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United Breweries (Holdings) Limited and Others Vs. State Bank of India and Others - Court Judgment

SooperKanoon Citation

Court

Karnataka High Court

Decided On

Case Number

W.P.Nos. 55166-167, 56769- 770, 56474, 56767- 768, 56617, 56967-968 0f 2013 (GM-DRT)

Judge

Appellant

United Breweries (Holdings) Limited and Others

Respondent

State Bank of India and Others

Excerpt:


.....bankers, invoked provisions of the act, 2002 for realizing debt due to them - respondents also filed application before debt recovery tribunal(drt) under section 19 of the act, 1993 seeking for grant of recovery certificate in their favor to recover a sum, due to them which was allowed - petitioners submitted that when said proceedings would decide rights of parties, application filed by respondents before drt would not be maintainable and is liable to be rejected – hence instant petition issue is – whether petition seeking a declaration that respondent no. 1 to 16 are precluded from taking recourse to remedies under the act, 1993, till respondent have exhausted their remedies under the act, 2002 is maintainable court held – high court would not normally exercise its discretion when there is an alternate remedy unless it is found that the writ petition filed is for enforcement of any fundamental rights or there is violation of the principles of natural justice - in a normal course, said appellate remedy is to be exhausted - despite, if discretion under articles 226 on 227 of constitution is to be exercised, order impugned should fall..........defendants no.2, 3 and 4, the petitioners herein have filed three applications therein which are numbered as ias- 3337/2013, 3417/2013 and 3388/2013 under section 22(2)(h) of the rddb act seeking that the main petition in oa no.766/2013 be rejected. the reason put forth for seeking such rejection is that since the banks have invoked the provisions of the sarfaesi act and initiated proceedings thereunder for enforcing the security interest and recover the debt and further since the banks have also invoked the jurisdiction of the high court under the companies act, 1956, the oa is liable to be rejected. it is also the case of defendants no.2, 3 and 4 therein viz., the petitioners herein that they have filed suitno.311/20j3 before the high court of mumbai, seeking declarator relief including that the corporate guarantee dated 21.12.2010 given by defendant no.2 and the personal guarantee dated 21.12.2010 executed by the defendant no.3 and the pledge agreement dated 21.12.2010 are void-ab-initio and non-est. in those circumstances, the petitioners contend that when the said proceedings would decide the rights of the parties, the present oa before the drt would not be maintainable and.....

Judgment:


(These writ petitions are filed under articles 226 and 227 of the constitution of india, with a prayer to declare that r1 to r16 are precluded from taking recourse to remedies under the drt act till the respondent banks have first exhausted their remedies under the sarfaesi act as per ann-m and etc.

these writ petitions having been reserved for orders, coming on for pronouncement this day. the court pronounced the following :)

1. In all these petitions, the petitioners are seeking a declaration that respondent No.l to 16 are precluded from taking recourse to remedies under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the ;RDDB Act' for short) till the respondent-Banks have first exhausted their remedies under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' for short). They are also seeking that the order dated 12.11.2013 passed by the Debt Recovery Tribunal ('DRT' for short) in OA No.766/2013 be set aside and consequently OA No.?'66/2013 be dismissed.

2. The relief sought in these petitions being similar and the petitioners being the co-defendants in OA No.766/2013 and since a common order dated 12.11.2013 is passed in respect of the three applications filed by these petitioners, the petitions are taken up together and this common order is passed.

3. In respect of certain loans advanced by the respondents No.l to 16, a consortium of the Bankers (hereinafter jointly referred to as "the Banks"), invoked the provisions of the SARFAESI. Act for realising the debt due to them. The said proceedings are not concluded. The Banks have also filed the application before the DPT under Sectioi} 19 of the RDDB Act seeking for grant of recovery certificate in their favour to recover a sum of Rs.6.200 crores which is due to them. The same is registered as OA No.766/2013. In the said proceedings, the petitioners are arraigned as defendants No.2, 3 and 4, The petitioners herein have filed three applications therein which are numbered as IAs- 3337/2013, 3417/2013 and 3388/2013 under Section 22(2)(h) of the RDDB Act seeking that the main petition in OA No.766/2013 be rejected. The reason put forth for seeking such rejection is that since the Banks have invoked the provisions of the SARFAESI Act and initiated proceedings thereunder for enforcing the security interest and recover the debt and further since the Banks have also invoked the jurisdiction of the High Court under the Companies Act, 1956, the OA is liable to be rejected. It is also the case of defendants No.2, 3 and 4 therein viz., the petitioners herein that they have filed SuitNo.311/20j3 before the High Court of Mumbai, seeking declarator relief including that the Corporate Guarantee dated 21.12.2010 given by defendant No.2 and the Personal Guarantee dated 21.12.2010 executed by the defendant No.3 and the Pledge Agreement dated 21.12.2010 are void-ab-initio and non-est. In those circumstances, the petitioners contend that when the said proceedings would decide the rights of the parties, the present OA before the DRT would not be maintainable and is liable to be rejected.

