9911796707
TMI Blog2007 (8) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... dha Palace, Rajpur Road, Dehradun - respondent herein. The Company mortgaged its land and building with the respondent-bank. According to the appellant, till 2001, the business of the appellant was comparatively good and it had no problem in depositing the interest accrued towards credit facilities. In or about 2001-02, however, because of heavy slump in the market due to arrival of cheaper Chinese Products, the appellant suffered huge losses and could not deposit the interest-amount with the respondent-bank. The respondent-bank, therefore, issued a notice on 16-10-2004 under sub-section (2) of section 13 of the Securitization, Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('the Act') alleging therein that the appellant failed to pay a sum of Rs. 87,64,549.42 P. It was stated that the appellant had created security by equitable mortgage of land, bearing Khasra Nos. 550/3 and 550/4 admeasuring 10,036 sq. ft. situated at village Jagjitpur, Pargana Jwalapur, Tehsil and District Haridwar. The notice also sought to invoke personal guarantee given by M.P. Goel, Sudha Goel and Abhinav Goel. The appellant was called upon to deposit the amount mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'as notified'. Stay of dispossession was, however, granted. On 6-5-2005, notice was issued and interim relief was granted on certain terms and conditions which we will refer to at an appropriate stage. Affidavits and further affidavits were filed and the Court directed the Registry to place the matter for final hearing. Accordingly, the matter has been placed before us. 7. We have heard the learned counsel for the parties. 8. The learned counsel for the appellant contended that the action of the respondent-bank was wholly illegal, unlawful and against the provisions of the Act. It was also in violation of the law laid down by this Court in Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513 /4 SCC 311. It was submitted that once a representation was made, it was incumbent on the respondent-bank to consider the same, to extend an opportunity to the appellant to enable the company to pay-off the amount and in case of rejection of such representation, to inform the appellant about such decision by recording reasons. Nothing had been done by the respondent. The orders passed by the bank, therefore, were totally illegal and unsustainable. A grievance was also made that the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear from what is stated above that the appellant took a credit facility from the respondent-bank to the extent of Rs. 85 lakhs. It is not disputed even by the appellant that no regular re-payment of loan was made by the company. The respondent-bank was, therefore, within its power to take appropriate action in consonance with law. Accordingly, a notice came to be issued on 16-10-2004 which was received by the company on 19-10-2004. So far as the representation said to have been made by the appellant on 20-10-2004 is concerned, it is the case of the respondent-bank that no such representation was made by the appellant and such stand was taken belatedly by the company with a view to get benefit of Mardia Chemicals Ltd.'s case (supra). In this connection our attention has been invited by the learned counsel for the respondent-bank. to an affidavit-in-reply, dated 5-9-2005 filed by D.K. Rudola, Chief Manager wherein it was stated that though the appellant had asserted that it submitted a representation on 20-10-2004 in terms of section 13(3A) of the Act, the Bank had never received the 'alleged representation'. A letter dated 20-10-2004 written by the appellant-company had been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to have been considered by the respondent-bank, a decision ought to have taken thereon by recording reasons and such decision ought to have been intimated to the appellant-company. 13. It is pertinent to note at this stage that in Mardia Chemicals Ltd.'s case (supra), constitutional validity of certain provisions of the Act had been challenged. Section 13 was one of them. It was contended that no adjudicatory mechanism for resolution of disputes had been provided by the Legislature under the said section and the provision was, therefore, ultra vires and unconstitutional. 14. Partly accepting the argument of the petitioner, this Court stated : "45. In the background we have indicated above, we may consider as to what forums or remedies are available to the borrower to ventilate his grievance. The purpose of serving a notice upon the borrower under sub-section (2) of section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under sub-section (4) of section 13 in case of non-compliance of notice within 60 days. The creditor must apply its mind to the objections raised in reply to such notice and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal as provided under section 17 of the Act matures on any measure having been taken under sub-section (4) of section 13 of the Act. 46. We are holding that it is necessary to communicate the reasons for not accepting the objections raised by the borrower in reply to notice under section 13(2) of the Act more particularly for the reason that normally in the event of non-compliance with notice, the party giving notice approaches the court to seek redressal but in the present case, in view of section 13(1) of the Act the creditor is empowered to enforce the security himself without intervention of the Court. Therefore, it goes with logic and reason that he may be checked to communicate the reason for not accepting the objections, if raised and before he takes the measures like taking over possession of the secured assets etc." (p. 347) The Court concluded : "80.