K. VIRUPAKSHA & ANR. versus THE STATE OF KARNATAKA & ANR. on 3 March 2020

[2020] 2 S.C.R. 1020

SUPREME COURT REPORTS

[2020] 2 S.C.R.

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K. VIRUPAKSHA & ANR.

v.

THE STATE OF KARNATAKA & ANR.

(Criminal Appeal No. 377 of 2020)

BMARCH 03, 2020

[R. BANUMATHI, S. ABDUL NAZEERAND A.S. BOPANNA, JJ.]

Securitisation and Reconstruction of Financial Assets andEnforcement of Securities Interest Act, 2002 – ss.13, 14, 17, 32 –CRespondent No.2 was sanctioned credit facilities amounting toRs.2.68 crores by Bank – Property measuring 3 acres 2 Guntas wasoffered as security and a charge was created (Secured Asset) – Asper the Bank, respondent no.2 did not repay the loan and his accountwas classified as Non-Performing Asset (NPA) – Ultimately, the BankDtook possession of the secured asset – Auction notice issued –Challenged by respondent no.2 – Rejected by High Court –Respondent no.2 filed application u/s.17(1) – Dismissed by DebtsRecovery Tribunal (DRT) for delay – Appellate Tribunal (DRAT)dismissed appeal– Respondent no.2 filed complaint u/s.200, CrPCagainst appellants who were working as Deputy General ManagersEin the Bank (accused no.1) alleging connivance with auctionpurchaser which caused wrongful loss to him – FIR registered –Appellants filed petition u/s.482, CrPC – Dismissed – Held:SARFAESI Act is a complete code in itself which provides theprocedure to be followed by secured creditor and also the remedyFto the aggrieved parties including borrower – In such circumstance,if there is any discrepancy in the manner of classifying the accountas NPA or in the manner in which the property was valued/auctioned,the DRT is vested with power to set aside such auction at the stageafter the secured creditor invokes power u/s.13 – Though in theinstant case the application filed by Complainant before DRT andGthe appeal before DRAT were dismissed, the remedy ought to havebeen availed diligently – In that direction the further remedy byapproaching the High Court to assail the order of DRT & DRAT isalso available in appropriate cases – Instead, after dismissal ofapplication before DRT, the impugned complaint was filed as anH

intimidatory tactic and an afterthought which is an abuse of theprocess of law – Criminal proceeding not sustainable in a matter ofpresent nature – Complaint and the order passed therein as also theFIR insofar as the appellants are concerned stand quashed –Complainant at liberty to avail his remedies if he assails the orderpassed by DRT & DRAT – Code of Criminal Procedure, 1973 – ss.200, 482 – Penal Code, 1860 – ss.511, 109, 34, 120-B, 406, 409,420, 405, 417 & 426 – Security Interest (Enforcement) Rules, 2002.

Allowing the appeal, the court

Conclusion

Allowing the appeal, the court

HELD: 1.1 The fact that the account of the Complainantwas classified as NPA is also the admitted position. In that regardwhen a right accrues to the secured creditor to enforce thesecurity interest, the procedure as contemplated under Sections13 and 14 of the Securitisation and Reconstruction of FinancialAssets and Enforcement of Securities Interest Act, 2002(SARFAESI Act) is to be resorted to. Further the SecurityInterest (Enforcement) Rules, 2002 provides the procedure tobe adopted with regard to the valuation and sale of the securedasset. If the Complainant, as a borrower had any grievance withregard to any of the measures taken by the secured creditorinvoking the provisions of Section 13 of the SARFAESI Act, theremedy as provided under Section 17 of the SARFAESI Act wasto be availed. It is in that light the High Court in the writproceedings had arrived at such conclusion. At that point in timethe Complainant availed the remedy under the Act by filing theapplication under Section 17. Since there was delay in filing, anapplication was filed under Section 5 of the Limitation Act seekingcondonation of delay. The same was rejected on the ground ofdelay against which an appeal is said to have been filed beforethe DRAT and it was pending though it is now stated to bedismissed. It is at that stage when it was still pending the impugnedcomplaint in P.C. No.389/2016 was filed, wherein through theorder dated 20.05.2016 it had been referred to an investigationunder Section 156 (3) of the Cr.PC. The sanction of loan, creationof mortgage and the manner in which the sanctioned loan was tobe released are all contractual matters between the parties. TheComplainant is an industrialist who had obtained the loan in thename of his company and the loan account was maintained by the A

