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Noorbari Tea Co. (P.) Ltd. And Anr. v. Uco Bank And Ors.
Factual and Procedural Background
The writ petition challenges the respondent-bank's threatened action under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("the Act") on the ground that the petitioners were not served with a notice under section 13(2) of the Act. Petitioner No.1 is a company (a tea manufacturer owning Noorbari Tea Estate) which took a loan from respondent No.1 (UCO Bank) in 2001 and admits there was a lapse in repayment. The petitioners contend they were unaware of any section 13(2) notice until informed on 25.2.2006 by a representative of respondent No.4. Upon contacting the bank they learned a section 13(2) notice had been issued and, since no response was made to that notice, the bank proposed to take action under the Act. The petitioners claim they requested a copy of the section 13(2) notice by communication dated 13.3.2006 (Annexure-B) in order to submit a reply, but did not receive a substantive response and faced threats of action by the bank.
The bank filed a counter-affidavit denying the petitioners' contentions, asserting that notices and prior communications detailing the charge had been sent to the petitioners (citing letters of 13.5.2005, 20.6.2005 and 21.7.2005), and produced a copy of a notice dated 30.9.2005 under section 13(2) demanding Rs. 3,74,52,775 as outstanding liability (with schedules and registered-post receipts annexed). The petitioners deny receipt of that notice. The matter was heard by the court and interim relief had been in place for about one year.
Legal Issues Presented
- Whether the respondent-bank can initiate action under section 13(4) of the Act when the petitioners assert they were not served with a notice under section 13(2).
- Whether the writ petition invoking article 226 of the Constitution is maintainable when the Act provides an inbuilt alternative remedy (including appeal under section 17) against actions taken under the Act.
- Whether the bank complied with the requirements of section 13(2) of the Act where it contends that notices were sent by registered post but the petitioners deny receipt.
Arguments of the Parties
Petitioners' Arguments
- The petitioners assert they did not receive any notice under section 13(2) of the Act and therefore were denied their right to reply to that notice.
- Relying on Mardia Chemicals Ltd. v. Union of India ((2004) 4 SCC 311), the petitioners contend they are entitled to reply to a section 13(2) notice and that the authority must apply its mind to that reply; denial of this right precludes action under section 13(4).
- They sent a communication dated 13.3.2006 requesting the section 13(2) notice so they could submit a reply, but they say no reply was furnished and the bank threatened action nonetheless.
Respondent Bank's Arguments
- The bank denies the petitioners' contentions and states that the notices (including the section 13(2) notice dated 30.9.2005) were duly served by registered post, with copies and postal receipts annexed to the counter-affidavit.
- The bank asserts the petitioners suppressed material facts and neglected to regularize the account or honor their obligations.
- The bank contends the writ petition is not maintainable because the Act contains an inbuilt remedy (appeal mechanism) and the writ jurisdiction should not be invoked to bypass the statutory remedy; counsel for the bank relied on several precedents (including Mardia Chemicals, Kanak Udyog, Sushil Kumar Agarwalla and Transcor) to support this position.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311 | Establishes that a party is entitled to reply to a notice under the relevant statutory provision and that the authority should apply its mind to such reply. | The petitioners relied on this decision to assert their right to reply to the section 13(2) notice. The court noted this reliance but found that the bank had complied with the requirements of section 13(2) and that the petitioners could file a reply to the annexed notice. |
| Kanak Udyog (India) v. State of Assam, 2006 (4) GLT 4 | Cited by the bank as supporting the proposition that writ petitions of this nature are not maintainable and that the writ court will be reluctant to interfere when action is in accordance with the Act. | The bank's counsel placed reliance on this decision to argue non-maintainability. The court considered these authorities as supporting the view that the statutory remedy should be pursued before invoking writ jurisdiction. |
| Sushil Kumar Agarwalla v. State of Assam, 2006 (4) GLT 4 | Cited by the bank in support of non-maintainability and restraint of writ interference. | The court noted reliance on this decision along with others to support the position that writ relief was premature when statutory mechanisms are available. |
