Common Cause Vs. Union of India and Others[SC 2017 November]

Keywords:- PIL- difference between judicial review and merit review

Capture

  • If the Statute provides for consultation with any person before making recommendation for appointment to any post, consultation with that person has to be made. The question of giving primacy to the opinion  expressed by the person with whom the consultation has to be made depends upon various factors. If there is no Selection Committee and the appointing authority is required to consult with some other Constitutional/Statutory authority then the question of giving primacy to the opinion expressed by the person with whom the consultation is to be made exists.
  • there is vital difference between judicial review and merit review. Once there is consultation, the content of that consultation is beyond the scope of judicial review though lack of effective consultation could fall within the scope of judicial review.

Act :- Delhi Special Police Establishment Act, 1946

SUPREME COURT OF INDIA

Common Cause Vs. Union of India and Others

[Writ Petition (Civil) No. 1088 of 2017]

O R D E R

R.K. Agrawal, J.

1. By means of the present public interest litigation (PIL), the petitioner, Common Cause, a Registered Society, through its President Shri Kamal Kant Jaswal, questions the validity of the order dated 22.10.2017 issued by Secretariat of the Appointments Committee of the Cabinet, Department of Personnel and Training (DoPT) appointing Shri Rakesh Asthana – Respondent No. 2 herein as the Special Director, Central Bureau of Investigation (CBI) on the ground that the appointment has been made illegally, arbitrarily, mala fide and in violation of the principles of impeccable and institutional integrity.

2. We have heard learned Shri Prashant Bhushan, learned counsel for the petitioner and Mr. K.K. Venugopal, learned Attorney General appearing for the Union of India.

3. Shri Prashant Bhushan, learned counsel contended that this Court in Vineet Narain and Others vs. Union of India and Another (1998) 1 SCC 226 has laid down the procedure for appointment of Director, CBI which is as under:-

“58.6. Recommendations for appointment of the Director, CBI shall be made by a Committee headed by the Central Vigilance Commissioner with the Home Secretary and Secretary (Personnel) as members. The views of the incumbent Director shall be considered by the Committee for making the best choice. The Committee shall draw up a panel of IPS officers on the basis of their seniority, integrity, experience in investigation and anti-corruption work. The final selection shall be made by the Appointments Committee of the Cabinet (ACC) from the panel recommended by the Selection Committee. If none among the panel is found suitable, the reasons thereof shall be recorded and the Committee asked to draw up a fresh panel.”

4. Learned counsel further contended that the CBI has been established under the Delhi Special Police Establishment Act, 1946 (in short ‘the DSPE Act’) and to give statutory effects to the directions given in Vineet Narain (supra), the DSPE Act was amended in 2003 vide Central Vigilance Commission Act, 2 2003 to provide that the Director, CBI and officers above the post of Superintendent of Police shall be appointed by the Central Government on the recommendations of the Central Vigilance Commissioner, the Vigilance Commissioners and two Secretaries to the Government of India.

5. The DSPE Act was further amended by the Lokpal and Lokayuktas Act, 2013 to provide for a mechanism for the appointment of Director, CBI as well as for the appointment of officers to the post above the Superintendent of Police. As in the present petition, the selection and appointment of the Special Director, CBI is under challenge and not the selection and appointment of the Director, CBI, only Section 4C, as substituted by the Act of 2013, has to be considered. Section 4C of the DSPE Act provides for the procedure for appointment of Superintendent of Police and above reads as under:-

“4C. Appointment for posts of Superintendent of Police and above extension and curtailment of their tenure, etc. –

(1)The Central Government shall appoint officers to the posts of the level of Superintendent of Police and above except Director, and also recommend the extension or curtailment of the tenure of such officers in the Delhi Special Police Establishment, on the recommendation of a Committee consisting of:-

a) The Central Vigilance Commissioner – Chairperson

b) Vigilance Commissioners – Members

c) Secretary to the Government of India in charge of the Ministry of Home – Member, and

d) Secretary to the Government of India in charge of the Department of Personnel – Member Provided that the Committee shall consult the Director before submitting its recommendation to the Central Government.

(2) On receipt of the recommendation under sub-Section (1), the Central Government shall pass such orders as it thinks fit to give effect to the said recommendation.”

6. Thus, the appointment on the post of Superintendent of Police and above has to be made by the Selection Committee in consultation with the Director, CBI. Shri Prashant Bhushan, relying upon the news reports dated 22.10.2017 in the India Today and reported on 23.10.2017 in ‘The Pioneer’ and the ‘The Hindu’ as also the newspaper report dated 24.10.2017 published in ‘The Pioneer’ submitted that no decision was taken by the Selection Committee in its meeting held on 21.10.2017 regarding the appointment of Shri Rakesh Asthana – Respondent No. 2 on the post of Special Director, CBI, and therefore, the order dated 22.10.2017 issued by the 4 Appointments Committee of the Cabinet (ACC) is wholly illegal and contrary to law.

7. Learned counsel for the petitioner, relying upon the diaries and other papers seized in the raid conducted in the premises of Sterling Biotech and Sandesara Group of Companies where on some pages of the diary, the name of Shri Rakesh Asthana – Respondent No. 2 herein finds place as also in the FIR dated 30.08.2017 filed by the CBI, in the column of details of known/suspected/unknown accused with full particulars, a mention has been made for “other unknown public servant and private persons”, contended that in any event Respondent No. 2 could not have been recommended for appointment as Special Director, CBI as the matter is under investigation.

8. He relied upon a 9-Judges Bench decision of this Court in Supreme Court Advocates-on-Record Association and Others vs. Union of India (1993) 4 SCC 441 to submit that consultation is to be effective and primacy has to be given to the views of the persons consulted.

9. Learned counsel for the petitioner further relied upon a decision of this Court in Centre for PIL and Another vs. Union of India and Another (2011) 4 SCC 1 in support of his submission that institution is more important than an individual and the decision to recommend has got to be an informed decision keeping in mind that the institution has to perform an important function.

10. Learned counsel further contended that the son of Respondent No. 2, viz., Ankush Asthana has worked for 2 years, 11 months with M/s Sterling Biotech as Assistant Manager (papers and diaries of which Company had been seized) and the cocktail party of the wedding of the daughter of Respondent No. 2 was held in the farm house of M/s Sandesaran Group of Companies. He also relied upon a news reported in the Indian Express dated 21.11.2017 wherein a Professor of the University of London had expressed doubt and concern about the working of the Vigilance Commission concerning CBI’s Additional Director’s recent effort to win promotion to bring home the point that the appointment of 6 Shri Rakesh Asthana – Respondent No. 2 as Special Director could not have been made at all.

11. Learned Attorney General for India placed before us the Minutes of the Selection Committee Meeting held on 21.10.2017 in the Office of the Central Vigilance Commissioner and submitted that the Selection Committee had considered the confidential letter dated 21.10.2017 submitted by the Director, CBI and had discussed the same in the meeting. The Selection Committee had given good reasons for not accepting the contents of the letter submitted by the Director, CBI and recommended Shri Rakesh Asthana for appointment as Special Director, CBI. He further submitted that the CBI itself had moved the proposal on 06.07.2017 for appointment of Shri Rakesh Asthana as a suitable candidate to hold the post of Special Director, CBI.

