WA/2577/2005 of Sri Rama Chander Vs Indian Bank, Rep. by its Manager, on 29 December 2005

::JUDGMENT::

Counsel for appellant : Sri B.Veerabhadra Rao Counsel for respondents : Smt. P.Balarani 29[th] December, 2005

Per G.S.Singhvi, C.J.

Dissatisfied with the partial relief given bythe learned Single Judge in Writ PetitionNo.25834 of 2005 filed by him for quashing notices dated 12-9-2005 and 15-11-2005 issued by The Indian Bank (for short ‘the bank’) under Sections 13 (2) and 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement ofSecurity Interest Act, 2002 (for short ‘the Act’), the appellant has filed this appeal under Clause 15 of the Letters Patent.

The appellant claims to be the owner of house property bearing No.18-1-6,Plot No.61, Survey No.193 admeasuring 264 sq. yds. situated in Sree Ram NagarColony, Alwal, Secunderabad. He mortgaged this property in his capacity asguarantor in respect of the loan sanctioned by the bank in favour of M/s.SriRanganatha Traders. On account of the borrower’s failure to repay the loan withinterest, the bank initiated proceedings for recovery of the principal amount togetherwith interest. Notice dated 22.8.2003 was issued to the appellant for repayment ofthe outstanding amount. The same was sent by registered post, but was returnedunserved. Thereupon, a copy of the notice was affixed on the property. After about 2years, the bank issued notice dated 12-9-2005 under Section 13(2) of the Actrequiring the petitioner to repay the loan amount of Rs.6,65,789/- with further interestat the agreed rate from 1.8.2005. The appellant did not contest the notice by filing anobjection under Section 13 (3A) of the Act. Therefore, the bank issued notice dated15.11.2005 under Section 13(4) of the Act for taking possession of the propertydescribed herein above.

Faced with the threat of being deprived of his property, the appellant filed writpetition under Article 226 of the Constitution of India for quashing notices dated 12-9-2005 and 15-11-2005 by contending that the first notice was vague to the core anddid not fulfill the mandatory requirement of Section 13 (3) of the Act.

The learned Single Judge declined to entertain the writ petition on the ground thatthe petitioner had not made any representation under Section 13 (3A) and againstthe notice issued under Section 13 (4), remedy of appeal was available underSection 17 of the Act.

Sri B.Veerabhadra Rao, learned counsel for the appellant fairly stated that his clienthad not made any representation or filed objection under Section 13(3A), but arguedthat his omission to do so is not sufficient to absolve the bank of its responsibility tocomply with the requirement of Section 13(3) in its letter and spirit. Learned counselemphasized that a notice issued under Section 13(2) without giving details of theamounts payable by the borrower and the secured assets intended to be enforcedby the secured creditor in the event of non-payment of the secured debts by theborrower should be declared as non-est. He then argued that the opportunity ofmaking representation or filing objection envisaged under sub-section (3A) of Section 13 cannot be treated as an empty formality by the secured creditor byomitting to disclose the details of the amount etc. Another contention of the learnedcounsel is that the requirement of furnishing details of the amount payable by theborrower and the secured assets intended to be enforced by the secured creditorrepresents one of the facets of the rules of natural justice and a notice issued withoutcomplying the mandate of that section is liable to be treated as nullity.

We have given serious thought to the arguments of the learned counsel but have notfelt impressed. A reading of the scheme of Section 13 read with Section 17 makes itclear that notwithstanding Sections 69 and 69A of the Transfer of Property Act, 1882,a secured creditor is entitled to initiate process for recovery of the amount payableby the borrower. Sub-section (2) of Section 13 entitles the secured creditor to issuenotice of 60 days to the borrower and guarantor for repayment of the amount withoutthe intervention of the Court or Tribunal.

Sub-section (3) of Section 13 envisages that notice issued under sub-section(2) shall give details of the amount payable by the borrower and the secured assetsintended to be enforced by the secured creditor in the event of non-payment ofsecured debts by the borrower. Sub-section (3A), which was introduced byEnforcement of Security Interest and Recovery of Debts Laws (Amendment) Act,2004 (This appears to have been done in view of the judgment of the SupremeCourt in Mardia Chemicals Limited v. Union of India, (2004) 4 SCC 311) entitlesthe borrower to make representation or raise any objection against the notice issuedunder sub-section (2) of Section 13. This sub-section also imposes a duty on thesecured creditor to consider such a representation or objection and pass a reasonedorder if the same is not to be accepted.

