REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL …

1 REPORTABLEIN THE SUPREME COURT OF INDIACIVIL APPELLATE JURISDICTIONCIVIL APPEAL NOS. 257-259 OF 2022 Phoenix ARC Private Limited ..Appellant(s)VersusVishwa Bharati Vidya Mandir & Ors..Respondent(s) SHAH, aggrieved and dissatisfied with the impugned order passed by the high COURT of karnataka at Bengaluru in WritPetition Nos. 35564-35566 of 2015 by which the high COURT hasentertained the aforesaid writ petitions under Article 226 of theConstitution of INDIA against the appellant, an Assets ReconstructingCompany and has passed an interim order directing for maintainingstatus quo with regard to SARFAESI action (possession of the securedassets), the original respondent the Assets Reconstructing Company(ARC) has preferred the present appeals. the respondent herein Vishwa Bharati Vidya Mandir isrunning educational institutions and is a Society registered under theKarnataka Societies Registration Act, 1960 which had availed creditfacilities to the tune of ,60,84,000/- (Rupees One Hundred Five1 Crores Sixty Lacs and Eighty Four Thousand Only) from Saraswat Co-operative Bank Limited.

2 That similarly, St. Ann's Education Society hadalso availed credit facilities to the tune of ,05,00,000/- (RupeesTwenty Crores and Five Lacs Only) from the aforesaid appears that in order to secure the due repayment of theaforesaid credit facilities, various loans / security documents wereexecuted by the respective respondents, including personal guaranteesin favour of the bank. The respondents also created an equitablemortgage by way of deposit of title deeds over the immovable propertieswith respect to the mortgaged properties. It appears that on account ofdefaults committed by the borrowers / respondents in repayment of theoutstanding dues, in the month of April, 2013, the account of theborrowers / respondents were classified as a Nonperforming Asset (NPA) by the Bank. As the borrowers / respondents failed and neglectedto repay the outstanding dues of the Bank, the Bank issued a noticedated under Section 13(2) of the Securitization andReconstruction of Financial Assets and Enforcement of SecuritiesInterest Act, 2002 (hereinafter referred to as SARFAESI Act ).

3 Itappears that in the month of March, 2014, the NPA account of theborrowers / respondents with respect to the credit facilities availed bythem was assigned by the Bank in favour of the appellant Phoenix2 ARC Private Limited vide registered Assignment Agreement to the assignment of the NPA account in favour of theappellant, the borrowers approached the appellant with a request forrestructuring the repayment of outstanding dues. A Letter of Acceptancedated was executed between the parties, wherein theborrowers / respondents acknowledged and admitted the liability torepay the entire outstanding dues. However, the borrowers failed torepay the dues as per the Letter of Acceptance. the borrowers again committed defaults in payment of theoutstanding dues, the appellant Phoenix ARC Private Limited issued aletter dated intimating the borrowers that since despiteissuance of 13(2) notice dated and the subsequentexecution of the Letter of Acceptance dated , the borrowershad failed to repay the outstanding dues, therefore, the appellant wouldbe proceeding to take possession of the mortgaged properties afterexpiry of 15 days from the date of the said the aforesaid communication/letter dated , theborrowers / respondents herein filed the writ petitions before the HighCourt on the ground that the communication/letter dated is a3possession notice under Section 13(4) of the SARFAESI Act, which isagainst the Security Interest (Enforcement)

4 Rules, was the case on behalf of the original writ petitioners that thesaid possession notice under Section 13(4) of the SARFAESI Act is inviolation of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002(hereinafter referred to as Rules, 2002 ) and without issuance of thepossession notice under Rule 8(1) and without publication of possessionnotice in two leading newspapers as required under Rule 8(2). The HighCourt passed an ex-parte ad-interim order dated directingstatus quo to be maintained with regard to possession of the mortgagedproperties subject to the borrowers making a payment of Rs. 1 crore withthe appellant Phoenix. petition was opposed by the appellant by filing statement ofobjections to the writ petitions contending, inter alia, that the letter as such cannot be said to be taking a measure underSection 13(4) of the SARFAESI Act and that it was only a proposedaction/measure to be taken by the appellant.

5 It was also submitted thatthe writ petitions are not maintainable. That the appellants filed anapplication being No. 01 of 2016 for vacation of the ex-parte ad-interim order dated However, instead of deciding theapplication for vacating the interim order, the high COURT extended the4interim order on on the condition that the borrowers shalldeposit a further sum of crore. Simultaneously, the appellant alsofiled two separate original applications against the borrowers before theDebt Recovery Tribunal, Bangalore for recovery of the outstanding , the high COURT again vide order dated extendedthe earlier ex-parte interim-order dated on condition that theborrowers deposit a further sum of Rs. 1 crore. aggrieved and dissatisfied with the aforesaid interim orders/ extension of the interim orders and entertaining the writ petitions, theappellant Phoenix ARC Private Limited, the original respondent haspreferred the present appeals.

