# M/s Kanika Swami v. State of U.P. & Ors

- **Citation:** (2021) 2 ILRA 954
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2021
- **Case number:** Writ C No. 46425 of 2017
- **Bench:** Baharati Sapru, Siddharth
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-kanika-swami-v-state-of-u-p-ors-44319
- **Pages:** 11

## Headnote

A. Civil Law - Cash Credit Facility -
Possession and Recovery - Secularization
and Reconstruction of Financial Assets
and Enforcement of Security Interest Act,
2002 Section 13(2), 13(4)

SARFAESI Act, 2002 - Section 17(1) -
Constitution of India: Article 226
-
Alternative remedy - The remedy of the
petitioner against the proceedings u/s
13(4) of the SARFAESI Act, 2002 lies
before Debts Recovery Tribunal u/s 17.
(Para 13)
2 All. M/s Kanika Swami Vs. State of U.P. & Ors.
955
The power of issuing writs shall not be exercised
unless substantial injustice has been caused or
likely to be caused and in other cases the
parties must be relegated to the course of
appeal or revision to set right mere errors of law
which do not occasion injustice in a broad and
general sense. (Para 14)

When an alternative and equally efficacious
remedy is open to a litigant, he should be
required to pursue that remedy and not invoke
the special jurisdiction of the High Court to issue
a prerogative writ. The Apex Court held that
existence of another remedy does not affects
the jurisdiction of the High Court to issue a writ,
but the existence of an adequate legal remedy
is a thing to be taken into consideration before
grant of writs, where the statutory remedy has
not been exhausted. (Para 15, 18)

The Supreme Court while considering the
provision of appeal u/s 20 of the Recovery of
Debts Due to Banks and Financial Institutions
Act, 1993 held that the special act has been
enacted with a view to provide a special
procedure for recovery of debts due to the
banks and the financial institutions and it cannot
be derailed by taking recourse to proceedings
under Articles 226 and 227 of the Constitution
and the High Court should refrain from
exercising its jurisdiction. (Para 17)

B. SARFAESI Act, 2002 - Section 13 -
Security Interest (Enforcement) Rules, 2002
- Rule 4, 6, Rule 8 Sub Clauses (i) (ii) (iii)
(iv) & (v) - Beneficial for borrower - The
inquiry into the correctness and manner of
classification of the account of borrower as
NPA by the secured creditor by going
through the operation of the account of the
borrower cannot be done under Article
226/227 of the Constitution of the India by
the High Court. It requires scrutiny of the
manner of operation of account by the borrower
and compliance of prudential norms of RBI by the
secured creditor is classifying it as N.P.A. (Para 22)

Scope of Section 17 of the SARFAESI Act,
2002 is akin to a court of appeal competent to go
into the questions of facts and law, both, for the
first time, at the behest of the borrower, or the
guarantor, against the action taken by the secured
creditor. (Para 20)
A perusal of the provisions of the SARFAESI Act,
2002 and the Security Interest (Enforcement) Rules,
2002 clearly prove that the sufficient checks have
been imposed upon the secured creditor while
proceeding with the possession and sale of the
secured assets of the borrower. When th

## Text

954 INDIAN LAW REPORTS ALLAHABAD SERIES
findings recorded by the courts below and
the conclusion that the alleged adoption
deed dated 11.08.1995 is not valid and the
respondent is able to get it cancelled, does
not suffer from any illegality or error.
Learned counsel for the appellant has also
failed to demonstrate in any manner that
the judgment and decree passed by the
appellate court is not sustainable on merit
therefore merely on technical grounds,
although that also does not subsist as
discussed above, it can not be reversed or
remanded in view of Section 99 of C.P.C.,
which is extracted below:-

Section 99. No decree to be
reversed
or
modified
for
error
or
irregularity
not
affecting
merits
or
jurisdiction.- No decree shall be reversed
or substantially varied, nor shall any case
be remanded, in appeal on account of any
misjoinder [or non-joinder] of parties or
causes of action or any error, defect or
irregularity in any proceedings in the suit,
not affecting the merits of the case or the
jurisdiction of the Court :

[Provided that nothing in this
section shall apply to non-joinder of a
necessary party.]

50. A coordinate bench of this Court
after considering the provisions of Order41, Rule-31 and S.99 of C.P.C., in the case
of Dalla Vs. Nanhu; 2018 SCC Online All
5845 has held as under:-

"32. In order to successfully
canvass the point of non-compliance of
Order XLI Rule 31 CPC, it is not mere non
framing of points of determination alone,
but consequent failure of justice must also
be established occasioned to a party."

51. In view of above, this court is of
the considered opinion that all the issues
raised by the appellant have failed and
there is no illegality or error in the
judgment and decree passed by the courts
below. The substantial questions of law
framed
by
this
Court
are
decided,
accordingly, against the appellant. The
appeal is misconceived and devoid of
merit.

