[SARFAESI] Rajasthan HC Imposes 2Lac Cost For Misrepresentation, Not Availing Alternative Remedy, Not Impleading Necessary Parties & For Keeping Court In Dark

The court noted that the petitioner has given an impression that its several members have paid their entire dues and in parallel are defending the matter before the Debts Recovery Tribunal, whereby they were successful in avoiding payment of due of Rs.20 crores and interest thereon.

Essentially, the writ petition has been filed challenging respondent(s)' action of issuing notices to petitioner under Sections 13(2) and 13(4) of the SARFAESI Act, 2002. The plea sought for declaring the entire act of the respondents under the SARFAESI Act, 2002 to be illegal, perverse and unconstitutional and for directing the respondents No. 1 & 5 to intervene in the matter or in the alternate for appointment of Court Commissioner for demarcating the arrears and liabilities in question in between the members.

Justice Sameer Jain, while dismissing the petition, ordered,

"In the light of the above, the writ petition is dismissed with a cost of Rs.2 lac which has to be deposited with the respondent No. 4 in half i.e. Rs.1 lac and the other half will be deposited before Rajasthan State Legal Services Authority, Jaipur within a period of 60 days. 20. All the pending applications stand disposed of."

Notably, the co-ordinate bench of this Court, on account of strike of the Advocates, granted no coercive action on 01/06/2018 and the stay order was continued on one count or the other vide order dated 18/07/2018.

The court observed that the arguments raised by the petitioner are technical in nature and are not tenable. The petitioner has been successful in misrepresenting the Court and by-passing the statutory remedy, acting against the settled position of law and on relying upon the judgments namely Whirlpool Corporation v. Registrar Trade Marks, Mumbai & Ors. [(1998) 8 SCC 1] on account of alternative remedy rendered in trade mark or tender matters or matters of public interest whereas, the case in hand is of SARFAESI Act, 2002 which is a special law having self-contained provisions.

The court opined that the said writ petition is not maintainable for the following reasons:

1. Firstly, on account of the fact that the SARFAESI Act, 2002 specifies specific remedy under Section 17 and Section 35 has an over-riding effect over the other laws.
2. Secondly, in the light of United Bank v. Satyavati Tandon and Phoenix ARC Private Limited v. Viswa Bharati Vidya Mandir, wherein it has been held that in cases relating to recovery of dues of banks, the secured creditors, the stay granted by the High Court would have a serious adverse impact on the financial health of such institutions and ultimately prove detrimental to the economy of the nation.
   
3. Thirdly, extra-ordinary powers under Article- 226 is not a rule of compulsion and in the matters of SARFAESI Act, 2002, a very slow and cautious approach has to be adopted and when a specific remedy is available writ court should not entertain writ petitions.
   
4. Lastly, petitioner has not approached this Court with clean hands and has not impleaded consortium banks as a necessary party though the prayers were sought against their action. The court noted that the Apex Court in S.P. Chengalvaraya Naidu (Dead) by L.Rs. v. Jagannath (Dead) by L.Rs. and Ors. [(1994) 1 SCC 1], observed that 'Fraud-avoids all judicial acts, ecclesiastical or temporal'.
   

The court observed that petitioner's contention that the alleged action is without jurisdiction and is contrary to letter issued by respondent No.1-Ministry of Textile is not tenable but is only aimed to avoid admitted liability against NPA account. On further perusal, the court observed that approval of the Ministry of Textile is only required when the assets are acquired wholly or substantially out of Government grants.

In addition, the court opined that the liability of the investment was by PMDO bankers and against the members' equity and admittedly, restructuring was done in the year 2012. Further, the court opined that SARFAESI Act, 2002 in terms of Section 35 has an over-riding effect and the Ministry of Textile inspite of the representation by the petitioner has turned down the request for intervention by not replying to the same.

The counsel for the petitioner submitted that the action of the respondents is without authority of law and action was initiated under the SARFAESI Act, 2002 without taking permission from Ministry of Textile/respondent No. 1. It was added that respondent No. 4 has no authority as the individual banks are sending notices of recovery and therefore, petitioner has approached this court by way of writ jurisdiction.

Further, he submitted that petitioner is defending the case before the DRT on the action initiated by the banks, and thus, not impleaded them as necessary party. On merits, he submitted that this is a project of public importance, funded by the Government of India with a given object and, therefore, without intervention of the Ministry of Textile, action cannot be initiated.

Submitted that writ petition is not maintainable, specially when admittedly the objections raised by the petitioner under Section 13(3A) are duly considered. He added that the attempt of the petitioner bypassing provisions of Section 17 of the SARFAESI Act, 2002 and straightway approaching this Court is against the judgments of Apex Court.

The counsel for respondents objected that the petitioner has not approached this Court with clean hands inasmuch as the petitioner' admission that notices were issued to them by consortium of lenders i.e. 15 Consortium Banks and Financial Institutions in a scheme of Pooled Municipal Debts Obligation (PMDO) and the petitioner was granted facility by formulating respondent No. 4 as a security trustee, however, despite having joined in several recovery proceedings, the petitioner has not impleaded them as necessary party though the prayer is raised qua them. In the light of the said misrepresentation, the writ petition is liable to be dismissed on this count alone, he added. He contended that petitioner bypassed alternate remedy under Section 17 and hence, the petition is not maintainable.

He submitted that in pursuance to setting up the said project under the aforesaid scheme the grant of Rs.38.37 crore was sanctioned from the Ministry of Textiles and PMDO lended them 51.6 crores, as per the terms and conditions of sanction letter, facility and security agreements were duly executed referred to as Common Loan Agreement (CLA) and Trust and Retention Account (TRA) in addition to deed of hypothecation under security cover of title deeds. He added that the petitioner has failed to serve the interest to the said credit facility and on 24.02.2012 because of the said default looking to the project in question the term loan facility was restructured to the tune of Rs. 20.31 crores and the same was accepted by the petitioner on 24.02.2012, the same was affirmed on 28.12.2015 by admission of liability by the petitioner.

The counsels for the petitioner include Mr. Archit Bohra with Ms. Lipi Garg and Ms. Astha Singhal. The counsels for the respondents include Mr. H.P. Kar. with Mr. Manish K. Sharma and Ms. Shalini Sheoran.

Case Title: Jaipur Texweaving Park Ltd. v. Union of India

Citation: 2022 LiveLaw (Raj) 102

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