Thursday, 15 September 2016

Whether high court exercises appellate powers in petition under article 226 of constitution?

In “State of Madhya Pradesh and Ors. –vs M.V.Vyavsaya and Company” [(1997) 1 SCC 156] it was held -
“15. - It has been repeatedly held by this Court that the
power of the High Court Under Article 226 of the
Constitution is not akin to appellate power. It is a
supervisory power. While exercising this power, the
Court does not go into the merits of the decision taken
by the authorities concerned but only ensures that the
decision is arrived at in accordance with the procedure
prescribed by law and in accordance with the
principles of natural justice wherever applicable.
Further, where there are disputed questions of fact, the
High Court does not normally go into or adjudicate
upon the disputed questions of fact.
(Ordinary Original Civil Jurisdiction)
 Original Side
The Hon’ble Justice Sudip Ahluwalia
W.P. No. 493 of 2011
G.A No. 2776 of 2012
Angel Distribution Co. Pvt. Ltd. & Anr.
Kotak Mahindra Bank Ltd. & Ors.

Judgement On : 20-05-2016

The writ petition was originally filed seeking the following
principal relief:-
“a) A writ of or in the nature of Mandamus do issued
commanding the respondents to forthwith take stepsfor release of and/or handing over the Flat No. A-1
belonging to the petitioners to them without any
undue delay.”
2. It was dismissed by the Hon’ble Justice Jayanta Kumar Biswas
(as His Lordship then was) originally on 5th May, 2011. An
appeal was thereafter preferred by the writ petitioner which
was allowed by a Division Bench of this Court vide a
judgement passed on 8th June, 2011. It was directed therein-
“His Lordship (that is the Trial Court) shall take
decision independently. This Court only has settled the
issue on consent of the parties in this matter on the
question of alternative remedy and not otherwise.
It is agreed by the parties that the observations
recorded in our order on the question of alternative
remedy are acceptable in this case only.”
3. It is therefore clear that the above observations by the learned
Appellate Court were made in the context of the fact that the
writ petition was originally dismissed without even the
affidavit-in-opposition having been filed by the respondents
simply on the ground of existence of the alternative remedy.
Therefore, in essence the direction of the Ld. Appellate Court
was to allow the respondents to file their affidavit-in-opposition
and to decide the matter on merits after completion of the
pleadings. Subsequently, the respondents have also filed this
application praying for dismissal of the writ petition on the
ground of its alleged non-maintainability.
4. It is submitted on behalf of the writ petitioners that the
disputed part of the properties described as “Secured Asset”
the respondent bank happens to be a Ground Floor Flat for
which the title is of the Company itself and not that of its
Director in his personal capacity. As such there cannot be any
scope of conveying the property in question lawfully by the
Petitioner no. 2, if done in his private capacity. The background of the matter as narrated/summarised by the Writ
Petitioners in their written notes of arguments is as follows:-
“1. The petitioner no. 1 company obtained a sub-lease
for a term of 99 years in respect of flat no. A1 located in
the ground floor of AB Block in the building known as
Gopal Bhavan situated at 43, Kailash Bose Street,
Kolkata – 700 006 from one Mahesh Properties Limited
by a registered deed dated October 11, 1999. [Annexure
P1 to the writ petition at pages 25 to 64]
2. In or about April 2007 M/s. Mitra Brothers, the
respondent No. 3 herein, entered into talks with Kotak
Mahindra Bank, the respondent no. 1, for the purpose of
obtaining financial assistance.
3. Initially the petitioner no. 2 had offered to stand as
surety against the loan to be sanctioned by the
respondent no. 3 bank and the petitioner no. 1 had
offered to secure the loan by way of an equitable
mortgage of the leasehold rights in respect of the abovementioned
flat. At the time, in or about June-July, 2007
a few documents including a deed of personal guarantee
dated July 19, 2007 executed by the petitioner no. 2 had
been signed and made over to the respondent no. 3.
