SARFAESI; Deepak Apparels Vs. City Union Bank [Karnataka High Court, 22-03-2016]

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Whether a writ petition would be maintainable against an order passed by the Debts Recovery Tribunal, while disposing of an appeal filed under Section 17 of the Act.


IN THE HIGH COURT OF KARNATAKA AT BENGALURU

PRESENT THE HON’BLE MR. JUSTICE S. ABDUL NAZEER A N D THE HON’BLE MR. JUSTICE ASHOK B. HINCHIGERI AND THE HON’BLE MR. JUSTICE A.N.VENUGOPALA GOWDA

DATED THIS THE 22ND DAY OF MARCH, 2016

WRIT PETITION NO.28182/2013 (GM-DRT)

BETWEEN: 1. M/s. Deepak Apparels Pvt. Ltd., No.526, 6th Block, 2nd Phase, Banashankari III Stage, Bangalore – 560 085, Rep. by its Managing Director Sri K. Kotrabasappa. 2. Sri Kotrabasappa, S/o. G. Kotrappa, A/a:- 50 years, Managing Director of M/s. Deepak Apparels Pvt. Ltd. 3. Smt. Kumari G.S., W/o. Kotrabasappa, A/a:- 43 years, Director of M/s. Deepak Apparels Pvt. Ltd. 2 Petitioner Nos.2 and 3 are residing at No.526, 6th Block, 2nd Phase, Banashankari III Stage, Bangalore – 560 085. …PETITIONERS (By Sri R.L. Patil, Senior Adv. for Sri Ashish Krupakar, Adv.) AND:- 1. City Union Bank Ltd., Having its registered office at:- Kumbakonam, Tamil Nadu and Branch office at No.82, 6th Cross, Malleshwaram, Bangalore – 560 003. 2. H.R. Varadarajan Shetty, A/a:- 65 years. 3. Smt. H.A. Sujatha Varadaraja Shetty, W/o. H.R. Varadaraja Shetty, A/a:- 60 years. Respondent Nos.2 and 3 are Residing at No.3406/2, 10th Main, 34th “A” cross, 4th Block Jayanagar, Bangalore. …RESPONDENTS (By Sri R. Ashok Kumar, Adv. for R1; Sri K.V. Shyam Prasad, Adv. for R2 and R3)

This Writ Petition was referred to a larger Bench by the learned Single Judge vide order dated 13.09.2013. This petition referred to this Full Bench by the Hon’ble Chief Justice on 27.01.2014, having been heard and reserved for pronouncement of ‘order on Reference’ this day, A.N. Venugopala Gowda J., pronounced the following:-

ORDER ON REFERENCE

In view of an order dated 13.09.2013, passed by the learned Single Judge, raising a question as to ‘whether a writ petition would be maintainable against an order passed by the Debts Recovery Tribunal (for short ‘the Tribunal’), while disposing of an appeal filed under S.17 of the

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

(for short ‘the SARFAESI Act’), in view of the alternative and efficacious remedy of an appeal provided under S.18, the Hon’ble Chief Justice, constituted this Bench to answer the said question.

2. Reference was made by the learned Single Judge, in view of the divergent views of the two Division Benches in W.A.No.6368/2011 decided on 21.11.2011, since reported in 2013 (1) AKR 370, (for short ‘Hotel Vandana Palace case’) and W.A.No.635/2013 decided on 18.03.2013, since reported in 2014 (1) AKR 40 (for short ‘Smt. Lily Joseph case’). The conflict in the aforementioned two judgments centers round the availability of writ remedy against the order passed by the Tribunal.

3. The petitioners had filed S.A.No.688/2012 before the Tribunal, under S.17 of the Act, to set aside the sale notice dated 25.09.2012 issued in respect of secured asset mentioned in the petition, on the premise that the same is arbitrary and illegal. On 14.06.2013, the said appeal having been dismissed, this writ petition was filed to quash the aforesaid order and for issue of a writ of mandamus directing the respondent – Bank, to consider ‘One Time Settlement’ proposal of the petitioners, and for grant of the consequential reliefs.