In our opinion, the width and amplitude of sub-section (3A) of Section 13entitles the borrower not only to question the amount specified in the notice issuedunder Section 13 (2), but also to question the very initiation of proceedings under theAct and the jurisdiction of the secured creditor to invoke the provisions of the Act.Therefore, if the petitioner felt aggrieved by the action initiated by the bank, then hecould have filed objections under Section 13 (3A) and pleaded that the noticeshould be withdrawn because the same did not contain the details of the amountpayable by the borrower and the secured assets intended to be enforced by thesecured creditor. If any such objection was raised, the bank could have eitherremoved the grievance of the petitioner or rejected his objection by recording reasons. However, the fact of the matter is that the petitioner neither availed theopportunity envisaged under Section 13 (3A) nor he paid the amount specified innotice dated 12-9-2005 or persuaded the borrower to repay the debt to the bank.This naturally created a situation in which the bank was compelled to take actionunder sub-section (4) of Section 13.

Section 17 (1) provides for remedy of appeal to the person aggrieved by any of themeasures referred to in sub-section (4) of Section 13 which may be taken by thesecured creditor or his authorized officer. Sub-section (3) of Section 17 empowersthe Debts Recovery Tribunal, before which an appeal can be preferred under sub-section (1) thereof, to examine the facts and circumstances of the case and evidenceproduced by the parties and nullify the action initiated by the bank under Section13(4) of the Act. In our opinion, the remedy of appeal available to the petitionerunder Section 17 (1) is an effective alternative remedy and the learned Single Judgedid not commit any error by refusing to entertain his challenge to notices dated 12-9-2005 and 15-11-2005 issued by the bank under Sections 13 (2) and 13 (4)respectively.

Conclusion

The Supreme Court has consistently held that the High Court should notentertain the writ petition under Article 226 of the Constitution if an effectivealternative remedy is available to the petitioner. In A.V. Venkateshwaran v. R.S.Wadhwani the Constitutional Bench of the Supreme Court while reiterating the rulethat the party who applies for the issue of a high prerogative writ should, before heapproaches the Court, exhaust the other remedies open to him under the law is notone which bars the jurisdiction of the High Court to entertain the petition but is a ruleevolved by the Courts for the exercise of their discretion, observed as under:

“ The wide proposition that the existence of an alternative remedy is a bar tothe entertainment of a petition under Art.226 of the Constitution unless (1)there was a complete lack of jurisdiction in the officer or authority to take theaction impugned, or (2) where the order prejudicial to the writ petitioner hasbeen passed in violation of the principles of natural justice and could,therefore, be treated as void or non est and that in all other cases, Courtsshould not entertain petitions under Art. 226, or in any event not grant anyrelief to such petitioners cannot be accepted. The two exceptions to thenormal rule as to the effect of the existence of an adequate alternative remedyare by no means exhaustive, and even beyond them a discretion vests in theHigh Court to entertain the petition and grant the petitioner reliefnotwithstanding the existence of an alternative remedy. The broad lines of thethe entertainment of a petition under Art.226 of the Constitution unless (1)there was a complete lack of jurisdiction in the officer or authority to take theaction impugned, or (2) where the order prejudicial to the writ petitioner hasbeen passed in violation of the principles of natural justice and could,therefore, be treated as void or non est and that in all other cases, Courtsshould not entertain petitions under Art. 226, or in any event not grant anyrelief to such petitioners cannot be accepted. The two exceptions to thenormal rule as to the effect of the existence of an adequate alternative remedyare by no means exhaustive, and even beyond them a discretion vests in theHigh Court to entertain the petition and grant the petitioner reliefnotwithstanding the existence of an alternative remedy. The broad lines of the general principles on which the Court should act having been clearly laiddown, their application to the facts of each particular case must necessarilybe dependent on a variety of individual facts which must govern the properexercise of the discretion of the court, and in a matter which is thus pre-eminently one of discretion, it is not possible or even if it were, it would not bedesirable to lay down inflexible rules which should be applied with rigidity inevery case which comes up before the court.”