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ACanara Bank in that regard. The loan admittedly was sanctionedon 16.03.2009. When at that stage the amount was released andif any amount was withheld, the Complainant was required to takeappropriate action at that point in time and avail his remedy. Onthe other hand, the Complainant had proceeded with thetransaction, maintained the loan account until the account wasBclassified as NPA on 15.01.2013. Initially the issue raised wasonly with regard to the under valuation of the property when itwas brought to sale. On that aspect, as taken note the writproceedings were filed and the Single Judge having examined,though did not find merit had reserved liberty to raise it beforeCthe DRT, which option is also availed. It is only thereafter theimpugned complaint was filed on 20.05.2016. [Paras 13, 15][1031B-F; 1032 E-F]

1.2 The SARFAESI Act is a complete code in itself whichprovides the procedure to be followed by the secured creditorDand also the remedy to the aggrieved parties including theborrower. In such circumstance as already taken note by the HighCourt in writ proceedings if there is any discrepancy in the mannerof classifying the account as NPA or in the manner in which theproperty was valued or was auctioned, the DRT is vested withthe power to set aside such auction at the stage after the securedEcreditor invokes the power under Section 13 of SARFAESI Act.The action taken by the Banks under the SARFAESI Act is neitherunquestionable nor treated as sacrosanct under all circumstancesbut if there is discrepancy in the manner the Bank has proceededit will always be open to assail it in the forum provided. ThoughFin the instant case the application filed by the Complainant beforethe DRT has been dismissed and the Appeal No.523/2015 filedbefore the DRAT is also stated to be dismissed the appellantsought to have availed the remedy diligently. In that direction thefurther remedy by approaching the High Court to assail the orderof DRT and DRAT is also available in appropriate cases. InsteadGthe petitioner after dismissal of the application before the DRTfiled the impugned complaint which appears to be an intimidatorytactic and an afterthought which is an abuse of the process of law.In the matter of present nature if the grievance as put forth istaken note and if the same is allowed to be agitated through aHcomplaint filed at this point in time and if the investigation is A

allowed to continue it would amount to permitting the jurisdictionalpolice to redo the process which would be in the nature ofreviewing the order passed by the Single Judge and the DivisionBench in the writ proceedings by the High Court and the orderspassed by the competent Court under the SARFAESI Act whichis neither desirable nor permissible and the banking systemcannot be allowed to be held to ransom by such intimidation. [Paras16, 17][1032 F-G; 1034 A-E]

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Authorised Officer, Indian Overseas Bank & Anr. v.Ashok Saw Mill (2009) 8 SCC 366 : [2009] 11 SCR599 – relied on.

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1.3 ORDER

(i) The complaint bearing P.C. No.389/2016 and the orderdated 20.05.16 passed therein as also the FIR No.0152/2016insofar as the appellants herein are concerned stand quashed.

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(ii) Insofar as the grievance of the Complainant, he is atliberty to avail his remedies in accordance with law if he choosesto assail the order dated 12.06.2015 passed in I.R. No.3044/2014and the order dated 31.05.2017 passed in Appeal No.523/2015by the DRT and DRAT respectively in accordance with law. [Para19][1035 B-C]

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State of Haryana v. Bhajan Lal (1992) Supp (1) SCC335 : [1990] 3 Suppl. SCR 259; United Bank of Indiav. Satyawati Tondon & Ors. (2009) 1 SCC 168 : [2008]SCR 28; General Officer Commanding, Rashtriya Riflesv. Central Bureau of Investigation & Anr. (2012) 6 SCC228 : [2012] 5 SCR 599 – referred to.

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CRIMINAL APPELLATE JURISDICTION: Criminal AppealNo. 377 of 2020.

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AFrom the Judgment and Order dated 21.01.2019 of the High Courtof Karnataka, Dharwad Bench in Petition under Section 482 bearingNo. Crl. Petition No. 100323 of 2018.

