Essjay Electrolinks Private Limited v. Union of India and others

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** **THURSDAY, THE 21ST DAY OF JUNE 2012/31ST JYAISHTA 1934** **WP(C).No. 9240 of 2012 (D)** **--------------------------------------** **PETITIONER:** ## **-------------------** **ESSJAY ELECTROLINKS PRIVATE LIMITED, KALLINGAPARAMBIL, NOCHIMA, NAVAL ARMAMENT DEPOT P.O, ALUVA, ERNAKULAM DISTRICT, PIN-683 563, REPRESENTED BY ITS MANAGING DIRECTOR MR.SHAJI SEBASTIAN.** **BY SRI.S.SREEKUMAR, SENIOR ADVOCATE, ADVS. SRI.SHAJI CHIRAYATH, SMT.JIJI M. VARKEY, SRI.M.M.SHAJAHAN.** **RESPONDENTS:** **------------------------** **1. UNION OF INDIA, REPRESENTED BY ITS SECRETARY,MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI - 110 001.** ## **2. RESERVE BANK OF INDIA,** **REPRESENTED BY ITS EXECUTIVE DIRECTOR & CHIEF VIGILANCE OFFICER, CENTRAL OFFICE BILDING, SHAHID BHAGAT SINGH MARG MUMBAI-400 001.** **3. LORD KRISHNA BANK LIMITED, INDIAN EXPRESS BUILDING, KALOOR, ERNAKULAM DISTRICT, PIN-682 017,REPRESENTED BY ITS MANAGING DIRECTOR.** ## **4. ATHORISED OFFICER,** **H D F C BANK LIMITED, DEPARTMENT FOR SPECIAL OPERATIONS, IST FLOOR, CHOICE TOWERS, MANORAMA JUNCTION,ERNAKULAM DISTRICT, PIN-682 016.** **5. H D F C BANK LIMITED, H D F C BANK HOUSE, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI, PIN-400 013,** **REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR.** **R1 BY SRI.P.PARAMESWARAN NAIR,A.S.G OF INDIA, R3,R4 & R5 BY ADV. SRI.T.RAJESH, S.C. ADV. SRI. S.R. DAYANANDA PRABHU.** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 21-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **W.P.(C).NO.9240/2012-D:** **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1:COPY OF NOTICE PURPORTEDLY UNDER SECTION 13(2) OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT ISSUED BY 4TH RESPONDENT 21/12/2011. EXT.P2:COPY OF NOTICE PURPORTEDLY UNDER SECTION 13(2) OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT ISSUED BY 3RD RESPONDENT 30/7/2002. EXT.P3:COPY OF JUDGMENT IN ORIGINAL PETITION NO 3035 OF 2002 ON THE FILES OF THIS HON'BLE COURT DTD. 21/5/2004. EXT.P4:COPY OF JUDGMENT IN W.P.(C).NO. 5791 OF 2006 ON THE FILES OF THIS COURT DTD. 28/2/2006. EXT.P5:COPY OF JUDGMENT IN WA NO 499 OF 2006 ON THE FILES OF THIS HON'BLE COURT DTD 14/3/2006. EXT.P6:COPY OF SECURITISTATION APPLICATION NO 96 OF 2008 ON THE FILES OF DEBT RECOVERY TRIBUNAL DTD. 20/5/2008. EXT.P7:COPY OF SECURITISATION APPLICATION (ID NO 5784)ON THE FILES OF DEBT RECOVERY TRIBUNAL DTD. 27/6/2008. EXT.P8:COPY OF WRIT PETITION [CIVIL] NO 33453 OF 2006 ON THE FILES OF THIS HON'BL COURT DTD. 18/11/2009. EXT.P9:COPY OF OBJECTION PURSUANT TO EXHIBIT P1 DTD. 19/1/2012.** **EXT.P10:COPY OF REPLY TO EXT.P7 OBJECTION, ISSUED BY THE 4TH RESPONDENT DTD 21/2/2012.** **EXT.P11:COPY OF NOTIFICATION FOR FORMATION OF CENTRAL REGISTRY DTD. 21/4/2011** **EXT.P12:COPY OF NOTICE DEMANDING POSSESSION ISSUED BY THE 4TH RESPONDENT DTD. 10/3/2012** **EXT.P13:COPY OF POSSESSION NOTICE ISSUED U/S13(4)OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT ISSUED BY 3RD RESPONDENT BANK DTD. 17/12/2002.** **EXT.P14:COPY OF THE NOTICE ISSUED BY MS. GEETHA POTTI, ADVOCATE COMMISSIONER AS PER ORDER IN CRIMINAL MISCELLANEOUS PETITION NO. 1526 OF 2012, CHIEF JUDICIAL MAGISTRATE COURT, ERNAKULAM.** ## **RESPONDENTS' EXHIBITS: NIL.** ## **//TRUE COPY//** ## **P.A. TO JUDGE.** **Prv.** ## **P.R.RAMACHANDRA MENON, J.** - - - - - - - - - - - - - - - - - - - - - ## **W.P.(c) No. 9240 OF 2012** - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 21[st] day of June , 2012 ## **JUDGMENT** Correctness and sustainability of the proceedings pursued by the respondent Bank, particularly, by issuing Ext.P1 notice under Section 13(2) of the SARFAESI Act, is under challenge. 2. Many a ground has been raised by the petitioner contending that, the proceedings pursued by the respondent Bank are per se wrong and illegal in all respects, also challenging the power and competency of the respondent Bank itself, to have pursued the proceedings. 