****** 1. Under sub-section (2) of section 13 it is incumbent upon the secured creditor to serve 60 days notice before proceeding to take any of the measures as provided under sub-section (4) of section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one hand, it had taken benefit of the order of interim relief and on the other hand, did not comply with it and failed to pay instalments as directed. Neither it raised any grievance against the condition as to payment of instalments nor made any application to the Court for modification of the condition. It continued to enjoy the benefit of stay ignoring and defying the term as to payment of money. The Company is thus in contempt of the order of this Court, has impeded the course of justice and has no right of hearing till it has purged itself of the contempt. 18. As already noted, stay of dispossession was granted by this Court on mention being made on 28-4-2005. The matter was then notified for admission-hearing on 6-5-2005. A two-Judge Bench of which one of us was a party (C.K. Thakker, J.) passed the following order: "Permission to file additional documents is granted. Issue notice. Subject to the petitioner's depositing an amount of Rs. 20 lakhs per month in this Court, there will be stay of the operation of the impugned order. First of such payment shall be made by 6-6-2005 and the subsequent payments by 6th of each succeeding month. In default of payment of any one inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal was filed by the mother against that order. A preliminary objection was raised by the father that as the appellant was in contempt, she was not entitled to be heard on merits. 23. Upholding the contention and speaking for the majority, Romer, L.J. observed : "I am clearly of the opinion that the mother was not entitled, in view of her continuing contempt of court, to prosecute the present appeal and that she will not be entitled to be heard in support of it until she had taken the first and essential step towards purging her contempt of returning the child within the jurisdiction." 24. In a concurring judgment, Denning, L.J. also stated : "The present case is a good example of a case where the disobedience of the party impedes the course of justice. So long as this boy remains in Australia, it is impossible for this Court to enforce its orders in respect of him. No good reason is shown why he should not be returned to this country so as to be within the jurisdiction of this Court. He should be returned before counsel is heard on the merits of this case, so that, whatever order is made, this Court will be able to enforce it. I am prepared to accept the view that in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bank. The owner/Director Sudha Goel had filed an affidavit dated 16-2-1996. In the said affidavit, it was, inter alia, stated as under : "That I/We declare and say that I/We have not created any mortgage charge, or encumbrance of any kind or nature whatsoever on or in respect of the said property. I/We further declare and say that the said property is free from all encumbrances, claims or demands of any kind or nature whatsoever. . . . . . .I/We shall not sell, charge, encumbrance, lease, dispose of or deal with any of my/our property in any manner whatsoever until such time all the liabilities under the various facilities granted to M/s. Prestige Lights Ltd. has been paid in full by the said M/s. Prestige Lights Ltd. and the deponent has got the discharge confirmed in writing." 30. In spite of the above declaration, undertaking and affidavit, encumbrance has been created by the deponent and the Company over the property in respect of which such undertaking has been furnished. 31. It was also alleged by the respondent-bank that the appellant-company had shifted machinery to other place and stock statements were not supplied to the respondent-bank. On 4-8-2004, the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied] 34. It is well-settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a Writ Court will indeed bear in mind the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppresses relevant materials or is otherwise guilty of misleading the Court, the Court may dismiss the action without adjudicating the matter. The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of Court by deceiving it. The very basis of the writ jurisdiction rests in disclosure of true, complete and correct facts. If the material facts are not candidly stated or are suppressed or are distorted, the very functioning of the writ courts would become impossible. 35. In the case on hand, several facts had been suppressed by the appellant-company. Collusive action has been taken with a view to deprive the respondent-bank from realizing legal and legitimate dues to which it was otherwise entitled. The Company had never disclosed that it had created third party's interests in the property mortgaged with the Bank. It had also shifted machinery and materials ..... X X X X Extracts X X X X X X X X Extracts X X X X
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