2016 (9) TMI 765 - HC - Indian Laws

Jurisdiction Confirmed: SARFAESI vs. PP Act, Show Cause Notices Valid, Premature Writ Petition Dismissed

JM Financial Asset Reconstruction Company Pvt. Ltd. Versus The Board of Trustees of the Port of Mumbai and Others

The Court held that there was no conflict between the SARFAESI Act and the PP Act as they operate in different fields. It was determined that the Estate ... Termination of lease - override of provisions of the SARFAESI Act - Held that:- Unable to agree with the submission of Mr Kamdar that in the facts of the present case, the provisions of the SARFAESI Act override the provisions of the PP Act, and consequently the 4th Respondent (the Estate Officer) had no jurisdiction to issue impugned show cause notices. No hesitation in holding that the provisions of the SARFAESI Act cannot destroy the rights of the 1st Respondent (landlord in the present case) who has admittedly not mortgaged its ownership rights in favour of the Petitioner (the secured creditor). In other words, if the 1st Respondent (landlord) has a right to terminate the lease, that right cannot be destroyed and remains unaffected by any action taken by the Petitioner (the secured creditor) for selling the leasehold interest in said property and which was mortgaged in its favour. In the facts of the present case, it is this very right that the 1st Respondent has sought to exercise by terminating the lease granted in favour of Respondent No.2. Merely because Respondent No.2 has mortgaged its leasehold rights in favour of the Petitioner, cannot take away the right of the landlord (the 1st Respondent herein) to terminate the lease, if Respondent No.2 has breached the terms thereof. At the cost of repetition, we must state that whether this termination is valid or otherwise will be the subject matter of the proceedings under the PP Act. We have not opined one way or the other, as to whether the said termination is valid or otherwise and consequently rendering the occupation of the said property unauthorized. That is an issue that will be inquired into by the Estate Officer after hearing all the parties concerned and after allowing the parties to lead their respective evidence. To our mind, in the facts of the present case, there being no conflict between the provisions of the SARFAESI Act and the PP Act, there is no question of the provisions of the SARFAESI Act overriding the provisions of the PP Act. We, therefore, have no hesitation in holding that Respondent No.4 (the Estate Officer) was well within his jurisdiction to issue the impugned SCNs. A mere SCN does not give rise to any cause of action, because it does not amount to an adverse order which affects the right of any party, unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the SCN or after holding an inquiry, the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ petition lies when some right of any party is infringed. A mere SCN does not infringe the right of any one. It is only when a final order imposing some punishment or penalty adversely affecting a party is passed, that the said party is said to be having some grievance. This being the clear enunciation of the law, we have no hesitation in holding that the present Petition is clearly premature as it merely challenges the SCNs issued by the 4th Respondent (the Estate Officer). Issues Involved:1. Jurisdiction of the Estate Officer to issue Show Cause Notices (SCNs).2. Conflict between the SARFAESI Act and the Public Premises (Eviction of Unauthorized Occupants) Act (PP Act).3. Validity of the termination of the lease.4. Prematurity and maintainability of the Writ Petition challenging SCNs.Detailed Analysis:1. Jurisdiction of the Estate Officer to issue SCNs:The Petitioner challenged the jurisdiction of the Estate Officer (Respondent No.4) to issue the impugned SCNs on the grounds that the Petitioner, being an Asset Reconstruction Company (ARC) and having taken possession of the property under Section 13(4) of the SARFAESI Act, could not be evicted under the provisions of the PP Act. The Petitioner argued that the SARFAESI Act overrides the PP Act, and thus, any eviction should be pursued through the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act.2. Conflict between the SARFAESI Act and the PP Act:The Petitioner contended that the SARFAESI Act, being a special legislation, overrides the PP Act. They cited several Supreme Court decisions to support their claim that the SARFAESI Act is a self-contained code and its provisions should prevail over those of the PP Act. Conversely, the Respondent argued that the SARFAESI Act and the PP Act operate in different fields, and there was no inconsistency between the two. The Respondent emphasized that the ownership rights of the 1st Respondent (landlord) remained intact, including the right to terminate the lease and evict the lessee for breaches of the lease terms.3. Validity of the termination of the lease:The Respondent asserted that the 1st Respondent, as the owner and lessor of the property, had the right to terminate the lease due to breaches by Respondent No.2. The Petitioner, having taken possession of the leasehold rights, could not claim a higher right than Respondent No.2. The validity of the lease termination was to be adjudicated under the PP Act by the Estate Officer, not the DRT under the SARFAESI Act.4. Prematurity and maintainability of the Writ Petition challenging SCNs:The Respondent argued that the Writ Petition was premature as it challenged SCNs, which do not per se decide any rights but merely call upon the noticees to show cause. The Supreme Court has deprecated the practice of challenging SCNs through writ petitions, stating that such petitions are premature unless the SCNs are issued by a person without jurisdiction. The Court agreed with this view, holding that the present Petition was premature and not maintainable.Conclusion:The Court found no conflict between the SARFAESI Act and the PP Act, holding that both operate in different fields. The SARFAESI Act concerns the recovery of non-performing assets by banks, while the PP Act governs the eviction of unauthorized occupants from public premises. The Court concluded that the Estate Officer had jurisdiction to issue the SCNs and that the Petition was premature. Consequently, the Writ Petition was dismissed with no order as to costs.