52. The second appeal is, accordingly,
dismissed with cost. The lower court
record shall be remitted back to the
concerned court.
----------
(2021)02ILR A954
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.10.2017

BEFORE

THE HON'BLE BAHARATI SAPRU, J.
THE HON'BLE SIDDHARTH, J.

Writ C No. 46425 of 2017

M/s Kanika Swami ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Ratnesh Kumar Srivastava

Counsel for the Respondents:
C.S.C., Sri Sanjay Singh

A. Civil Law - Cash Credit Facility -
Possession and Recovery - Secularization
and Reconstruction of Financial Assets
and Enforcement of Security Interest Act,
2002 Section 13(2), 13(4)

SARFAESI Act, 2002 - Section 17(1) -
Constitution of India: Article 226
-
Alternative remedy - The remedy of the
petitioner against the proceedings u/s
13(4) of the SARFAESI Act, 2002 lies
before Debts Recovery Tribunal u/s 17.
(Para 13)
2 All. M/s Kanika Swami Vs. State of U.P. & Ors.
955
The power of issuing writs shall not be exercised
unless substantial injustice has been caused or
likely to be caused and in other cases the
parties must be relegated to the course of
appeal or revision to set right mere errors of law
which do not occasion injustice in a broad and
general sense. (Para 14)

When an alternative and equally efficacious
remedy is open to a litigant, he should be
required to pursue that remedy and not invoke
the special jurisdiction of the High Court to issue
a prerogative writ. The Apex Court held that
existence of another remedy does not affects
the jurisdiction of the High Court to issue a writ,
but the existence of an adequate legal remedy
is a thing to be taken into consideration before
grant of writs, where the statutory remedy has
not been exhausted. (Para 15, 18)

The Supreme Court while considering the
provision of appeal u/s 20 of the Recovery of
Debts Due to Banks and Financial Institutions
Act, 1993 held that the special act has been
enacted with a view to provide a special
procedure for recovery of debts due to the
banks and the financial institutions and it cannot
be derailed by taking recourse to proceedings
under Articles 226 and 227 of the Constitution
and the High Court should refrain from
exercising its jurisdiction. (Para 17)

B. SARFAESI Act, 2002 - Section 13 -
Security Interest (Enforcement) Rules, 2002
- Rule 4, 6, Rule 8 Sub Clauses (i) (ii) (iii)
(iv) & (v) - Beneficial for borrower - The
inquiry into the correctness and manner of
classification of the account of borrower as
NPA by the secured creditor by going
through the operation of the account of the
borrower cannot be done under Article
226/227 of the Constitution of the India by
the High Court. It requires scrutiny of the
manner of operation of account by the borrower
and compliance of prudential norms of RBI by the
secured creditor is classifying it as N.P.A. (Para 22)

Scope of Section 17 of the SARFAESI Act,
2002 is akin to a court of appeal competent to go
into the questions of facts and law, both, for the
first time, at the behest of the borrower, or the
guarantor, against the action taken by the secured
creditor. (Para 20)
A perusal of the provisions of the SARFAESI Act,
2002 and the Security Interest (Enforcement) Rules,
2002 clearly prove that the sufficient checks have
been imposed upon the secured creditor while
proceeding with the possession and sale of the
secured assets of the borrower. When the action of
the secured creditor is challenged by the borrower
u/s 17 (1) of the SARFAESI Act, 2002, the secured
creditor is required to prove the compliance of all
the mandatory provisions of the Act and the Rule
before the Debt Recovery Tribunal. If any of the
requirements of Act and the Rule is not found to be
complied by the Debt Recovery Tribunal, the action
of the secured creditor fails against the borrower.
(Para 29)

The remedy u/s 17 of the SARFAESI Act, 2002
before the DRT is a broad remedy available to the
borrower/guarantor vis-à-vis the jurisdiction of the
High Court under Articles 226 and 227 and he has
further opportunity to file further appeal u/s 18 of
the DRAT against the order of DRT in case he fails
to get any relief u/s 17 of the SARFAESI Act, 2002
from the DRT. The remedy of appeal u/s 18 of the
SARFAESI Act, 2002 also eludes a borrower who
approaches the High Court under Article 226/227 of
the Constitution of India directly against the
proceedings under SARFAESI Act, 2002 where the
scope of inquiry regarding the action of the secured
creditor is very limited. The remedy under Article
226/227 of the Constitution is still available to the
borrower after exhaustion of remedies under the
SARFAESI Act, 2002. (Para 31)