Brijesh Kumar Tamber, Ms. Mani Solanki, Advs. for theAppellants.B

Ms. Kiran Suri, Sr. Adv., Chandrashekhar A. Chakalabbi, ShivPandey, Awanish, Anshul Rai, Amith S.J., M/s. Aishwarya Kumar (forM/S. Dharmaprabhas Law Associates), Shubhanshu Padhi, Ashish Yadav,Rakshit Jain, Vishal Banshal, Joseph Aristotle S., Advs. for theRespondents.C The Judgment of the Court was delivered by

A. S. BOPANNA, J.

1. Leave granted.

2. The appellants herein were the petitioners in Criminal PetitionDNo.100323/2018 which was dismissed by the High Court of Karnataka,Dharwad Bench through the order dated 21.01.2019. The said orderwas passed by the High Court while considering the petition filed by theappellants herein under Section 482 of the Cr.P.C. seeking that the orderdated 20.05.2016 passed by the Principal Civil Judge & JMFC in PCNo. 389/2016 referring the matter for investigation and consequentialEregistration of FIR in Crime No. 152/2016 by the Hubballi Sub-UrbanPolice Station for the alleged offences punishable under Sections 511,109, 34, 120-B, 406, 409, 420, 405, 417 and 426 of IPC be quashed. Inthe said proceedings the appellants herein are arrayed as Accused Nos.9 and 11 respectively. The appellants herein were at the relevant point inFtime working as the Deputy General Managers in the Canara Bank(Accused No.1), Circle Office at Hubbali, Karnataka.

3. The brief facts leading to the present situation is that therespondent No.2 herein (hereinafter referred to as the ‘Complainant’)had approached the Canara Bank at Hubballi pursuant to which creditGfacilities were sanctioned on 16.03.2009. The total credit facilitysanctioned amounted to Rs.2.68 crores. The property bearing SurveyNo. 213/2002 situated at Anchatageri Village, Hubballi measuring 3 acres2 Guntas was offered as security for the said loan and a charge wascreated. The said property is hereinafter referred to as the ‘SecuredAsset’. As per the case of Canara Bank, the Complainant had not repaidH

the loan amount and in that view having committed default, the accountof the Complainant was classified as ‘Non-Performing Asset’ (‘NPA’for short) on 15.01.2013. The Canara Bank thus having invoked thepower under Section 13(2) of TheSecuritisation and Reconstruction ofFinancial Assets and Enforcement of Securities Interest Act, 2002(‘SARFAESI Act’ for short) had issued appropriate notices and ultimatelythe possession of the secured asset as contemplated under Section 14 ofthe SARFAESI Act was taken on 22.03.2013. The secured asset wasthereafter evaluated and was brought to auction through the public noticedated 13.10.2013 indicating the date of auction as 15.11.2013. Thereserve price of the secured asset was fixed at Rs.2,28,51,000/-. Thoughpublication was made, no bids were received in the auction proposed on15.11.2013 and since the same was a public holiday declared in theState of Karnataka the auction was postponed to 04.12.2013. Even onthe said date no bids were received.

4. Accordingly, the Canara Bank had revised the valuation,indicating the reserve price as Rs.1.10 Crore since the earlier reserveprice at a higher rate had not attracted purchasers and issued the freshauction notice dated 30.12.2013. The Complainant claiming to beaggrieved by such action, assailed the auction notice in a Writ Petitionfiled before the High Court of Karnataka, Dharwad Bench in Writ PetitionNo. 100382/2014. The learned Single Judge having considered the matter,apart from taking note of the contentions put forth by the Complainanthad also taken into consideration the alternate remedy available to theComplainant under the SARFAESI Act and accordingly dismissed thewrit petition with cost of Rs.10,000/-, on 22.01.2014. The Complainantassailed the said order by filing a Writ Appeal before the Division Benchin WA No. 100349/2014. The Division Bench through the order dated19.08.2014 dismissed the Writ Appeal. The Complainant thereafteravailed the remedy under Section 17(1) of the SARFAESI Act by filingan application in IR No.3044/2014 (SA) and also accompanying the samewith an application under Section 5 of the Limitation Act bearing IA No.4482/2014. The application seeking condonation of delay andconsequently the main application were dismissed by the Debts RecoveryTribunal (‘DRT’ for short) through its order dated 12.06.2015. Pursuantthereto the Complainant is stated to have filed an Appeal before theDebts Recovery Appellate Tribunal, Chennai (‘DRAT’ for short) whichis also stated to be dismissed.