According to him, Shri Rakesh Asthana was holding the post of Additional Director, CBI before being appointed as Special Director, CBI and had been supervising functions of 11 Zones, viz., STF Zone, MDMA Zone, Delhi Zone, Lucknow Zone, Patna Zone, EoZ-II Zone, Mumbai, EoZ-III Zone, Kolkata Zone, North East 7 Zone, Chennai Zone & Chandigarh Zone. In the above capacity, he is supervising the investigation/trial of a number of scam cases including Augusta Westland Case, Ambulance Scam Case, Kingfisher Cases, Hassan Ali Khan Case, Moin Qureshi Case, J.P. Singh Bribery Case, Paramount Airways Case, Coal Scam Cases, AHD and Bitumen Scam Cases of Bihar and Jharkhand.

He is also supervising a number of Special Crime cases which were registered on the orders of Courts or on the request of State Governments besides cases against Ministers/officials of Delhi Government. He thus submitted that no fault can be found in the recommendations made by the Selection Committee. Respondent No. 1 had rightly accepted the recommendation for appointment of Shri Rakesh Asthana as Special Director, CBI.

12. We have given our thoughtful consideration to the various pleas raised by learned counsel for the parties.

13. There cannot be any doubt that if the Statute provides for consultation with any person before making recommendation for appointment to any post, consultation with that person has to be made. The question of giving primacy to the opinion  expressed by the person with whom the consultation has to be made depends upon various factors. If there is no Selection Committee and the appointing authority is required to consult with some other Constitutional/Statutory authority then the question of giving primacy to the opinion expressed by the person with whom the consultation is to be made exists.

14. However, in cases, where a Selection Committee has been constituted which consists of high officials and consultation has to be made with another person of the Department for which recommendation for appointment is to be made, in that event, the consultation is only a process of discussion which has to be taken into consideration while making recommendation by the Selection Committee. It cannot be said to have a primacy.

15. In the Minutes of the Meeting of the Selection Committee held on 21.10.2017, the Selection Committee had discussed the note submitted by the Director, CBI and also discussed the same with him as would be clear from the Minutes reproduced hereinbelow:-

“Item No. II: Induction of IPS officers as Special Director, CBI. The Agenda papers have been considered. The Director CBI has furnished a Secret/Confidential letter ID No. 30/2017/VC(CVC) 152/1552 dated 21.10.2017 in the meeting, enclosing an unsigned note on Sterling Biotech Ltd. and related entities. It is mentioned by the Director, CBI that the entries in the note refer, inter alia, to one Shri Rakesh Asthana.

The Committee considered the note and the matter was also discussed with the Director, CBI. Keeping in view that there is no finding in these papers that the person mentioned therein is the same person under consideration for appointment and there is nothing about the veracity of the contents of the document and the further fact that the CBI itself moved the present proposal on 06.07.2017 wherein it has been categorically mentioned that Shri Rakesh Asthana IPS (GJ:1984) is suitable to hold the post of Special Director, CBI and no further verified material has been brought on record, the Committee decided to recommend him for appointment as Special Director, CBI. The Committee has also kept in view the fact that the Vigilance Commission does not take cognizance of complaints received just on the verge of appointments or promotions unless they are proved misconducts. The Committee has also noted the decisions of the Courts in respect of such documents.”

16. From a perusal of the aforesaid Minutes, we find as under:-

(i) The Director, CBI had furnished a secret/confidential letter dated 21.10.2017 enclosing an unsigned note on M/s Sterling Biotech Ltd. and related entities and that the entries in the note referred, inter alia, to one Shri Rakesh Asthana.

(ii) The Committee had considered the note and the matter was also discussed with the Director, CBI.

(iii) The Committee found that there are no findings in the papers that the person mentioned therein is the same person under consideration for appointment and there is nothing about the veracity of the contents of the document.

(iv) The Committee further found the fact that the CBI itself moved the present proposal on 06.07.2017 categorically mentioning that Shri Rakesh Asthana IPS (GJ:1984) is suitable to hold the post of Special Director, CBI.

(v) The Committee also held that no further verified material has been brought on record and the Committee decided to recommend the name of Shri Rakesh Asthana for appointment as Special Director, CBI.

(vi) The Committee has also kept in view the fact that the Vigilance Commission does not take cognizance of complaints received just on the verge of appointments or promotions unless they are proven misconducts.

(vii) The decision taken by the Selection Committee was unanimous.

17. Further, this Court, in Mahesh Chandra Gupta vs. Union of India and Others has highlighted the fact that there is vital difference between judicial review and merit review. Once there is consultation, the content of that consultation is beyond the scope of judicial review though lack of effective consultation could fall within the scope of judicial review.

18. We cannot question the decision taken by the Selection Committee which is unanimous and before taking the decision, the Director, CBI, had participated in the discussions and it is based on relevant materials and considerations. Further, even in the FIR filed by the CBI, the name of Shri Rakesh Asthana has not been mentioned at all. Thus, lodging of FIR will not come in the way of considering Shri Rakesh Asthana for the post of Special Director, after taking into consideration his service record and work and experience.

From the Minutes of the Meeting (MoM) of the Selection Committee, we find that the news items reported in the print and electronic media that no decision was taken with respect to the appointment on the post of Special Director, CBI in the meeting of the Selection Committee held on 21.10.2017 are factually incorrect. Likewise, the statement of the Professor of the University of London reported in the Indian Express appears to be based on the newspaper reports which have been found to be factually incorrect, and therefore, it has no substance.

19. In view of the foregoing discussion, we are of the considered opinion that the appointment of Shri Rakesh Asthana – Respondent No. 2 herein to the post of Special Director, CBI does not suffer from any illegality. The writ petition fails and is dismissed.

 (R.K. AGRAWAL)

 (ABHAY MANOHAR SAPRE)

Khilendra Singh Vs. Union of India, Ministry of Agriculture through Secretary & Ors [SC 2017 November]

KEYWORDS:- Backword Class-Jaat caste

Capture

  • The Central List of OBCs prepared for the States of Uttar Pradesh in 1993 did not include the “Jaat” caste/ community. The State of Uttarakhand was formed in 2000. By a Resolution passed in 2010, the National Commission for Backward Classes resolved that till the Central List for the State of Uttarakhand was finalized, the List that was in operation in the State of Uttar Pradesh will be followed for appointment to the Central posts reserved for OBCs. The advertisement and selection in this case was made in the year 2007 when the caste to which the Appellant belongs i.e. “Jaat” was not in the Central List for Uttar Pradesh.

DATE: November 28, 2017

ACTS:-National Commission for Backward Classes Act, 1993

SUPREME COURT OF INDIA

Khilendra Singh Vs. Union of India, Ministry of Agriculture through Secretary & Ors.

[Civil Appeal No. 19862 of 2017 arising out of Special Leave Petition (Civil) No. 14201 of 2011]

L. NAGESWARA RAO, J.

1. Leave granted.

2. The Appellant applied for appointment to the posts of Subject Matter Specialist (Crop Protection & Crop Psychology) in Vivekananda Parvatiya Krishi Anusandhan Sansthan, Almora. The Appellant belongs to “Jaat” caste which was falling within the category of Other Backward Classes (OBCs) in the State of Uttar Pradesh. The Tesildar, Thakurdwara, Moradabad (U.P.) issued a certificate in favour of the Appellant stating that he belongs to Other Backward Classes on 22nd June, 2007. The Appellant was appointed on 2nd January, 2008 in a post reserved for OBCs. A show-cause notice was issued to the Appellant asking him to explain as to why his appointment should not be cancelled as the community to which he belongs is not found in the Central List of OBCs. The Appellant submitted his explanation on 6th November, 2010. An inquiry was conducted and on the basis of the recommendation of the Inquiry Committee, the services of the Appellant were terminated on 20th November, 2010. He approached the High Court of Uttarakhand at Nainital by filing Writ Petition challenging the order of termination. The Writ Petition was dismissed vide judgment dated 24th February, 2011, the legality of which is assailed in the above Appeal.