3. It is stated that, the petitioner had availed a loan from the earstwhile Lord Krishna Bank Ltd creating security interest over hte property. Apart from the loan availed by the petitioner from the Bank, other similarly situated persons, including the partners of the firm had also availed some loans and different items of properties were offered as security, over which security interest was created. It is brought on WPC.No.9240/2012 2 record that, in the course of the proceedings, Lord Krishna Bank was taken over by the Centurion Bank of Punjab Ltd. , which Bank itself was later got amalgamated with the present respondent Bank - HDFC Bank Ltd, by the passage of time. 4. The case of the petitioner is that, the Bank has filed O.A. before the DRT for realisation of the amount due under the loan transaction. During the pendency of the above proceedings, Lord Krishna Bank proceeded with steps under the SARFAESI Act, by issuing notice under Section 13(2), which was sought to be challenged by some of the defendants in the O.A, who approached this Court by filing O.P.No.39335/2002. Holding that the challenge raised against Section 13(2) notice, if at all any, had to be made before the concerned Tribunal by filing appeal under Section 17 of the Act and that the issue was squarely covered by the decision rendered by the Apex court in _**Mardia Chemicals Limited v. Union of India**_ ( 2004(4) SCC 311), interference was declined, relegating the writ petitioners to avail the statutory remedy. 5. It is seen that the 6[th] respondent in the O.A.( who is none WPC.No.9240/2012 3 other than the second petitioner to the writ petition wherein Ext.P4 judgement was passed) filed S.A. 96/2008, which is stated as still pending. In the meanwhile, a notice of sale was issued, at the instance of the Bank, which was sought to be challenged by the petitioner in the earlier writ petition and the 6[th] defendant in the O.A. jointly as W.P.(C) No.5791/2006 . After considering the facts and figures, interference on merits was declined and the said writ petitioners were relegated to avail the statutory remedy against the sale notice, within two weeks and to enable them to pursue such exercise, the confirmation of sale, if any, was ordered to be kept in abeyance till 15/03/2006. Being aggrieved of the said verdict, the said writ petitioners filed W.A.499/2006 and after considering the merits, the Division Bench observed that, no error was to be noted in respect of the judgement passed and thus declined interference, however, intercepting the sale for a period of 'two months', to enable the appellants to pursue the alternate remedy. It is brought to the notice of this Court that, pursuant to the disposal of the appeal, first petitioner/first appellant filed a securitisation application, wherein some defect was noted, for want of satisfaction of the court WPC.No.9240/2012 4 fees, giving the number as ID 5784 . A copy of the said proceedings is filed before this Court as Ext.P7. Being aggrieved of the course pursued by the Tribunal, the first petitioner to Ext.P4 judgement ( first appellant in Ext.P5) has approached this Court by filing W.P(C) No.33453/09 ( Ext.P8), which is stated as pending. 6. Sri.S.Sreekumar, the learned counsel for the petitioner submits that, detailed statement of objection has been preferred in response to Ext.P1, as borne by Ext.P9. It was replied by the Bank as per Ext.P10. Ext.P12 notice demanding possession was issued on 10/03/2012. During the pendency of the above writ petition, the petitioner has filed I.A.8374/12 producing a copy of the notice dated 12/6/12 issued by the Advocate Commissioner, appointed by the concerned CJM Court, in a petition under Section 14 of the Act, demanding vacant surrender and has sought for interim stay. 7. Heard both the sides. Learned counsel for the petitioner submits that, there is a fresh course of action, as far as the present petitioner is concerned, in having issued Ext.P1 notice under Section 13(2) . It is stated that, the proceedings are being pursued by the Bank WPC.No.9240/2012 5 without any regard to the rule of law and total disregard to the statutory prescription. Learned counsel submits that, there is a running establishment, which is intended to be simply taken over leaving the management of the establishment in doldrums. It is also pointed out that, the cause of action is a fresh one and the same has not become final, by virtue of the various proceedings - because of the pendency of the issue before the Tribunal, as well as Ext.P8 writ petition before this Court. 8. The learned counsel for the respondent Bank submits that, the writ petition itself is not maintainable, either on facts or in law. It is asserted that, the Bank has complied with all the requirements under the statute and the challenge raised against the proceedings is quite wrong and unfounded. It is also stated that, the establishment is not a running concern and the same is 'locked out'. Learned counsel further submits that, many an effort was taken to have the issue settled some how or the other and the opportunities given by the Bank have not been made use of by the petitioner or the others concerned, at any point of time. It is brought to the notice of this Court that, out of the total WPC.No.9240/2012 6 five items of properties, only one item was taken possession of, which in fact, was a building almost in an abandoned condition. The learned counsel for the petitioner submits that, there is a stay of further proceedings in S.A.No.96/2008, in respect of the said property. 