Home » Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir

Phoenix ARC Pvt. Ltd. v. Vishwa Bharati Vidya Mandir

Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 – Assets Reconstructing Company (ARC) – A writ petition against the private financial institution under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable.

In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable.

The writ petitions against the notice under Section 13(4) of the SARFAESI Act was not required to be entertained by the High Court.

Question of Law

Whether, in the facts and circumstances of the case, the High Court is justified in entertaining the writ petitions against the communication dated 13.08.2015 and to pass the ex-parte ad interim order virtually stalling/restricting the proceedings under the SARFAESI Act by the creditor.

Filing of the writ petitions by the borrowers before the High Court under Article 226 of the Constitution of India is an abuse of process of the Court.

The writ petitions have been filed against the proposed action to be taken under Section 13(4). As observed hereinabove, even assuming that the communication dated 13.08.2015 was a notice under Section 13(4), in that case also, in view of the statutory, efficacious remedy available by way of appeal under Section 17 of the SARFAESI Act, the High Court ought not to have entertained the writ petitions. Even the impugned orders passed by the High Court directing to maintain the status quo with respect to the possession of the secured properties on payment of Rs.1 crore only (in all Rs.3 crores) is absolutely unjustifiable. The dues are to the extent of approximately Rs.117 crores. The ad-interim relief has been continued since 2015 and the secured creditor is deprived of proceeding further with the action under the SARFAESI Act. Filing of the writ petition by the borrowers before the High Court is nothing but an abuse of process of Court. It appears that the High Court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed. [Para 13]

Case Law Reference

  1. Radha Krishnan Industries v. State of Himachal Pradesh, (2021) 6 SCC 771
  2. State Bank of Travancore v. Mathew K.C., (2018) 3 SCC 85
  3. Agarwal Tracom Pvt. Ltd. v. Punjab National Bank, (2018) 1 SCC 626
  4. J. Rajiv Subramaniyan v. Pandiyas, (2014) 5 SCC 651
  5. Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610
  6. Kanaiyalal Lalchand Sachdev v. State of Maharashtra, (2011) 2 SCC 782
  7. Sri Siddeshwara Cooperative Bank v. Ikbal, (2013) 10 SCC 83
  8. Ramesh Ahluwalia v. State of Punjab, (2012) 12 SCC 331
  9. United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110
  10. City and Industrial Development Corpn. v. Dosu Aardeshir Bhiwandiwala, (2009) 1 SCC 168
  11. State Bank of India v. Allied Chemical Laboratories, (2006) 9 SCC 252
  12. Surya Dev Rai v. Ram Chander Rai, (2003) 6 SCC 675
  13. Sadhana Lodh v. National insurance Co. Ltd., (2003) 3 SCC 524
  14. United Commercial Bank v. Bank of India, (1981) 2 SCC 766
  15. Praga Tools Corporation v. C.A. Imanual, (1969) 1 SCC 585

Case Number : CIVIL APPEAL NOS. 257-259 OF 2022; JANUARY 12, 2022

Hon’ble Mr. Justice M.R. Shah has pronounced the reportable judgment of the Bench comprising His Lordship and Hon’ble Mrs. Justice B.V. Nagarathna.

For Appellant(s) Mr. Suresh Dutt Dobhal, AOR Mr. Shikhar Kumar, Adv. For Respondent(s) Mr. Basavaprabhu S.Patil, Sr. Adv Mr. Geet Ahuja, Adv Mr. V. N. Raghupathy, AOR

Case Link : https://pdf.caselaw.in/sc/2022/01/1180/

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