3. The National Commission for Backward Classes was constituted by the National Commission for Backward Classes Act, 1993 (Act 27 of 1993). Section 9 of the Act empowers the Commission to examine requests for inclusion of any class of citizens as a backward class in the lists and hear complaints of over-inclusion or under-inclusion of any backward class in such lists and tender such advice to the Central Government as it deems appropriate. Section 2(c) defines “Lists” as follows: (c) “lists” means lists prepared by the Government of India from time to time for purposes of making provision for the reservation of appointments or posts in favour of backward classes of citizens which, in the opinion of that Government, are not adequately represented in the services under the Government of India and any local or other authority within the territory of India or under the control of the Government of India

4. By a proceeding dated 10th September, 1993 the Government of India finalised the Central List of OBCs for each State. A common List for the State of Uttar Pradesh was annexed to the said proceedings in which the caste of “Jaat” was not included. The matter pertaining to the inclusion of “Jaat” in the Central List of OBCs for the States of Uttar Pradesh, Madhya Pradesh, Haryana and Rajasthan came up for consideration before the Commission in the year 1997. The National Commission for Backward Classes recommended inclusion of “Jaat” caste in the OBCs only for the State of Rajasthan and not the other three States. On the basis of the power of review that was conferred on the National Commission for Backward Classes, the matter was examined afresh.

The National Commission for Backward Classes conducted hearings in Delhi to consider the request of “Jaat” caste in the Central List of OBCs for nine States including the State of Uttar Pradesh. The National Commission for Backward Classes advised the Central Government not to include the “Jaat” caste/ community in the Central List of OBCs. While rejecting the recommendation made by the National Commission for Backward Classes, the Central Government issued a notification including “Jaat” caste/ community in the Central List of OBCs for the States of Uttar Pradesh/ Uttarakhand and seven other States in 2014.

5. A perusal of the facts that are stated in the preceding paragraph on the basis of the counter affidavit filed by the National Commission for Backward Classes would show that “Jaat” caste/ community is in the Central List of OBCs for the State of Uttarakhand from 2014. The Central List of OBCs prepared for the States of Uttar Pradesh in 1993 did not include the “Jaat” caste/ community. The State of Uttarakhand was formed in 2000. By a Resolution passed in 2010, the National Commission for Backward Classes resolved that till the Central List for the State of Uttarakhand was finalized, the List that was in operation in the State of Uttar Pradesh will be followed for appointment to the Central posts reserved for OBCs. The advertisement and selection in this case was made in the year 2007 when the caste to which the Appellant belongs i.e. “Jaat” was not in the Central List for Uttar Pradesh.

6. We are not in agreement with the reasons given by the High Court while dismissing the Writ Petition. It was held in the impugned judgment that the List prepared by the State of Uttarakhand would be applicable for appointment to Central posts. We approve the final conclusion of the High Court that the Appellant was not entitled for appointment in the post reserved for OBCs, though for different reasons as stated supra.

7. The Appeal is dismissed accordingly. No costs.

 [S.A. BOBDE]

 [L. NAGESWARA RAO]


Union of India & Ors. Vs. Kamal Kishore & Ors., Etc.

[Civil Appeal Nos. 19859-19860 of 2017 arising out of Special Leave Petition (Civil) Nos.18584-85 of 2012

L. NAGESWARA RAO, J.

1. Leave granted.

2. The writ petitions filed by the Respondents seeking appointment to the post of Constable G.D. in Central Reserve Police Force (CRPF) in the category of Other Backward Classes (OBCs) were allowed by a learned Single Judge of the High Court of Uttarakhand at Nainital. The Appeals filed by the Union of India were dismissed by a Division Bench. The Appellants have approached this Court challenging the correctness of the said judgment of the High Court.

3. An advertisement was issued on 24th July, 2010 duly published in daily newspaper Uttar Ujala inviting applications for appointment to the post of Constable G.D. in the CRPF from Indian citizens residing in the States of Uttar Pradesh and Uttarakhand. 78 vacancies were notified out of which nine were reserved for OBCs. 13 backlog vacancies of OBCs were also included in the notification. The Respondents who belong to Saini, Momin (Ansar), Gujjar and Kahar communities applied for being considered for appointment to the posts reserved for OBCs.

They qualified in the written examination and appeared before a medical board for medical examination. Their names were not included in the final list that was prepared for appointment. On enquiry, they found that their names were shifted to the general category from the OBC category on the ground that the castes to which they belong did not find place in the OBCs List for the Central Government services for Uttarakhand State as per “Swamy’s Compilation on Reservations and Concessions” book. They could not be appointed on the basis of the marks they obtained in the general category.

4. The Respondents filed Writ Petitions in the High Court of Uttarakhand seeking issuance of Mandamus for commanding the Appellants to appoint them to the post of Constable G.D. in CRPF against the post reserved for OBC candidates of Uttarakhand. The Appellants filed a counter affidavit in the High Court in which it was stated that the Respondents were not entitled to be considered for appointment in the posts reserved for OBCs as the castes to which they belong were not included in the List of OBCs for Central Government services, Uttarakhand State as per “Swamy’s Compilation on Reservations and Concessions” book.

The learned Single Judge of the High Court of Uttarakhand at Nainital allowed the Writ Petitions vide judgment dated 11th October, 2011 by relying upon a judgment of the High Court in Deepak Kumar versus Gurukul Kangri University, Haridwar1. It was also held that there is no dispute about the fact that the castes to which the Respondents belong are OBCs in the State of Uttarakhand. The Appellants could not succeed in convincing the Division Bench of the High Court that the judgment of the learned Single Judge warranted interference.

5. Pursuant to the judgment of this Court in Indra Sawhney versus Union of India2, the Government of India decided to implement reservation of 27% in civil posts and services in favour of OBCs. On the recommendations made by an Expert Committee, a Central List of OBCs was prepared for each State. The Central List of OBCs prepared for the State of Uttar Pradesh included the castes of the Respondents. The State of Uttarakhand was created in the year 2000. In the judgment of Deepak Kumar (supra) relied upon by the learned Single Judge in this case, a reference was made to a letter dated 28th July, 2011 issued by the National Commission for Backward Classes.

It was stated in the said letter that the Central List for OBCs for the State of Uttarakhand was under process and that till it was finalized, the List for Uttar Pradesh will be applicable for appointment to Central posts in the State of Uttarakhand. The National Commission for Backward Classes has filed a counter affidavit in these Appeals supporting the Respondents. The Commission stated in the affidavit that the List of OBCs for the State of Uttar Pradesh will enure to the benefit of those residing in Uttarakhand for appointment to services under the Union of India till the Central List of OBCs for Uttarakhand is finalized. It was further stated that by a Resolution dated 8th December, 2011, the Central Government notified the Central List of OBCs for the State of Uttarakhand which consisted of 84 castes.