4. However, since the respondent bank was delaying
disbursement of the loan, the respondent no. 3 firm
decided no to transfer the loan account from UTI Bank.
In the above backdrop, most of the original documents
that had previously been executed for the purpose of
having the loan account transferred including inter alia
the deed of personal guarantee dated July 19, 2007
were returned by the respondent bank to the petitioners.
The original registered deed of sub-lease dated October
11, 2007 and the original deed of personal guarantee
singed by the petitioner no. 2 on July 19, 2007 are lying
and have at all material times been in the custody of the
petitioners. [Photocopy of the original deed of personal
guarantee dated July 19, 2007 is Annexure B to the
affidavit in reply at pages 19 to 27]5. By way of a notice dated May 20, 2009 addressed only to the
respondent no. 3 firm and its partners, with a copy marked to
the petitioner no. 2, the respondent bank purported to invoke the
provisions of Section 13(2) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002. [Annexure P-2 to the writ petition at pages 65
to 72 thereof]
6. On January 24, 2011 the respondent bank illegally and forcibly
took possession of the flat in question from the petitioner no. 1
with the assistance of police force.
7. The instant application was thereafter filed challenging the
arbitrary, illegal and wrongful manner in which the respondent
bank had purported to invoke the provisions of the Act of 2002.”
5. It is therefore the contention that no action lies in relation to
that particular property since it could not have been conveyed
by the Director in his private capacity. It may be mentioned here
that the writ petitioner no. 1 is the company itself while the writ
petitioner no. 2 is Mr. Ahim Mitra, its Director who according to
the bank had placed the disputed premises as a “Secured Asset”
ostensibly as Guarantor for the respondent No. 3 namely “M/s.
Mitra Brothers”, a Partnership firm of which his own two sons
are the partners. It is also the contention that in any case no
such original deed sub-lease was delivered by the petitioner no.
1 to the bank authorities, and so, any document in that regard
relied upon or in possession of the authorities would be forged
and fictitious.
6. On the other hand it has been asserted on behalf of the
respondent bank that -
“…….a) The original registered deed of sub-lease dated
October 11, 1999 is in its custody;
b) the petitioner no. 2 had executed several documents in
relation to the loan in question including a deed of personal
guarantee dated July 31, 2007 [Annexure B at pages 27 to
34 of the Affidavit in Opposition];c) the partners of the respondent no. 3 firm had created an
equitable mortgage in respect of the flat in question by
depositing an original registered deed of gift dated June 5,
2002 executed by the petitioner no. 2 in favour of the two
partners of the respondent no. 3 firm [Annexure C at pages
38 to 44 of the Affidavit in Opposition] and further by
executing a memorandum of deposit of title deeds on
September 15, 2007 [Annexure D appearing at pages 109 to
113of the Affidavit in Opposition]…….”
8. It is the assertion of the writ petitioners that the writ petitioner
no. 1 namely the Company is not bound by the private act of
its director in relation to the disputed property and that even
assuming that any such mortgage was created, the bank itself
should not have accepted the same without satisfying itself
about the Director’s title and authority to do so in terms of
Section 41 of the Transfer of Property Act. In support of these
contentions the writ petitioners have also referred to some
9. In “V.E.R.M.A.R Chettyar Firm vs. Ma Joo Teen & Ors.”
(AIR 1933 Rangoon 299) the Division Bench considered the
question of whether tax receipts could be regarded as
documents of title or title deeds and arrived at the conclusion
that it was only documents which emphatically established
prima facie or apparent Title to the property in the depositor
that could be regarded as documents of Title deeds and none
10. In “Bank of India vs. Abhay D. Narottam & Ors.”
reported at (2005) 11 SCC 520, the Supreme Court,
considering the question of whether a charge in respect of a
property could be created by deposit of an agreement for sale
by the agreement holder, had referred to the definition of the
expression “mortgage” as contained in section 58(a), and held
that without a transfer of interest there arose no question of
there being a mortgage. It was observed therein –“No interest was created in favour of Respondent 2 by
virtue of this agreement for sale which could have been
transferred by way of security to the appellant Bank.
