C/SCA/1670/2015 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 1670 of 2015 ================================================================ FAB TECH MANUFACTURING P. LTD. & 1....Petitioner(s) Versus AUTHORISED OFFICER, STATE BANK OF INDIA (SBI) & 1....Respondent(s) ================================================================ Appearance: MR MASOOM K SHAH, ADVOCATE for the Petitioner(s) No. 1 - 2 MS MOHINI K SHAH, ADVOCATE for the Petitioner(s) No. 1 - 2 ================================================================
CORAM: HONOURABLE MR.JUSTICE RAJESH H.SHUKLA Date : 30/01/2015 ORAL
JUDGMENT 1. The present petition is filed by the petitioners under Articles 226 of the Constitution of India as well as under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “the Securitisation Act”) for the following prayers: “(A) Be pleased to quash and set aside the impugned rejections dated 25.09.2014 adjudicated and decided by Advocate under the instructions of the Respondent No.2 (Bank) as ultra vires, illegal, without authority, null and void. (B) Pending Admission, Hearing and Final Disposal of the Petition, the Respondent No.2 / and or their agents / servants be restrained to take further steps under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, 2002 qua the secured asset. (C) Cost of this petition are awarded. (D) Such further and other relief, order or direction which Page 1 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT may be just, fit proper and equitable in the facts and circumstances of the petition.”
2. Heard learned Advocate Shri Masoom K. Shah for the petitioners.
3. Learned Advocate Shri Shah referred to the background of the facts as well as the provisions of the Securitisation Act and tried to submit that the impugned communication at page 63 rejecting the objection of the petitioners is contrary to the statutory provisions. He submitted that as provided in the Securitisation Act, it is only the authorized officer who can have the power and jurisdiction and such an objection could not have been adjudicated and / or rejected by the Advocate of the Respondent Bank. For that purpose he has referred to the definitions and pointedly referred to Section 2(z)(d) of the Securitization Act. Similarly, he has also referred to Section 13(2) and 13(3) of the Securitisation Act. Learned Advocate Shri Shah has submitted that Chapter III of the Securitization Act referring to Section 13 provide for enforcement of the security interest and he emphasized referring to Section 13(2) as well as 13(3) that Section 13(2) provide: “.................................The secured creditor may require the borrower by notice in writing to discharge.......................” Meaning thereby it is only the secured creditor or the authorized officer as defined in the Security Interest Page 2 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT (Enforcement) Rules, 2002 (hereinafter referred to as the Rules”), who could issue such notice. He referred to the definition as provided in Rule 2(a) of the Rules and submitted that the ‘authorised officer’ has been defined. He therefore submitted that the lawyer is not an authorised officer and therefore the aforesaid rejection is without authority or jurisdiction and contrary to the statutory provisions. While referring to the provisions of Section 13(2) and 13(3) of the Securitisation Act, learned Advocate Shri Shah has stated that it has to be read with the Rules and submitted that the reliance could be placed on a judgment of the Hon'ble Andhra Pradesh High Court in the case of Sampoorna Battu v. ICICI Bank and Anr. reported in Manu/AP/0835/2012 (Writ Petition No. 28734 of 2010). Learned Advocate Mr. Shah has submitted that Rule 2(a) of the Rules defines ‘authorized officer’, and as observed, only the officer or the chief officer would be covered and not the lawyer. Similarly, he has also referred to and relied upon the judgment of the Hon'ble Kerala High Court in the case of Bobby Sebastian v. Authorised Officer, reported in Manu/DE/0612/2014 to support his submissions. Learned Advocate Shri Shah has also submitted that apart from this authority and jurisdiction, even reply or rejection is without any application of mind. He pointedly referred to the objections filed by the petitioners through the Advocate dated 12.9.2014 produced at page 42 and referred to Page 3 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT the reply and submitted that it has not dealt with the objections, and the reply through the lawyer dated 25.9.2014 produced on page 63 is without any application of mind. He pointedly referred to the table showing calculation of interest and submitted that even penal interest is charged and capitalized which is not permissible. In support of his submission he has referred to and relied upon the judgment of the Hon'ble Apex Court reported in (2002) 1 SCC 367 – Central Bank of India v. Ravindra And Ors. and tried to submit that it cannot be capitalized and therefore the present petition is filed for invoking discretionary jurisdiction of the High Court.