6. Ms. Indu Malhotra, learned senior counsel appearing for the Union of India relied upon a proceeding dated 12th March, 2007 which was filed along with the rejoinder to contend that there was only one caste included in the Central List for the State of Uttarakhand. She submitted that all the other OBCs were included in the Central List only in 2011 and as the selections in the present case were conducted in 2010, the Respondents whose castes were not in the list of OBCs cannot be considered in the posts reserved for OBCs. We are not in agreement with the said submission as a perusal of the proceeding dated 12th March, 2007 would show that it pertains to inclusion/ amendments in the Central List of OBCs in respect of various States.

There is no doubt that one caste Rai-Sikh (Mahatam) was shown in the proposed Entry at serial No.1. It means that the caste was included by the proceeding as an OBC. It does not mean that there was only one caste falling within the category of OBCs in the State of Uttar Pradesh. The position as it existed pertaining to reservation to OBC posts in Uttarakhand is explained by the National Commission for Backward Classes. It is clear from the affidavit filed by the National Commission for Backward Classes that a decision was taken in 2010 to apply the Central List prepared for the State of Uttar Pradesh to the State of Uttarakhand till the List of OBCs for Uttarakhand was finalized.

The List was finalized in 2011. There cannot be any doubt that the Respondents belong to the castes which were included in the Central List of OBCs for the State of Uttar Pradesh and were entitled to be considered for the posts reserved for OBCs in the advertisement that was issued on 24th July, 2010. There was some confusion about the applicability of the Lists of the OBCs prepared by the States of Uttar Pradesh and Uttarakhand for implementing reservation in the State’s civil posts. Those Lists have no relevance for appointment to services under the Union of India.

7. Before concluding, it is necessary to mention that the Respondents were deprived of their consideration to the posts reserved for OBCs only on the ground that the castes to which they belong did not find a place in “Swamy’s Compilation on Reservations and Concessions” book. This practice of relying upon private books for the purpose of defeating the rights of citizens is deprecated. The Union of India ought to have referred to the Resolutions of the National Commission for Backward Classes and the Central List that were prepared by the Government of India from the official publications. For no fault of theirs, the Respondents were not considered for appointment as Constables G.D. in CRPF in the year 2010.

8. We uphold the judgment of the High Court and direct the Appellants to consider the Respondents for appointment as Constables G.D., CRPF in the posts reserved for OBCs in the advertisement dated 24th July, 2010. The Appellants are directed not to deny the appointment to the Respondents on the ground that they are now over-aged provided they fulfill the condition of fitness.

9. For the aforementioned reasons, the Appeals are dismissed.

 [S.A. BOBDE]

 [L. NAGESWARA RAO]

District Development Officer & ANR. Vs. Satish Kantilal Amrelia [SC 2017 November]

KEYWORDS:-  termination from Service- Compensation -Retrenchment

Capture

  • It is trite law that when the termination is found to be illegal because of non-payment of retrenchment compensation and notice pay as mandatorily required under Section 25-F of the Industrial Disputes Act, even after reinstatement, it is always open to the management to terminate the services of that employee by paying him the retrenchment compensation. Since such a workman was working on daily-wage basis and even after he is reinstated, he has no right to seek regularisation

Act : Section 10 of Industrial Disputes Act, 1947 -Section 25-G

DATE : November 28, 2017

SUPREME COURT OF INDIA

District Development Officer & ANR. Vs. Satish Kantilal Amrelia

[Civil Appeal Nos. 19857-19858 of 2017 arising out of SLP (C) Nos.11956-11957 of 2015]

Abhay Manohar Sapre, J.

1. Leave granted.

2. These appeals are filed against the final judgment and order dated 01.12.2014 passed by the High Court of Gujarat at Ahmedabad in Civil Application No.10519 of 2014 in Letters Patent Appeal No.1878 of 2006, wherein the High Court dismissed the Letters Patent Appeal filed by the appellant herein in default and further declined to 1 restore the appeal when prayed by the appellant. The Letters Patent Appeal arose out of judgment and final order of the Single Judge dated 21.04.2006 in Special Civil Application No.8390 whereby the learned Single Judge dismissed the writ petition filed by the appellant and affirmed the Award dated 01.02.2006 passed by Labour Court, Bhavnagar in Reference Case No.166 of 1992.

3. The controversy involved in the appeals is confined to short facts, which, however, need mention hereinbelow to appreciate the same.

4. The appellant is the Panchayat Department of State of Gujarat having its office at Bhavnagar. The respondent – Satish Kantilal Amrelia worked in the appellant’s Revenue Department at Bhavnagar as a Peon-cum-Driver on daily wages from 18.12.1989 to 31.05.1990 (5 months 15 days) and then started giving his services again as daily wager in appellant’s another branch (Small Saving) from 01.06.1990 to 12.02.1992 (1 year 9 months) on daily payment of Rs.27.55 (Rs.Twenty Seven and Fifty Five Paisa). The respondent’s tenure was then discontinued with effect from 12.02.1992 vide order dated 23.03.1992 (Annexure P-4).

5. The respondent felt aggrieved of his termination and initiated two actions against the appellant. In the first instance, challenging his termination order dated 23.03.1992 from the services, the respondent filed Civil Suit No.141 of 1992 in the Civil Court at Bhavnagar. During the pendency of the civil suit, he also approached to the State (Labour Commissioner) and prayed for making Industrial Reference to the concerned Labour Court under Section 10 of Industrial Disputes Act, 1947 (hereinafter referred to as “the Act”) for deciding the legality and propriety of his termination order.

6. The Labour Commissioner made an Industrial Reference No.166 of 1992 to the Labour Court No. 2 at Bhavnagar for deciding the legality and correctness of the termination order and for regularization of respondent’s services.

7. The 2nd Joint Civil Judge (SD), Bhavnagar, vide judgment/decree dated 03.05.1994 decreed the respondent’s suit, set aside the termination order and directed the appellant (State) to re-instate the respondent in service with all consequential benefits.

8. Against the judgment/decree of the Trial Court, the appellant filed first appeal being Civil Appeal No.45/1994 before the Assistant Judge, Bhavnagar. The Appellate Court, by order dated 30.09.2003, allowed the appellant’s appeal, set aside the judgment/decree of the Trial Court and dismissed the respondent’s civil suit. In substance, the Appellate Court upheld the respondent’s termination order.

9. The Labour Court, however, by Award dated 01.02.2006 (Annexure P-9) answered the Reference in respondent’s favour. Applying the provisions of the Act, the Labour Court held that since the 4 respondent was able to prove that he has worked for 240 days continuously in one previous calendar year, he was entitled to get the protection of the Act. It was held that it was a case of illegal retrenchment because the respondent was not paid any prior retrenchment compensation before termination of his services. The Labour Court also held that there was violation of Section 25-G of the Act in passing the termination order. The Labour Court accordingly directed the appellant(State) to re-instate the respondent in service along with payment of 40% back wages.

10. The appellant (State) felt aggrieved, filed writ petition (Special Civil Application No.8390/2006) before the High Court of Gujarat. By order dated 21.04.2006, the Single Judge dismissed the appellant’s writ petition and affirmed the Award of the Labour Court. The appellant then filed Letters Patent Appeal before the Division Bench of the High Court but it was dismissed in default. The appellant applied for restoration of the Letters Patent Appeal but it was dismissed and hence this appeal by special leave was filed by the State before this Court against the order of the Division Bench as also against the order of the Single Judge.