In Thansingh Nathmal v. Superintendent of Taxes another Constitutional Benchof the Supreme Court considered the question relating to exercise of discretion bythe High Court in entertaining a writ petition despite the availability of alternativeremedy and held:

“The jurisdiction of the High Court under Article 226 of the Constitution iscouched in wide terms and the exercise thereof is not subject to anyrestrictions except the territorial restrictions which are expressly provided inthe Articles. But the exercise of the jurisdiction is discretionary: it is notexercised merely because it is lawful to do so. The very amplitude of thejurisdiction demands that it will ordinarily be exercised subject to certain self-imposed limitations. Resort that jurisdiction is not intended as an alternativeremedy for relief which may be obtained in a suit or other mode prescribed bystatute. Ordinarily the Court will not entertain a petition for a writ under Article226, where the petitioner has an alternative remedy, which without beingunduly onerous, provides an equally efficacious remedy. Again the HighCourt does not generally enter upon a determination of questions whichdemand an elaborate examination of evidence to establish the right toenforce which the writ is claimed. The High Court does not therefore act as acourt of appeal against the decision of a court or tribunal, to correct errors offact, and does not by assuming jurisdiction under Article 226 trench upon analternative remedy provided by statute for obtaining relief. Where it is open tothe aggrieved petitioner to move another tribunal, or even itself in anotherjurisdiction for obtaining redress in the manner provided by a statute, the HighCourt normally will not permit by entertaining a petition under Article 226 ofthe Constitution the machinery created under the statute to be bypassed, andwill leave the party applying to it to seek resort to the machinery so set up.”

In Baburam v. Zilla Parishad the Supreme Court reiterated the rule of alternativeremedy in the following words:

“When an alternative and equally efficacious remedy is open to a litigant heshould be required to pursue that remedy and not to invoke the special jurisdiction of the High Court to issue a prerogative writ. It is true that theexistence of a statutory remedy does not affect the jurisdiction of the HighCourt to issue a writ. But, the existence of an adequate legal remedy is athing to be taken into consideration in the matter of granting writs and wheresuch a remedy exists it will be a sound exercise of discretion to refuse tointerfere in a writ petition unless there are good grounds therefor. But it shouldbe remembered that the rule of exhaustion of statutory remedies before a writis granted is a rule of self imposed limitation, a rule of policy, and discretionrather than a rule of law and the Court may therefore in exceptional casesissue a writ such as a writ of certiorari, notwithstanding the fact that thestatutory remedies have not been exhausted.”

Their Lordships then carved out the following two exceptions to the rule ofalternative remedy:

1. where proceedings are taken before a Tribunal under a provision oflaw, which is ultra vires to the Constitution,law, which is ultra vires to the Constitution,

2. where the impugned order has been made in violation of the rules ofnatural justice.natural justice.

In Champa Lal v. I.T. Commissioner, J.M. & Co. v. Agricultural I.T. Officer,Assam, C.I.T. v. Ramendra Nath Ghosh, Swadeshi Cotton Mills Co. Ltd., v.Government of U.P., Gujarat University v. N.U. Rajguru, State of H.P. v. RajaMahendra Pal, L.L. Sudhakar Reddy v. State of A.P., State of Bihar v. JainPlastics & Chemicals Ltd.,, Harbanslal Sahnia v. Indian Oil Corporation Ltd.,,ABL International Ltd., v. Export Credit Guarantee Corporation of India Ltd., theSupreme Court applied the rule of alternative remedy in different fact situations. InHarbanslal Sahnia[12] (supra) the Supreme Court considered the eventualities inwhich the High Court can exercise under Article 226 of the Constitution of Indianotwithstanding the availability of alternative remedy and held:

“The rule of exclusion of writ jurisdiction by availability of an alternativeremedy is a rule of discretion and not one of compulsion. In an appropriatecase, in spite of availability of the alternative remedy, the High Court may stillexercise its writ jurisdiction in at least three contingencies: i) where the writpetition seeks enforcement of any of the fundamental rights; (ii) where there isfailure of principles of natural justice; or (iii) where the orders or proceedingsare wholly without jurisdiction or the vires of an Act is challenged. (SeeWhirlpool Corpn. v. Registrar of Trade Marks {(1998) 8 SCC 1}. Thepresent case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners’ dealership, which is their bread and butter, came to beterminated for an irrelevant and non-existent cause. In such circumstances,we feel that the appellants should have been allowed relief by the High Courtitself instead of driving them to the need of initiating arbitration proceedings.”

I n Titaghur Paper Mills Co. Ltd. v. State of Orissa the Supreme Courtstated the rule of alternative remedy in the following words:

“ Where a right or liability is created by a statute which gives a special remedyfor enforcing it, the remedy provided by that statute alone must be availed of.Under the scheme of the Orissa Sales Tax Act, there is a hierarchy ofauthorities for granting redress. The petitioners had an equally efficaciousalternative remedy by way of an appeal to the Prescribed Authority undersub-section (1) of Section 23, then a second appeal to the Tribunal undersub-section (3)(a) thereof, and thereafter in the event the petitioners get norelief, to have the case stated to the High Court under Section 24 of the Act.The Act provides for an adequate safeguard against an arbitrary or unjustassessment, such as right to prefer appeal under Section 23 (1) and to applyfor stay of recovery under clause (a) of the second proviso to Section 13 (5).Thus the Act provides for a complete machinery to challenge an order ofassessment, and the impugned orders of assessment can only be challengedby the mode prescribed by the Act and not by a petition under Article 226.