In the present case, the petitioner has not made
any representation u/s 13 (13-A) of the SARFAESI
Act, 2002 before the bank and has approached this
Court by-passing statutory mechanism which has
been disapproved by the Supreme Court. (Para 34)

Writ petition dimsissed. (E-3)

Precedent followed:

1. United Bank of India Vs Satyawati Tandon &
ors., (2010) 8 SCC 110 (Para 13)

2. Marida Chemical Ltd. Vs U.O.I., (2004) 4 SCC
311 (Para 13)

3. K.S. Rashid & Sons Vs Income Tax
Investigation Commission, AIR 1954 SC 207
(Para 14)
956 INDIAN LAW REPORTS ALLAHABAD SERIES
4. Sangram Singh Vs Election Tribunal, Kotah,
AIR 1955 SC 425 (Para 14)

5. U.O.I. Vs T.R. Varma, AIR 1957 SC 882 (Para
15)

6. Thansingh Nathmal & ors. Vs A. Mazid
Superintendent of Taxes, AIR 1964 SC 1419
(Para 16)

7. Punjab National Bank Vs O.C. Krishnan, AIR
2001 SC 3208 (Para 17)

8. Rajasthan State industrial and Investment
Corporation & anr. Vs Diamond and Gem
Development Corporation Ltd., AIR 2003 SC
1241 (Para 18)

9. Mathew Varghese Vs M. Amritha Kumar &
ors., (2014) 5 SCC 610 (Para 32)

10. J. Rajiv Subramaniyan & anr. Vs Pandiyas &
ors., (2014) 5 SCC 651 (Para 32)

11. Oasis Dealcom Pvt. Ltd. Vs Khazana
Dealcom Pvt. Ltd., (2016) 10 SCC 214 (Para 32)

12. Devi Ispat Limited & anr. Vs S.B.I. & ors.,
(2014) 5 SCC 762 (Para 34)

Present petition prays for the quashing of
the possession notice dated 26.09.2017
issued u/s 13(4) SARFAESI Act, 2002.

(Delivered by Hon'ble Siddharth, J.)

1. Heard Shri Ratnesh Kumar
Srivastava, learned counsel for the petitioner,
learned Standing counsel for the respondent
No.1 and Shri Sanjai Singh, learned counsel
for the respondent Nos. 2 and 3.

2. The above noted writ petition has
been filed by the petitioner praying for
quashing of the possession notice dated
26.9.2017 issued under Section 13(4) of the
Secularization
and
Reconstruction
of
Financial Assets and Enforcement of Security
Interest Act, 2002 (hereinafter referred to as
'SARFAESI Act, 2002').

3. The brief facts of the present petition
are that the petitioner availed cash credit
facility from the respondent No. 2 for setting
up the business of trading of LED Bulb
through a firm in the name and style of " M/s
Kanika Swami" situated at Swami Pada
Aggrawal
Complex,
Chandan
Bhawan,
Meerut.

4. The petitioner has stated that the
above noted credit facility was accorded to
her by the bank on 30.9.2016 for a limit of
Rs.93,00,000/-. Due to demonetization goods
purchased by her could not be sold out and
after the enforcement of Goods and Service
Tax (GST), her business further suffered
losses and her account with the respondent
No. 2 became irregular.

5. The respondent No.2, bank issued a
notice under Section 13 (2) dated 05.07.2017
under SARFAESI Act, 2002 for payment of
the outstanding dues of Rs.96,35,,532.00 and
then the impugned possession notice dated
26.9.2017 has been issued by the bank under
Section 13 (4) of the SARFAESI Act, 2002
read with Rule 8 of the Security Interest
(Enforcement)
Rules,
2002
(hereinafter
referred to as "Rules" only).

6. The petitioner has stated that she is
willing to deposit Rs.3,50,000/- but the
bank is not accepting the same and she is
willing to pay the balance amount for
regularization of her account in the
respondent-bank.

7. The learned counsel for the
respondent No.2, Sri Sanjai Singh, has
argued that against the possession notice
dated 26.9.2017 issued by the bank under
Section 13(4) of the SARFAESI Act, 2002,
the
petitioner
has
efficacious
and
alternative remedy under Section 17(1) of
the SARFAESI Act, 2002 and this Hon'ble
2 All. M/s Kanika Swami Vs. State of U.P. & Ors.
957
Court should not interfere with the
proceedings of recovery initiated by the
bank against the petitioner. He has further
submitted that after the notice dated
05.7.2017 issued by the bank, under
Section 13 (2) of the SARFAESI Act, 2002,
the petitioner did not turn up to clear her
liability and, therefore, after the expiry of
period of 60 days given in the notice, the
bank has proceeded to take possession of
the property under Section 13, Sub Clause
(4) of the SARFAESI Act, 2002 and the
petitioner is unable to point out any
illegality in the same. He has further stated
that since the account of the petitioner has
been declared Non Performing Asset (NPA)
by the Bank as per the prudential norms of
Reserve Bank of India, therefore, unless
outstanding dues are cleared, the account of
the petitioner cannot be regularized.

