M/S Om Cotton Ginning And Pressing Factory And Another vs. Oriental Bank Of Commerce And Others

Held

The High Court held that the SARFAESI Act is a complete code in itself, and a Tribunal constituted under it is expected to consider issues of law and fact. Interference by the High Court under Article 226 of the Constitution is generally frowned upon and deprecated, except in extraordinary and exceptional circumstances. The Supreme Court, in cases like Union Bank of India v. Satyawati Tandon, has reiterated that when an effective alternative forum is provided by statute, High Courts should not substitute themselves for the decision-making authority. The Court found no exceptional or extraordinary circumstance in the present case to warrant interference. All arguments raised by the petitioners, including the alleged non-service of notice and violation of RBI guidelines, were well within the realm of consideration by the learned Tribunal. No pure question of law or jurisdictional issue was raised that necessitated intervention at this stage. The Court noted that the petitioners' account was declared NPA, which is a matter of record. Therefore, the writ petition was dismissed, granting the petitioners fifteen working days from the receipt of the order to file appropriate proceedings before the concerned Tribunal, with liberty to seek exclusion of delay and interim relief. The question of granting interim relief or excluding delay was left to the Tribunal.

Facts

The petitioners, M/s Om Cotton Ginning & Pressing Factory and another, filed a writ petition challenging notices issued by Oriental Bank of Commerce under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The notices challenged were dated 02.11.2018 (Section 13(2)), 10.01.2019 (Section 13(4)), and 01.05.2019 (Section 13(2)), along with a sale notice dated 05.04.2019. The petitioners' business was adversely affected by demonetization and GST implementation, leading to their account being declared NPA on 31.10.2018. The petitioners claimed they did not receive the initial Section 13(2) notice, thus being deprived of their right to reply. The bank stated that the second Section 13(2) notice was issued to include mortgaged plant and machinery not mentioned in the first notice.

Key Issues

1. Whether the High Court should entertain a writ petition challenging proceedings under the SARFAESI Act when an efficacious alternative remedy is available before the Debt Recovery Tribunal (DRT)? (Question of law turning on SARFAESI Act, Section 17(1)). 2. Whether the notices issued under the SARFAESI Act were illegal and arbitrary, particularly concerning the alleged non-service of the initial Section 13(2) notice and the issuance of a subsequent Section 13(2) notice? 3. Whether the violation of the Reserve Bank of India's 'Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)' dated 17.03.2016 warrants interference by the High Court? Petitioner's arguments: The Section 13(2) notice dated 02.11.2018 was not served, depriving them of their right to reply under Section 3-A of SARFAESI Act. The issuance of a second Section 13(2) notice on 01.05.2019 was unnecessary. All proceedings are illegal, arbitrary, and in violation of the SARFAESI Act, applicable laws, and RBI guidelines. Respondent's arguments: The writ petition is not maintainable due to the availability of an efficacious alternative remedy under the SARFAESI Act before the DRT. The second Section 13(2) notice was issued to include plant and machinery, which was mortgaged but not mentioned in the earlier notice. All these issues can be adjudicated by the DRT.