondent in favour of the fourth respondent is not reflected in the said encumbrance certificate. Therefore, petitioners being the bonafide intending purchases entered into agreement with the fifth respondent. It clearly indicates that there is collusion between respondent Nos.4 and 5. The first respondent, without considering the violations made by respondent Nos.4 and 5, blindly and mechanically, has passed the impugned order.
17. He further contended that the letter, Annexure- R17 addressed to the General Manager, Reserve Bank of India, by the fourth respondent, the bank has admitted the mistakes with regard to matters relating to escrow account and it is stated that as per the sanction order, the branch was advised to collect 30% from sales proceeds/advance payment before issuing NOC to the prospective buyers. Since the repayment was regular, the borrower requested not to deduct amount out of the advance booking money, so that they could utilize the amount for completion of the project. There were no instances of overdues till June 2013. Therefore, the fourth respondent has committed violation of guidelines issued by the first respondent.
18. He further contended that the petitioners who are the bonafide purchasers, without knowing the transaction between the fifth respondent and the fourth respondent, entered into agreement with the fifth respondent. The petitioners should not be deprived of their right in respect of immovable property since they have invested their hard earned money. The petitioners have also initiated criminal proceedings against the fifth respondent. The petitioners have obtained favourable orders before the consumer forum against the fifth respondent. Therefore, he sought to allow the writ petitions.
19. In support of his contentions, learned counsel for the petitioners relied upon the following judgments:
(i) Central Bank of India vs. Ravindra and others reported in AIR 2001 SC 3095, (manupatra-paragraphs 49 and 50) regarding Sections 21A and 35A of the Banking Regulation Act, 1949.
(ii) Reserve Bank of India and others vs. Jayantilal N. Misty and others reported in AIR 2016 SC 1 (manupatra- paragraphs 69,70,71), to the effect that, many financial institutions have resorted to acts which are neither clean nor transparent. The RBI in association with them has been trying to cover up their acts from public scrutiny. It is the responsibility of the RBI to take rigid action against those Banks which have been practicing disreputable business practices. These acts are neither in the best interests of the Country nor in the interests of citizens. The RBI as a Watch Dog should have been more dedicated towards disclosing information to the general public under the Right to Information Act and RBI has to take strict action against the concerned erring banks.
VI Arguments Advanced by the Learned Senior Counsel for Respondent Nos.1 to 3 20. Per contra, Sri R.V.S.Naik, learned Senior Counsel appearing on behalf of the Reserve Bank of India/ respondent Nos.1 to 3, while reiterating the averments made in the statement of objections, contended that the very writ petitions filed accusing RBI without there being any basis, is erroneous, contrary to the material on record and liable to be dismissed. The Reserve Bank of India has acted as a mother to all the banks and citizens of the country and conducted enquiry in terms of the directions issued by this Court, impartially, and passed the impugned order. He further contended that there were about 19 news paper advertisements in respect of project of the respondent No.5 came to be issued. Among them, 4 advertisements relates to multi project. The remaining 15 advertisements relates to the present project i.e., Sovereign Unnathi of the 5th respondent. Out of the said 15 advertisements, 3 advertisements were issued before, Karnataka Bank Limited (KBL) had issued credit sanction information on 27.04.2010. 8 were issued between the date of credit sanction information and the date of the undertaking from SDIL i.e. 15.05.2010. The remaining 4 advertisements were issued after SDIL had furnished the undertaking dated 15.05.2010 assuring the KBL that they would append the information relating to mortgage while publishing advertisements i.e., after the obligation on the part of the SDIL to append KBL’s name as morgagee bank in the advertisements had arisen, but after KBL had made the first disbursal under the sanctioned term loan on 17.05.2010. Admittedly, petitioners entered into agreement in the year 2010 and 2011. Therefore, they should have been aware of the loan transaction before entering into agreement.
21. He further contended that at paragraphs 34 and 35 of the statement of objections, it is clearly stated how the case of the petitioners has been considered by the Reserve Bank of India, after remand. Petitioners have not come to the Court with clean hands and have suppressed the material facts. The impugned order passed by the Reserve Bank of India as per Annexure-A is in consonance with the directions issued by this Court. It is further contended that even though there was no direction issued by this Court in the earlier writ petition i.e., W.P.No. 60457/2014 and connected matters dated 29.10.2015 to consider the representation made by the petitioners after disposal of the said writ petitions, still the first respondent considered the representation dated 17.01.2016 vide Annexure-H made by the petitioners after disposal of the said writ petitions. Therefore, the allegations/ assertions made by the petitioners in the present writ petitions against the Reserve Bank of India are totally devoid of merit and liable to be rejected.