4. The Banks had filed their detailed objection statement and have contended that there is no embargo in law to file the said OA under Section 19 of the RDDB Act despite initiating action under Section 13 of the SARFAESI Act as there is no inconsistency. Further, the right of the Banks to prosecute the application is sought to be justified by referring to the different nature of the proceedings before the different forums. The DRT, by its detailed order has dismissed the interlocutory applications with costs by the order dated 12.11.2013 which is impugned herein. Though the petitioners have urged several contentions on merits to assail the order impugned, the Banks have raised the preliminary objection with regard to the question of entertaining these petitions before this Court under Articles 226 and 227 of the Constitution when an alternative and efficacious remedy is provided under Section 20 of the RDDB Act by way of appeal to the Debt Recovery Appellate Tribunal ('DRAT' for short). Hence, the said aspect requires consideration at the outset.

5. Sri. Udaya Holla, learned Senior Counsel appearing on behalf of the petitioners, in an attempt to retort the contention with regard to the maintainability of the petition has relied on the following decisions:

(i) The case ofWhirlpool Corporation -Vs- Registrar of Trade Marks, Mumbai and others (1998(8) SCC the 1)wherein it is held that under Article 226 of the Constitution, the High Court having regard to the facts, has the discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions, one of which is that if an effective and efficacious remedy is available, it would normally not exercise its jurisdiction. But, the existence of alternative remedy would not operate as a bar in at least three contingencies i.e., when the writ petition is filed for the enforcement of any of the fundamental rights or where there has been a violation of the principles of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.

(ii) The case ofA.V.Venkateswaran ,Collector of Customs, Bombay -Vs- Ramchand SobhrajWadhwani and Another (AIR 1961 SC 1506)wherein the Constitution Bench has held that the rule that a party who applies for the issue of a high prerogative writ should have exhausted other remedies open to him under the law, is not one which bars the jurisdiction of the High Court to entertain the petition or to deal with it, but is rather a rule which Courts have laid down for the exercise of their discretion. The rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of convenience and discretion rather than a rule of law.

(iii) The case ofUnion of India and Others -Vs- R.Rsddappa and Another (1993(4) SCC 269)wherein it is held that the jurisdiction exercised by the High Court under Article 226 is not as wide as it is in an appeal or revision, but once the Court is satisfied of injustice or arbitrariness, then the restriction either self imposed or statutory, stands removed and no rule of technicality on exercise of power can stand in the way of rendering justice.

(vi) The case ofRBF RIG Corporation, Mumbai -vs- Commissioner of Customs(Imports), Mumbai (2011(3) SCC 573)wherein it is heid that Article 226 of the Constitution confers powers on the High Court to issue certain writs for the enforcement of fundamental rights conferred by Part III of the Constitution or for any other purpose. The questionwhetherany particular relief should be granted under Article 226 of the Constitution, depends on the facts of each case. The guiding principle in all the cases is promotion of justice and prevention of injustice.

(v) The case ofUnion of India and Others -vs- Tantia Constuction Private Limited (2011(5) SCC697)wherein while taking note of the existence of the Arbitration clause it was held that an alternative remedy is not an absolute bar to the invocation of the writ jurisdiction of the High Court or the Supreme Court and it is well established that it is not that without exhausting that remedy a writ petition would not be maintainable.

6. In the light of the above, it is the contention of the learned Senior Counsel for the petitioners that the prayer made in the petition is with regard to the statutory bar for the DRT to entertain the OA under the RDDB Act when the remedy invoked under the SARFAESI Act is not exhausted . That is in view of the provision contained in Section 13(10) of the SARFAESI Act -w hich provides that where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an OA to the DRT having jurisdiction for recovery of the balance due. It is contended that as on today the secured assets have not been sold and as such the OA under RDDB Act could not have been filed to the DRT. The DRT therefore lacks jurisdiction to entertain such OA which is contrary to the provision. When the contention is that the DRT lacks inherent jurisdiction, the question of availing the alternative remedy of appeal does not arise. In such situation, this Court can exercise its jurisdiction under Article 226 of the Constitution is the contention. It is also his contention that when the winding up petition is filed and also a suit is instituted seeking declaration of the documents on which reliance is placed by the Banks as null and void, the recovery application cannot be maintained at this juncture. The learned Senior Counsel would also refer to an earlier writ petition filed before this Court by the respondent Banks relating an application filed by them in the very same OA and as such the respondents cannot be heard to contend regarding maintainability.