4. From the appreciation of the submissions and perusal of record, the first aspect with regard to the authority or jurisdiction by the impugned communication rejecting the request of the petitioner through lawyer require consideration. The petitioner through lawyer communicated vide communication dated 12.9.2014 which is labeled as: “Request for withdrawal of notice under s. 13(2) dated 18.07.2014 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act no.54 of 2002) and Objections qua the same.” Thus, the objections are sought to be raised for withdrawal of any notice under Section 13(2) on various grounds. It is this communication which is replied through lawyer by the Page 4 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT Respondent Bank dated 25.9.2014 which is sought to be contended as without jurisdiction or authority. It is not in dispute that the notice as required under Section 13(2) of the Securitisation Act has been already issued by the authorised officer as provided in Section 2(z)(d) of the Securitization Act. The said notice under Section 13(2) is produced at Annexure-P1 dated 18.7.2014 signed by the Chief Manager and authorized officer. Therefore, a close look at the provisions of Securitization Act particularly Section 13 require appreciation of submission made by learned Advocate Shri Shah for the petitioners. Section 13(2) of the Securitization Act refers to the notice to the borrower for the default in repayment of the secured debt failing which the secured creditor may proceed as provided under the Securitization Act including as provided under Section 13(4) of the Securitization Act. The provisions of Section 3 or 3(a) which have been much emphasized submitting that the same analogy may be applied while considering the provisions of Section 13(3A) read with the Rules 2002. The provisions of Section 13(3A) on the contrary provide that if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate. (emphasis supplied) Therefore, like any provision or notice under the Code of Civil Procedure or any other statute, when the objection is sought to be raised by the borrower through lawyer, the same is communicated by the Page 5 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT Respondent Bank through lawyer that such objections are not tenable and not acceptable and it cannot be said to be without jurisdiction or authority. The scheme of the Securitisation Act as provided in Section 13 contemplate for notice under Section 13(2) before proceeding further with the recovery under the Act. Admittedly such notice has been served to the petitioners and such a notice is by the authorised officer of the Bank as stated above. Thereafter if any objection or a notice is given through a lawyer by the petitioners, one fails to understand why the Respondent Bank cannot reply suitably like any legal notice through the lawyer. Therefore, such submissions referring to the statutory provisions and the Rules as stated above has no relevance and the reliance sought to be placed on the judgment of the Hon'ble Andhra Pradesh High Court is without reference to the factual background. In the judgment of the Hon'ble Andhra Pradesh High Court it was an issue with regard to the notice and there is a specific reference that the notice under Section 13(2) has to be issued in accordance with the Enforcement Rules. It is in this context the discussion has been made referring to the provisions of Section 13(2) of the Act read with the Enforcement Rules 2002 and the definition of the ‘authorised officer’ as provided in Rule 2(a) of the Enforcement Rules. Again, the reference to the judgment of the Kerala High Court also has no relevance as the demand notice has been admittedly issued by the authorised officer of Page 6 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT the Bank.
5. Therefore such novel submissions which are sought to be raised with reference to the background of the facts relying on the judgment cannot be of any assistance to the petitioners.
6. The another facet of the submission that apart from the jurisdiction or authority, the reply rejecting the objection of the petitioners is without any application of mind is also misconceived.
7. Though the reference is made with comparison to both, it is evident that the same reply which is said to be without any application of mind in clear terms has stated: “Fact of the case is that, After availing the financial facility your client is not doing business and sales proceeding through the cash credit facility and your client failed to regularize the said cash credit account. Your client has misused the fund of the cash credit account and transferred all the funds outside your business. My client several times informed and remaindered to regularize the account and approach to my client with concrete plan to regularize the cash credit account. Your client is highly irregular to provide stock statement, details required for completing the stock audit exercise. Your client is not bonafide against my clients and misappropriated the funds. And with ulterior motive your client has sold out hypothecated stock and not ready to submit stock statement, stock audit report. And reply given by your client is only to defeat and delay of dues of the bank. My client has approached your client several times for regularization of account but your client has neither given any concrete proposal Page 7 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT nor paid the dues. Therefore my client rejected the reply.”
8. Thus, the bottom line of the reply is that the petitioner has misused the funds and in spite of several reminders to regularize the account has failed to improve and in no uncertain terms it has been stated, “Your client is not bonafide and has misappropriated the funds” (emphasis supplied). It is in this background when the reply has been given it can hardly be said that there is no application of mind because the reply may not be found suitable to the person like the petitioners. Again the reply to the notice is not necessarily to be dealt with every aspect in detail. Therefore such a submission, which has been made by learned Advocate Shri Masoom K. Shah for the petitioners cannot be accepted.
9. The submission made by learned Advocate Shri Shah referring to the judgment of the Hon'ble Apex Court in the case of Central Bank of India v. Ravindra And Ors. (supra) referring to the penal interest is also misconceived inasmuch as it is not the case that the penal interest cannot be levied as observed in this judgment. The doctrine of interest and penal interest are two separate issues. It has a reference to capitalizing the penal interest which cannot be entertained or considered in exercise of discretion under Article 226 merely because the petitioner claim that the interest or the penal interest is sought to be capitalized. In any view of the matter Page 8 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023 C/SCA/1670/2015 JUDGMENT the judgment of the Hon'ble Apex Court is in context of Section 34 of the CPC is also required to be noted. Therefore the submission is without any merit. Both the judgment of the Hon'ble Andhra Pradesh High Court and Kerala High Court have also referred to dissenting view of Calcutta High Court which has also been discussed and fairly referred to by learned Advocate Shri Shah.
10. At the cost of repetition it is required to be mentioned that it is a novel way of abusing the process of the court for delay in the payment and the court particularly the High Court in exercise of discretionary jurisdiction under Article 226 or 227 would not be justified at all considering the objects and reasons of the Securitisation Act for which such an Act has been made by the parliament. If any such arguments are at all considered as relevant it would frustrate the very purpose of the Securitisation Act. Therefore, there is no reason or justification for exercise of discretion under Article 226 and therefore this court has even declined to issue a notice and the present petition therefore deserves to be dismissed and accordingly stands dismissed in limine. (RAJESH H.SHUKLA, J.) JNW Page 9 of 9 Downloaded on : Sat Apr 15 11:10:10 IST 2023