8.

We
have
given
thoughtful
consideration to the rival submissions made
at the bar. Before we examine the
submissions made at the bar, a brief look at
the purpose of enactment of SARFAESI
Act, 2002 may be useful.

9. The accumulation of the "NonPerforming Assets" (NPAs), a glorified
terminology used in the banking circles to
refer to 'bad loans', has always been an eye
sore for the banks. The prudential norms
applicable to banking companies stipulate
the stage at which an asset should be
classified as an NPA. The prudential norms
require the banks to categorize NPAs and
make provisions accordingly.

10. The enactment of the Recovery of
Debts Due to Banks and Financial
Institutions Act, 1993 (RDB Act) is a
watershed event. Banks and other lending
institutions have had enough in the
prolonged litigations before civil courts.
Alarming level of NPAs in the country
paved way for the establishment of "Debts
Recovery Tribunals (DRT). The DRTs offer
a simple and speedy recovery mechanism.

11. Despite establishment and decade
of operations of DRTs, banks and financial
institutions
felt
the
need
for
direct
enforcement mechanism in certain cases
without intervention by courts. As per
Sections 69 and Section 69-A of the
Transfer of Property Act, 1882 only an
English Mortgage could be enforced
without court intervention. Section 29 of
the State Finance Corporation Act, 1951
empowered State Finance Corporations
(SFCs) to enforce their security without
intervention by courts. Such a measure was
considered to be essential for recovering
dues from borrowers who are wilful
defaulters.

12. The Committees constituted by
the Central Government, inter alia, for
dealing with Recovery of Debts were
unanimous in providing powers to the
banks to takeover the securities provided to
them and to realize the dues without the
intervention of the courts as a means for the
reduction of the monies locked up a NPAs.
This has resulted in the drafting of the
Secularization
and
Reconstruction
of
Financial Assets and Enforcement of the
Security
Interest
Bill
which
was
promulgated as an ordinance twice by the
President of India before it finally became
an Act on 21st day of June, 2002.

13. Adverting to the case in hand, it is
clear from the pleadings on record, that the
account of the petitioner has been classified
as NPA on account of her failure to
maintain
financial
discipline
in
the
operation of her cash credit account with
respondent-bank. The respondent-bank has
958 INDIAN LAW REPORTS ALLAHABAD SERIES
initiated proceedings for recovery as per
the provisions of SARFAESI Act, 2002
against the petitioner in its normal course
of business. As per the judgment of the
Apex Court in the case of United Bank of
India Vs. Satyawati Tandon and other
(2010) 8 SCC 110 the remedy of the
petitioner against the proceedings under
Section 13 (4) of the SARFAESI Act, 2002
lies before Debts Recovery Tribunal under
Section 17 of the SARFAESI Act, 2002.
Earlier, in the case of Mardia Chemical
Ltd. Vs. Union of India (2004) 4 SCC 311,
the Apex Court had already held that the
borrower can challenge the action of the
secured creditor taken under Section 13 (4)
of the SARFAESI Act, 2002 by filing an
application under Section 17 (1) of the Act
itself.

14. A Constitution Bench of the Apex
Court in K.S. Rashid & Sons Vs. Income Tax
Investigation Commission, AIR 1954 SC 207
held that Article 226 of the Constitution of India
confers on all the High Courts very wide
powers in the matter of issuing writs. The said
powers are limited. However, the remedy of
writ is an absolutely discretionary remedy and
the High Court always has the discretion to
refuse to grant any writ if it is satisfied that the
aggrieved party can have an adequate or
suitable relief elsewhere. Similar view has been
reiterated by the Apex Court in the case of
Sangram Singh Vs. Election Tribunal, Kotah,
AIR 1955 SC 425 holding that the power of
issuing writs shall not be exercised unless
substantial injustice has been caused or likely to
be caused and in other cases the parties must be
relegated to the course of appeal or revision to
set right mere errors of law which do not
occasion injustice in a broad and general sense.

15. Again a Constitution Bench of
Supreme Court in the case of Union of
India Vs. T.R. Varma, AIR 1957 SC 882,
held that when an alternative and equally
efficacious remedy is open to a litigant, he
should be required to pursue that remedy
and not invoke the special jurisdiction of
the High Court to issue a prerogative writ.
The Apex Court held that existence of
another remedy does not affects the
jurisdiction of the High Court to issue a
writ, but the existence of an adequate legal
remedy is a thing to be taken into
 consideration before grant of writs, where
the
statutory
remedy
has
not
been
exhausted.