VII Arguments advanced by the learned Senior Counsel for 4th Respondent -Bank 22. Sri Udaya Holla, learned Senior Counsel appearing on behalf of respondent No.4-Karnataka Bank Limited, reiterating the averments made in the statement of objections, contended that at the outset the writ petitions filed for the relief sought for is not maintainable and the writ petitions are liable to be dismissed. He contended that the petitioners have deliberately suppressed the fact of issuance of NOCs to petitioner Nos.1,2,5,7,8,14 and 15 in terms of Annexures-R.25 to R.35 produced along with statement of objections and to about other 600 flat buyers. Nowhere in the averments of the memorandum of writ petitions, the petitioners have referred to the NOCs issued. Therefore, the writ petitions are liable to be dismissed for suppression of material facts.
23. The learned Senior Counsel, further contended that the petitioners have not stated as to whether they have paid the entire amount in respect of individual flats, in terms of agreement of sale. Knowingfully well that the property in question has been mortgaged by the fifth respondent in favour of the fourth respondent, the petitioners have entered into agreement and now they cannot make allegations against the fourth respondent who is custodian of public money. As per the finding recorded by this Court in W.P.No.60457/2014 and connected matters dated 29.10.2015, it is for the petitioners to approach the competent Civil Court for appropriate relief. The Reserve Bank of India, considering the entire material on record in respect of the issues raised, and considering the objections furnished by the fourth respondent-bank, has proceeded to pass the impugned order strictly in accordance with law. The petitioners have not made out any case to interfere with the impugned Order in exercise of powers under Article 226 of the Constitution of India. Therefore, sought to dismiss the writ petitions.
24. In support of his contentions, learned Senior Counsel sought to rely on the following judgments:
(i) S.P.Chengalvaraya Naidu (dead) by LRs vs. Jagannath (dead) by LRs and others reported in (1994)1 SCC 1, paragraphs 5 and 6, to the effect that, one who comes to the Court must come with clean hands and a person whose case is based on falsity has no right to approach the Court. He can be summarily thrown out at any stage of litigation. A person who approaches the Court is bound to produce all documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side, then he will be guilty of fraud on the Court as well as on the opposite side.
(ii) K.D.Sharma vs. Steel Authority of India Limited and others reported in (2008)12 SCC 481, paragraphs 34, 35 and 36, to the effect that, the petitioner who approaches the writ Court must come with clean hands, put forward all the facts before the Court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant material facts, petitioner is guilty of misleading the Court and the writ petition has to be dismissed.
(iii) Damoh Panna Sagar Rural Regional Bank and another vs. Munna Lal Jain reported in (2005) 10 SCC 84, para-14, with regard to judicial review. The Court should not interfere with administrative orders unless it is illogical, suffers from procedural impropriety or shocks the conscience.
VIII Arguments Advanced By The Learned Senior Counsel For 6th Respondent 25. Sri S.S.Naganand, learned Senior Counsel appearing on behalf of the respondent No.6-M/s Phoenix ARC Pvt. Limited, contended that prayer (c) in the writ petitions is sought against the respondent No.6. The petitioners have not made out any ground to declare the assignment agreement dated 29.03.2016 between the respondent No.4 and respondent No.6 as null and void. He contended that Annexure- R1/Assignment agreement filed along with statement of objections filed by the respondent No.6 was accepted by the Board of Directors of fifth respondent and Annexure-R2/Extract of the Minutes of Meeting of the Board of Directors of fifth respondent depicts that the Board accorded for accepting the settlement of the existing debt with fourth respondent to sixth respondent by way of Assignment. Annexure-R6 is the letter addressed by the Chief Operating Officer of the sixth respondent to the Director of fifth respondent informing that additional term loan facility of `5 crores has been approved and the borrower shall utilize the funds for intended purpose of completion of Phase-1 of the project ‘Sovereign Unnathi’. Accordingly, Loan Agreement dated 09.06.2016 was executed as per Annexure-R7 between respondent Nos.5 and 6. Letter of acceptance was executed between respondent Nos.5 and 6 as per Annexure-R8. Personal Guarantee towards additional loan of `5 crores was executed as per Annexure-R9.
