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IN THE HIGH COURT OF MADHYA PRADESH
Sushrut Arvind Dharmadhikari and Gajendra Singh, JJ.
Virendra Rathore & Others v. Tehsildar Distt. Mandsaur (Madhya Pradesh) & Others
Writ Petition No. 3745 of 2024 (Indore); Decided on 22.5.2024
(1) Constitution of India -- Art. 226/227 -- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 -- S. 14 -- maintainability of writ petition -- bar of alternative remedy -- petitioner questions jurisdiction and applicability of SARFAESI proceedings and raises pure question of law pertaining to invocation of S. 13 by respondent housing finance corporation when debt is below prescribed pecuniary threshold -- held -- writ petition to decide upon such pure questions of law touching upon jurisdiction, existence and exercise of powers by respondent housing finance corporation is maintainable. Lee 2023 SCC Online SC 95 followed. (2022) 5 SCC 345, (2003) 10 SCC 733, 2022 SCC Online SC 1522 and (2010) 8 SCC 110 referred to. [Paras 15 to 17]
(2) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 -- applicability of Act -- SARFAESI Act must receive an interpretation that furthers its object, and not a self-defeating one -- in interpretation of its provisions, a broad, purposive approach must be adopted which ensures fulfilment of objective and reasons behind enactment -- approach of Court should generally be to hold that SARFAESI Act applies to any recovery proceedings, rather than leaning against on grounds of technicalities. (2004) 4 SCC 311 and (2010) 8 SCC 110 = (2010) 3 SCC (Civil) 260 followed. [Para 19]
(3) Interpretation of Statute -- legal maxim “generalia specialibus non derogant” -- means “general provisions never derogate from special ones and that general provisions must always give way to special provisions” -- this principle is applied in context of either two different conflicting/overlapping enactments or two provisions overlapping/conflicting with each other under same enactment.(2020) 6 SCC 411 followed. [Para 32]
(4) Interpretation of Statute -- legal maxim “verba ita sunt intelligenda ut res magis valeat quam pereat” -- if two constructions of provision are possible on its face and one would clearly advance legislative purpose whilst other might end up achieving little or nothing, former should always be preferred -- where two interpretations arise out of interplay of two different enactments, Courts must always adopt that interpretation which furthers the intention of legislature. [Para 34]