16. Similar view has been taken in the
case of Thansingh Nathmal and others Vs.
A. Mazid Superintendent of Taxes, AIR
1964 SC 1419.

17. In Panjab National Bank Vs.
O.C. Krishnan, AIR 2001 SC 3208, the
Supreme Court while considering the
provision of appeal under Section 20 of the
Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 held that
the special act has been enacted with a
view to provide a special procedure for
recovery of debts due to the banks and the
financial institutions and it cannot be
derailed by taking recourse to proceedings
under Articles 226 and 227 of the
Constitution and the High Court should
refrain from exercising its jurisdiction.

18. It is settled law that writ does not
lies merely because it is lawful to do so. A
person should exhaust statutory/alternative
remedy available to him in law prior to it.
(Rajasthan
State
Industrial
and
Investment Corporation and another Vs.
Diamond
and
Gem
Development
Corporation Ltd., AIR 2003 SC 1241).

19. In view of the above legal
position, the writ petition filed by the
2 All. M/s Kanika Swami Vs. State of U.P. & Ors.
959
petitioner cannot be entertained by this
court.

20. It is further notable that the
invoking of the jurisdiction of the High
Court by the defaulters of the banks and
financial
institutions
against
the
proceedings under SARFAESI Act, 2002 is
not in their larger interest since in most of
the cases, the petitioner offers to deposit the
amount in installments and in the process,
they admit the outstanding liability without
any demur before this Court. It is
detrimental to the interest of the borrowers
and guarantors in the long run since the
scope of Section 17 of the SARFAESI Act,
2002 is akin to a court of appeal competent
to go into the questions of facts and law,
both, for the first time, at the behest of the
borrower, or the guarantor, against the
action taken by the secured creditor.

21. The SARFAESI Act, 2002 casts a
heavy burden on the secured creditor of
proceeding with the recovery against the
borrower with strict compliance of the
provisions of the act. The relevant provisions
of Section 13 are as follows:-

"13. Enforcement of security
interest.

(2) Where any borrower, who is
under a liability to a secured creditor under a
security agreement, makes any default in
repayment of secured debt or any instalment
thereof, and his account in respect of such
debt is classified by the secured creditor as
non-performing asset, then, the secured
creditor may require the borrower by notice
in writing to discharge in full his liabilities to
the secured creditor within sixty days from
the date of notice failing which the secured
creditor shall be entitled to exercise all or any
of the rights under sub section (4).

[Provided that-

(i)
the
requirement
of
classification of secured debt as nonperforming asset under this sub-section
shall not apply to a borrower who has
raised
funds
through
issue
of
debt
securities; and].

(ii) in the event of default, the
debenture trustee shall be entitled to
enforce security interest in the same
manner as provided under this section with
such modifications as may be necessary
and in accordance with the terms and
conditions of security documents executed
in favour of the debenture trustees],

(4) In case the borrower fails to
discharge his liability in full within the
period specified in sub-section (2), the
secured creditor may take recourse to one
or more of the following measures to
recover his secured debt, namely:--

(a) take possession of the secured
assets of the borrower including the right
to transfer by way of lease, assignment or
sale for realising the secured asset;

[(b) take over the management of
the business of the borrower including the
right to transfer by

way of lease, assignment or sale
for realising the secured asset:

Provided that the right to transfer
by way of lease, assignment or sale shall be
exercised only where the substantial part of
the business of the borrower is held as
security for the debt:

Provided further that where the
management of whole of the business or
part of the business is severable, the
secured creditor shall take over the
management of such business of the
borrower which is relatable to the security
for the debt;]

(c) appoint any person (hereafter
referred to as the manager), to manage the
secured assets the possession of which has
been taken over by the secured creditor;
960 INDIAN LAW REPORTS ALLAHABAD SERIES

(d) require at any time by notice
in writing, any person who has acquired
any of the secured assets from the borrower
and from whom any money is due or may
become due to the borrower, to pay the
secured creditor, so much of the money as
is sufficient to pay the secured debt."

22. A perusal of the above provisions
of the Act prove that starting point of the
proceedings
for
recovery
under
the
SARFAESI Act, 2002 is classification of
the account of the borrower as NPA as per
the prudential norms of the Reserve Bank
of India. The inquiry into the correctness
and manner of classification of the account
of borrower as NPA by the secured creditor
by going through the operation of the
account of the borrower cannot be done
under Article 226/227 of the Constitution
of the India by the High Court. It requires
scrutiny of the manner of operation of
account by the borrower and compliance of
prudential norms of RBI by the secured
creditor is classifying it as N.P.A.