26. The learned Senior Counsel further contended that the sixth respondent initiated proceedings in O.A.No. 1083/2017 before the Debts Recovery Tribunal, against the fifth respondent and its guarantors for recovery of `49.96 crores. He contended that the petitioners have made some allegations of fraud without there being any proof and have filed an application for referring the matter to CBI and the same cannot be allowed, in view of the dictum of the Hon’ble Supreme Court in the case of State of West Bengal and others vs. Committee for Protection of Democratic Rights, West Bengal and others reported in (2010) 3 SCC 571. He further contended that the provisions of Section 5(b) and 5(2) of the SARFAESI Act provides for Assignment of Debts by the bank. Accordingly, Assignment came to be executed by the fourth respondent in favour of the sixth respondent and on the request made by the fifth respondent and Directors and Guarantors, an amount of `5 crores was sanctioned after following the procedure as contemplated. Therefore, petitioners are not entitled to any relief sought for and hence sought to dismiss the writ petitions.
IX. Consideration 27. I have given my anxious consideration to the arguments advanced by the learned counsel for the parties and perused the entire material on record, carefully.
28. It is the specific case of the petitioners that they are the allottees of individual flats in the project known as Sovereign Unnathi of the fifth respondent and they were not aware of the transactions between respondent Nos.4 and 5 as the same was not disclosed to the allottees. On the complaint made by the petitioners and others to the respondent Nos.1 to 3 regarding mortgage of the property in question, the Reserve Bank of India did not conduct enquiry. Therefore, the petitioners were forced to approach this Court by filing writ petitions seeking to direct the Reserve Bank of India to consider the petitioners’ representations dated 05.10.2014 and 15.12.2014. It is the specific case of the fourth respondent that the transaction between the fourth and fifth respondent was known to the entire world and accordingly, they issued NOC as per Annexures R-25 to 35 to various purchasers as stated in the statement of objections and categorically contended that fact of about 600 NOCs given by the fourth respondent has been suppressed by the petitioners. It is the specific case of the Reserve Bank of India/first respondent that in pursuance of the directions issued by this Court, after following the procedure and taking into consideration the guidelines issued, the Reserve Bank of India proceeded to pass the impugned Order and it is the specific case of the sixth respondent that in terms of the provisions of Section 5(b) and 5(2) of the SARFAESI Act, assignment was entered with the fourth respondent. Thereafter, considering the request made by the fifth respondent and its Directors and Guarantors, an amount of `5 crores was sanctioned. At this stage, it is relevant to refer to the finding recorded by this Court at paragraph 5 of the Order dated 29.10.2015 made in W.P.Nos.60457/2014 and 27002-27182/2015, which reads as under:
“5. In the above background, the remedy of the petitioners if they seek to negate the liability and seek to claim that the petitioners were agreement holders have parted with the entire price reserved under the agreement to be denied their due at this point of time on the basis of a charge created by respondent No.5 without the knowledge of the petitioners, results in a miscarriage of justice, is a matter which requires to be established with reference to facts and therefore, to proceed on the basis of affidavits supporting the writ petition would not be advisable for this Court to intervene.
It would at best be possible for the petitioners to file an appropriate suit for damages in the meanwhile, to secure their possession of the property, if they are in possession of the same.
Insofar as the inaction on the part of the Reserve Bank of India is concerned, it is indeed inexplicable that the counsel who represented the Reserve Bank of India has withdrawn from the proceedings and there is no move on the part of the Reserve Bank of India to engage any other counsel. This would indicate the sense of irresponsibility on the part of the Reserve Bank of India. It is in that background that the complaint of the petitioners that their representation has not been considered by the Reserve Bank of India and no further steps have been taken, would have to be accepted. It is therefore expected of the Reserve Bank of India to proceed forthwith and to examine the allegations made by the petitioners and to take appropriate action if necessary. This Court has stopped short of issuing a bailable warrant to the person representing the Reserve Bank of India for its conduct before this Court in having engaged counsel and thereafter having withdrawn the authority and not having taken any steps to engage some other counsel. It would be expected of the Reserve Bank of India to take action forthwith on the representation, if it is found to be validly made.”
