Judgment:
P.R. Ramachandra Menon, J.
1. The petitioner has approached this Court Challenging Exts. P2 and P5 notices issued by the Secured Creditor invoking the relevant provisions under the SARFAESI Act. The case of the petitioner is that, he has already approached the Civil Court by filing O.S. 219 of 2005, for settlement of accounts and unless and until the same is finalized, no proceedings under the SARFAESI Act will He.
2. Yet another contention raised by the petitioner is that in response to the averments in the plaint filed before the Civil Court, the Secured Creditor has filed Ext.P1 written statement, wherein the question of maintainability of the suit is also raised stating that, the proceedings under the SARFAESI Act had been taken much prior to the institution of the suit by issuing notice under Section 13(2) on 18.12.2004 and hence that the secured Creditor is very touch entitled to proceed with such steps under the Act. During the course of the proceedings before the Civil Court, the Secured Creditor issued Ext.PS notice under Section 13(2) of the Act again, stating that the earlier notice and records were not traceable (in response to a petition filed by the petitioner for causing production of the details). The specific contention of the petitioner is that, no second notice under Section 13(2) will lie and hence that the proceedings under the SARFAESI Act, are liable to be declared as unsustainable.
3. With regard to the main prayer i.e. for a declaration that the suit filed by the petitioner before the Sub Court, Kollam for settlement of accounts is not barred under the provisions of the SARFAESI Act, the learned Counsel for the petitioner submits that, the bar of jurisdiction is only with regard to the sustainability of the steps taken by the Secured Creditor and to see whether it is in accordance with the provisions of the SARFAESI Act and nothing more, it is also pointed out that, the right of the petitioner to dispute the quantum of liability, as well as other incidental aspects as to the actual amount due are not at ail barred and that the petitioner is very much entitled to challenge the same by filing a suit before the Civil Court.
4. With reference to the question of jurisdiction of the Civil Court, right from the beginning, as per the machinery provided by virtue of enactment of the Recovery of Debts Due to Banks and Financial Institutions Act 1993, the jurisdiction of the Debt Recovery Tribunal is clearly dealt with as provided under Section 17 therein and the jurisdiction of the Civil Court was specifically barred as provided under Section 18. As per Section 31 of the Act, the pending cases before the Civil Court were to be transferred to the DRT for proper adjudication, to the extent as provided, it was subsequently, that the Parliament thought of enactment of SARFAESI Act, which was brought into force w.e.f. 21.6.2002. By virtue of the specific stipulations therein the need, necessity and occasion for the secured creditors to have the intervention of the Court/ Tribunal was spared and a speeder machinery was provided by enabling the institutions to proceed against the secured assets and to realize the dues.
5. The power vested with the secured creditors as above, invoking the provisions under Section 13 of the Act in the manner stipulated therein, was of course subjected to scrutiny and challenge before the DRT, as provided under Section 17. By virtue of this stringent provision, the power conferred under the Statute was being exercised by different financial institutions in an indiscrete manner, which happened to be challenged in appropriate proceedings and the matter finally came up for consideration before the Apex Court in Mardia Chemicals v. Union of India : 2004 (4) SCC 311. It was held that the opportunity given to the debtors under Section 13(2) cannot be stated as an empty formality and that they are very much entitled to project their grievance by way of statement of objections and it is for the secured creditors to consider the same and only, thereafter will the secured creditors be justified in proceeding with further steps as provided under Section 13(4) of the Act, As per the said decision, the various other adverse stipulations, particularly Sub-section 2 to Section 17, wherein 75% of the liability was directed to be deposited for availing the benefit of appeal, were also set aside. In conformity with the above observations, Section 13(3A) was introduced making it clear that, on service of notice under Section 13(2). the borrowers will be entitled to raise their objections and that the same will have to be considered by the secured creditors, 'Proviso' to Section 13(3A) states that, the reply given by the secured creditors in response to the objections will not confer any jurisdiction or right to the parties for approaching the Tribunal, invoking the power under Section 17 of the Act.
6. Coming to the scope of challenge against the action being pursued by the secured creditors, the rights and liberties of the parties concerned, particularly the borrowers are very much liable to be adjudicated before the Debt Recovery Tribunal. Section 17(1) is extracted below:
17. Right to appeal : (1) Any person (including borrower), aggrieved by any of the measures referred to Sub-section (4) of Section 13 taken by the secured creditor or his authorized officer under this Chapter, (may make an application along with such fee, as may be prescribed) to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date of which such measures had been taken.