23. Further perusal of the above
provisions of the act shows that the notice
under Section 13 Sub Clause (2) of the
SARFAESI Act, 2002 is issued by the
secured creditor to the borrower after his
account gets classified as NPA. The
borrower is required to discharge his full
liabilities within 60 days from the date of
notice failing which the secured creditor
becomes entitled to exercise all or any of
the rights under Section 13 Sub Clause (4).
Therefore, the secured creditor is bound by
law to wait for 60 days before exercising
any of his right under Section 13, Sub
Clause (4) of the SARFAESI Act, 2002.

24. Further Rule 4 of the Security
Interest
(Enforcement)
Rules,
2002
(hereinafter referred to as "Rules") provides
that Authorized Officer of the secured
creditor is required to take possession of
movable property of the borrower in the
presence
of
two
witnesses
after
a
panchnama drawn and signed by witnesses
as clearly as possible in Appendix I of these
rules.

25. Secondly, after taking possession
under Rule 4 of the Rules of the movable
assets, the authorized officer shall make or
caused to be made an inventory of the
property as clearly as possible in the form
given in Appendix II of these rules and
deliver or caused to be delivered a copy of
such inventory to the borrower, or to any
person entitled to receive on behalf of the
borrower.

26. Thirdly, the borrower shall be
intimated by a notice enclosing the
panchanama drawn in Appendix I and the
inventory in Appendix IV.

27. Fourthly, all the notices under
these Rules may also be served through
electronic mode of service in addition to
the modes specified under Rule 3.

28. Fifthly, the authorized officer is
required to keep the property taking in
possession either in his own custody or in
the custody of any person authorized or
appointed by him, who shall take as much
care of the property as the owner himself.
Similarly, detailed procedures have been
provided under Rule 8 Sub Clauses (i) (ii)
(iii) (iv) & (v) of the Security Interest
(Enforcement) Rules, 2002 regarding the
immovable secured assets, regarding their
possession
by
the
secured
creditor.
Publication of notices is two leading
newspapers intimating the factum of
possession and service of notice through
electronic mode on the borrower in
2 All. M/s Kanika Swami Vs. State of U.P. & Ors.
961
addition to the other modes is also
provided. Regarding the sale of the
movable and immovable secured assets, the
provisions have been made in Rules 6 and
8 of the aforesaid Rules which are as
under:-

6. Sale of movable secured assets.-
(1) The authorised officer may sell the
movable secured assets taken possession
under sub-rule (1) of rule 4 in one or more
lots by adopting any of the following methods
to secure maximum sale price for the assets,
to be so sold--

(a) obtaining quotations from
parties dealing in the secured assets or
otherwise interested in buying such assets; or

(b) inviting tenders from the public
; or

[(c)
holding
public
auction
including through e-auction mode; or]

(d) by private treaty.

(2) The authorised officer shall
serve to the borrower a notice of thirty days
for sale of the movable secured assets, under
sub-rule (1):

Provided that if the sale of such
secured assets is being effected by either
inviting tenders from the public or by holding
public auction, the secured creditor shall
cause a public notice in two leading
newspapers, one in vernacular language,
having sufficient circulation in that locality
by setting out the terms of sale, which may

include,--

(a) details about the borrower and
the secured creditor;

(b) description of movable secured
assets to be sold with identification marks or
numbers, if any, on them;

(c) reserve price, if any, and the
time and manner of payment;

(d) time and place of public
auction or the time after which sale by any
other mode shall be completed;

(e) depositing earnest money as
may be stipulated by the secured creditor;

(f) any other thing which the
authorised officer considers it material for
a purchaser to know in order to judge the
nature and value of movable secured
assets.

[Provided further that if sale of
movable property by any one of the
methods specified under sub-rule (1) fails
and the sale is required to be conducted
again, the authorised officer shall serve,
affix and publish notice of sale of not less
than fifteen days to the borrower for any
subsequent.]

(3) Sale by any methods other
than public auction or public tender, shall
be on such terms as may be settled
[between the secured creditors and the
proposed purchaser].

8. Sale of immovable secured
assets- (1) Where the secured asset is an
immovable property, the authorised officer
shall take or cause to be taken possession,
by delivering a possession notice prepared
as nearly as possible in Appendix-IV to
these rules, to the borrower and by affixing
the possession notice on the outer door or
at such conspicuous place of the property.

(2) The possession notice as
referred to in sub-rule (1) shall also be
published, as soon as possible but in any
case not later than seven days from the date
of taking possession, in two leading
newspapers, one in vernacular language
having sufficient circulation in that locality,
by the authorised officer.

[(2A) All notices under these
rules may also be served upon the borrower
through electronic mode of service, in
addition to the modes prescribed under
sub-rule (1)and sub-rule (2) of rule 8.]