6 V. Giri, learned Senior Advocate has appeared on behalf ofthe respective appellants and Shri Basavaprabhu S. Patil, learnedSenior Advocate has appeared on behalf of the original writ petitioners borrowers. V. Giri, learned Senior Advocate appearing on behalf of theappellant(s) has vehemently submitted that in the present case theborrowers are liable to pay to the appellant ARC / secured creditor anamount of ,31,68,487/-. It is submitted that for recovery of theamount due and payable, initially in the year 2003, notice under Section13(2) of the SARFAESI Act was issued and therefore the proceedings5under the SARFAESI Act commenced. It is submitted that thereafterdespite the Letter of Acceptance dated admitting the duesand agreeing to make the payment due and payable, the borrowersfailed to repay the amount due and payable, the appellant proposed toproceed further with the proceedings under the SARFAESI Act andtherefore vide communication dated , the borrowers werecalled upon to make the payment within 15 days failing which it wasproposed to take further steps under the provisions of the SARFAESIAct.

7 It is submitted that, technically speaking, at that stagecommunication dated cannot be said to be notice underSection 13(4) of the SARFAESI Act. Despite the above and treatingand/or considering the communication dated as possessionnotice under Section 13(4) of the SARFAESI Act, the borrowers filed thewrit petitions before the high COURT against communication It is submitted that unfortunately the high COURT hasentertained the aforesaid writ petitions though not maintainable against aprivate party like the appellant ARC and has granted an ex-parte ad-interim order, which has been extended from time to time directing tomaintain status quo with respect to the possession of the mortgagedproperties on payment of meager amount of Rs. 1 crore (in all Rs. 3crores only) against the total dues of crores approximately. is submitted that as such the writ petitions against the privateparty ARC and that too against the communication proposing to takeaction under the SARFAESI Act would not be maintainable at all, and,therefore, the high COURT ought not to have entertained such writpetitions and ought not to have granted the interim protection to theborrowers, who have failed to repay the amount due and payable, whichcomes to approximately is further submitted by Shri Giri, learned Senior Advocateappearing on behalf of the appellant ARC that assuming that thecommunication dated is treated as an action under Section13(4) of the SARFAESI Act, in that case also, the only remedy availableto the borrowers was by way of an appeal under Section 17 of theSARFAESI Act.

8 It is submitted that under no circumstances, the writpetitions would be maintainable and that too against the private ARC. is submitted that the high COURT has not at all appreciated that assuch there was no occasion to interfere in exercise of the powers underArticle 226 of the Constitution of INDIA against a private party and a non-State actor like the appellant Phoenix ARC. It is submitted that the writpetitions under Article 226 of the Constitution of INDIA for the reliefsought in the writ petitions shall not be maintainable and that too againsta private party. It is submitted that, however, the Hon ble high COURT has7not only entertained the writ petitions but also passed an ex-parte ad-interim order dated , which has been continued from time totime directing to maintain the status quo with regard to the SARFAESI action (possession of the secured assets). It is submitted that thiseffectively resulted in staying of all further proceedings under theSARFAESI Act.

9 It is submitted that despite the application(s) forvacating the ex-parte ad-interim relief, the high COURT extended the ex-parte interim order dated on condition that the borrowers payfurther sum of crore only. is submitted that even in the subsequent order , though the high COURT observed that though the learnedcounsel for the petitioners seeks to refer the nature of the claim andcontend that the demand as made would not be justified, the saidconsideration in a writ petition of the present nature would not arise , stillthe high COURT has extended the ex-parte interim order by observing that the petitioner is required to settle thematter with the respondents . It is submitted that the high COURT is notat all justified firstly, in entertaining the writ petitions under Article 226 ofthe Constitution of INDIA for the relief sought in the main writ petitionsand that too against a private party and, more particularly, when againstany action under the SARFAESI Act, an appeal under Section 17 of theSARFAESI Act would be maintainable and is required to be filed.

10 Giri, learned Senior Advocate appearing on behalf of theappellant(s) has relied upon the following decisions in support of thesubmission that the writ petitions before the high COURT are notmaintainable:-United Bank of INDIA Vs. Satyawati Tondon & Ors., (2010) 8 SCC 110; Kanaiyalal Lalchand Sachdev & Ors. Vs. State ofMaharashtra & Ors., (2011) 2 SCC 782; General Manager, SriSiddeshwara Cooperative Bank Limited & Anr. Vs. Ikbal &Ors., (2013) 10 SCC 83; Agarwal Tracom Private Limited National Bank & Ors., (2018) 1 SCC 626; AuthorizedOfficer, State Bank of Travancore & Anr. Vs. Mathew ,(2018) 3 SCC 85; and Radha Krishnan Industries Vs. State ofHimachal Pradesh & Ors., (2021) 6 SCC 771. the aforesaid submissions and relying upon the abovedecisions, it is prayed to set aside the impugned order dated also to dismiss the writ petitions filed before the high COURT as beingnon-maintainable.