11. Heard Ms. Jesal Wahi, learned counsel for the appellants and Mr. Purvish Jitendra Malkan, learned counsel for the respondent.

12. Having heard the learned counsel for the parties and on perusal of the record of the case, we are inclined to allow the appeals in part and while setting aside the impugned orders (Single Judge and Division Bench), modify the Award of the Labour Court as indicated below.

13. Having gone through the entire record of the case and further keeping in view the nature of factual controversy, findings of the Labour Court, the manner in which the respondent fought this litigation on two fronts simultaneously, namely, one in Civil Court and the other in Labour Court in challenging his termination order and seeking regularization in service, which resulted in passing the two conflicting orders – one in respondent’s favour (Labour Court) and the other against him (Civil Court) and lastly, it being an admitted fact that the respondent was a daily wager during his short tenure, which lasted hardly two and half years approximately and coupled with the fact that 25 years has since been passed from the date of his alleged termination, we are of the considered opinion that the law laid down by this Court in the case of Bharat Sanchar Nigam Limited vs. Bhurumal would aptly apply to the facts of this case and we prefer to apply the same for disposal of these appeals.

14. It is apposite to reproduce what this Court has held in the case of Bharat Sanchar Nigam Limited (supra):

“33. It is clear from the reading of the aforesaid judgments that the ordinary principle of grant of reinstatement with full back wages, when the termination is found to be illegal is not applied mechanically in all cases. While that may be a position where services of a regular/permanent workman are terminated illegally and/or mala fide and/or by way of victimisation, unfair labour practice, etc. However, when it comes to the case of termination of a daily-wage worker and where the termination is found illegal because of a procedural defect, namely, in violation of Section 25-F of the Industrial Disputes Act, this Court is consistent in taking the view that in such cases reinstatement with back wages is not automatic and instead the workman should be given monetary compensation which will meet the ends of justice. Rationale for shifting in this direction is obvious.

34. The reasons for denying the relief of reinstatement in such cases are obvious. It is trite law that when the termination is found to be illegal because of non-payment of retrenchment compensation and notice pay as mandatorily required under Section 25-F of the Industrial Disputes Act, even after reinstatement, it is always open to the management to terminate the services of that employee by paying him the retrenchment compensation. Since such a workman was working on daily-wage basis and even after he is reinstated, he has no right to seek regularisation [see State of Karnataka v. Umadevi (3)17].

Thus when he cannot claim regularisation and he has no right to continue even as a daily-wage worker, no useful purpose is going to be served in reinstating such a workman and he can be given monetary compensation by the Court itself inasmuch as if he is terminated again after reinstatement, he would receive monetary compensation only in the form of retrenchment compensation and notice pay. In such a situation, giving the relief of reinstatement, that too after a long gap, would not serve any purpose.

“35. We would, however, like to add a caveat here. There may be cases where termination of a daily-wage worker is found to be illegal on the ground that it was resorted to as unfair labour practice or in violation of the principle of last come first go viz. while retrenching such a worker daily wage juniors to him were retained. There may also be a situation that persons junior to him were regularised under some policy but the workman concerned terminated. In such circumstances, the terminated worker should not be denied reinstatement unless there are some other weighty reasons for adopting the course of grant of compensation instead of reinstatement. In such cases, reinstatement should be the rule and only in exceptional cases for the reasons stated to be in writing, such a relief can be denied.”

15. We have taken note of one fact here that the Labour Court has also found that the termination is bad due to violation of Section 25-G of the Act. In our opinion, taking note of overall factual scenario emerging from the record of the case and having regard to the nature of the findings rendered and further the averments made in the SLP justifying the need to pass the termination order, this case does not fall in exceptional cases as observed by this Court in Para 35 of Bharat Sanchar Nigam Limited case (supra) due to finding of Section 25-G of the Act recorded against the appellant. In other words, there are reasons to take out the case from exceptional cases contained in Para 35 because we find that the appellant did not resort to any kind of unfair practice while terminating the services of the respondent.

16. In view of forgoing discussion, we are of the considered view that it would be just, proper and reasonable to award lump sum monetary compensation to the respondent in full and final satisfaction of his claim of re-instatement and other consequential benefits by taking recourse to the powers under Section 11-A of the Act and the law laid down by this Court in Bharat Sanchar Nigam Limited case (supra).

17. Having regard to the totality of the facts taken note of supra, we consider it just and reasonable to award a total sum of Rs.2,50,000/- (Rs.Two Lakhs Fifty Thousand) to the respondent in lieu of his right 10 to claim re-instatement and back wages in full and final satisfaction of this dispute.

18. Let the payment of Rs.2,50,000/- be made by the appellant(State) to the respondent within three months from the date of receipt of this judgment failing which the amount will carry interest at the rate of 9% per annum payable from the date of this judgment till payment to respondent.

19. In view of foregoing discussion, the appeals succeed and are allowed in part. The impugned order of the Division Bench and that of the Single Judge are set aside. The Award of the Labour Court dated 01.02.2006 is accordingly modified to the extent indicated above.

 [R.K. AGRAWAL]

[ABHAY MANOHAR SAPRE]

United Bank of India vs. Satyawati Tondon & Ors[SC 2010 July]

Keywords:- DRT-SARFAESI Act Explained

Capture

Court must have good and sufficient reason to bypass the alternative remedy provided by statute

AIR 2010 SC 3413 : (2010) 7 SCALE 696 : (2010) 8 SCC 110 : (2010) 9 SCR 1 : JT 2010 (7) SC 651

(SUPREME COURT OF INDIA)

United Bank of India Appellant
Versus
Satyawati Tondon and OTHERS Respondent

(Before : G. S. Singhvi and Asok Kumar Ganguly, JJ.)

Civil Appeal No. … of 2010 (Arising out of SLP (C) No. 10145 of 2010);

Decided On: 26-07-2010

Recovery of Debts Due to Banks and Financial Institutions Act, 1993—Sections 17 and 34(1)—Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Sections 13, 13(4), 35, 17, 14 and 13(7)—Transfer of Property Act, 1882—Sections 69 and 69A—Companies Act, 1956—Sections 529(1) and 529A—Contract Act, 1872—Section 140—Constitution of India, 1950—Articles 226 and 227.

JUDGMENT

1. Leave granted.

2. With a view to give impetus to the industrial development of the country, the Central and State Governments encouraged the banks and other financial institutions to formulate liberal policies for grant of loans and other financial facilities to those who wanted to set up new industrial units or expand the existing units. Many hundred thousand took advantage of easy financing by the banks and other financial institutions but a large number of them did not repay the amount of loan, etc. Not only this, they instituted frivolous cases and succeeded in persuading the Civil Courts to pass orders of injunction against the steps taken by banks and financial institutions to recover their dues. Due to lack of adequate infrastructure and non-availability of manpower, the regular Courts could not accomplish the task of expeditiously adjudicating the cases instituted by banks and other financial institutions for recovery of their dues. As a result, several hundred crores of public money got blocked in unproductive ventures. In order to redeem the situation, the Government of India constituted a committee under the chairmanship of Shri T. Tiwari to examine the legal and other difficulties faced by banks and financial institutions in the recovery of their dues and suggest remedial measures. The Tiwari Committee noted that the existing procedure for recovery was very cumbersome and suggested that special tribunals be set up for recovery of the dues of banks and financial institutions by following a summary procedure. The Tiwari Committee also prepared a draft of the proposed legislation which contained a provision for disposal of cases in three months and conferment of power upon the Recovery Officer for expeditious execution of orders made by adjudicating bodies. The issue was further examined by the Committee on the Financial System headed by Shri M. Narasimham. In its First Report, the Narasimham Committee also suggested setting up of special tribunals with special powers for adjudication of cases involving the dues of banks and financial institutions.