(5) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 -- Ss. 2(1)(m)(iv), 13 and 14 -- Reserve Bank of India Act, 1934 -- Chap. III-B and S. 45(1)(f) -- National Housing Bank Act, 1987 -- S. 29A -- applicability of SARFAESI Act when debt is below prescribed pecuniary threshold of Rs. 20 lakhs -- provisions under Chapter III-B of RBI Act, specifically S. 45(1)(f) cannot be treated to be applicable in context of housing finance institutions/housing finance corporations established u/s. 29A of NHB Act, for purposes of interpretation of notifications issued u/s. 2(1)(m)(iv) of SARFAESI Act -- HFIs/HFCs will be categorised as financial institutions not by virtue of their being non-banking financial institutions, but because of their falling under phrase “any other institution” as mentioned u/s. 2(1)(m)(iv) -- therefore, notifications resultantly issued pertaining to NBFC will also not apply to HFCs/HFIs -- held -- respondent HFC is entitled under law to resort to SARFAESI Act for recovery of loans and borrowings, irrespective of loan borrowings falling below threshold of Rs. 20 lakhs -- notifications issued by Central Government (Ministry of Finance) on applicability of SARFAESI Act to NBFCs shall not be applicable in context of HFCs/HFIs, but only in context of NBFCs defined under Chap. III-B of RBI Act, especially S. 45(1)(f) -- writ petition dismissed with liberty to petitioner to approach DRT u/s. 17 if aggrieved by any measure taken u/s. 13 or 14 of SARFAESI Act. [Paras 35 & 36]
¼1½ Hkkjr dk lafo/kku & vuqPNsn 226@227 & foÙkh; vkfLr;ksa dk çfrHkwfrdj.k vkSj iquxZBu rFkk çfrHkwfr fgr dk çorZu vf/kfu;e] 2002 & /kkjk 14 & fjV ;kfpdk pyus ;ksX; gksuk & vkuqdfYid mipkj dk otZu & ;kph us vf/kdkfjrk vkSj ljQslh dk;Zokgh ds ykxw gksus dks ç'uxr fd;k gS rFkk _.k fofgr /kuh; lhekjs[kk ls de gksus ij çR;FkhZ vkokl foÙk fuxe }kjk /kkjk 13 dk vkJ; fy, tkus ds laca/k esa fof/k dk fo'kq) ç'u mBk;k gS & vfHkfu/kkZfjr & vf/kdkfjrk] çR;FkhZ vkokl foÙk fuxe }kjk 'kfä dh fo|ekurk vkSj ç;ksx ls laLi'khZ ,sls fofèk ds fo'kq) ç'u ds fofu'p;u ds fy, fjV ;kfpdk pyus ;ksX; gSA 2023 ,llhlh v‚uykbu ,llh 95 vuqlfjrA ¼2022½ 5 ,llhlh 345] ¼2003½ 10 ,llhlh 733] 2022 ,llhlh v‚uykbu ,llh 1522 rFkk ¼2010½ 8 ,llhlh 110 fufnZ"VA ¼iSjk 15 ls 17½
¼2½ foÙkh; vkfLr;ksa dk çfrHkwfrdj.k vkSj iquxZBu rFkk çfrHkwfr fgr dk çorZu vf/kfu;e] 2002 & vf/kfu;e ykxw gksuk & ljQslh vf/kfu;e dk ,slk fuoZpu vko';d gS ftlls mldk mn~ns'; vxzlj gks] vkRe?kkrh fuoZou ugha & blds mica/kksa ds fuoZpu esa ,slk O;kid ç;kstuijd :[k viuk;k tkuk gksrk gS ftlls vf/kfu;fefr ds ihNs ds mn~ns'; vkSj dkj.kksa dh iwfrZZ lqfuf'pr gks & U;k;ky; dk :[k rduhdh ckjhfd;ksa ds vk/kkjksa ij mlds fo:) >qdus ds ctk;] lk/kkj.kr% ;g vfHkfu/kkZfjr djus dk gksuk pkfg, fd ljQslh vf/kfu;e fdlh Hkh olwyh dk;Zokgh dks ykxw gksrk gSA ¼2004½ 4 ,llhlh 311 rFkk ¼2010½ 8 ,llhlh 110 ¾ ¼2010½ 3 ,llhlh ¼flfoy½ 260 vuqlfjrA ¼iSjk 19½
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¼4½ fof/k dk fuoZpu & fof/kd lw= ^^'kCnksa dk vFkkZUo;u bl çdkj fd;k tkuk gksrk gS fd og çHkkoh gksa- O;FkZ ugha** & ;fn mica/k ds çR;{kr% nks vFkZ laHko gSa rFkk ,d ls Li"Vr% fo/kk;h ç;kstu vxzlj gksxk tcfd vU; ls vYi ;k dqN ugha çkIr gksxk] rks lnSo igys vFkZ dks vf/keku fn;k tkuk pkfg, & tgka nks fHkUu vf/kfu;fefr;ksa ds ijLij çHkko ls nks fuoZpu fudyrs gSa] ogk¡ U;k;ky;ksa dks lnSo og fuoZpu gh vaxhdkj djuk pkfg, ftlls fo/kku eaMy dk vk'k; vxzlj gksrk gSA ¼iSjk 34½