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A5. It is in the said backdrop the Complainant filed the complaintunder Section 200 of the Cr.P.C in the Court of the Principal Civil Judge(Junior Division) & JMFC, Hubballi in P.C. No.389/2016 alleging thatthe Officers of the Canara Bank in connivance with the auction purchaserhad caused wrongful loss to the Complainant. To the said complaint,apart from the Canara Bank, the highly placed officials, the appellantsBherein, the valuers and the auction purchaser were shown as the accused.The said complaint being taken on record, the learned Magistrate hasreferred the same for investigation under Section 156(3) of Cr.P.C. andto submit a report. Based on such direction the FIR No.0152/2016 isregistered. The appellants, therefore, claiming to be aggrieved hadCpreferred the Criminal Petition under Section 482 of Cr.P.C in CriminalPetition No.100323/2018, which was dismissed by the High Court throughthe order dated 21.01.2019 which is assailed herein.

6. Heard Mr. Brijesh Kumar Tamber, learned counsel appearingfor the appellants, Ms. Kiran Suri, learned senior counsel for the DComplainant, Mr. Shubhanshu Padhi, learned counsel for the State ofKarnataka and perused the appeal papers.

7. The learned counsel for the appellants would contend that apartfrom the appellants having no role in the transaction between theComplainant and the Canara Bank, being the Deputy General ManagersEand working at the Circle Office, even otherwise cannot be held liable toface a criminal action of the present nature. It is contended that the loantransaction and the account being treated as NPA due to the non-repayment of loan cannot be disputed. In that circumstance the entireaction taken, upto the stage of the sale of the property is as regulatedunder the provisions of the SARFAESI Act which provides not only forFthe procedure but also for redressal of the grievance of the partiesconcerned. In that circumstance even if the grievance as sought to bemade out by the Complainant are taken note, the same cannot form thebasis for maintaining the criminal complaint and in such event the learnedMagistrate without application of mind has directed investigation underGSection 156(3) of Cr.P.C. which has led to the registration of the FIR. Itis contended that in respect of the action taken by the Canara Bank, thecomplainant in fact has availed the remedy of filing the Writ Petition,Writ Appeal and thereafter the proceedings before the DRT as alsoDRAT and having failed therein has set criminal law into motion whichis not bonafide and not sustainable in law. It is contended that the learnedH

Judge of the High Court of Karnataka has not appreciated the matter inits correct perspective. Instead, the learned Judge has arrived at theconclusion that the investigation would not prejudice the appellants, whichis not justified. It is contended that when action is taken against a defaulter,if the instant action is permitted, it would not be possible to discharge theofficial functions and as such the instant case is a fit case whereinterference was required but the High Court has failed to appreciatethis aspect of the matter. Further, it is also pointed out that the learnedJudge was not justified in rejecting the petition filed by the appellantsmerely because the other petitions filed in Criminal Petition No.101258/2016 and Criminal Petition No.101162/2016 filed by certain other accusedhad been dismissed and a direction was issued to the police to file thefinal report.

8. The learned senior counsel for the Complainant would on theother hand rely on the identical criminal petitions which had beendismissed by the High Court insofar as Accused Nos.1 and 12 areconcerned. It is contended that though the loan of Rs.2.68 Crores wassanctioned, only a sum of Rs.90 lakhs was disbursed and the remainingamount was adjusted as repayment. It is further contended that thesecured asset which was worth more than Rs.4 Crores was undervaluedand ultimately sold for Rs.1.10 Crores in connivance with the auctionpurchaser who is arrayed as Accused No.15. It is further contendedthat the under valuation of the mortgage property is not the only issuebut the issue with regard to the non-disbursement of the entire loan andthe non-consideration of the three offers made by the Complainant forOne Time Settlement (‘OTS’ for short) are all aspects which are to beinvestigated upon. It is contended that in such circumstance theinvestigation as ordered by the learned Magistrate was justified and theHigh Court has appropriately refrained from interfering in the matter atthis stage. It is, therefore, contended that the contention as urged in theinstant appeal by the appellants does not merit consideration and theappeal is liable to be rejected. The learned counsel for the State ofKarnataka would contend that pursuant to direction issued by the learnedMagistrate the FIR had been registered and the investigation is in progressand therefore, the same be permitted to be taken to its logical conclusion.