After considering the reports of the two Committees and taking cognizance of the fact that as on 30-9-1990 more than 15 lakh cases filed by public sector banks and 304 cases filed by financial institutions were pending in various Courts for recovery of debts, etc. amounting to ` 6000 crores, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, ‘the DRT Act’). The new legislation facilitated creation of specialised forums i.e., the Debts Recovery Tribunals and the Debts Recovery Appellate Tribunals for expeditious adjudication of disputes relating to recovery of the debts due to banks and financial institutions. Simultaneously, the jurisdiction of the Civil Courts was barred and all pending matters were transferred to the Tribunals from the date of their establishment.

An analysis of the provisions of the DRT Act shows that primary object of that Act was to facilitate creation of special machinery for speedy recovery of the dues of banks and financial institutions. This is the reason why the DRT Act not only provides for establishment of the Tribunals and the Appellate Tribunals with the jurisdiction, powers and authority to make summary adjudication of applications made by banks or financial institutions and specifies the modes of recovery of the amount determined by the Tribunal or the Appellate Tribunal but also bars the jurisdiction of all courts except the Supreme Court and the High Courts in relation to the matters specified in Section 17. The Tribunals and the Appellate Tribunals have also been freed from the shackles of procedure contained in the Code of Civil Procedure. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of the dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of Civil Courts for frustrating the proceedings initiated by the banks and other financial institutions.

For few years, the new dispensation worked well and the officers appointed to man the Tribunals worked with great zeal for ensuring that cases involving recovery of the dues of banks and financial institutions are decided expeditiously. However, with the passage of time, the proceedings before the Tribunals became synonymous with those of the regular Courts and the lawyers representing the borrowers and defaulters used every possible mechanism and dilatory tactics to impede the expeditious adjudication of such cases. The flawed appointment procedure adopted by the Government greatly contributed to the malaise of delay in disposal of the cases instituted before the Tribunals.

The survey conducted by the Ministry of Finance, Government of India revealed that as in 2001, a sum of more than ` 1,20,000/- crores was due to the banks and financial institutions and this was adversely affecting the economy of the country. Therefore, the Government of India asked the Narasimham Committee to suggest measures for expediting the recovery of debts due to banks and financial institutions. In its Second Report, the Narasimham Committee noted that the non-performing assets of most of the public sector banks were abnormally high and the existing mechanism for recovery of the same was wholly insufficient. In Chapter VIII of the Report, the Committee noted that the evaluation of legal framework has not kept pace with the changing commercial practice and financial sector reforms and as a result of that the economy could not reap full benefits of the reform process. The Committee made various suggestions for bringing about radical changes in the existing adjudicatory mechanism. By way of illustration, the Committee referred to the scheme of mortgage under the Transfer of Property Act and suggested that the existing laws should be changed not only for facilitating speedy recovery of the dues of banks, etc. but also for quick resolution of disputes arising out of the action taken for recovery of such dues. The Andhyarujina Committee constituted by the Central Government for examining banking sector reforms also considered the need for changes in the legal system. Both, the Narasimham and Andhyarujina Committees suggested enactment of new legislation for securitisation and empowering the banks and financial institutions to take possession of the securities and sell them without intervention of the court. The Government of India accepted the recommendations of the two committees and that led to enactment of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘the SARFAESI Act’), which can be termed as one of the most radical legislative measures taken by the Parliament for ensuring that dues of secured creditors including banks, financial institutions are recovered from the defaulting borrowers without any obstruction. For the first time, the secured creditors have been empowered to take steps for recovery of their dues without intervention of the Courts or Tribunals.

3. Section 13 of the SARFAESI Act contains detailed mechanism for enforcement of security interest. Sub-section (1) thereof lays down that notwithstanding anything contained in Sections 69 or 69A of the Transfer of Property Act, any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. Sub-section (2) of Section 13 enumerates first of many steps needed to be taken by the secured creditor for enforcement of security interest. This Sub-section provides that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non- performing asset, then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice with an indication that if he fails to do so, the secured creditor shall be entitled to exercise all or any of its rights in terms of Section 13(4). Sub-section (3) of Section 13 lays down that notice issued under Section 13(2) shall contain details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the bank or financial institution. Sub-section (3-A) of Section 13 lays down that the borrower may make a representation in response to the notice issued under Section 13(2) and challenge the classification of his account as non-performing asset as also the quantum of amount specified in the notice. If the bank or financial institution comes to the conclusion that the representation/objection of the borrower is not acceptable, then reasons for non- acceptance are required to be communicated within one week. Sub-section (4) of Section 13 specifies various modes which can be adopted by the secured creditor for recovery of secured debt. The secured creditor can take possession of the secured assets of the borrower and transfer the same by way of lease, assignment or sale for realising the secured assets. This is subject to the condition that the right to transfer by way of lease, etc. shall be exercised only where substantial part of the business of the borrower is held as secured debt. If the management of whole or part of the business is severable, then the secured creditor can take over management only of such business of the borrower which is relatable to security. The secured creditor can appoint any person to manage the secured asset, the possession of which has been taken over. The secured creditor can also, by notice in writing, call upon a person who has acquired any of the secured assets from the borrower to pay the money, which may be sufficient to discharge the liability of the borrower. Sub-section (7) of Section 13 lays down that where any action has been taken against a borrower under Sub-section (4), all costs, charges and expenses properly incurred by the secured creditor or any expenses incidental thereto can be recovered from the borrower. The money which is received by the secured creditor is required to be held by him in trust and applied, in the first instance, for such costs, charges and expenses and then in discharge of dues of the secured creditor. Residue of the money is payable to the person entitled thereto according to his rights and interest. Sub-section (8) of Section 13 imposes a restriction on the sale or transfer of the secured asset if the amount due to the secured creditor together with costs, charges and expenses incurred by him are tendered at any time before the time fixed for such sale or transfer. Sub-section (9) of Section 13 deals with the situation in which more than one secured creditor has stakes in the secured assets and lays down that in the case of financing a financial asset by more than one secured creditor or joint financing of a financial asset by secured creditors, no individual secured creditor shall be entitled to exercise any or all of the rights under Sub-section (4) unless all of them agree for such a course. There are five unnumbered provisos to Section 13(9) which deal with pari passu charge of the workers of a company in liquidation. The first of these provisos lays down that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529A of the Companies Act, 1956. The second proviso deals with the case of a company being wound up on or after the commencement of this Act. If the secured creditor of such company opts to realise its security instead of relinquishing the same and proving its debt under Section 529(1) of the Companies Act, then it can retain sale proceeds after depositing the workmen’s dues with the liquidator in accordance with Section 529A. The third proviso requires the liquidator to inform the secured creditor about the dues payable to the workmen in terms of Section 529A. If the amount payable to the workmen is not certain, then the liquidator has to intimate the estimated amount to the secured creditor. The fourth proviso lays down that in case the secured creditor deposits the estimated amount of the workmen’s dues, then such creditor shall be liable to pay the balance of the workmen’s dues or entitled to receive the excess amount, if any, deposited with the liquidator. In terms of the fifth proviso, the secured creditor is required to give an undertaking to the liquidator to pay the balance of the workmen’s dues, if any. Sub-section (10) of Section 13 lays down that where dues of the secured creditor are not fully satisfied by the sale proceeds of the secured assets, the secured creditor may file an application before the Tribunal under Section 17 for recovery of balance amount from the borrower. Sub-section (11) states that without prejudice to the rights conferred on the secured creditor under or by this section, it shall be entitled to proceed against the guarantors or sell the pledged assets without resorting to the measures specified in Clauses (a) to (d) of Sub-section (4) in relation to the secured assets. Sub-section (12) of Section 13 lays down that rights available to the secured creditor under the Act may be exercised by one or more of its officers authorised in this behalf. Sub-section (13) lays down that after receipt of notice under Sub-section (2), the borrower shall not transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice without prior written consent of the secured creditor. In terms of Section 14, the secured creditor can file an application before the Chief Metropolitan Magistrate or the District Magistrate, within whose jurisdiction the secured asset or other documents relating thereto are found for taking possession thereof. If any such request is made, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, is obliged to take possession of such asset or document and forward the same to the secured creditor.

