I have considered the submissions of the parties and gone through the material on record. As per the chronology of facts narrated hereinabove, it is evident that on the date on which the proceedings were instituted as a pre-litigation case under Section 22 of Legal Services Authority Act, i.e., on 31st August, 2015, Bank had proceeded in taking symbolic possession of the property under Section 13(4) of the Act, 2002. An application for taking physical possession of the property through use of force was also pending before Deputy Commissioner Bokaro under Section 14 of the Act of 2002. In that way, any court or authority was precluded from passing any order of injunction in respect of action taken by the Bank/Financial institution in pursuance of the power conferred under the SARFAESI Act, 2002. The P.L.A however proceeded to not only entertain the application as a pre-litigation application but also passed an interim order upon the Bank to maintain status quo and not to take further action against the petitioner. This action of the P.L.A was wholly without jurisdiction. It was in teeth of the provisions of Section 34 of the Act, 2002. Proceeding in P.L.A are to be held in a spirit of conciliation and settlement. Any decision in pre-litigation case on merits under Section 22-C(8) can be passed after following the procedure prescribed under Section 22-C. The procedure has been well interpreted and laid down by learned Single Judge of this Court in the case of Branch Manager, Tata AIG v. Mrs. Bandana Devi reported in MANU/JH/0255/2010 : (2010) 3 JLJR 312 relied upon by the petitioner Bank.
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (C) No. 6328 of 2015
Decided On: 04.05.2016
Allahabad Bank Vs. Sunita Devi
Hon'ble Judges/Coram:
Aparesh Kumar Singh, J.
Citation:AIR 2017 JHAR 118
Citation:AIR 2017 JHAR 118
Aparesh Kumar Singh, J.
1. Heard learned counsel for the parties.
2. Petitioner-Bank has challenged the proceedings instituted before Permanent Lok Adalat at the instance of sole respondent being P.L.A Case No. 23 of 2015.
3. As the sequence of facts narrated in the pleadings unfold, the sole respondent herein is the guarantor in respect of a loan from Petitioner-Allahabad Bank which had granted cash credit limit of Rs. 85 Lakhs and term loan of Rs. 12 Lakhs to M/s. R.K. Ispat. The sole respondent was one of the Guarantor. On failure to pay the same, the Bank issued notice under Section 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 1st February, 2014. That was however later on withdrawn and a fresh notice was issued on 24th December, 2014 to the borrower. Possession of mortgaged property was taken under Section 13(4) of the Act of 2002 on 4th March, 2015.
4. The respondent herein approached this Court in W. P. (C) No. 557 of 2015 with a prayer that the respondent- Bank be restrained from taking coercive steps till the disposal of SARFAESI Appeal No. 94 of 2014. The writ petition was disposed of on 11th May, 2015 with an observation that the respondent-Allahabad Bank (petitioner herein) being a State instrumentality would act in manner prescribed under SARFAESI Act, 2002 and Security Interest (Enforcement) Rule 2002 and conform to fairness in action. The writ petitioner was granted liberty to challenge the notices dated 24th December, 2014/4th March, 2015 by seeking amendment in SARFAESI Appeal No. 94 of 2014 (Annexure-10). The SARFAESI Appeal No. 94 of 2014 has been dismissed thereafter on 24. 8. 2015. The Bank, in the meantime, issued notice for auction sale of the property fixing the date as 26th August, 2015. Auction sale took place on 26th August, 2015 itself. In the midst of that, respondent instituted P.L.A. Case No. 23 of 2015 on 31st August, 2015 which is Annexure-3 to the writ application with a prayer that the opposite party-Bank be directed to hand over all the documents, and take Rs. 50.10 Lakhs before Your Honour's Court. The application was made under Section 19/22-C of the Legal Services Authority Act and confined to one mortgaged property stating that the actual bid amount made in the auction sale undertaken on 26th August, 2015 was 50.10 Lakhs by the successful bidder. The property described in the petition preferred before Permanent Lok Adalat is under plot No. 6830, Khata No. 197, total area 13 decimal acquired by the respondent herein through registered deed No. 8494 dated 31st July, 2010. One more plot having an area of 10.5 decimals under deed No. 9608 dated 1st September, 2010 was also put on auction. Petitioner, Sunita Devi, respondent herein, thereafter preferred W. P(C) No. 4185 of 2015 on 2nd September, 2015 challenging the order passed in SARFAESI Appeal No. 94 of 2014. One more significant fact to be noted here is that at the time the petitioner instituted P.L.A case on 31st August, 2015, an application under Section 14 of SARFAESI Act was pending before learned Deputy Commissioner, Bokaro with a request to provide force for taking physical possession of the property in question. The P.L.A on 31st August, 2015 took up the matter and passed an interim order to the effect that Allahabad Bank, Bokaro Still City Branch shall maintain status quo and is also required not to take any further action against the petitioner/applicant.