9. After hearing both the sides and also on going through the pleadings and proceedings, this Court finds that the first point to be considered is whether the writ petition is maintainable before this Court. Then alone will arise the need and necessity to consider the merits involved. The petitioners themselves have conceded that some of the defendants in the O.A. including the Managing Director of the petitioner Company had approached this Court earlier, challenging a similar notice under Section 13(2) issued by the erstwhile Lord Krishna bank. In view of the law declared by the Apex Court in **Mardia Chemicals Limited v. Union of India** ( 2004(4) SCC 311), this Court observed that, no writ petition was maintainable and the party, if at all aggrieved, was to approach the DRT. When the sale was notified, the very same petitioner along with 6[th] defendant in the O.A. had approached this Court, by filing another writ petition, where also WPC.No.9240/2012 7 interference was declined on merits, alerting them to have the necessity to file appropriate proceedings before the DRT, as borne by Ext.P4 judgement. The said judgement has been upheld by the Division Bench vide Ext.P5, though granting some breathing time, intercepting the sale, to pursue such exercise before the DRT . The 6[th] defendant in the O.A. i.e. the second petitioner to Ext.P4/P5 verdicts has preferred S.A. 96/2008, wherein an interim order of stay is stated as passed by the Tribunal. Though similar S.A. was preferred by the other petitioner i.e. the Managing Director of the petitioner Company, as borne by Ext.P7, for non-remittance of the requisite court fees, it was not duly numbered, which in turn is sought to be challenged by filing Ext.P8 petition W.P.(C) No.33453/06 before this Court. To put it short, the course available to the petitioner can only be by way of approaching the DRT and not this Court. 10. The legal position in this regard is evident from the statutory prescription, even after the amendment, whereby an opportunity has been conferred on the aggrieved party to ventilate the grievance by filing a representation or statement of objection, on WPC.No.9240/2012 8 service of notice under Section 13(2). Sub Section 3A to Section 13 was accordingly introduced in the statute book, by way of Act 30 of 2004 with effect from 11/11/2004, which is extracted below: _13(3A) “If, on receipt of the notice under subsection (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:_ _Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons_ _**shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17** or the Court of District Judge under section 17A.”_ This by itself shows that even at the stage of sending reply to the representation/objection under section 13(3A), the cause of action will not arise, which in turn is to arise only on proceeding with steps under Section 13(4). At the time of filing the writ petition, admittedly, the proceedings were in respect of challenge raised against the notice issued under Section 13(2). As such, the writ petition was pre-mature. It is now stated that further proceedings have been pursued by filing a WPC.No.9240/2012 9 petition under Section 14 before the concerned CJM Court, leading to an order and consequential notice issued by Advocate Commissioner (produced as Ext.P14 along with I.A. No.8374/12). But, here again, the question is maintainability and the jurisdiction. In view of the law declared by the Apex Court as mentioned hereinbefore and so also in view of the verdicts passed by this Court by way of Exts.P4 and P5, both by Single Bench and the Division Bench, it is not open for this Court to have the alleged cause of action entertained on merits. The law in this regard has been reiterated by the Supreme Court in **United Bank of India v. Satyawati Tondon and others** (2010 (8) SCC 110). In the above circumstances, this Court finds that no interference is warranted . Writ petition fails and it is dismissed accordingly. It is made clear that, all the contentions raised by both the sides are left open and nothing has been expressed by this Court with reference to the merits involved. It is open for the parties to agitate the matter before the Tribunal. ## **P.R.RAMACHANDRA MENON JUDGE** sv. WPC.No.9240/2012 10 WPC.No.9240/2012 11