| Transcor v. Union of India, (unreported judgment dated 29.11.2006, Civil Appeal Nos. 908/2006) | Relied upon by the bank to support the contention that writ relief is not appropriate where action is taken in accordance with statutory provisions. | The court recorded that the bank placed reliance on this unreported Apex Court judgment in support of its submission concerning maintainability and non-interference by the writ court. |
| Barak Valley Tea Co. v. Union of India (judgment and order dated 13.9.2006) | Demonstrates that under somewhat similar circumstances a writ petition was dismissed as premature at the stage of a section 13(2) notice. | The court referred to this decision as a comparable case in which a writ petition was dismissed under similar facts, supporting the conclusion that the present petition was premature. |
| D. Ravichand v. Manager, Overseas Bank (Madras High Court, WP No. 250/2006) | Held that a writ petition of this nature is premature where the matter is only at the stage of a section 13(2) notice. | The court noted this Madras High Court decision (which relied on an earlier Division Bench judgment) to reinforce the view that the writ was premature at the notice stage. |
| Punjab National Bank v. O.C. Krishnan, AIR 2001 SCW 2993 | Affirms that when a statute provides an alternative remedy (including an appeal procedure), courts should refrain from exercising jurisdiction under article 226/227 to derail the statutory fast-track mechanism. | The court quoted this Apex Court decision and applied its principle to hold that the petitioners should pursue the statutory remedies (including appeal under section 17) rather than bypass them via writ jurisdiction. |
Court's Reasoning and Analysis
The court's analysis proceeded as follows:
- Assessment of facts: The bank asserted that it issued a notice dated 30.9.2005 under section 13(2) (demanding Rs. 3,74,52,775) and provided the notice (with schedules) and registered-post receipts as Annexures to its counter-affidavit. The petitioners denied receipt of that notice.
- On the sufficiency of service: The court observed that the bank had sent the notices by registered post and had annexed a copy of the notice and postal receipts to its affidavit. The court noted that, even if the petitioners asserted non-receipt, the petitioners had access to the copy of the notice enclosed in the bank's counter-affidavit and thus could have filed a reply to that notice; yet they persisted in maintaining they had not received the notice and invoked writ jurisdiction.
- On the procedural posture (prematurity): The court emphasized that the matter was at the notice stage (section 13(2)) and that the stage had not ripened for restraining any action under section 13(4). It relied on similar decisions (including Barak Valley Tea Co. and the Madras High Court decision in D. Ravichand) holding such writ petitions premature at the notice stage.
- On availability of alternative remedy: Citing Punjab National Bank v. O.C. Krishnan, the court reiterated the principle that where a statute provides an alternative remedy (appeal under the Act), judicial prudence requires refraining from exercising writ jurisdiction; the court therefore held that the statutory remedy (including appeal under section 17) could not be bypassed by invoking article 226.
- On merit: The court also recorded that the petitioners had admitted liability on the loan and thus, on merits, their case did not warrant interference at that stage.
- Practical direction: While dismissing the writ, the court granted the petitioners liberty to file their reply to the section 13(2) notice (a copy annexed to the bank's counter-affidavit) within the time stipulated in that notice, taking the date of notice from the date of the court's order. The bank was permitted to consider the reply and take follow-up action accordingly. If aggrieved by any action under section 13(4), the petitioners could pursue the statutory appeal mechanism.
Holding and Implications
Holding: The court's final decision was to dismiss the writ petition. The core ruling is emphasized below:
DISMISSED
Implications and direct effects:
- The writ petition was dismissed subject to the liberty granted to the petitioners to submit a reply to the section 13(2) notice (the copy of which is annexed to the bank's counter-affidavit) within the time stipulated in that notice, the date of notice being taken from the date of the court's order.
- Upon receipt and consideration of any such reply, the bank may take follow-up action as permitted under the Act.
- If the petitioners remain aggrieved by any action taken under section 13(4) of the Act, they may pursue the statutory remedy of appeal under section 17 of the Act; the court made clear that the petitioners cannot bypass the statutory remedy by invoking writ jurisdiction.
- There shall be no order as to costs.