There is as such no question of the appellant Bank
having any charge over such non-existent interest.”
11. Thus according to the petitioners, “……….The qualification
aforesaid is implicit in section 58(f) of the said Act and any
construction otherwise would lead to anomalous consequences.
For instance, a person could, by resorting to wrongful and illegal
means or by practising fraud and/or deceit, obtain the original
title documents in respect of an immovable property belonging to
another over which such person has no right, title or interest
whatsoever and could thereafter proceed to deliver the same two
one of his creditors for the purpose of creating an equitable
mortgage. In such a case it would be absurd to suggest that by
dint of Section 58(f) of the Act of 1882, and equitable mortgage
in respect of such immovable property has been created……..”
12. On the other hand the assertion of the respondent is that
undoubtedly the property in question was mortgaged by none
other than the petitioner no. 2 himself and there is no forgery
in any of the documents. It is also asserted that the
representation made by the petitioner no. 2 who had chosen to
stand guarantor for the partnership firms of his own two sons
was to the effect that he was competent to pledge the disputed
flat which has been treated as the “Secured Asset” and he can
now not retract from his own conduct/representation of being
the ostensible owner of the disputed premises, since in any
case even according to the cause title of the writ petition, he
alone is the Director of the petitioner Company, and therefore
fully liable to face consequence of his action. In addition the
respondent bank has also made reference to certain decisions
regarding the liability of borrowers and / or guarantors in
relation to banking transaction or to be loans.
13. In “State of Madhya Pradesh and Ors. –vs M.V.Vyavsaya and Company” [(1997) 1 SCC 156] it was held -
“15. - It has been repeatedly held by this Court that the
power of the High Court Under Article 226 of the
Constitution is not akin to appellate power. It is a
supervisory power. While exercising this power, the
Court does not go into the merits of the decision taken
by the authorities concerned but only ensures that the
decision is arrived at in accordance with the procedure
prescribed by law and in accordance with the
principles of natural justice wherever applicable.
Further, where there are disputed questions of fact, the
High Court does not normally go into or adjudicate
upon the disputed questions of fact. Yet another
principle which has been repeatedly affirmed by this
Court is that a person who solemnly enters into a
contract cannot be allowed to wriggle out of it by
resorting to Article 226 of the Constitution. This Court
has also repeatedly emphasized the inadvisability of
making interim orders which have the effect of
depriving the State (the people of the State) of the
revenues legitimately due to it. The Court should not
take upon itself the responsibility of staying the
recovery of amounts due to State unless a clear case of
illegality is made out and the balance of convenience is
duly considered. Otherwise, the odium of unlawfully
depriving the State/the people of the monies lawfully
due to it/them would lie upon the Court.
“17. A Constitution Bench of this Court held in Har
Shankar v. Deputy Excise and Taxation Commr. (1975)
1 SCC 737 : AIR 1975 SC 1121, that "the writ
jurisdiction of High Courts Under Article 226 of the
Constitution is not intended to facilitate avoidance of
obligations voluntarily incurred." Of course, where
there is a statutory violation, interference would be
permissible even in the case of a contract but not where
the relevant facts are disputed and which dispute callsfor an elaborate enquiry which cannot be conveniently
done by the High Court in a writ petition.”
14. In “United Bank of India vs Satyawati Tondon & Ors.”
(2010) 8 SCC 110, it was observed -
“45. It is true that the rule of exhaustion of alternative
remedy is a rule of discretion and not one of
compulsion, but it is difficult to fathom any reason why
the High Court should entertain a petition filed under
Article 226 of the Constitution and pass interim order
ignoring the fact that the petitioner can avail effective
alternative remedy by filing application, appeal,
revision, etc. and the particular legislation contains a
detailed mechanism for redressal of his grievance.
