2010 Supreme(SC) 615

IN THE SUPREME COURT OF INDIA
G.S. Singhvi & Asok Kumar Ganguly
United Bank of India...Appellant
Versus
Satyawati Tondon and others...Respondents
CIVIL APPEAL NO. OF 2010
(Arising out of SLP(C) No.10145 of 2010)
Decided on : July 26, 2010.

Headnote:(a) Administration of Justice – Interim order – Normally Supreme Court does not interfere with discretion of passing interim order by High Court – Instantly, the interim order having the effect of defeating the very object of SARFAESI Act – Warrants interference. (Para 13)

       (b) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Validity – The Act is constitutionally valid. (Para 6)

       (2004) 4 SCC 311 – Relied upon

       (c) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13(2) and (4) – Creditor can recover loan from surety or guarantor even without making efforts for recovering the dues from borrower – Liability of guarantor and principal debtor is co-extensive and not in alternative – Surety gets subrogated to rights of creditor under Section 140 of the Indian Contract Act and he may then recover the amount from the borrower. (Para 14, 15)

       (1969) 1 SCR 620; (1992) 3 SCC 159; (2009) 9 SCC 478 – Relied upon

       (d) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13(2) and (4) – Despite receiving notices, borrower and surety paying only a paltry amount – Not bothering to pay outstanding dues – Giving undertaking for payment and not honouring it – Action by appellant Bank u/s 13(2) and (4) – Cannot be faulted – Impugned order restraining appellant Bank not sustainable. (Para 16)

       (e) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 17(1) – Alternative remedy – Expression `any person’ – Has wide import – Includes not only borrower but also guarantor or any other person affected by action taken u/s 13(4) or Section 14 – Remedies under the Act expeditious and effective – Writ petition ought not be entertained without exhausting these remedies – Interference in matters relating to recovery of dues to Banks may have serious financial implication for Banks. (Para 17)

       (f) Constitution of India – Article 226 – Jurisdiction and discretion of High Court to issue directions – No limitation – Exhaustion of alternate remedy – Rule of discretion and not compulsion – Alternate remedy in statute expeditious and effective – No reason why High Court should entertain petition without exhausting such remedy. (Para 18)

       AIR 1969 SC 556; (1998) 8 SCC 1; (2003) 2 SCC 107; (1964) 6 SCR 654; (1983) 2 SCC 433; (1985) 1 SCC 260; (2008) 3 SCC 688; (2009) 1 SCC 168; (2010) 4 SCC 772; (2010) 5 SCC 44 – Relied upon

       

       Facts of the case:

       The appellant sanctioned a term loan of Rs.22,50,000/- in favour of M/s. Pawan Color Lab [through its proprietor Pawan Singh (respondent No.2)] sometime in November, 2004. Respondent No.1 gave guarantee for repayment of the loan and mortgaged her property bearing House No. 752/062, Bakshi Khurd, Daraganj, Pargana and Tehsil Sadar, District Allahabad by deposit of title deeds. She also submitted an affidavit dated 28.12.2004 and executed agreement of guarantee dated 29.12.2004 making herself liable for repayment of the loan amount with interest.

       After one year and six months, the appellant sent letter dated 6.5.2006 to respondent Nos.1 and 2 pointing out that repayment of loan was highly irregular. After another one year, the account of respondent No.2 was classified as Non- Performing Asset. On 19.7.2007, the appellant sent separate letters to respondent Nos. 1 and 2 requiring them to deposit the outstanding dues amounting to Rs.23,78,478/-. Thereupon, respondent No.1 deposited a sum of Rs.50,000/- and gave written undertaking to pay the balance amount in instalments. However, she did not fulfil her promise to repay the remaining amount. This compelled the appellant to issue notice to respondent Nos.1 and 2 under Section 13(2) requiring them to pay Rs.23,22,972/- along with future interest and incidental expenses within 60 days.

       Upon receipt of the notice, respondent No.1 offered to pay a sum of Rs.18 lakhs for settlement of the loan account, but the appellant did not accept the offer and filed an application under Section 14 of the SARFAESI Act, which was allowed by District Magistrate/Collector, Allahabad vide his order dated 25.8.2008. Thereafter, the appellant issued notice dated 21.1.2009 to respondent Nos.1 and 2 under Section 13(4) of the SARFAESI Act.

       Respondent No.1 approached the High Court and prayed that the appellant herein may be restrained from taking coercive action in pursuance of the notices issued under Section 13(2) and (4) and order dated 25.8.2008 passed by District Magistrate/Collector, Allahabad. She pleaded that the notices issued by the appellant for recovery of the outstanding dues are ex facie illegal and liable to be quashed because no action had been taken against the borrower i.e., respondent No.2 for recovery of the outstanding dues.

       The Division Bench of the High Court restrained the appellant from taking action in furtherance of notice issued under Section 13(4) of the SARFAESI Act.

       Finding of the Court:

       Impugned order cannot be sustained.

       Result:

       Appeal allowed.