7. It is quite obvious from the above provision that, any person including the borrower aggrieved by any of the measures referred to in Sub-section 4 of Section 13 is entitled to approach the DRT in the manner as specified therein. This being the position, the borrower, whether or not projected his grievance before the Bank/secured creditor by filing any statement of objection, in response to the notice availing opportunity provided under Section 3A, can however challenge the matter before the DRT on all points including the actual liability to be discharged by him so as to redeem the property concerned. This is more so, when the jurisdiction of the other Forum including the Civil Court specifically barred, by virtue of the stipulation under Section 34, where it is specifically mentioned that no Civil Court shall have the jurisdiction to entertain any Suit or proceeding in respect of any matter, which the Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts due to Banks and Financial Institutions Act, 1993. It is provided under Section 35, that the provisions of the SARFAESI Act, will have 'overriding effect' on other laws in existence.
8. The learned Counsel for the petitioner, referring to Section 17 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 submits that, the rights and liberties to approach the DRT thereunder are vested only upon the Bank and financial institutions and that no remedy is available to the borrower to dispute the facts and figures by filing objections directly before the DRT. The said submission does not appear to be correct or sustainable, for many a reason. During the earlier period i.e. when the SARFAESI Act was not in existence, the remedy available to the Bank and other financial institutions was by approaching the DRT, invoking the power under Section 17; the jurisdiction and power of the Civil Court having been taken away, so as to deal with the case as specified. The dispute on facts, as to the quantum of the liability, would arise on filing appropriate proceedings before the DRT under Section 17 and in turn, judgment/ decree/order passed by the DRT would depend upon the relative merits, pleadings and evidence before the DRT. While so, the Parliament thought of enacting the SARFAESI Act, whereby the intervention of the Court/Tribunal was decided to be ousted by resorting to the SARFAESI proceedings, providing stringent stipulations, particularly the steps under Section 13(4), subject to issuance of notice under Section 13(2) and the same was brought into force, of course providing necessary safeguard by way of appeal! to the DRT under Section 17 and by way of further appeal to the DRAT as provided under Section 18.
9. However, the question came up for consideration before the Apex Court in Mardia Chemicals' Cast, where the validity of the stringent provisions under the SARFAESI Act was under challenge. The Hon'ble Supreme Court, in the said case (Mardia Chemicals Ltd. v. Union of India) inter alia,:
(a) Upheld the validity of the provisions of the said Act except that of Sub-section (2) of Section 17, which was declared ultra vires Article 14 of the Constitution (the said subjection provided for deposit of seventy-five percent of the amount claimed before entertaining an appeal (petition) by the Debts Recovery Tribunal (DRT) under Section 17).
(b) Observed that in cases where a secured creditor has taken action under Sub-section (4) of Section 13 of the said Act, it would be open to borrowers to file appeals under Section 17 of the Act within the limitation as prescribed therefor. It is also observed that if the borrower, after service of notice under Sub-section (2) of section of the said Act, raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. The reasons so communicated Shall be only for the purposes of the information/ knowledge of the borrower, without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act, at that stage.
10. One of the main points raised was that, because of the stipulation under the Statute, the borrower had to satisfy the entire liability for redeeming the property before any challenge is raised in this regard before the DRT. More so, the right to approach the DRT would arise only after taking steps under Section 13(4). After considering the facts and circumstances, the Apex Court held that, eventhough some of the provisions are very much stringent, that alone cannot be a reason for setting aside the provision to declare the same as unconstitutional, particularly since the purpose of enactment was to avoid the delayed proceedings before the Civil Court or such other forum and to realize the money, instead of leaving the same as 'NPA' without generating funds, in favour of the financial institutions and to make use of the same for public good. It was however observed that, in cases where there was no dispute on the amount due, the property can be redeemed by the borrower as provided under the Statute. In the cases where the amounts were in dispute, it was also observed that, the parties could very well approach the DRT and matter can be got finalized before the sale. Necessary observations were made in paragraphs 50 54, 55 and elsewhere, it was also taken note of by the Apex Court that, the scope of jurisdiction of Civil Court, though ousted with respect to the matters provided in the Act, it could be attracted in rare cases where (he issue regarding the 'English Mortgage' was involved. But for the specific instances as aforesaid, the jurisdiction of the Civil Court was specifically held as not applicable under any circumstances.
11. Viewed in the above context, the reliance placed by the learned Counsel for the petitioner on the decisions in Vysa Co-operative Bank Lid. v. Ms. G. Keerthana and Ors. 2008 Karnataka 25 end Lakshmi Shankar Mills (P) Ltd. v. Authorised Officer Indian Bank AIR 2008 Mad 181 does not deserve to be considered; particularly since the law laid down by the Apex Court is the 'law of the land' by virtue of Article 141 of the Constitution of India.