¼5½ foÙkh; vkfLr;ksa dk çfrHkwfrdj.k vkSj iquxZBu rFkk çfrHkwfr fgr dk çorZu vf/kfu;e 2002 & /kkjk 2¼1½¼M½¼4½ 13 rFkk 14 & Hkkjrh; fjtoZ cSad vf/kfu;e] 1934 & v/;k; 3&[k rFkk /kkjk 45¼1½¼p½ & jk"Vªh; vkokl cSad vf/kfu;e] 1987 & /kkjk 29d & _.k :i;s 20 yk[k dh fofgr /kuh; lhek js[kk ds uhps gks rc ljQslh vf/kfu;e ykxw gksuk & ljQslh vf/kfu;e dh /kkjk 2¼1½¼M½¼4½ ds v/khu tkjh vf/klwpukvksa ds fuoZpu ds ç;kstuksa ds fy,] Hkkjrh; fjtoZ cSad vf/kfu;e ds v/;k; 3&[k fofufnZ"Vr% /kkjk 45¼1½¼p½ ds v/khu micaèk dks jk"Vªh; vkokl cSad vf/kfu;e dh /kkjk 29d ds v/khu LFkkfir vkokl foÙk laLFkkvksa@vkokl foÙk fuxeksa ds lanHkZ esa ykxw gksus ;ksX; ugha ekuk tk ldrk & vkokl foÙk laLFkkvksa@vkokl foÙk fuxeksa dks muds xSj&cSafdax foÙkh; laLFkk gksus ds vk/kkj ij ugha vfirq /kkjk 2¼1½¼M½¼4½ ds v/khu ;Fkk mfYyf[kr okD;ka'k ^^vU; fdlh laLFkk** ds v/khu vkus ds dkj.k foÙkh; laLFkk ds :i esa oxhZ—r fd;k tk,xk & vr% xSj&cSafdax foÙkh; fuxe ds rkjrE; esa ifj.kkeLo:i tkjh vfèklwpuk,¡ Hkh vkokl foÙk fuxeksa@vkokl foÙk laLFkkvksa dks ykxw ugha gksaxh & vfHkfu/kkZfjr & çR;FkhZ vkokl foÙk fuxe] _.k m/kkjh :i;s 20 yk[k dh lhekjs[kk ls de gksus ls fujis{k] _.kksa vkSj m/kkfj;ksa dh olwyh ds fy, ljQslh vf/kfu;e dk vkJ; ysus gsrq fof/kr% gdnkj gS & xSj&cSafdax foÙkh; fuxeksa dks ljQslh vfèkfu;e ykxw gksus ds ckjs esa dsaæ ljdkj ¼foÙk ea=ky;½ }kjk tkjh vf/klwpuk,¡ vkokl foÙk fuxeksa@vkokl foÙk laLFkkvksa ds lanHkZ esa ykxw ugha gksaxh] cfYd dsoy Hkkjrh; fjtoZ cSad vf/kfu;e ds v/;k; 3&[k fo'ks"kr% /kkjk 45¼1½¼p½ ds v/khu ifjHkkf"kr xSj&cSafdax foÙkh; fuxeksa ds lanHkZ esa ykxw gksaxh & ljQslh vf/kfu;e dh /kkjk 13 ;k 14 ds v/khu fd, x, fdlh mik; ls ;kph O;fFkr gks rks /kkjk 17 ds v/khu _.k olwyh vf/kdj.k ds le{k tkus dh Lora=rk ds lkFk fjV ;kfpdk [kkfjtA ¼iSjk 35 ,oa 36½
ORDER
1. The present petition under Article 226/227 of the Constitution of India takes exception to the impugned order dated 7.8.2023 passed by the Chief Judicial Magistrate (CJM), District Mandsaur under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI Act’). The action is sought to be taken under section 14 for recovery of a loan amount due on the part of the petitioner owed to Respondent no. 2 (SRG Housing Finance Limited) (for short ‘Respondent HFC’).
2. Shorn of unnecessary details, the petitioner borrowed a secured loan of Rs. 8,00,000 (8 Lacs) from Respondent HFC, mortgaging his property as a collateral in lieu of the said loan. On his default in repayment, the amount became outstanding and proceedings under section 13 of the SARFAESI Act of 2002 were initiated. Followed by declaration of NPA and section 13 proceedings, the CJM also directed for coercive measures against the petitioner under section 14 of the SARFAESI Act, taking over of possession, vide order dated 4.8.2023 passed in Case No. MJCR/2606/2023.