7. Per contra, Sri. Naganand, learned Senior Counsel appearing for the respondent Banks would contend that the decisions relied on behalf of the petitioners would not be of assistance for the present case. It is contended that the exercise of discretion stated therein are under different circumstances as a general principle. However, the present facts are to be considered in the background of the object behind the special enactments for recovery of debts which is public money and the huge debt of more than Rs.6200 crores being due, while the secured assets being miniscule compared to the same. In such event, all avenues available under law is to be invoked. There is no bar under Sec. 13(10) of SARFAESI Act as contended. Though the general principles have been laid down by the Hon'ble Supreme Court in the decisions cited on behalf of the petitioners, the Court while adverting to the cases relating recovery of dues to the Banks has also held that the specially constituted Tribunal alone should examine such issues.

8. The learned Senior Counsel for the respondent Banks has in that regard relied on the following decisions.

(i) The case ofPunjab National Banks -Vs- O.C.Krishnan and Ors (2001(6) SCC 569)wherein with reference to the remedy of appeal provided under Sec.20 of the RDDB Act it is held that the Act has been enacted with a view to provide a special procedure for recovery of debts due to the Banks and financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Sec.20 and this fast track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. It is further held that even though a provision under the Act cannot expressly oust the jurisdiction of the Court under Articles 226 and 227 of the Constitution, nevertheless, when there is alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the constitutional provisions.

(li) The case ofT.P.Vishnu Kumar -Vs- Canara Banks, P.N.Road, Tiruppur and Others (2013 AIR SCW 4462)wherein it is held that the powers which were conferred on the civil court now stands conferred on the DRT under the RDDB Act thereby it can deal with the applications from Banks and financial institutions for recovery of debts due to such Banks and financial institutions and when specific remedy is made available to the aggrieved party under Section 20 of the Act the learned Single Judge of the High Court* in exercise of its jurisdiction under Article 226 of the Constitution was not justified in interfering with the orders passed by the DRT. It is further held that the powers of the High Court under Article 226 cannot be invoked in the matter of recovery of dues under the Act, unless there is any statutory violation resulting in prejudice to the party or where such proceedings or action is wholly arbitrary, unreasonable and unfair. When the Act itself provides for a mechanism, by an appeal under Section 20 of the Act, the High Court is not justified in invoking jurisdiction under Article 226 of the Constitution to decide whether that the rejection of the applications by the DRT was correct or not.

9. From the above noticed decisions cited from both sides, the position of law is clear that when a statute prescribes an alternate remedy, the party aggrieved would have to exhaust such remedy. However, the same would not bar the jurisdiction of the High Court, but it is a rule which the Courts have laid down for exercise of their jurisdiction and it is a self imposed restraint. In that view, the High Court would not normally exercise its discretion when there is an alternate remedy unless it is found that the writ petition filed is for enforcement of any fundamental rights or there is violation of the principles of natural justice or the proceedings regarding which a grievance is made is wholly without jurisdiction or the vires of the Act is challenged. The interference is also permissible when there is statutory violation resulting in prejudice or the action is wholly arbitrary, unreasonable and unfair. In all other cases, when there is alternative remedy available, judicial prudence demands that the Court would relegate the parties to avail their appellate remedy and a writ petition would not be entertained as a matter of course.

10. In view of the established legal position, the learned senior counsel for the petitioner would seek to bring the present case within one of the exceptions which has been carved out by the Hon'ble Supreme Court. It is therefore contended that the OA filed by the respondent-Banks would not be maintainable in view of the provision contained in Section 13(10) of the SARFAESI Act which reads as hereunder:

"(10) Where dues of the secured creditor- are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower."

11. With reference to the said provision, it is contended that in view of the same there is inherent lack of jurisdiction to the DRT to entertain the OA filed by the respondent Banks under Section 19 of the Act since the cause for filing the same has not arisen. That apart there are also other proceedings relating to the very subject matter which had been referred to above and as such the proceedings before the ORT would not be maintainable. Having noticed the said contention at present, the merit of the OA with relation to the provision cited would not arise but it is to be noticed only to the extent to arrive at a conclusion whether the provision contained can be accepted as creating an inherent lack of jurisdiction so as to entertain the writ petition.

12. In that view, a perusal of sub-section (10) to Section 13 of SARFAESI Act will disclose that it makes a provision for the secured creditor to take further action after the secuied assets are sold and if it is found that further amount is to be recovered. Neither the said provision contemplates an express bar nor the RDDB Act has created any bar to file the OA earlier. If this basic position is noticed, even though it may be open for the petitioners to contend as to whether parallel remedies should be availed or as to whether the remedy invoked should be exhausted before another remedy provided is resorted to, they are all issues which are required to be taken note in the proceedings where such contentions are urged, and will not imply lack of jurisdiction but only postponement of exercise of jurisdiction if such contention is accepted. On the other hand, the respondent Banks in order to justify their action of filing the OA under the RDDB Act, notwithstanding the other proceedings initiated by them has also contended that the secured assets is wholly insufficient for recovery of the amount keeping in view the huge outstanding. When such rival contentions are advanced and when there is no absolute bar that is noticed, the determination of that aspect, to proceed or not to proceed further, is to be made by the forum before which the OA is pending when such objection is raised and the correctness or otherwise of such determination is to be considered by its appellate forum.