4. Section 17 speaks of the remedies available to any person including borrower who may have grievance against the action taken by the secured creditor under Sub-section (4) of Section 13. Such an aggrieved person can make an application to the Tribunal within 45 days from the date on which action is taken under that Sub-section. By way of abundant caution, an Explanation has been added to Section 17(1) and it has been clarified that the communication of reasons to the borrower in terms of Section 13(3A) shall not constitute a ground for filing application under Section 17(1). Sub-section (2) of Section 17 casts a duty on the Tribunal to consider whether the measures taken by the secured creditor for enforcement of security interest are in accordance with the provisions of the Act and the Rules made thereunder. If the Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that the measures taken by the secured creditor are not in consonance with Sub-section (4) of Section 13, then it can direct the secured creditor to restore management of the business or possession of the secured assets to the borrower. On the other hand, if the Tribunal finds that the recourse taken by the secured creditor under Sub-section (4) of Section 13 is in accordance with the provisions of the Act and the Rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor can take recourse to one or more of the measures specified in Section 13(4) for recovery of its secured debt. Sub-section (5) of Section 17 prescribes the time-limit of sixty days within which an application made under Section 17 is required to be disposed of. The proviso to this Sub-section envisages extension of time, but the outer limit for adjudication of an application is four months. If the Tribunal fails to decide the application within a maximum period of four months, then either party can move the Appellate Tribunal for issue of a direction to the Tribunal to dispose of the application expeditiously. Section 18 provides for an appeal to the Appellate Tribunal.

5. Section 34 lays down that no Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Tribunal or Appellate Tribunal is empowered to determine. It further lays down that no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken under the SARFAESI Act or the DRT Act. Section 35 of the SARFAESI Act is substantially similar to Section 34(1) of the DRT Act. It declares that the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

6. However, effective implementation of the SARFAESI Act was delayed by more than two years because several writ petitions were filed in the High Courts and this Court questioning its vires. The matter was finally decided by this Court in Mardia Chemicals v. Union of India, (2004) 4 SCC 311 and the validity of the SARFAESI Act was upheld except the condition of deposit of 75% amount enshrined in Section 17(2). The Court referred to the recommendations of the Narasimham and Andhyarujina Committees on the issue of constitution of special tribunals to deal with cases relating to recovery of the dues of banks etc. and observed:

One of the measures recommended in the circumstances was to vest the financial institutions through special statutes, the power of sale of the assets without intervention of the court and for reconstruction of assets. It is thus to be seen that the question of non-recoverable or delayed recovery of debts advanced by the banks or financial institutions has been attracting attention and the matter was considered in depth by the Committees specially constituted consisting of the experts in the field. In the prevalent situation where the amounts of dues are huge and hope of early recovery is less, it cannot be said that a more effective legislation for the purpose was uncalled for or that it could not be resorted to. It is again to be noted that after the Report of the Narasimham Committee, yet another Committee was constituted headed by Mr. Andhyarujina for bringing about the needed steps within the legal framework. We are, therefore, unable to find much substance in the submission made on behalf of the petitioners that while the Recovery of Debts Due to Banks and Financial Institutions Act was in operation it was uncalled for to have yet another legislation for the recovery of the mounting dues. Considering the totality of circumstances and the financial climate world over, if it was thought as a matter of policy to have yet speedier legal method to recover the dues, such a policy decision cannot be faulted with nor is it a matter to be gone into by the courts to test the legitimacy of such a measure relating to financial policy.

(emphasis supplied)

This Court then held that the borrower can challenge the action taken under Section 13(4) by filing an application under Section 17 of the SARFAESI Act and a civil suit can be filed within the narrow scope and on the limited grounds on which they are permissible in the matters relating to an English mortgage enforceable without intervention of the Court. In paragraph 31 of the judgment, the Court observed as under:

In view of the discussion held in the judgment and the findings and directions contained in the preceding paragraphs, we hold that the borrowers would get a reasonably fair deal and opportunity to get the matter adjudicated upon before the Debts Recovery Tribunal. The effect of some of the provisions may be a bit harsh for some of the borrowers but on that ground the impugned provisions of the Act cannot be said to be unconstitutional in view of the fact that the object of the Act is to achieve speedier recovery of the dues declared as NPAs and better availability of capital liquidity and resources to help in growth of the economy of the country and welfare of the people in general which would subserve the public interest.

(emphasis supplied)

7. In the light of the above, we shall now consider whether the Division Bench of the High Court was justified in restraining the appellant from proceeding under Section 13(4) of the SARFAESI Act against the property of respondent No. 1.

8. A perusal of the record shows that the appellant sanctioned a term loan of ` 22,50,000/- in favour of M/s. Pawan Color Lab (through its proprietor Pawan Singh (respondent No. 2)) some time in November, 2004. Respondent No. 1 gave guarantee for repayment of the loan and mortgaged her property bearing House No. 752/062, Bakshi Khurd, Daraganj, Pargana and Tehsil Sadar, District Allahabad by deposit of title deeds. She also submitted an affidavit dated 28.12.2004 and executed agreement of guarantee dated 29.12.2004 making herself liable for repayment of the loan amount with interest.

9. After one year and six months, the appellant sent letter dated 6.5.2006 to respondent Nos. 1 and 2 pointing out that repayment of loan was highly irregular. After another one year, the account of respondent No. 2 was classified as Non- Performing Asset. On 19.7.2007, the appellant sent separate letters to respondent Nos. 1 and 2 requiring them to deposit the outstanding dues amounting to ` 23,78,478/-. Thereupon, respondent No. 1 deposited a sum of ` 50,000/- and gave written undertaking to pay the balance amount in instalments. However, she did not fulfil her promise to repay the remaining amount. This compelled the appellant to issue notice to respondent Nos. 1 and 2 under Section 13(2) requiring them to pay ` 23,22,972/- along with future interest and incidental expenses within 60 days. Upon receipt of the notice, respondent No. 1 offered to pay a sum of ` 18 lakhs for settlement of the loan account, but the appellant did not accept the offer and filed an application under Section 14 of the SARFAESI Act, which was allowed by District Magistrate/Collector, Allahabad vide his order dated 25.8.2008. Thereafter, the appellant issued notice dated 21.1.2009 to respondent Nos. 1 and 2 under Section 13(4) of the SARFAESI Act.