12. The petitioner has got a contention that,, no proceedings under the SARFAESI Act can be pursued during the pendency of the Civil Suit instituted by the petitioner. Proviso to Section 19(1) of the Recovery of Debt Due to the Financial Institutions Act, 1993 stipulates that the Bank or the Financial institution may, with the permission of the DRT, on an application made by it, withdraw the application so as to proceed with the SARFAESI Act. Scope of the said stipulation was considered, analysed and appreciated by the Apex Court in Transcore v. Union of India and Anr. AIR 2007 SC 711 and held that, the pendency of the proceedings before the DRT is not a bar and the Secured Creditor is at liberty to proceed with such steps under the SARFAESI Act.
13. The 3rd and last contention raised by the petitioner is that, since the Secured Creditor admittedly had issued a notice under Section 13(2) in 2004 (as borne by Ext.P2), it cannot issue any second notice (as borne by Ext.P5) so as to sustain the further steps under the SARFAESI Act.
14. As borne by the contentions taken by the first respondent in Ext.P1 written statement filed before the Civil Court, the said respondent wanted to sustain the action pursued under the SARFAESI Act, referring to 13 (2) notice stated as issued prior to the institution of the suit. It was at this point of time, that the petitioner specifically contended that no such notice under Section 13(2) was ever issued and served to him and the petitioner filed an I.A. seeking to produce the relevant records. The first respondent submitted before the Civil Court that, the records were not traceable, it was during the pendency of the proceedings before the Civil Court, that the first respondent chose to issue a fresh notice (Ext.PS) under Section 13(2), followed by the consequential proceedings, which in turn forms the subject matter of challenge in the Writ Petition.
15. The learned Counsel for the petitioner submits that, the Statute never contemplates issuance of notice under Section 13(2) twice. Since the cause of action allegedly had arisen by virtue of issuance of the first notice In 2004, no proceeding could have been justified on the basis of Ext P5 notice issued again. The learned Counsel also places reliance on the relevant provisions of the Negotiable Instruments Act with specific reference to Sections 138 and 142.
16. It is very much relevant to note that, the SARFAESI Act does never stipulate anywhere that once a notice Is issued under Section 13(2), it is inevitably to be followed by the measures contemplated under Section 13(4). In other words, rights tod liberties of the secured creators who had chosen to issue notice under Section 13(2), are not barred from considering the matter afresh on the basis of the objections to be submitted by the borrower in response to the notice as provided under Sub-section 3A to Section 13 and to proceed with further steps as found to be fit and proper after effecting the corrections/modifications, if so necessitated, based on the objections; which otherwise will make the chance to file objections, an empty formality; which cannot be the position anymore after the decision in Mardia Chemicals' Case and after incorporation of Section 3A. Since there is no specific bar under the statute, even to issue a corrected/fresh notice under Section 13(2), the contention raised in this regard does not appear to Be correct or sustainable and the reliance placed on the provisions of the Negotiable Instruments Act is wrong and misconceived. This is more so because arising of the 'cause of action' under the Negotiable Instruments Act is specifically dealt with, und6r Sections 138 and 142 of the N.I Act. Once the cheque dishonoured, the party concerned will have to issue a notice of dishonour to the person who issued the cheque, within 30 days from the date of dishonour, giving the latter a period of 15 days' time to satisfy the contents of the cheque, if there is failure in this regard, a complaint will have to be filed within the stipulated time and the cognizance is to be taken as specifically dealt with under Section 142, where it is stated that, the complaint has to be filed within one month from the date of arising the cause of action (with power to condone the delay brought into effect from 6th February, 2003 by virtue of amendment vide Act 55 of 2002).
17. The Apex Court has made it clear that, the cause of action can arise on different occasions in respect of the dishonour of the same cheque within a span of 6 months and it was to be confined to the first instance where notice is sent on dishonour of the cheque, demanding the contents of the same. Unlike this, there is no such adverse stipulation specifying or limiting the cause of action in respect of the further proceedings to be pursued, once a notice under Section 13(2) issued, any where in the SARFAESI Act.
18. This being the position, there is absolutely no bar for the secured creditor in issuing any fresh notice under Section 13(2). More so. when {he specific case raised by the petitioner before the Court below and before this Court is that he had never obtained any notice stated as issued by the 1st respondent Bank earlier, in the year, 2004 (Ext.P2).
19. In the above facts and circumstances, the prayer raised by the petitioner to declare the suit as maintainable is quite wrong and unfounded. The 1st respondent is very much at liberty to proceed with Ext.PS notice issued under Section 13(2) of the SARFAESI Act. No interference is called for. The Writ Petition fails and it is dismissed accordingly.