46. It must be remembered that stay of an action
initiated by the State and/or its
agencies/instrumentalities for recovery of taxes, cess,
fees etc. seriously impedes execution of projects of
public importance and disables them from discharging
their constitutional and legal obligations towards the
citizen. In cases relating to recovery of the dues of
banks, financial institutions and secured creditors,
stay granted by the High Court would have serious
adverse impact on the financial health of such
bodies/institutions, which ultimately prove detrimental
to the economy of the nation. Therefore, the High Court
should be extremely careful and circumspect in
exercising its discretion to grant stay in such matters.
Of course, if the petitioner is able to show that its case
falls within any of the exceptions carved out in
Baburam Prakash Chandra Maheshwari v. Antarim
Zila Parishad (AIR 1969 SC 556), Whirlpool Corpn. V.
Registrar of Trade Marks ( (1998) 8 SCC 1) and
Harbanslal Sahnia v. Indian Oil Corpn Ltd ( (2003) 2
SCC 107) and some other judgments, then the High
Court may, after considering all the relevant
parameters and public interest pass an appropriate
interim order….
55. It is a matter of serious concern that despite
repeated pronouncement of this Court, the High
Courts continuing to ignore the availability ofstatutory remedies under the DRT Act and the
SARFAESI Act and exercise jurisdiction under
Article 226 for passing orders which have serious
adverse impact on the right of banks and other
financial institutions to recover their dues. We
hope and trust that in future the High Courts will
exercise their discretion in such matters with
greater caution, care and circumspection.”
15. In “Kanaiyalal Lalchand Sachdev and Ors. Vs State of
Maharashtra and Ors.” [(2011) 2 SCC 782 ] it was held -
“22. We are in respectful agreement with the above
enunciation of law on the point. It is manifest that an
action under Section 14 of the Act constitutes an action
taken after the stage of Section 13(4), and therefore,
the same would fall within the ambit of Section 17(1) of
the Act. Thus, the Act itself contemplates an efficacious
remedy for the borrower or any person affected by an
action under Section 13(4) of the Act, by providing for
an appeal before the DRT. ”
“23. In our opinion, therefore, the High Court rightly
dismissed the petition on the ground that an efficacious
remedy was available to the Appellants under Section
17 of the Act. It is well-settled that ordinarily relief
under Articles 226/227 of the Constitution of India is
not available if an efficacious alternative remedy is
available to any aggrieved person. (See: Sadhana Lodh
v. National Insurance Co. Ltd. and Anr. : (2003) 3 SCC
524; Surya Dev Rai v. Ram Chander Rai and Ors. :
(2003) 6 SCC 675; State Bank of India v. Allied
Chemical Laboratories and Anr. (2006) 9 SCC 252. ”
16. In “Juggi Lal Kamlapat Vs Commissioner of Income
Tax, U.P.” [AIR 1969 SC 932] the Apex Court had gone on to
observe -
“7. …….It is true that from juristic point of view
the company is a legal personality entirely
distinct from its members and the company is
capable of enjoying rights and being subjected to
duties which are not the same as those enjoyed or
borne by its members. But in certain exceptionalcases the
 Court is entitled to lift the veil of
corporate entity and to pay regard to the
economic realities behind the legal facade. For
example, the Court has power to disregard the
corporate entity if it is used for tax evasion or to
circumvent tax obligation or to perpetrate fraud.