4. As this Bench is only required to answer the aforesaid question and lay down the principle of law, it is unnecessary to state the facts of the case in detail.

5. The petitioners borrowed loan from the respondent No.1 (for short ‘the Bank’) and their account was treated on 30.09.2010, as Non-performing Asset. A demand notice dated 22.12.2010, under S.13(2) of the Act, was issued by the Bank. S.A.No.399/2011 filed on 19.08.2011 by the petitioners was allowed on 22.08.2012 by the Tribunal, on the ground that there is violation of sub-rule(4) of Rule 9 of the Security Interest (Enforcement) Rules, 2002. A fresh auction notice having been issued and proceeding initiated in pursuance of the liberty granted in S.A.No.399/2011 and an auction notice dated 25.09.2012 having been published, S.A.No.688/2012 was filed. The auction having been conducted on 05.11.2012 and the bid submitted by respondent Nos. 2 and 3, in the form of sealed Tenders having been accepted on 14.06.2013 by the Bank, the Tribunal having found the said appeal to be devoid of merit and dismissed the appeal, this writ petition was filed.

6. Respondents having contended that the writ petition is not maintainable on the ground that an appeal remedy is provided to the Debts Recovery Appellate Tribunal, under S.18 of the Act and reliance having been placed on the judgment in the case of Smt. Lily Joseph and the petitioner having relied upon the judgment rendered in the case of Hotel Vandana Palace, wherein, the question raised as to the maintainability of the writ petition without filing an appeal to the Appellate Tribunal as provided under S.18 of the Act was answered in favour of the writ petitioners, on the ground that the pre-deposit is required under S.18 of the SARFAESI Act and in such circumstances, it cannot be considered as an efficacious remedy, the learned Single Judge having felt that the question raised requires to be conclusively addressed by an appropriate Bench to be constituted by the Hon’ble Chief Justice and the Registry having been directed to obtain orders, the Hon’ble Chief Justice has passed the order dated 27.01.2014 and constituted the Special Bench. Hence, the matter is before us.

7. Sri. R.L. Patil, learned Senior Advocate, at the threshold, vehemently contended that the reference itself is bad. He submitted that

S.9(xii) of the Karnataka High Court Act, 1961

requires all writ petitions, other than Habeas Corpus Petitions, to be heard by a learned Single Judge and that the power and prerogative of the Chief Justice to constitute Benches and allocate the work should, therefore, be read subject to the said statutory provision. He submitted that the learned Single Judge is bound by the judgment passed in the case of Hotel Vandana Palace and the judgment rendered in the case of Smt. Lily Joseph, having not noticed the judgment rendered in the case of Hotel Vandana Palace, the judgment rendered in the case of Smt. Lily Joseph, being per incuriam, an uncalled for reference was made.

8. Sri R. Ashok Kumar, learned advocate, on the other hand, contended that the Hon’ble Chief Justice has the absolute prerogative of constituting the Benches and allocation of the work to the learned Judges. He submitted that the powers of the Chief Justice to constitute Benches and allocate the work to the learned Judges is traceable under Articles 225 and 226 of the Constitution and, therefore, any provision in any statute concerning the High Court administration must yield to the powers of the 8 Hon’ble Chief Justice, which flows from Constitution itself and, therefore, S.9(xii)(a) of the KHC Act, 1961 should yield to the prerogative of the Chief Justice.

9. In view of the rival contentions and there being no dispute that the reference to this Bench is not by the learned Single Judge and that the Special Bench was constituted by the Hon’ble Chief Justice, we would address the preliminary objection raised with regard to the maintainability of the reference made by the Hon’ble Chief Justice.

10. What a learned Single Judge should do, if he feels that the decision of the Division Bench is required to be reconsidered was the subject matter of consideration by the Apex Court, in