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IN THE HIGH COURT OF KERALA AT ERNAKULAM
N.NAGARESH, J.
Amal Babu & Anr. - Appellant
Versus
All India Council For Technical Education (AICTE) – Respondent
W.P.(C) Nos.771, 19232 and 28766 of 2023
Decided on : 12-01-2024
Trust Properties - Securitisation Act - Section 13(2), Section 14, Indian Trusts Act, 1882 - The court discussed the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Indian Trusts Act, 1882, and the legal principles established in various judgments related to the maintainability of writ petitions against proceedings initiated under the Securitisation Act. The court emphasized that no writ would lie against the proceedings initiated by a financial institution under the provisions of the SARFAESI Act and cited several judgments in support of this principle.
Fact of the Case:
The case involved disputes related to the administration of Gurudeva Trust, including the availing of bank loans and mortgaging of trust properties. The petitioners, including beneficiaries and students, challenged the proceedings initiated by the bank under the Securitisation Act, alleging statutory violations and seeking redressal.
Finding of the Court:
The court found that the disputes between members of a private trust or between beneficiaries of a trust and the trust cannot be resolved through writ proceedings under Article 226 of the Constitution of India. The court emphasized that the issues raised were civil disputes involving questions of fact, which could not be addressed through the writ jurisdiction. The court also highlighted that no statutory provision required prior approval of the AICTE or any university for mortgaging trust properties where educational institutions are functioning.
Issues: The issues included the authority to mortgage trust properties, statutory violations, and the maintainability of writ petitions against proceedings initiated under the Securitisation Act.
Ratio Decidendi: The court's decision was based on the principle that no writ would lie against the proceedings initiated by a financial institution under the provisions of the SARFAESI Act, as established in various judgments, including United Bank of India v. Satyawati Tondon, Authorised Officer, State Bank of Travancore v. Mathew K.C., Anilkumar v. State Bank of India, and others.
Final Decision: The writ petitions were dismissed, and the court clarified that the observations made in the judgment would not affect any pending civil proceedings and would not bar any of the parties from approaching any competent court/forum for redressal of their grievances.
JUDGMENT :
These writ petitions have common facts and common questions of law. Hence, these writ petitions are heard together and being disposed of by a common judgment.
2. The petitioner in W.P.(C) No.19232/2023 is beneficiary of the 4th respondent-Gurudeva Trust. The petitioner states that he is filing this writ petition with an intention to protect the Trust properties as the Trust is imparting education which is a public duty.
3. The 4th respondent-Trust is running Sree Narayana Guru Institute of Science and Technology at Manjaly, North Paravur. The Trust is also running another Arts and Science College at Manakkappady. According to the petitioner, as per Clause 4(e) of Ext.P1 Trust Deed, the Trust is empowered to sell, pledge, mortgage or otherwise encumber the assets of the Trust with the approval of the General Body. Clause 22(8) provides that the General Body of the Trust has a right to give sanction to sell any properties belonging to the Trust or to create charge on properties. Therefore, sanction of the General Body is required for mortgaging Gurudeva Trust properties.
4. Respondents 7 to 9, who are the Chairman, Secretary and Treasurer of the Trust since 2014, availed a loan of Rs.20 Crores from the 5th respondent-Kotak Mahindra Bank Limited, purportedly for the development of educational institutions under the Trust. The petitioner states that a large number of students are studying in the institution and there are about 200 employees working. There was no requirement for availing a loan of Rs.20 Crores at that time. The loan amount was misutilised by respondents 7 to 9 for their personal purpose. The agenda for availing loan was not placed before the General Body meeting of the Trust.
5. On 09.01.2021, the Kotak Mahindra Bank issued notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 demanding to clear a liability of Rs.9,85,50,144.90 as on 24.11.2020. The Chairman of the Trust filed W.P.(C) No.6535/2021 before this Court and this Court directed the Trust to remit Rs.11,20,00,000/-in instalments. The direction of this Court was not complied with.
6. There are civil suits pending in the courts at North Paravur against the maladministration of the Trust properties by the office bearers of the Trust. Respondents 5 and 6 invoked Section 14 of the Securitisation Act and have filed MC No.520/2022 before the Additional Chief Judicial Magistrate's Court, Ernakulam and the Court has passed order appointing an Advocate Commissioner to take possession of the assets of the Trust. The Advocate Commissioner appointed by the CJM Court has issued Ext.P3 notice to the Trust informing that properties will be taken possession of immediately. The petitioner challenges Ext.P3 notice.
7. The counsel for the petitioner argued that the properties of a Trust cannot be encumbered. The General Body of the Trust has not given permission to mortgage its properties. No prior permission was obtained from the District Court for alienating the properties. The liability created by respondents 7 to 9 is violating statutory provisions. If the 6th respondent is resorting to distress sale of the Trust properties, that will put the Trust and its beneficiaries to irreversible loss.
8. W.P.(C) No.771/2023 has been filed by students studying in educational institutions under the Gurudeva Trust. The petitioners/students argue that the Chief Judicial Magistrate, while passing an order under Section 14 of the Securitisation Act had a statutory obligation to seek the views/permissions of the AICTE/KUHS. The petitioners further urge that the AICTE and the University have obligation to see that the students are shifted to some other affiliated Colleges so that their studies are not affected when the Bank takes over the assets of the Trust where educational institutions are functioning. According to the petitioners, the action of the Bank in taking possession of the properties of the Col
AI
Point of Law : There is no repugnancy nor inconsistency between the two remedies under the RDB Act and the Securitisation Act, the Supreme Court observed that “Together they constitute one remedy and....
High Courts should not entertain writ petitions challenging financial recovery proceedings under statutory frameworks when effective appellate or remedial forums are established, as these legislation....
The registrar's refusal to grant permission for trust property sale must be supported by evidence of prejudice to public interest; arbitrary denials are against statutory provisions.
The SARFAESI Act, 2002 has overriding effect over state laws, ensuring secured creditors' rights are prioritized in debt recovery.
The removal of a member from a Trust results in the loss of the right to intervene in related proceedings, as demonstrated in the absence of a demonstrated interest in a loan sanction application und....
Educational institutions cannot have their management taken over unless there is substantial proof that their operations have been mortgaged.
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