9. Before adverting to the rival contentions urged on behalf of theparties we have kept in perspective the decision of this Court in the caseof State of Haryana vs. Bhajan Lal (1992) Supp (1) SCC 335 placed A

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Afor consideration by the learned senior counsel for the Complainant whichlays down the parameters that are to be kept in view while exercisingthe extraordinary power/inherent power to quash the criminal proceeding.On stating the parameters, this Court has cautioned that the power ofquashing a criminal proceeding should be exercised very sparingly andwith circumspection and that too in rare cases. In that background,Bkeeping in view the nature of transaction and the manner in which theearlier proceedings were resorted to on the same subject matter, thepresent situation is required to be considered.

10. As noted, the undisputed fact is that the Complainant hadapproached the Canara Bank for financial assistance, wherein theCappellants herein were the Officers in the Circle Office. The Complainanthad availed the loan facility to the tune of Rs.2.68 Crores on 16.03.2009.Though the Complainant contends that the entire amount of Rs.2.68Crores was not released, but only a sum of Rs.90 lakh was releasedand the remaining amount was adjusted as repayment, the question wouldDbe as to whether that aspect and the other aspects as raised with regardto the non-consideration of the OTS as also the value for which theproperty was sold and the manner in which it was sold could beinvestigated into by the police merely because allegations are made andcertain sections of the Indian Penal Code are invoked when the action isresorted to and regulated under SARFAESI Act. While taking note ofEthe sequence of events it is noticed that the secured asset though sold inthe auction conducted on 31.01.2014 and the grievances as sought to beput forth at this point in the criminal complaint was available at thatjuncture, it is not as if the complaint was immediately filed. On the otherhand, when the auction notice dated 13.10.2013 was issued, no grievanceFwas made out by the Complainant before any judicial forum. However,the sale did not take place for want of purchasers and a fresh auctionnotice dated 30.12.2013 was issued indicating the reserve price at Rs.1.10Crores.

11. At that stage the Complainant approached the High Court ofGKarnataka, Dharwad Bench in a Writ Petition filed under Articles 226and 227 of the Constitution of India in W.P. No.100382/2014. The auctionnotice dated 30.12.2013 was impugned therein. The allegation which isnow sought to be put forth in the complaint filed under Section 200 of theCr.PC wherein the appellants herein along with others have been accusedof with regard to the under valuation of the secured assets was the veryH

contention which was urged in the said Writ Petition. The learned SingleJudge in the said Writ Petition had taken note of the contention that thereserve price in respect of the secured assets was fixed at Rs.228.51Lakhs initially, thereafter in the subsequent auction conducted the samewas fixed at Rs.1.10 Crores and has thereafter concluded as hereunder:

“Undisputedly, petitioner is the debtor and has suffered an orderpassed by jurisdictional Debt Recovery Tribunal. The DebtRecovery Tribunal, Bangalore has issued recovery certificate infavour of respondent-Bank to recover the said amount. Propertymortgaged to respondent-Bank by the petitioner has been broughtfor sale by auction. In the event of Bank not adhering to provisionsof SARFAESI Act in conducting the sale or there being anyinfraction in this regard, petitioner has an alternate remedy availableunder SARFAESI Act. Hence, at the stage of auction beingconducted by respondent-Bank for recovery of its legitimate dues,this Court would not interfere with said auction in the normalcourse.”

“In the instant case, reserve price earlier fixed at Rs.228.51lakhs has not fetched customers and as such, respondent-Bankhas fixed the reserve price at Rs.110 lakhs which would be theprice with which the public auction starts and auction bidders arenot permitted to give bids below the floor value or reserve price.If the petitioner is able to secure a customer or a bidder who canoffer his bid for the value as proposed by the petitioner itself, itwould be needless to state that secured creditor would definitelyaccept the said bid since earlier attempts by it to auction theproperty has been in vain.”