The opinion focuses on the consequences for the parties in this matter and does not purport to lay down a novel legal principle beyond applying established authorities regarding prematurity and the availability of statutory remedies.
1. The challenge in this writ petition is to the threatened action of the respondent-bank to take action under section 13(4) of the Securetisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 without serving notice upon the petitioners under section 13(2) of the Act.
2. The petitioner No. 1 is a company incorporated under the provisions of the Companies Act, 1956 having its registered office situated at Guwahati. The company is engaged in the business of manufacturing and sale of tea and for the purpose it owns a tea garden, which stands in the name and style of Noorbari Tea Estate situated at Tezpur, Assam.
3. The petitioner No. 1 company represented by the petitioner No. 1, one of the Directors, took a loan from the respondent No. 1, i.e, UCO Bank in the year 2001. The petitioners have admitted that there was lapse on their part towards repayment of the loan amount. In the writ petition, the petitioners have not furnished the details of the loan taken and the outstanding liability. It is the case of the petitioners that on 25.2.2006, a person, namely, Sri S.K Roy, Manager of the respondent No. 4 company informed the petitioners that the company has been authorized by the respondent-bank to take action against the petitioner-company as per the provisions of the aforesaid Act. According to the petitioners, they were not aware of any such move of the Bank as they did not receive any communication.
4. It is the further case of the petitioner that on receipt of the intimation from the representative of the respondent No. 4, they contacted the respondent-bank and upon such contact could come to know that the notice under section 13(2) of the Act was in fact issued to the petitioners. They were also informed that since the notice was not responded to the respondent-bank proposed to take action against the petitioner-company as per the provisions of the Act. Situated thus, the petitioners made Annexure-B communication dated 13.3.2006 to the respondent-bank making a request to provide with the notice under section 13(2) of the Act enabling it to submit reply to the same. The petitioners have asserted that although no reply has been furnished to them, but on the other hand the respondent-bank has threatened to take action as per the provisions of the Act.
5. Referring to the decision of the Apex Court in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311, the petitioners have contended that they are entitled to reply to the notice under section 13(2) of the Act to which the authority must apply its mind. According to the petitioners, this right having been denied to them, the Bank is precluded from taking action under section 13(4) of the Act.
6. The respondent-bank has filed its affidavit denying the contention raised by the petitioners. In the affidavit, the bank apart from dealing with the merit of the case has also questioned the maintainability of the writ petition in view of the remedy available to the petitioners under the inbuilt provisions of the Act. Referring to the Annexure-A letters dated 13.5.2005, 20.6.2005 and 21.7.2005, in which the respondent bank had given the details of the charge against the petitioners, it has been contended in the affidavit that the petitioners have suppressed material fact and have also neglected to regularize their accounts and/or honour its obligation towards the respondent-bank.
7. In paragraph 3(g) of the counter affidavit, it has been stated that under the circumstances, the respondent-bank was compelled to issue notice dated 30.9.2005 under section 13(2) of the Act demanding the amount of Rs. 3,74,52,775 being the outstanding liability as on 30.9.2005 The details of the liability were indicated in Schedule A to the notice. In Schedule B to the notice the details of the security documents were also indicated, while the details of the secured assets were mentioned in Schedule C. Copies of the notices were sent by registered post to the petitioners and also the other guarantors. The copy of the notice has been annexed to the counter affidavit as Annexure-B. The respondent-bank has also annexed the receipts relating to registered post of the notice. The petitioners in their affidavit-in-reply have denied receipt of the notice.
10. I have heard Mr. D. Baruah, learned counsel for the petitioner as well as Mr. RC. Goswami, learned counsel representing the respondent-bank. While Mr. Barua, learned counsel for the petitioner highlighting the above aspects of the matter has contended that the impugned action is uncalled for in the given fact situation of the case, Mr. Goswami, learned counsel for the bank placing reliance on the decisions of the Apex Court and this court submitted that the writ petition is not maintainable and that the action of the respondent-bank being in accordance with the provisions of the Act, the writ court will be reluctant to interfere with the said action. He has placed reliance on the decisions reported in (2004) 4 SCC 311 (Mardia Chemicals Ltd. v. Union of India), 2006 (4) GLT 4 (Kanak Udyog (India) v. State of Assam), 2006 (4) GLT 4 (Sushil Kumar Agarwalla v. State of Assam,) and the unreported judgment of the Apex Court dated 29.11.2006 in Civil Appeal Nos. 908/2006 (Transcor v. Union of India).