The findings recorded by this Court that it would best be possible for petitioners to file an appropriate suit for damages has reached finality and binding on the petitioners.
29. It is the specific case of the Reserve Bank of India that respondent Nos. 1 to 3 considered the allegations made by the petitioners with regard to non information of mortgage and non following instructions of the Reserve Bank of India. Considering the entire material on record, the RBI observed that, “there is on record an undertaking dated 15.05.2010 furnished by two Directors of the SDIL (the builder) undertaking to adhere to the requisite conditions. The first disbursal under the sanctioned term loan was on 17.05.2010. Thus, it could be concluded that the compliance of paragraph 3 of the Circular was delayed. However, subsequently, the aforesaid undertaking was obtained before release of funds.” It is further observed that, “the SUAAWA has forwarded copies of two pamphlets/ brochures in which the above mentioned disclosures are not mentioned. On the other hand, KBL had submitted copy of one pamphlet/brochure which contains the disclosures. This indicates that there were more than one versions of brochures/pamphlets i.e., the one submitted by KBL and the other(s) submitted by SUAAWA”.
30. With regard to advertisement, the first respondent has further observed that, “In all, there are 19 such advertisements. It is observed that 4 of these advertisements issued in the year 2013 covered more than one housing schemes/ projects of the SDIL. The remaining 15 advertisements, however, were pertaining solely to “Sovereign Unnathi”, 3 of them were issued before KBL had issued credit sanction intimation on April 27, 2010. 8 were issued between the date of the credit sanction intimation and the date of the undertaking from SDIL i.e., May 15, 2010. The remaining 4 advertisements, however, were issued after SDIL had furnished the undertaking dated May 15, 2010 assuring KBL that they would append the information relating to mortgage while publishing advertisements i.e., after the obligation on the part of SDIL to append KBL’s name as mortgagee bank in the advertisements had arisen, but after KBL had made the first disbursal under the sanctioned term loan on May 17, 2010. Besides, in this regard KBL has alluded to the aspect of practicability in monitoring contents of newspaper advertisements on an ongoing basis in their comments by stating that its branch concerned could not obtain/view all the advertisements released by the builder viz., SDIL”. Ultimately, the Reserve Bank of India came to the conclusion that, “the alleged violations of the instructions contained in aforesaid Circular were carefully examined by the Reserve Bank of India. The bank had not fully succeeded in ensuring compliance to the terms of undertaking obtained from the builder in accordance with the Circular. However, in the form of other actions such as obtaining an undertaking dated May 15, 2010 from the builder and obtaining and holding on record one of the pamphlets in compliance with our Circular dated August 27, 2009 and further displaying the bank’s name board as “bankers to the project” at the site/corporate office of the builder, ensuring that mortgage charge is reflected on the encumbrance certificate etc., the bank had taken measures to have the information of KBL being the mortgagee bank disseminated. Further, the fact that about 600 provisional NOCs were sought from and issued by KBL, as corroborated by our examination and other correspondence, leads us to reasonably conclude that the steps taken by the bank were adequate to ensure that the prospective buyers were made aware about the mortgage of the property” and further observed that “the systems and controls in KBL (fourth respondent) need to be further strengthened to ensure and sustain compliance with the instructions contained in RBI Circular dated August 27, 2009” and warned the bank that any failure to do so will be viewed very seriously and may result in penal action. It was further made clear that the said Order is without prejudice to such other action as the Reserve Bank of India may consider necessary in the matter.
31. The Reserve Bank of India, in pursuance of the directions issued by this Court, considered the representation dated 17.01.2016 made by the petitioners after disposal of the writ petitions. The RBI who is a responsible bank should act like a mother bank to all the banks in India. There should be no partiality on any of the banks. The RBI, considering the entire material on record has come to the conclusion that the fourth respondent has adhered to all the Circulars issued by the RBI though there was little delay in obtaining undertaking from fifth respondent. The RBI considering the entire material on record passed the impugned Order. This Court cannot interfere with the impugned Order unless the petitioners make out a case that the impugned Order is illogical, suffers from procedural impropriety or shocks the conscience. The scope of judicial review of this Court under Article 226 is very limited and in the entire petition the petitioners, except stating that the RBI has not followed the procedure, have not made any personal allegation of malafide on the RBI. Therefore, the impugned Order passed by the RBI cannot be interfered by this Court.