17. Similarly in “Dalip Singh v. State of U.P. and Ors.”
[(2010) 2 SCC 114, the Supreme Court made these scathing
comments -
“2. In last 40 years, a new creed of litigants has
cropped up. Those who belong to this creed do not
have any respect for truth. They shamelessly
resort to falsehood and unethical means for
achieving their goals. In order to meet the
challenge posed by this new creed of litigants,
the courts have, from time to time, evolved new
rules and it is now well established that a
litigant, who attempts to pollute the stream of
justice or who touches the pure fountain of
justice with tainted hands, is not entitled to any
relief, interim or final. ”
18. In “S. Chatterjee Vs. Dr. K.L. Bhave and Ors.” [AIR
1960 MP 323], it was observed -
“6. The principles on which damages for the form of
tort known as 'deceit' arc awarded, are thus stated by
Lord Herscliell L. C. in Derry v. Peek (1889) AC 337:
"I think the authorities establish the following
propositions: First, in order to sustain an action of
deceit, there must be proof of fraud, and nothing short
of that will suffice. Secondly, fraud is proved when it is
shown that a false representation has been made (1)
knowingly, or (2) without belief in its truth, or (3)
recklessly, careless whether it be true or false.
Although I have treated the second and third as
distinct cases, I think the third is but an instance of the
second, for one who makes a statement under such
circumstances can have no real belief in the truth of
what he states. To prevent a fake statement being fraudulent,
 there must, I think, always be an honest
belief in its truth. And, this probably covers the whole
ground, for one who knowingly alleges that which is
false, has obviously no such honest belief. Thirdly, if
fraud be proved, the motive of the person guilty of it is
immaterial. It matters not that there was no intention to
cheat or injure the person to whom the statement was
“7. The principle, thus stated, applied to 'actual' fraud
as opposed to constructive fraud, and, in the instant
case, we are concerned with actual fraud, a conscious
misrepresentation, as understood in (1889) AC 337
(supra), as we shall presently show.”
19. In “R.N. Gosain Vs. Yashpal Dhir” [(1992) 4 SCC 683],
the Apex Court held -
“10. Law does not permit a person to both
approbate and reprobate. This principle is based
on the doctrine of election which postulates that
no party can accept and reject the same
instrument and that "a person cannot say at one
time that a transaction is valid any thereby
obtain some advantage, to which he could only be
entitled on the footing that it is valid, and then
turn round and say it is void for the purpose of
securing some other advantage".
20. The assertion of the writ petitioner is that firstly the
original deed of sub-lease was never delivered to the
respondent bank and any such document in its possession is
forged or fabricated. The petitioners have however not placed
on record any document or cogent material/report to prove
such alleged fraud even though it was mentioned from their
side that the Police had investigated the matter and had
apparently reported that the documents relied upon by the
bank are forged or fraudulent. On the contrary, the
Respondent/Bank has placed on record an Online Search
Report of the records of the Petitioner Company in relation to
its immovable properties, which is Annexure ‘L’ to its Affidavit –in – opposition. The same reveals that the Balance Sheet Filed
by the petitioner company with the Ministry of Corporate
Affairs did not show any immovable property as the fixed
assets for 3 consecutive financial years been 2007–08 to 2009–
10. In the given circumstances this factual assertion raised on
behalf of the petitioners is found to be untenable.
21. The alternative contention raised on their behalf to the
effect that any document executed by the petitioner no. 2
(Director) in his personal capacity does not bind the Company
is also unconvincing in view of the highlighted observations of
the Supreme Court in “Juggi Lal Kamlapat Vs
Commissioner of Income Tax, U.P.” and “Dalip Singh Vs.
State of U.P.” (supra). In essence, the petitioner no. 2 is trying
to both approbate and reprobate by on the one hand
purporting to stand as Guarantor for the loan of his sons’
Partnership Firm, and then denying any liability by contending
that the property mortgaged does not belong to him but to the
Company, of which he appears to be the sole Director
according to the Cause Title of the Writ petition.
22. Such conduct of the petitioners is not appreciable. They
have clearly not come before this Court with clean hands and
are therefore not entitled to the relief prayed for.
For the aforesaid reasons the writ petition is dismissed.
(Sudip Ahluwalia, J.)
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