In the present case the challenge was only to the regularity of theproceedings before the S.T.O. as also his authority to treat the gross turnoverreturned by the petitioners to be the taxable turnover. The impugned orders ofassessment were not challenged on the ground that they were based on aprovision which was ultra vires. There was no question as to jurisdiction tomake the assessment. The entrustment of power to assess was not indispute, and the authority within the limits of his power was a Tribunal forexclusive jurisdiction.

There was also no question of denial of natural justice. The petitioners wereserved notice of the proceedings under Rule 12 (5) of the Central Sales Tax(Orissa) Rules and Section 12 (4) of the Act. The impugned orders clearlyshow that the petitioners were afforded sufficient opportunity to place theircase. Mere refusal by the S.T.O. to grant any further adjournment and hisdecision to proceed to best judgment under Rule 15 does not amount toviolation of natural justice because the question of grant of any furtheradjournment was within the discretion of the S.T.O. and is a matter which canbe properly raised only in appeal under Section 23 (1) of the Act.”

In Assistant Collector, Central Excise v. Dunlop India Ltd. the SupremeCourt referred to some earlier judgments, including the one of Titaghur Paper Mills Co. Ltd. v. State of Orissa[14](supra) and held:

“Article 226 is not meant to short-circuit or circumvent statutoryprocedures. It is only where statutory remedies are entirely ill-suited to meetthe demands of extraordinary situations, as for instance where the very viresof the statute is in question or where private or public wrongs are soinextricably mixed up and the prevention of public injury and the vindicationof public justice require it that recourse may be had to Article 226 of theConstitution. But then the Court must have good and sufficient reason tobypass the alternative remedy provided by statute. Surely matters involvingthe revenue where statutory remedies are available are not such matters. Wecan also take judicial notice of the fact that the vast majority of the petitionsunder Article 226 of the Constitution are filed solely for the purpose ofobtaining interim orders and thereafter prolong the proceedings by onedevice or the other. The practice certainly needs to be strongly discouraged.”

In the case before us, the appellant has neither pleaded nor has the learnedcounsel argued that the provisions of the Act are ultra vires to the Constitution or thatthe proceedings initiated by the bank are without jurisdiction. As a matter of fact, theonly substantive argument of the learned counsel is that the notice issued underSection 13(2) without complying with the requirement of Section 13(3) should betreated as nullity and after going through the notice we are convinced that thisargument of the learned counsel is without substance. A reading of notice dated12.9.2005 makes it clear that the bank had clearly identified the amount payable bythe borrower. The amount specified was Rs.6,65,789/- with further interest at theagreed rate. It is not the pleaded case of the appellant that he was not aware of theterms of the agreement entered into between the borrower and the bank or that hewas not aware of the amount of interest which was payable by the borrower.Therefore, it is not possible to agree with the learned counsel that notice dated 12-9-2005 is vitiated due to non-compliance of Section 13 (3).

The argument of the learned counsel that notice dated 12-9-2005 is vitiateddue to the violation of the rules of natural justice sounds attractive but lacks merit. Inour considered view, the appellant’s failure to raise objection under Section 13(3A)militates against his plea that the notice issued under Section 13(2) is vitiated due toviolation of rules of natural justice.

There is another reason for our disinclination to entertain the appellant’s plea ofviolation of the rules of natural justice. In the writ petition, the appellant neither

pleaded nor placed on record any material to show that his cause had beenprejudiced on account of the absence of the so-called material particulars in noticedated 12.9.2005. In the absence of a prima facie proof of prejudice, the learnedSingle Judge could not have nullified the notice only on the ground of the so-calledviolation of the rules of natural justice.

No other point has been argued.

For the reasons stated above, the appeal is dismissed. However, we give liberty tothe appellant to avail remedy of appeal under Section 17(1) and direct that if appealis filed within 15 days from today, then the same shall be entertained by theconcerned Debts Recovery Tribunal.

G.S.SINGHVI, C.J.

29.12.2005.

R.SUBHASH REDDY, J.

VR / svs