(3) In the event of possession of
immovable property is actually taken by the
authorised officer, such property shall be
962 INDIAN LAW REPORTS ALLAHABAD SERIES
kept in his own custody or in the custody of
any person authorised or appointed by him,
who shall take as much care of the property
in his custody as an owner of ordinary
prudence
would,
under
the
similar
circumstances, take of such property.

(4) The authorised officer shall
take steps for preservation and protection
of secured assets and insure them, if
necessary, till they are sold or otherwise
disposed of.

(5) Before effecting sale of the
immovable property referred to in sub-rule
(1) of rule 9, the authorised officer shall
obtain valuation of the property from an
approved valuer and in consultation with
the secured creditor, fix the reserve price of
the property and may sell the whole or any
part of such immovable secured asset by
any of the following methods:--

(a) by obtaining quotations from
the persons dealing with similar secured
assets or otherwise interested in buying the
such assets; or

(b) by inviting tenders from the
public;

(c) by holding public auction
including through e-auction mode; or

(d) by private treaty.

[Provided that in case of sale of
immovable property in the State of Jammu
and Kashmir, the provisions of Jammu and
Kashmir Transfer of Property Act, 1977
shall apply to the person who acquires such
property in the State.]

(6) The authorised officer shall
serve to the borrower a notice of thirty days
for sale of the immovable secured assets,
under sub-rule (5):

Provided that if the sale of such
secured asset is being effected by either
inviting tenders from the public or by
holding public auction, the secured creditor
shall cause a public notice in two leading
newspapers; one in vernacular language
having sufficient circulation in the locality
by setting out the terms of sale, which shall

include,--

(a)
the
description
of
the
immovable property to be sold, including
the details of the encumbrances known to
the secured creditor;

(b) the secured debt for recovery
of which the property is to be sold;

(c) reserve price, below which the
property may not be sold;

(d) time and place of public
auction or the time after which sale by any
other mode shall be completed;

(e) depositing earnest money as
may be stipulated by the secured creditor;

(f) any other thing which the
authorised officer considers it material for
a purchaser to know in order to judge the
nature and value of the property.

(7) Every notice of sale shall be
affixed on a conspicuous part of the
immovable property and may, if the
authorised officer deems it fit, put on the
web-site of the secured creditor on the
Internet.
(8) Sale by any method other than public
auction or public tender, shall be on such
terms as may be settled between the parties
in writing.

29. A perusal of the above provisions
of the SARFAESI Act, 2002 and the
Security Interest (Enforcement) Rules,
2002 clearly prove that the sufficient
checks have been imposed upon the
secured creditor while proceeding with the
possession and sale of the secured assets of
the borrower. When the action of the
secured creditor is challenged by the
borrower under Section 17 (1) of the
SARFAESI Act, 2002, the secured creditor
is required to prove the compliance of all
the mandatory provisions of the Act and the
Rule before the Debt Recovery Tribunal. If
2 All. M/s Kanika Swami Vs. State of U.P. & Ors.
963
any of the requirements of Act and the Rule
is not found to be complied by the Debt
Recovery Tribunal, the action of the
secured creditor fails against the borrower.

30. The SARFAESI Act, 2002 is a
strict act which requires strict compliance
of the provisions provided therein and any
deviation in compliance of the provisions
renders the action of the secured creditor
bad and unsustainable. The Debt Recovery
Tribunal is fully empowered to go into the
record of the secured creditor regarding the
compliance of the provisions of the Act and
Rule and the borrower gets an opportunity
to see the record of the proceedings
initiated and conducted by the bank against
him in recovery of debt from him before
the Debts Recovery Tribunal.

31. n the writ petitions filed under
Article 226 of the constitution before the
High Court, the borrower never gets the
opportunity to rebut the action taken by the
secured creditor against him and by
accepting the liability alleged by the
secured creditor, he gets estopped from
raising any objection against the action of
the secured creditor, in future, since he
admits the liability and thereby ratifies all
the actions done by the secured creditor
against the borrower. Therefore, the remedy
under Section 17 of the SARFAESI Act,
2002 before the Debts Recovery Tribunal is
a
broad
remedy
available
to
the
borrower/guarantor
vis-a-vis
the
jurisdiction of the High Court under
Articles 226 and 227 of the Constitution
and he has further opportunity to file
further appeal under Section 18 of the Debt
Recovery Appellate Tribunal against the
order of Debts Recovery Tribunal in case
he fails to get any relief under Section 17 of
the SARFAESI Act, 2002 from the Debts
Recovery Tribunal. The remedy of appeal
under Section 18 of the SARFAESI Act,
2002
also
eludes
a
borrower
who
approaches the High Court under Article
226/227 of the Constitution of India
directly against the proceedings under
SARFAESI Act, 2002 where the scope of
inquiry regarding the action of the secured
creditor is very limited. The remedy under
Article 226/227 of the Constitution is still
available to the borrower after exhaustion
of remedies under the SARFAESI Act,
2002.