“In the instant case, as already noticed hereinabove,petitioner is a borrower and it had defaulted in payment of moniesdue to the Bank. In other words, public money due by petitionerto the Bank has not been repaid. Petitioner loan account havingbeen classified as a ‘non-performing asset’, respondent-Bank hasinitiated proceedings under the SARFAESI Act to recover thedues. In the earlier auctions conducted, reserve price fixed wasRs.228.51 lakhs i.e., in the auction which was to be held on15.11.2013 and 04.12.2013. However, in the paper publication thathas been issued on 30.12.2013 Annexure-C in the auction proposedto be held on 31.01.2014 at 3.30 p.m. (E-auction), reserve price A

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SUPREME COURT REPORTS

Ahas been fixed at Rs.110 lakhs. The grievance of the petitioner isthat value of the property is more than Rs.405.21 lakhs and assuch, property in question cannot be sold for a pittance. If valueof the property as contended by petitioner is Rs.405.21 lakhs,nothing prevents the petitioner from getting a purchaser or a bidderto purchase the property for the said value and clear off the debtsBdue by it to the respondent which even according to petitioner isaround Rs.285.71 lakhs as on 31.01.2014 (which was Rs.261 lakhsas on 11.10.2013). However, without taking said recourse,petitioner is attempting to stall the auction proceedings which is-not permissible inasmuch as the respondentBank being aCnationalised Bank which is the custodian of public money is taking-steps to recover its dues by auctioning the property through eauction and the action of respondent-Bank cannot be flawed.-RespondentBank has adopted one of the courses suggested bythe Hon’ble Apex Court in United India Assurance case referredto supra namely “Public Auction” by which process there wouldDbe larger participation. If at all the auction is to be set-aside forany reason whatsoever, petitioner can take recourse to the remedyavailable under SARFAESI Act and get the sale set aside.However, petitioner cannot be permitted to stall the auction itselfunder extraordinary jurisdiction of this Court.”

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(emphasis supplied)

12. While arriving at such conclusion the learned Single Judgehad kept in view the provisions as contained in the SARFAESI Act, asalso the decisions of this Court, more particularly in the case of UnitedBank of India vs. Satyawati Tondon & Ors. (2009) 1 SCC 168. InFthat view though the learned Single Judge did not accept the contentionsas put forth had also indicated that if at all the auction is to be set asidefor any reason whatsoever, the Complainant who was the petitionertherein can take recourse to the remedy under SARFAESI Act and getthe sale set aside. In that view the learned Single Judge was of theGopinion that the Complainant cannot be permitted to stall the auctionitself through the prayer made in the Writ Petition. The Complainant hadassailed the said order in an intra-court appeal bearing W.A. No.100349/2014. The Division Bench by its order dated 19.08.2014 had taken noteof the consideration made by the learned Single Judge with reference tothe case of Satyawati Tondon & Ors. (Supra) and had accordinglyHdismissed the Writ Appeal.

13. Having taken note of the nature of consideration made by theHigh Court in the said writ proceedings and keeping in view theproceedings on hand, in order to come to a conclusion as to whether in amatter of the present nature the appellants should be exposed to theignominy of going through the process of criminal proceedings, it is alsoappropriate to take note of the provisions as contained in the SARFAESIAct. The fact that the issue relates to the exercise of remedy relating toa secured asset as defined under the Act cannot be in dispute. The factthat the account of the Complainant was classified as NPA is also theadmitted position. In that regard when a right accrues to the securedcreditor to enforce the security interest, the procedure as contemplatedunder Sections 13 and 14 of the SARFAESI Act is to be resorted to.Further the Security Interest (Enforcement) Rules, 2002 provides theprocedure to be adopted with regard to the valuation and sale of thesecured asset. If the Complainant, as a borrower had any grievancewith regard to any of the measures taken by the secured creditor invokingthe provisions of Section 13 of the SARFAESI Act, the remedy as providedunder Section 17 of the SARFAESI Act was to be availed. It is in thatlight the High Court in the writ proceedings had arrived at such conclusion.At that point in time the Complainant availed the remedy under the Actby filing the application under Section 17 in I.R. No.3044/2014. Sincethere was delay in filing, an application in I.A. No.4482/2015 was filedunder Section 5 of the Limitation Act seeking condonation of delay. Thesame was rejected on the ground of delay against which an appeal issaid to have been filed before the DRAT and it was pending though it isnow stated to be dismissed. It is at that stage when it was still pendingthe impugned complaint in P.C. No.389/2016 was filed, wherein throughthe order dated 20.05.2016 it had been referred to an investigation underSection 156 (3) of the Cr.PC.

