2016 (2) TMI 582 - HC - Indian Laws

Court dismisses petition for suppression of material facts, upholds impugned order.

AUROVILL APPLIANCES PVT LTD Versus DISTRICT MAGISTRATE AND 4

The court rejected the petition due to the suppression of material facts by the petitioner and the implementation of the impugned order, including the ... Eviction from disputed property - jurisdiction of Additional District Magistrate under Section 14 of SARFAESI Act - petitioner is a lessee - Held that:- It is a settled position of law that under Section 14 of the SARFAESI Act, the Chief Metropolitan Magistrate or the District Magistrate, acts in assistance of the secured creditor in taking possession of the secured assets. In the present case, the power under Section 14 has been exercised by the Additional District Magistrate by assisting the respondentBank in taking possession of the secured asset. By auctioning the disputed property, the respondentBank is no longer in possession. The possession of the disputed property is with respondent No.5. Without any challenge to the auction, the auction purchaser cannot be dispossessed of the property purchased in a public auction, the possession of which has been handed over to it, solely because the petitioner now seeks to assert its rights as a lessee at this stage. This Court is of the view that the petitioner is guilty of suppression of material facts which would have a vital effect on the adjudication of the petition. Further, in view of the implementation of the impugned order under Section 14 of the SARFAESI Act, the petitioner cannot seek to undo the auction and its legal consequences, without even raising a challenge to it. For the aforestated reasons, this Court does not consider it necessary to deal with the submissions regarding the availability of an alternative remedy under Section 17 of the SARFAESI Act.Similarly, the issue regarding the jurisdiction, or the lack of it, of the Additional District Magistrate to pass an order under Section 14 of the SARFAESI Act, as contended by the petitioner, is not required to be dealt with as the said order has already been implemented. For similar reasons, it is not necessary to examine whether, or not, the petitioner is/ was a lessee of the secured asset. For the reasons indicated hereinabove, this Court considers the present petition to be devoid of merit. Issues Involved:1. Jurisdiction of the Additional District Magistrate under Section 14 of the SARFAESI Act.2. Violation of Article 300A of the Constitution of India.3. Validity of the lease under Section 13(13) of the SARFAESI Act.4. Principles of natural justice regarding notice and hearing.5. Prematurity of the application under Section 14 of the SARFAESI Act.6. Suppression of material facts by the petitioner.7. Availability of alternative remedy under Section 17 of the SARFAESI Act.8. Implementation of the impugned order and its consequences.Detailed Analysis:1. Jurisdiction of the Additional District Magistrate under Section 14 of the SARFAESI Act:The petitioner argued that the impugned order dated 09.05.2014, passed by the Additional District Magistrate, is without jurisdiction as Section 14 mandates that such orders should be passed by the District Magistrate or the Chief Metropolitan Magistrate. The petitioner cited several judgments to support this claim. However, the court did not find it necessary to examine this issue as the order had already been implemented.2. Violation of Article 300A of the Constitution of India:The petitioner claimed that the impugned order violated Article 300A, which protects against deprivation of property without authority of law. The petitioner, being a lawful lessee, argued that they were deprived of possession without due process. The court noted that the petitioner was attempting to regain possession after the property had been auctioned and third-party rights had been created, which complicated the matter.3. Validity of the Lease under Section 13(13) of the SARFAESI Act:The petitioner asserted that the lease was valid as it was executed before the issuance of the notice under Section 13(2) of the SARFAESI Act. They argued that Section 35 of the SARFAESI Act overrides Section 65A of the Transfer of Property Act. The court did not delve into this issue as the lease's validity was not the primary concern given the subsequent auction and transfer of possession.4. Principles of Natural Justice Regarding Notice and Hearing:The petitioner contended that the impugned order was passed without notice or an opportunity of hearing, violating principles of natural justice. They relied on the Supreme Court judgment in Harshad Govardhan Sondagar's case. The court acknowledged the principles but noted that the petitioner did not challenge the order immediately and allowed the auction to proceed.5. Prematurity of the Application under Section 14 of the SARFAESI Act:The petitioner argued that the application under Section 14 was premature as it was filed before the lessee was aware of the possession being taken over. The court did not find this argument compelling, given the subsequent events of the auction and transfer of possession.6. Suppression of Material Facts by the Petitioner:The respondent-Bank argued that the petitioner suppressed material facts, including their participation in the auction and the transfer of possession to the auction purchaser. The court found this suppression significant and material, affecting the merits of the case. The court cited Supreme Court judgments emphasizing the importance of full and fair disclosure of facts in writ petitions.7. Availability of Alternative Remedy under Section 17 of the SARFAESI Act:The respondent-Bank argued that the petitioner had an alternative remedy of filing an appeal under Section 17 of the SARFAESI Act. The court did not address this issue in detail, given the suppression of material facts and the implementation of the impugned order.8. Implementation of the Impugned Order and Its Consequences:The court noted that the impugned order had already been implemented, the property auctioned, and possession transferred to the auction purchaser. The petitioner's attempt to regain possession at this stage was seen as an attempt to undo the auction and its legal consequences without challenging the auction proceedings.Conclusion:The court rejected the petition, emphasizing the suppression of material facts by the petitioner and the subsequent auction and transfer of possession. The court did not find it necessary to address the issues of jurisdiction, alternative remedy, or the validity of the lease in detail, given the implementation of the impugned order and the creation of third-party rights. The petition was dismissed, and the rule was discharged with no order as to costs.