32. The Apex Court has interfered and
disapproved the action of the secured
creditor
in
proceeding
under
the
SARFAESI Act, 2002 in the case of
Mathew Varghese Vs. M. Amritha Kumar
and others (2014) 5 SCC 610 ; J. Rajiv
Subramaniyan and another Vs. Pandiyas
and others (2014) 5 SCC 651. In Mathew
Varghese (supra), the Supreme Court
disapproved the action of the secured
creditor of not notifying the borrower
afresh of 30 days clear individual notice of
the fresh date of sale after the first sale
could not take place and held that the
subsequent
sale
was
invalid.
Oasis
Dealcom Pvt. Ltd. Vs. Khazana Dealcom
Pvt. Ltd., (2016) 10 SCC 214.

33. In J. Rajiv Subramaniyan and
another (supra), the sale of the secured
assets conducted by the secured creditor by
means of a private treaty as required by
Rule 8(8) of Rules, 2002 was set aside
being violative of the Rule.

34. In the present case, the petitioner
has not made any representation under
Section 13 (13-A) of the SARFAESI Act,
2002 before the bank and has approached
this Court by-passing statutory mechanism
which has been disapproved by the
Supreme Court in the case of Devi Ispat
964 INDIAN LAW REPORTS ALLAHABAD SERIES
Limited and another Vs. State Bank of
India and other (2014) 5 SCC 762.

35. Therefore, in view of the legal
position stated above this writ petition is
being
dismissed
on
the
ground
of
alternative
remedy
available
to
the
petitioner
under
Section
17
of
the
SARFAESI Act, 2002.

36. There shall be no order as to costs.
----------
(2021)02ILR A964
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 22.01.2021

BEFORE

THE HON'BLE J.J. MUNIR, J.

Writ C No. 7616 of 2020

Maulana Mohammad Ali Jauhar Trust, Lko.
U.P. & Anr. ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Syed Mohd. Fazal, Sri S.G. Hasnain

Counsel for the Opposite Party:
C.S.C., A.S.G.I., Sri Sanjay Kumar Om.

A. Civil Law - Tax - The Building and Other
Construction Workers Welfare Cess Act,
1996 - Section 3, 4, 5, 6, 8, 9, 10, 11 - The
Building and Other Construction Workers
Welfare Cess Rules, 1998: Rules 6, 7, 13, 14
(Para 49)

Maintainability of writ petition - It must be
remembered that a statutory alternative
remedy in a fiscal statute ought not to be
ignored
except
in
very
exceptional
circumstances and on reputed principles,
which are not found to exist here. Even if
the statutory remedy is onerous, in the
sense that it involves a condition of pre-deposit, a writ petition ought not to be
entertained. (Para 46, 47)

Facts show that no return was filed by the
University, leaving the Assessment Officer with no
option but to proceed u/s 5(2) of the Cess Act to
assess without a return. It is to the above end that
the
Cess
Assessment
Collector-cum-Assistant
Labour Commissioner, Rampur addressed a memo
dated 16.11.2017 to the Assessment Officer,
recommending inter alia that a team be got
constituted by the Uttar Pradesh Buildings and
other Construction Workers' Welfare Board or
other competent Authority to assess the cost of
the constructions involved. Taking cognizance of
the aforesaid recommendation, the Deputy Labour
Commissioner/Assessment Officer addressed a
memo
dated
18.11.2017
to
the
District
Magistrate/Collector, Rampur, requesting him to
ensure a valuation of the constructions raised by
the University, by Engineers from the Public Works
Department
or
the
Rampur
Development
Authority. The Collector, in turn, constituted a twomember team, including the Executive Engineer of
the PWD, Rampur to undertake a valuation of the
constructions made after February, 2009, vide an
order dated 22.12.2017.

It has been noticed in detail that how a team of
valuers demanded copies of drawings, designs,
valuation report and other construction related
documents, but in vain from the University.
There is a rather startling document on record,
which is a letter dated 8.2.2018 addressed by
the Administrative Officer/PRO of the University
to the Executive Engineer of PWD, Rampur,
which says that the required building plans and
other documents, demanded by the Executive
Engineer for the purpose of valuing the cost of
constructions, could not be provided for the
present, because these were with the Engineer,
Building
Construction
and
Maintenance
Department,
who
was
not
available
for
sometime past. The record shows that it is
replete with letters written by the Executive
Engineer, PWD to the University, requiring their
assistance to value the constructions for the
purpose of assessment under the Cess Act, but
all to no avail.

Therefore, it can be said that ample opportunity
was afforded to the University, at different