32. It is also not in dispute that though the petitioners relied upon the encumbrance certificate issued by the jurisdictional Sub Registrar as per Annexure-D from 01.04.2008 to 21.12.2014, the concerned Registrar has stated as under:
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33. The petitioners should have been aware before purchasing the flats from the fifth respondent who have borrowed loan, mortgaging the entire land and the proposed construction with the fourth respondent bank. Because of the dereliction on the part of the petitioners, the fourth respondent-bank cannot be blamed. The fourth respondent has provided loan to fifth respondent to build the project/apartments and the bank is custodian of public money and have followed procedure and the fifth respondent also assured the fourth respondent that he has complied all the directions and also displayed about mortgage of the property in the office of the fifth respondent.
34. “The brochures are made very colourful. It depicts “Dream Houses are affordable!!!. Just `14 lakhs. Approximate distance from major places to attract the general public has been mentioned”. Sri Udaya Holla, learned Senior Counsel for the respondent No.4 brought to the notice of this Court that the brochures published as per Annexure-R5 clearly depicts that “this project is mortgaged with Karnataka Bank Limited for Credit Facilities sanctioned by them. Promoters will provide NOC/Permission for sale of Flat/property wherever required”.
35. It is also not in dispute that the respondent No.5 and its Directors executed registered mortgage deed in favour of the fourth respondent on 13.05.2010 in respect of schedule ‘A’ land and 13 floors including ‘B’ schedule property. The said registered mortgage deed is still not discharged by the fifth respondent. It is also relevant to note that on 08.11.2011, in response to the request made by the fifth respondent bank made queries 1 to 11. Query No.11 reads as under:
“11. Please confirm that you are displaying our bank name board at the site?”
The comment by the builder:
“We have displayed the bank name board at the site.”
36. Annexures-R2 and R3 produced by the fourth respondent along with statement of objections clearly depicts that the board displayed at Sovereign Unnathi site marketing office and head office, depicts that the project is financed by Karnataka Bank Limited which clearly indicates that the fourth respondent had followed the procedure as contemplated under the provisions of the Circular issued by the Reserve Bank of India, from time to time.
37. It is also not in dispute that when the petitioners intended to purchase flats should have been beware and after holding proper enquiry should have entered into agreement with the fifth respondent to buy the flats. When there are abundant documents which clearly depict that the fourth respondent bank made advertisement to the general public about mortgage of the property and after mortgage it was also made public by advertisement about mortgage of the property including construction with the fourth respondent bank and also issued NOC to various persons including petitioners as stated supra, the petitioners should have been more cautious while entering into transaction with the fifth respondent in respect of immovable properties and it is not the case of the petitioners that they have paid the entire amount mentioned in the agreement and they have not disclosed as to what is the value of the flat intended to be purchased by them under the agreements and copies of the agreements are not produced before the Court except one agreement as per Annexure-C (pertaining to petitioner No.19). There is no mention about what is the total value of the flat and what is the amount paid as on the date of filing of the writ petitions.
38. It is not the case of the petitioners that they have paid the entire amount to the fifth respondent. The petitioners have not filed any suit to enforce the agreement for specific performance. It is also brought to the notice of this Court by the learned counsel for the petitioners that all the petitioners, in pursuance of the alleged agreements approached the District Consumer Forum and State Consumer Forum and some approached the Arbitration. Arbitration proceedings are still pending. The Orders passed by the Consumer Forums are favourable to the petitioners and petitioners are taking steps to enforce the orders. It is also brought to the notice of the Court by the learned counsel for the petitioners that petitioners have already initiated criminal proceedings against the fifth respondent.
39. As contended by the learned counsel for the petitioners, the Reserve Bank of India should ensure that the financial institutions should act in a transparent manner and it is the responsibility of the Reserve Bank of India to take rigid action against the erring banks. The Reserve Bank of India has right to direct the banks to disclose information to general public under RTI. It is the duty of the Reserve Bank of India to take action against the erring financial institutions who are not maintaining transparency. Admittedly in the present case, the Reserve Bank of India has come to the conclusion that the fourth respondent bank has transacted with fifth respondent after following the procedure as contemplated.