14. The learned senior counsel for the Complainant no doubtreferred to the Criminal Petition No.101162/2016 and Criminal PetitionNo.101258/2016 filed by the Accused Nos. 1 and 12 being dismissed bythe High Court and the same not being carried further and attainingfinality. Though that be the position, in the instant case the appellants arebefore this Court to exercise the remedy available and as such thedismissal of the said petitions cannot prejudice their case when this Courtis required to take a view on the matter though it has not been availed inthe earlier cases. Further the learned senior counsel has also referred tothe statements of two former Officers of the Canara Bank, namely, AB

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AGurupadayya and Bapu which was recorded during the course of theinvestigation and a reference was made by the learned senior counsel tothe detailed report regarding investigation wherein the InvestigatingOfficer, namely, the Assistant Police Sub-Inspector, Sub-Urban PoliceStation, Hubballi had concluded that as per the investigation it is foundthat all the accused persons with conspiracy and in collusion with eachBother have cheated the Complainant by releasing only Rs.90 Lakhs outof the sanctioned amount of Rs.2.68 Crores and by later not releasingthe remaining amount had caused economic stumbling block and soldthe property mortgaged to one of the accused.

15. The issue however is, as to whether such proceedings by theCpolice in the present facts and circumstances could be permitted. At theoutset the sanction of loan, creation of mortgage and the manner inwhich the sanctioned loan was to be released are all contractual mattersbetween the parties. The Complainant is an industrialist who had obtainedthe loan in the name of his company and the loan account was maintainedDby the Canara Bank in that regard. The loan admittedly was sanctionedon 16.03.2009. When at that stage the amount was released and if anyamount was withheld, the Complainant was required to take appropriateaction at that point in time and avail his remedy. On the other hand, theComplainant had proceeded with the transaction, maintained the loanaccount until the account was classified as NPA on 15.01.2013. InitiallyEthe issue raised was only with regard to the under valuation of the propertywhen it was brought to sale. On that aspect, as taken note the writproceedings were filed and the learned Single Judge having examined,though did not find merit had reserved liberty to raise it before the DRT,which option is also availed. It is only thereafter the impugned complaintFwas filed on 20.05.2016.

16. The SARFAESI Act is a complete code in itself which providesthe procedure to be followed by the secured creditor and also the remedyto the aggrieved parties including the borrower. In such circumstanceas already taken note by the High Court in writ proceedings if there isGany discrepancy in the manner of classifying the account of the appellantsas NPA or in the manner in which the property was valued or wasauctioned, the DRT is vested with the power to set aside such auction atthe stage after the secured creditor invokes the power under Section 13of SARFAESI Act. This view is fortified by the decision of this Court inthe case of Authorised Officer, Indian Overseas Bank & Anr. vs.HAshok Saw Mill (2009) 8 SCC 366 wherein it is held as hereunder:

“34. The provisions of Section 13 enable the secured creditors,such as banks and financial institutions, not only to take possessionof the secured assets of the borrower, but also to take over themanagement of the business of the borrower, including the rightto transfer by way of lease, assignment or sale for realising securedassets, subject to the conditions indicated in the two provisos toclause (b) of sub-section (4) of Section 13.

35. In order to prevent misuse of such wide powers and to preventprejudice being caused to a borrower on account of an error onthe part of the banks or financial institutions, certain checks andbalances have been introduced in Section 17 which allow anyperson, including the borrower, aggrieved by any of the measuresreferred to in sub-section (4) of Section 13 taken by the securedcreditor, to make an application to the DRT having jurisdiction inthe matter within 45 days from the date of such measures havingtaken for the reliefs indicated in sub-section (3) thereof.