5. Assailing the initiation of proceeding before P.L.A as a pre-litigation application under Section 22 of Legal Services Authority Act, 1987, counsel for the petitioner - Bank has submitted that Section 34 of SARFAESI Act, 2002 bars any such application before a civil court. No injunction should be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Permanent Lok Adalat has proceeded to entertain the P.L.A Case as pre-litigation case in the midst of all the litigations between the borrower and Petitioner-Bank as have been referred to hereinabove. The outstanding dues in respect of loan amount as per the assertion made on affidavit by respondent borrower herself is more than Rs. 1 crore i.e., beyond pecuniary jurisdiction of P.L.A as per the notification dated 22nd March, 2015 Annexure-H at page 48 of the counter affidavit of the respondent. Even otherwise, the Permanent Lok Adalat can adjudicate in terms of provisions of Section 22-C on merits only after following the procedure prescribed under the said provisions and after framing the terms of settlement to which the other party agrees to. This Court in the case of Branch Manager, Tata AIG v. Mrs. Bandana Devi reported in MANU/JH/0255/2010 : 2010 (3) JLJR 312 has laid down the procedure to be followed by P.L.A in such cases. Additionally, a ground has been taken that banking services have not been shown to be included in the category of Public Utility Service under Section 22-A of the Act of 1987.
6. Reliance has also been placed upon a judgment rendered in the case of Citicorp Finance (India) Limited v. Dhrub Shanker Thakur and Anr. reported in MANU/JH/1296/2012 : 2012 (4) JLJR 573.
7. Counsel for the petitioner also points out that the petitioner even after filing of P.L.A Case invoked the jurisdiction of this Court in W. P (C) No. 4537 of 2015 and withdrew it on 22nd February, 2016. The writ petition was preferred with a prayer to implement the interim order passed by Permanent Lok Adalat. Learned counsel for the petitioner submits that the proceedings before P.L.A are therefore an abuse of process of law and should be quashed.
8. Counsel for the respondent guarantor has referred to the provisions of Section 22 of the Act of 1987 and submitted that the powers of P.L.A are not confined to Public Utility Service enumerated in Section 22-A of the Act. The property in respect of which the proceedings have been initiated are the house of the guarantor which has been auctioned/sold at an amount of Rs. 50 lakhs which the guarantor are ready and willing to pay to the Petitioner-Bank at the time of auction sale. Even thereafter, it has made offer to Bank vide Annexure-F to pay Rs. 50 lakhs to substantiate the aforesaid contention.
9. Repeating the chronology of facts, it has been submitted that at the time when the P.L.A Case No. 23 of 2015 was instituted, there were no pending litigation in any court of law. Therefore, the Respondent - guarantor was well within its right to invoke the jurisdiction of P.L.A for settlement of the outstanding dues in respect of one of the properties under mortgage with the petitioner-Bank. The petitioner-Bank has not undertaken the valuation of the property in terms of Rule 8(5) of Security Interest (Enforcement) Rule 2002. There is a violation of Section 13(8) of the Act of 2002, as the petitioner has not been given opportunity to repudiate the outstanding dues till the time the sale/transfer of the mortgaged property is effected. In such circumstances, interference in the proceedings of P.L.A would allow the petitioner Bank to transfer the property in favour of auction purchaser and deny the respondent guarantor with any opportunity to redeem its mortgaged property.
10. I have considered the submissions of the parties and gone through the material on record. As per the chronology of facts narrated hereinabove, it is evident that on the date on which the proceedings were instituted as a pre-litigation case under Section 22 of Legal Services Authority Act, i.e., on 31st August, 2015, Bank had proceeded in taking symbolic possession of the property under Section 13(4) of the Act, 2002. An application for taking physical possession of the property through use of force was also pending before Deputy Commissioner Bokaro under Section 14 of the Act of 2002. In that way, any court or authority was precluded from passing any order of injunction in respect of action taken by the Bank/Financial institution in pursuance of the power conferred under the SARFAESI Act, 2002. The P.L.A however proceeded to not only entertain the application as a pre-litigation application but also passed an interim order upon the Bank to maintain status quo and not to take further action against the petitioner. This action of the P.L.A was wholly without jurisdiction. It was in teeth of the provisions of Section 34 of the Act, 2002. Proceeding in P.L.A are to be held in a spirit of conciliation and settlement. Any decision in pre-litigation case on merits under Section 22-C(8) can be passed after following the procedure prescribed under Section 22-C. The procedure has been well interpreted and laid down by learned Single Judge of this Court in the case of Branch Manager, Tata AIG v. Mrs. Bandana Devi reported in MANU/JH/0255/2010 : (2010) 3 JLJR 312 relied upon by the petitioner Bank.
11. Petitioner had lost the challenge to the action of the Bank taken under the provisions of Section 13(4) of SARFAESI Act before Debt Recovery Tribunal in SARFAESI Appeal No. 94 of 2014. The respondent guarantor and others had gone before learned Debt Recovery Tribunal against the action of the Bank in respect of auction sale of the mortgaged property. In no way, therefore the proceeding initiated before P.L.A could be said to be a pre-litigation matter. The other contentions relating to lack of valuation of the property or violation of Section 13(8) of the SARFAESI Act, 2002 are not germane to the issue involved in the present matter.
12. The entire conspectus of facts and the discussions made hereinabove go to show that the proceedings instituted as a pre-litigation case before P.L.A on the part of the respondent guarantor i.e., P.L.A. Case No. 23 of 2015 was not maintainable in the eye of law. The P.L.A committed a serious error of jurisdiction in passing an interim order also on 31st August, 2014 in the teeth of provisions of Section 34 of SARFAESI Act. Therefore, the entire proceedings in P.L.A case No. 23 of 2015 are quashed. Consequently, the order dated 31st August, 2015 also sands quashed.
13. The writ petition is accordingly allowed.
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