11. The only contention raised by the petitioners is that since they did not receive any notice under section 13(2) of the Act, their valuable right to have their say in the matter by way of responding the notice has been infringed. While it is the case of the Bank that the notices were duly served, the petitioners have contended that they did not receive any notice. The bank could not have done anything more than to send the notice to the petitioners and their representative by registered post. It is unbelievable that the petitioners were not aware of the same. In the affidavit the respondent-bank has stated that the copies of the notices were also sent to the guarantors. The petitioners cannot thwart the proceeding under the Act on ground of non-receipt of notice. Even assuming that they did not receive notice, the respondent-bank having enclosed the copy thereof in their counter affidavit, it was always open for the petitioners to respond to the same by furnishing their reply. Instead, they kept on insisting that they did not receive the notice. It is only on this ground, the petitioners have invoked the writ jurisdiction of this court and the matter is now pending for about one year with interim stay.
12. The bank has complied with the necessary requirements of section 13(2) of the Act and upon failure to discharge their liability in full, the petitioners have now apprehended action under section 13(4) of the Act. In the event of being dissatisfied with the action taken under section 13(4) of the Act, it will be open for the petitioners to prefer an appeal under section 17 of the Act. This statutory remedy cannot be bypassed invoking the writ jurisdiction. Moreover, the stage has not yet ripened for initiating any proceeding. It is only at the notice stage and it will be open for the bank to take action as per the provision of the Act upon failure of the petitioners to comply with the requirement under section 13(2) of the Act.
13. Under somewhat similar circumstances, this court by judgment and order dated 13.9.2006 passed in Barak Valley Tea Co. v. Union of India has dismissed the writ petition. In that case, the decision dated 2.2.2006 of the Madras High Court in WP No. 250/2006 (D. Ravichand v. Manager, Overseas Bank) has also been referred to. In the decision of the Madras High Court, which has been passed placing reliance on the earlier Division Bench judgment, it has been held that the writ petition of this nature is premature as the case as in the instant case was only at the stage of section 13(2) notice.
14. In view of the above. I am of the considered opinion that the writ petition does not disclose any material warranting interference under article 226 of the Constitution of India. It fails on all counts, i.e, being statutory remedy of appeal in case of initiation of proceeding under section 13(4) of the Act and also on merit, in view of the own admission of the petitioner regarding its liability to the loan amount. In this connection, the observation of the Apex Court in Punjab National Bank v. O.C Krishnan, AIR 2001 SCW 2993 are quoted below:
“5. In our opinion, the order which was passed by the Tribunal directing sale of mortgaged property was appealable under 5.20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (‘the Act’). The High Court ought not to have exercised its jurisdiction under article 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the tribunal was correct or not has to be decided before an appropriate forum.
6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is hierarchy of appeal provided in the Act, namely, filing of an appeal under section 20 and this fast track procedure cannot be allowed to be derailed either taking recourse to proceedings under articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under articles 226 and 227 of the Constitution, nevertheless when there is an alternative remedy available judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.”
15. It will, however, be open for the petitioners to furnish their reply to the notice under section 13(2) of the Act, copy of which has been annexed to the counter affidavit. If the petitioners want to submit their reply to the notice, it will be open for them to do so within the time stipulated in the notice taking the date of notice from today. Thereafter, the bank upon consideration of the reply may take the follow up action. It is made clear that, if the petitioners remained aggrieved by the decision of the respondent-bank, it will be open for them to take recourse to the course of action under the provisions of the Act. It has already been held above, that the petitioners cannot invoke the writ jurisdiction without pursuing their remedy under the Act itself.
16. Subject to the above liberty to the petitioners, the writ petition is dismissed. There shall be no order as to costs.
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