36. The intention of the legislature is, therefore, clear that whilethe banks and financial institutions have been vested with stringentpowers for recovery of their dues, safeguards have also beenprovided for rectifying any error or wrongful use of such powersby vesting the DRT with authority after conducting an adjudicationinto the matter to declare any such action invalid and also to restorepossession even though possession may have been made over tothe transferee.

37. The consequences of the authority vested in the DRT undersub-section (3) of Section 17 necessarily implies that the DRT isentitled to question the action taken by the secured creditor andthe transactions entered into by virtue of Section 13(4) of the Act.The legislature by including sub-section (3) in Section 17 has goneto the extent of vesting the DRT with authority to even set asidea transaction including sale and to restore possession to theborrower in appropriate cases. Resultantly, the submissionsadvanced by Mr Gopalan and Mr Altaf Ahmed that the DRT hasno jurisdiction to deal with a post-Section 13(4) situation, cannotbe accepted.”

(emphasis supplied)

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A17. We reiterate, the action taken by the Banks under theSARFAESI Act is neither unquestionable nor treated as sacrosanct underall circumstances but if there is discrepancy in the manner the Bank hasproceeded it will always be open to assail it in the forum provided. Thoughin the instant case the application filed by the Complainant before theDRT has been dismissed and the Appeal No.523/2015 filed before theBDRAT is also stated to be dismissed the appellants ought to have availedthe remedy diligently. In that direction the further remedy by approachingthe High Court to assail the order of DRT and DRAT is also available inappropriate cases. Instead the petitioner after dismissal of the applicationbefore the DRT filed the impugned complaint which appears to be anCintimidatory tactic and an afterthought which is an abuse of the processof law. In the matter of present nature if the grievance as put forth istaken note and if the same is allowed to be agitated through a complaintfiled at this point in time and if the investigation is allowed to continue itwould amount to permitting the jurisdictional police to redo the processwhich would be in the nature of reviewing the order passed by the learnedDSingle Judge and the Division Bench in the writ proceedings by the HighCourt and the orders passed by the competent Court under theSARFAESI Act which is neither desirable nor permissible and the bankingsystem cannot be allowed to be held to ransom by such intimidation.Therefore, the present case is a fit case wherein the extraordinary powerEis necessary to be invoked and exercised.

18. The appellants herein had also referred to the provision ascontained in Section 32 of the SARFAESI Act which provides for theimmunity from prosecution since protection is provided thereunder forthe action taken in good faith. The learned senior counsel for theFComplainant has in that regard referred to the decision of this Court inthe case of General Officer Commanding,Rashtriya Rifles vs.Central Bureau of Investigation & Anr. (2012) 6 SCC 228 to contendthat the defence relating to good faith and public good are questions offact and they are required to be proved by adducing evidence. Thoughon the proposition of law as enunciated therein there could be no cavil,Gthat aspect of the matter is also an aspect which can be examined in theproceedings provided under the SARFAESI Act.In a circumstance wherewe have already indicated that a criminal proceeding would not besustainable in a matter of the present nature, exposing the appellantseven on that count to the proceedings before the Investigating OfficerHor the criminal court would not be justified.

K. VIRUPAKSHA & ANR. v. THE STATE OFKARNATAKA & ANR. [A. S. BOPANNA, J.]

19. In that view, for all the reasons stated above we pass thefollowing:

O R D E R

(i) The complaint bearing P.C. No.389/2016 and the order dated20.05.2016 passed therein as also the FIR No.0152/2016 insofaras the appellants herein are concerned stand quashed.

(ii) Insofar as the grievance of the Complainant, he is at liberty toavail his remedies in accordance with law if he chooses to assailthe order dated 12.06.2015 passed in I.R. No.3044/2014 and theorder dated 31.05.2017 passed in Appeal No.523/2015 by the DRTand DRAT respectively in accordance with law.

(iii) The appeal is accordingly allowed with no order as to costs.

(iv) Pending applications if any, shall also stand disposed of.

Divya Pandey

Appeal allowed.

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