13. Keeping these aspects in perspective, the position in the instant case is that the petitioners herein have in that direction filed the interlocutory applications in IA Nos.3337/2013, 3417/2013 and 3388/2013 seeking rejection of OA No.766/2013. The respondent Banks have filed their objections to the said applications, detailed arguments have been advanced and several decisions have been cited on the rival points of view. The DRT by its considered order dated 12.11.2013 has dismissed the said applications for the reasons stated and the conclusion reached by it. Being aggrieved by the same, the petitioners are before this Court in these petitions.

14. Though the petitioners herein have formulated the prayer in these petitions to seek a declaration that the respondent Banks are precluded from taking recourse to remedies under RDDB Act before exhausting their remedies under the SARFAESI Act and in that regard have prayed that this Court exercise its discretion under Articles 226 and 227 of the Constitution of India and satisfy itself as to the legality, validity, propriety and justiciability of the impugned
order dated 12.11.2013, in effect what is prayed is to adjudicate the correctness or otherwise of the order passed by the DRT on the interlocutory applications in the pending original proceedings i.e., m OA. As against such order, indisputably an appeal is provided under Section 20 of the RDDB Act to DRAT at Chennai. In a normal course, the said appellate remedy is to be exhausted. Despite the same, if the discretion under Articles 226 on 22 7 of the Constitution is to be exercised, the order impugned should fall within the exceptions enunciated by the Hon'ble Supreme Court as noticed above.

15. In that regard, as noticed, it is not established at this stage that there is inherent lack of jurisdiction to the DRT or there is a statutory bar and as such there is violation of statute nor is any prejudice evident in that regard. Further, in a circumstance where huge amounts are claimed to be due and an OA seeking recovery certificate is filed before the DRT, notwithstanding the other proceedings that are initiated, the present OA seeking recovery certificate will only result in determination of the claim and not a parallel execution proceedings at this stage even if the DRAT does not interfere. As such, the proceedings or the action cannot also be termed as arbitrary, unreasonable and unfair at this stage so as to enable this Court to exercise its discretion under Article 226 or 227 of the Constitution nor any injustice is seen to have been caused so as to remove the self imposed restriction.

16. Therefore, if the enactment of the RDDB Act with a view to provide; a special procedure for recovery of debts due to financial institutions and the hierarchy of appeal provided therein as observed in the case of Punjab National Banks(supra) and the observations made in the case ofT.P.Vishnu Kumar(supra) with regard to there being no justification to invoke the jurisdiction under Article 226 of the Constitution due to the availability of the mechanism of appeal under Section 20 of the RDDB Act is kept in view and that too when such observation is made in a circumstance where the rejection of an interlocutory application was the issue therein, certainly there would be no justification for this Court to entertain these writ petitions any further.

17. The learned Senior Counsel for the petitioners also contended that the appelate remedy cannot be considered as efficacious in view of the pre-deposit as contemplated under Section 21 of the RDDB Act. However as rightly pointed out by the learned Senior Counsel for the respondents, the pre-deposit as contemplated therein is of the amount of debt due, as determined by the DRT under Section 19 of the Act. Such determination has not taken place and the deposit at this stage will not arise.

18. One other contention raised by the learned Senior Counsel for the petitioners is that the respondents herein were before this Court on an earlier occasion by filing writ petition arising out of the very same proceedings and as such the instant writ petitions should also be entertained. In that regard, it is not in dispute that the respondent Banks herein had filed writ petitions in W.P.No.38870/2013 and connected petitions before this Court, What is however to be noticed is that they had not sought adjudication of the correctness or otherwise of the orders passed by the DRT. The prayer made in those petitions was for issue of writ in the nature of Mandamus, directing the DRT to hear and dispose of the Interlocutory Applications filed by Banks in O.A.No.766/2013. No doubt true that this Court while directing notice to the respondents therein had also granted an interim order which was certainly in the interest of rendering justice and protecting public interest which is an exception. That is so, since a huge claim of public money was pending and sale of assets would have been against public interest. Even that be the position, the rival contentions were not decided by this Court, but the writ petitions were disposed of on 13.11.2013 by allowing the DRT to fix its own time frame and dispose of the applications in an expeditious manner. Hence the same cannot provide parity to the petitioners herein to seek that these petitions ale to be entertained by this Court.

19. For all the aforestated reasons, these petitions are disposed of by reserving liberty to the petitioners to avail their remedy of appeal. .MI contentions on merits are left open to be urged in the appeal. Parties to bear their own costs.


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