This has triggered the filing of the present writ petition.
3. Issue for resolution at the heart of this matter is whether Respondent HFC is justified in resorting to provisions of SARFAESI Act for recovery of their outstanding dues from the petitioner, when it is lower than the monetary threshold of Rs. 20 Lacs; a bar fixed by the Central Government (Ministry of Finance) for Non Banking Financing Company (‘for short NBFC’s).
A. CONTENTIONS ON BEHALF OF THE PETITIONER:
4. The petitioner questioned the jurisdiction and authority of the respondent HFC to institute SARFAESI proceedings as a ‘secured creditor’ of the loan amount lent by a ‘financial institution’ under the Act 2002 (for short ‘FI’). It has been contended that proceedings under SARFAESI could not be invoked by the respondent HFC, since they are admittedly an NBFC and the debt owed was less than Rs. 20 Lacs.
5. Relying upon the Notification issued under section 2 1(m)(iv) of the SARFAESI Act, specifically the latest notification dated 12.2.2021, it is contended that NBFC’s are allowed to resort to machinery of SARFAESI Act towards loan recovery only when the minimum debt is Rs. 20 Lacs or more.
6. Referring to the Gazette Notification of 12.r2.2021, the petitioner vehemently argued that HFC’s are one of the sub-species of larger category of NBFC, and therefore, having once been categorised as such bound by the Gazette Notifications.
7. Relying on various Circulars issued by the RBI, it is contended that all Housing Finance Companies (for short HFCs) are covered under the larger umbrella of Non- Banking Financial Companies (NBFCs), and therefore notifications applicable with respect to pecuniary jurisdiction to institute SARFAESI proceedings shall apply on all the fours to HFCs/HFI’s as well. Reference is also being made to Clause 2 (a) of the Master Circular/ Directions of RBI dated 17.2.2021, relying on which it is argued that HFCs are treated as covered within the upper and middle layer of NBFCs.
8. Earlier, the Competent Authority issued a list of NBFCs, but later on superseding all the earlier notifications on 12.2.2021, it was held and directed that if any NBFC intends to kickstart SARFAESI proceedings, then the same will be applicable to loan net worth amounts of Rs. 20,00,000/- ( Rupees Twenty Lacs) and more. Thus, in the present case when the loan amount is just Rs. 8,00,000/- (Rupees Eight Lakhs), SARFAESI Act, 2002 cannot be fell back upon for its recovery by the respondents.
B. CONTENTIONS ON BEHALF OF THE RESPONDENTS
9. The present Writ Petition is not maintainable and that the petitioner has to avail statutorily available remedy under section 17 of the SARFAESI Act, 2002 by approaching the Debt Recovery Tribunal, which is equally competent to decide on the issue of applicability of provisions of SARFAESI Act, 2002 to the loan arrangement in question.
10. Re
Housing Finance Companies are classified as Non-Banking Financial Companies, bound by threshold limits for invoking SARFAESI Act, with actions below Rs. 20 lakh deemed unauthorized.
Financial institutions cannot initiate SARFAESI proceedings for loan amounts below Rs.20,00,000/- as per Central Government regulations.
The court affirmed that the respondent qualified as a financial institution under the SARFAESI Act, rendering the recovery proceedings lawful and the writ petition non-maintainable due to available s....
Petitioners did not establish MSME status prior to loan classification as NPA; statutory remedies under SARFAESI Act must be availed instead of writ jurisdiction.
The SARFAESI Act provides an efficacious and expeditious remedy to borrowers under Section 17, allowing them to challenge the actions of the secured creditor. The absence of a judicial remedy under C....
Writ petitions against private financial institutions under the SARFAESI Act are not maintainable; statutory remedies must be pursued instead.
The High Court should not exercise jurisdiction under Article 226 in matters governed by the SARFAESI Act where effective remedies exist, and classification of accounts as NPAs is not subject to judi....
SARFAESI Act is a complete code by itself, providing for expeditious recovery of dues arising out of loans granted by financial institutions.
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