40. With regard to the judgments relied upon by the learned counsel for the petitioners in the case of Central Bank of India vs. Ravindra and others reported in AIR 2001 SC 3095, “under Banking Regulation Act, 1949, the Reserve Bank, on its being satisfied that it is necessary or expedient in the public interest or in the interest of depositors or banking policy so to do, to determine the policy in relation to advances to be followed by banking companies generally, or by any banking company in particular and when the policy has been so determined it has a binding effect”. The Reserve Bank of India can initiate proceedings in the interest of public under the provisions of Section 21A and 35 of the Act. Admittedly, the Reserve Bank of India, in the impugned Order directed the fourth respondent to strengthen its system and control and review the same from time to time with a view to ensure sustained compliance with the instructions contained in RBI Circular dated 27.08.2009 and also cautioned the fourth respondent that any violation to do so will be viewed seriously and may result in penal action and also observed that the said order passed is without prejudice to such other action as the RBI may consider necessary in the matter. Therefore, the judgment relied upon by the learned counsel for the petitioners has no application to the facts and circumstances of the present case.
41. The Hon’ble Supreme Court, while considering the suppression of material facts, observed that the person coming to the Court must come with clean hands, clean mind and clean heart. Otherwise, he is not entitled to any relief and he can be summarily thrown out at any stage of litigation, as held in the case of S.P.Chengalvaraya Naidu (dead) by LRs vs. Jagannath (dead) by LRs and others reported in (1994)1 SCC 1, paragraphs 5 and 6, which reads as under:
5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that “there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence”. The principle of “finality of litigation” cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan- dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal gains indefinitely. We have no hesitation to say that a person, who's case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.
6. The facts of the present case leave no manner of doubt that Jagannath obtained the preliminary decree by playing fraud on the court. A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. Jagannath was working as a clerk with Chunilal Sowcar. He purchased the property in the court auction on behalf of Chunilal Sowcar. He had, on his own volition, executed the registered release deed (Ex. B-15) in favour of Chunilal Sowcar regarding the property in dispute. He knew that the appellants had paid the total decretal amount to his master Chunilal Sowcar. Without disclosing all these facts, he filed the suit for the partition of the property on the ground that he had purchased the property on his own behalf and not on behalf of Chunilal Sowcar. Non-production and even non-mentioning of the release deed at the trial is tantamount to playing fraud on the court. We do not agree with the observations of the High Court that the appellants-defendants could have easily produced the certified registered copy of Ex. B-15 and non-suited the plaintiff. A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party.
42. The Hon’ble Supreme Court, in the case of K.D.Sharma vs. Steel Authority of India Limited and others reported in (2008)12 SCC 481, at paragraphs 34, 35 and 36, it is held as under:
34. The jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary. Prerogative writs mentioned therein are issued for doing substantial justice. It is, therefore, of utmost necessity that the petitioner approaching the writ court must come with clean hands, put forward all the facts before the court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the court, his petition may be dismissed at the threshold without considering the merits of the claim.
35. The underlying object has been succinctly stated by Scrutton, L.J., in the leading case of R.v. Kensington Income Tax Commrs. [(1917) 1 KB 486 : 86 LJKB 257 : 116 LT 136 (CA)] in the following words: (KB p. 514) “… it has been for many years the rule of the court, and one which it is of the greatest importance to maintain, that when an applicant comes to the court to obtain relief on an ex parte statement he should make a full and fair disclosure of all the material facts—it says facts, not law. He must not misstate the law if he can help it—the court is supposed to know the law. But it knows nothing about the facts, and the applicant must state fully and fairly the facts; and the penalty by which the court enforces that obligation is that if it finds out that the facts have not been fully and fairly stated to it, the court will set aside any action which it has taken on the faith of the imperfect statement.”
(emphasis supplied) 36. A prerogative remedy is not a matter of course. While exercising extraordinary power a writ court would certainly bear in mind the conduct of the party who invokes the jurisdiction of the court. If the applicant makes a false statement or suppresses material fact or attempts to mislead the court, the court may dismiss the action on that ground alone and may refuse to enter into the merits of the case by stating, “We will not listen to your application because of what you have done.” The rule has been evolved in the larger public interest to deter unscrupulous litigants from abusing the process of court by deceiving it.
