2022 (7) TMI 1544 - HC - Indian Laws

Who is the Borrower - actual physical possession of the property - respondent-Bank did not disclose about the pendency of the civil proceedings - Section 14(1) of SARFAESI Act - HELD THAT - The order rejecting the interim injunction application was affirmed by the Division Bench. However, while doing so, the Hon ble Division Bench has observed that the appellant/plaintiff shall not be evicted from the premises in question except in due process of law. The question would be as to what is meant by due process of law in the facts and circumstances of this case. As observed earlier, it is for the District Magistrate to decide the same, and therefore, the Bank ought to have placed the order passed by the Division Bench before the District Magistrate before he could exercise jurisdiction under Section 14(1) of the SARFAESI Act. There are no hesitation to hold that not placing the order passed by the Division Bench before the District Magistrate is definitely prejudicial to the interest of the appellant as the District Magistrate had no occasion to make any observation as regards the effect of such order. It is not clear as to why the respondent-Bank failed to place the order passed by the Hon ble Division Bench before the District Magistrate. In fact, stronger observation ought to have been made against the respondent-Bank than what was made by the learned Single Bench by stating that the respondent-Bank should have been more careful while disclosing true state of affairs. The respondent-Bank being lendor ought to be fair by placing all materials before the concerned authority. Non- disclosure especially when it is an order passed by the Hon ble Division Bench of this Court is undoubtedly a very serious matter, and has to be deprecated. The order passed in the writ petition is set aside. Consequently, the order passed by the District Magistrate dated 06.06.2017 is quashed, and the matter is remanded to the District Magistrate, Paschim Medinipur and with the direction to the respondent-Bank to place all the materials including the pleadings and the orders passed by the civil court as well as the order passed by the Hon ble Division Bench and thereafter the District Magistrate shall afford an opportunity of hearing to the respondent-Bank as well as the appellant, and take a fresh decision on merits and in accordance with the law. Appeal allowed by way of remand.

Summary

Issues:
Challenge to order passed under Section 14(1) of SARFAESI Act based on non-disclosure of civil proceedings and orders by respondent-Bank before District Magistrate.

Analysis:
The appellant challenged the order dated 06.06.2017 passed under Section 14(1) of the SARFAESI Act, claiming prejudice due to non-disclosure of civil proceedings and orders by the respondent-Bank. The Single Judge noted the Bank's failure to disclose the pendency of civil proceedings but deemed it non-fatal to the application under Section 14 of the Act. The Court observed that lack of disclosure did not impact the District Magistrate's decision and dismissed the writ petition.

The appellant appealed the decision, arguing that the non-disclosure of civil proceedings was crucial. The respondent-Bank contended that their invocation of power under Section 14 was justified and the writ petition was not maintainable as the appellant had not approached the Debt Recovery Tribunal under Section 17 at the relevant time. The Court highlighted that relevant material was not presented to the District Magistrate, including the pendency of civil proceedings and orders from the civil court and Division Bench.

The Division Bench's order on the appellant's application for interim injunction was discussed. While the order rejecting the injunction was upheld, it was emphasized that the appellant should not be evicted except through due process of law. The Court emphasized the importance of disclosing all relevant materials, especially orders from the Division Bench, to the District Magistrate. The failure to disclose crucial information was considered prejudicial to the appellant's interests.

The Court concluded that the District Magistrate's procedural infraction and violation of natural justice warranted intervention under Article 227 of the Constitution. The appeal was allowed, setting aside the previous order and remanding the matter to the District Magistrate. The respondent-Bank was directed to provide all relevant materials, and a fresh decision was to be made after affording both parties an opportunity to be heard. The rights of the parties in the pending proceedings before the Debt Recovery Tribunal were preserved, allowing the respondent-Bank to raise defenses before the Tribunal.

In summary, the judgment addressed the significance of full disclosure of relevant materials, the impact of non-disclosure on legal proceedings, and the Court's authority to intervene in cases of procedural irregularities and violations of natural justice. The decision emphasized the need for transparency and fairness in legal proceedings, ensuring all parties have a fair opportunity to present their case.