43. Learned counsel for the petitioners filed an application for amendment of pleadings and another application to implead Central Bureau of Investigation as a party to the writ petitions to investigate into the transactions between respondent Nos.4 and 5 and the enquiry made by the RBI. This Court, considering the case on merits as above, is of the view that the petitioners have not made out any case of fraud committed by the fourth respondent or by the sixth respondent or by the RBI. The material on record clearly depicts that it is the fifth respondent alone who has done all the mischief to the fourth respondent, sixth respondent and to the petitioners. Therefore, question of impleading the CBI and amending the writ petitions would not arise. The Hon’ble Supreme Court, while considering the powers under Articles 226 and 32 of the Constitution of India, in the case of State of West Bengal and others vs. Committee for Protection of Democratic Rights, West Bengal and others reported in (2010) 3 SCC 571, at paragraph 68, has held as under:
68. Thus, having examined the rival contentions in the context of the constitutional scheme, we conclude as follows:
(i) The fundamental rights, enshrined in Part III of the Constitution, are inherent and cannot be extinguished by any constitutional or statutory provision. Any law that abrogates or abridges such rights would be violative of the basic structure doctrine. The actual effect and impact of the law on the rights guaranteed under Part III has to be taken into account in determining whether or not it destroys the basic structure.
(ii) Article 21 of the Constitution in its broad perspective seeks to protect the persons of their lives and personal liberties except according to the procedure established by law. The said article in its broad application not only takes within its fold enforcement of the rights of an accused but also the rights of the victim. The State has a duty to enforce the human rights of a citizen providing for fair and impartial investigation against any person accused of commission of a cognizable offence, which may include its own officers. In certain situations even a witness to the crime may seek for and shall be granted protection by the State.
(iii) In view of the constitutional scheme and the jurisdiction conferred on this Court under Article 32 and on the High Courts under Article 226 of the Constitution the power of judicial review being an integral part of the basic structure of the Constitution, no Act of Parliament can exclude or curtail the powers of the constitutional courts with regard to the enforcement of fundamental rights. As a matter of fact, such a power is essential to give practicable content to the objectives of the Constitution embodied in Part III and other parts of the Constitution. Moreover, in a federal constitution, the distribution of legislative powers between Parliament and the State Legislature involves limitation on legislative powers and, therefore, this requires an authority other than Parliament to ascertain whether such limitations are transgressed. Judicial review acts as the final arbiter not only to give effect to the distribution of legislative powers between Parliament and the State Legislatures, it is also necessary to show any transgression by each entity. Therefore, to borrow the words of Lord Steyn, judicial review is justified by combination of “the principles of separation of powers, rule of law, the principle of constitutionality and the reach of judicial review”.
(iv) If the federal structure is violated by any legislative action, the Constitution takes care to protect the federal structure by ensuring that the Courts act as guardians and interpreters of the Constitution and provide remedy under Articles 32 and 226, whenever there is an attempted violation. In the circumstances, any direction by the Supreme Court or the High Court in exercise of power under Article 32 or 226 to uphold the Constitution and maintain the rule of law cannot be termed as violating the federal structure.
(v) Restriction on Parliament by the Constitution and restriction on the executive by Parliament under an enactment, do not amount to restriction on the power of the Judiciary under Articles 32 and 226 of the Constitution.
(vi) If in terms of Entry 2 of List II of the Seventh Schedule on the one hand and Entry 2-A and Entry 80 of List I on the other, an investigation by another agency is permissible subject to grant of consent by the State concerned, there is no reason as to why, in an exceptional situation, the Court would be precluded from exercising the same power which the Union could exercise in terms of the provisions of the statute. In our opinion, exercise of such power by the constitutional courts would not violate the doctrine of separation of powers. In fact, if in such a situation the Court fails to grant relief, it would be failing in its constitutional duty.
(vii) When the Special Police Act itself provides that subject to the consent by the State, CBI can take up investigation in relation to the crime which was otherwise within the jurisdiction of the State police, the Court can also exercise its constitutional power of judicial review and direct CBI to take up the investigation within the jurisdiction of the State. The power of the High Court under Article 226 of the Constitution cannot be taken away, curtailed or diluted by Section 6 of the Special Police Act. Irrespective of there being any statutory provision acting as a restriction on the powers of the Courts, the restriction imposed by Section 6 of the Special Police Act on the powers of the Union, cannot be read as restriction on the powers of the constitutional courts. Therefore, exercise of power of judicial review by the High Court, in our opinion, would not amount to infringement of either the doctrine of separation of power or the federal structure.
44. The Hon’ble Supreme Court, while considering the powers under Article 226 of the Constitution of India, in the case of Secretary, Minor Irrigation and Rural Engineering Services, U.P and others vs. Sahngoo Ram Arya and another reported in (2002)5 SCC 521, at paragraphs 5 and 6, held as under:
5. While none can dispute the power of the High Court under Article 226 to direct an inquiry by CBI, the said power can be exercised only in cases where there is sufficient material to come to a prima facie conclusion that there is a need for such inquiry. It is not sufficient to have such material in the pleadings. On the contrary, there is a need for the High Court on consideration of such pleadings to come to the conclusion that the material before it is sufficient to direct such an inquiry by CBI. This is a requirement which is clearly deducible from the judgment of this Court in the case of Common Cause [(1999) 6 SCC 667 : 1999 SCC (Cri) 1196] . This Court in the said judgment at paragraph 174 of the Report has held thus: (SCC p. 750, para 174) “174. The other direction, namely, the direction to CBI to investigate ‘any other offence’ is wholly erroneous and cannot be sustained. Obviously, direction for investigation can be given only if an offence is, prima facie, found to have been committed or a person's involvement is prima facie established, but a direction to CBI to investigate whether any person has committed an offence or not cannot be legally given. Such a direction would be contrary to the concept and philosophy of ‘LIFE’ and ‘LIBERTY’ guaranteed to a person under Article 21 of the Constitution. This direction is in complete negation of various decisions of this Court in which the concept of ‘LIFE’ has been explained in a manner which has infused ‘LIFE’ into the letters of Article 21.”
6. It is seen from the above decision of this Court that the right to life under Article 21 includes the right of a person to live without being hounded by the police or CBI to find out whether he has committed any offence or is living as a law-abiding citizen. Therefore, it is clear that a decision to direct an inquiry by CBI against a person can only be done if the High Court after considering the material on record comes to a conclusion that such material does disclose a prima facie case calling for an investigation by CBI or any other similar agency, and the same cannot be done as a matter of routine or merely because a party makes some such allegations. In the instant case, we see that the High Court without coming to a definite conclusion that there is a prima facie case established to direct an inquiry has proceeded on the basis of “ifs” and “buts” and thought it appropriate that the inquiry should be made by CBI. With respect, we think that this is not what is required by the law as laid down by this Court in the case of Common Cause [(1999) 6 SCC 667 : 1999 SCC (Cri) 1196] .
45. Therefore, petitioners have not made out any ground to allow the applications for impleading and amendment. Considering the pleadings and objections of the parties and in view of the findings recorded by this Court on merits in the present writ petitions, I.A.Nos.1/2018 and 2/2018 are rejected.
X. Conclusion 46. In view of the aforesaid reasons, petitioners have not made out any prima-facie case to interfere with the impugned Order dated 17.03.2016 passed by respondent Nos.1 to 3. Petitioners have not made out any statutorily enforceable right to issue mandamus directing the respondent No.1 to initiate requisite proceedings against the fourth respondent and have not made out a case to declare the assignment agreement dated 29.03.2016 entered into between respondent Nos.4 and 6 for assignment of the financial assistance granted to the respondent No.5 together with underlying security interest to Phoenix Trust-FY 16-15 Scheme B, as null and void and also have not made out any case to issue direction to the first respondent to initiate action against respondent Nos.2 and 3 for dereliction of their duties and for a direction to the fourth respondent to issue final NOCs to the petitioners.
47. There are disputed facts arising in the present writ petitions in view of the allegations and counter allegations made by the parties. It requires evidence and this Court cannot adjudicate the same in exercise of powers under Article 226 of the Constitution of India. The Order passed by the learned single Judge in W.P.No.60457/2014 and W.P. Nos.27002-182/2015 dated 29.10.2015, recording a finding that it is appropriate for the petitioners to file a suit for damages, has reached finality. Therefore, petitioners are not entitled to any relief before this Court under the extraordinary writ jurisdiction and it is for the petitioners to approach the competent civil Court for damages against the fifth respondent, in accordance with law.
48. For the reasons stated above, writ petitions are dismissed. However, it is open for the petitioners to initiate appropriate proceedings and proceed against the fifth respondent, in addition to proceedings already initiated, in accordance with law.
In view of the dismissal of the writ petitions, I.A. No.1/2019 also stands disposed off.
Sd/- JUDGE kcm