10. Faced with the imminent threat of losing the mortgaged property, respondent No. 1 filed C.M.W.P. No. 55375 of 2009 and prayed that the appellant herein may be restrained from taking coercive action in pursuance of the notices issued under Section 13(2) and (4) and order dated 25.8.2008 passed by District Magistrate/Collector, Allahabad. She pleaded that the notices issued by the appellant for recovery of the outstanding dues are ex facie illegal and liable to be quashed because no action had been taken against the borrower i.e., respondent No. 2 for recovery of the outstanding dues.

11. In the counter affidavit filed on behalf of the appellant, it was pleaded that action initiated against respondent No. 1 was consistent with the provisions of SARFAESI Act and writ petitioner (respondent No. 1 herein) was bound to discharge her obligations to pay the outstanding dues and there was no merit in her challenge to the notices issued under Section 13(2) and 13(4) or the order passed under Section 14. It was further pleaded that the writ petition is liable to be dismissed because an alternative remedy is available to the petitioner under Section 17 of the SARFAESI Act.

12. The Division Bench of the High Court did not even advert to the appellant’s plea that the writ petition should not be entertained because an effective alternative remedy was available to the writ petitioner under Section 17 of the SARFAESI Act and passed the impugned order restraining the appellant from taking action in furtherance of notice issued under Section 13(4) of the SARFAESI Act. The reason which prompted the High Court to pass the impugned interim order and operative portion thereof are extracted below:

Learned Counsel for the petitioner has urged that the loan was taken by respondent No. 4 for opening a colour lab at 50/43, Raj Complex, K.P. Kakkar Road, Allahabad, but the loan has not been repaid by respondent No. 4 and the bank is proceeding against the petitioner who is the guarantor of the loan. It is not clear from the documents produced by learned Counsel for the bank as to what steps have been taken by the bank against the borrower of the loan and merely issuance of notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against the borrower is not sufficient. The bank should have proceeded against the borrower and exhausted all the remedies against him and thereafter the bank could have proceeded against the guarantor. Until further orders of this Court, the respondents are restrained from proceeding under Section 13(4) of the Act 2002 with regard to petitioner’s property who was the guarantor of the loan. However, if any possession has been taken by the bank then the property shall not be sold to any one else and the petitioner shall be continued in possession of the property.

13. We have heard learned Counsel for the appellant and perused the record. Normally, this Court does not interfere with the discretion exercised by the High Court to pass an interim order in a pending matter but, having carefully examined the matter, we have felt persuaded to make an exception in this case because the order under challenge has the effect of defeating the very object of the legislation enacted by the Parliament for ensuring that there are no unwarranted impediments in the recovery of the debts, etc. due to banks, other financial institutions and secured creditors.

14. The question whether the appellant could have issued notices to respondent No. 1 under Section 13(2) and (4) and filed an application under Section 14 of the SARFAESI Act without first initiating action against the borrower i.e., respondent No. 2 for recovery of the outstanding dues is no longer res integra. In Bank of Bihar Ltd. v. Damodar Prasad, (1969) 1 SCR 620 this Court considered and answered in affirmative the question whether the bank is entitled to recover its dues from the surety and observed:

It is the duty of the surety to pay the decretal amount. On such payment he will be subrogated to the rights of the creditor under Section 140 of the Indian Contract Act, and he may then recover the amount from the principal. The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down.

In State Bank of India v. Indexport Registered and Ors., (1992) 3 SCC 159 this Court held that the decree-holder bank can execute the decree against the guarantor without proceeding against the principal borrower and then proceeded to observe:

The execution of the money decree is not made dependent on first applying for execution of the mortgage decree. The choice is left entirely with the decree-holder. The question arises whether a decree which is framed as a composite decree, as a matter of law, must be executed against the mortgage property first or can a money decree, which covers whole or part of decretal amount covering mortgage decree can be executed earlier. There is nothing in law which provides such a composite decree to be first executed only against the (principal debtor).

In Industrial Investment Bank of India Limited v. Biswanath Jhunjhunwala, (2009) 9 SCC 478 this Court again held that the liability of the guarantor and principal debtor is co-extensive and not in alternative and the creditor/decree-holder has the right to proceed against either for recovery of dues or realization of the decretal amount.

15. In view of the law laid down in the aforementioned cases, it must be held that the High Court completely misdirected itself in assuming that the appellant could not have initiated action against respondent No. 1 without making efforts for recovery of its dues from the borrower – respondent No. 2.

16. The facts of the present case show that even after receipt of notices under Section 13(2) and (4) and order passed under Section 14 of the SARFAESI Act, respondent Nos. 1 and 2 did not bother to pay the outstanding dues. Only a paltry amount of ` 50,000/- was paid by respondent No. 1 on 29.10.2007. She did give an undertaking to pay the balance amount in installments but did not honour her commitment. Therefore, the action taken by the appellant for recovery of its dues by issuing notices under Section 13(2) and 13(4) and by filing an application under Section 14 cannot be faulted on any legally permissible ground and, in our view, the Division Bench of the High Court committed serious error by entertaining the writ petition of respondent No. 1.

17. There is another reason why the impugned order should be set aside. If respondent No. 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression ‘any person’ used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

18. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. 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. 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 citizens. 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 Corporation v. Registrar of Trade Marks, Mumbai, (1998) 8 SCC 1 and Harbanslal Sahnia and Anr. v. Indian Oil Corporation Ltd. and Ors., (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order.

19. In Thansingh Nathmal v. Superintendent of Taxes, (1964) 6 SCR 654 the Constitution Bench considered the question whether the High Court of Assam should have entertained the writ petition filed by the appellant under Article 226 of the Constitution questioning the order passed by the Commissioner of Taxes under the Assam Sales Tax Act, 1947. While dismissing the appeal, the Court observed as under:

The jurisdiction of the High Court under Article 226 of the Constitution is couched in wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions which are expressly provided in the Articles. But the exercise of the jurisdiction is discretionary: it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain self- imposed limitations. Resort that jurisdiction is not intended as an alternative remedy for relief which may be obtained in a suit or other mode prescribed by statute. Ordinarily the Court will not entertain a petition for a writ under Article 226, where the petitioner has an alternative remedy, which without being unduly onerous, provides an equally efficacious remedy. Again the High Court does not generally enter upon a determination of questions which demand an elaborate examination of evidence to establish the right to enforce which the writ is claimed. The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.

20. In Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 a three-Judge Bench considered the question whether a petition under Article 226 of the Constitution should be entertained in a matter involving challenge to the order of the assessment passed by the competent authority under the Central Sales Tax Act, 1956 and corresponding law enacted by the State legislature and answered the same in negative by making the following observations:

Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The petitioners have the right to prefer an appeal before the Prescribed Authority under Sub-section (1) of Section 23 of the Act. If the petitioners are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under Sub-section (3) of Section 23 of the Act, and then ask for a case to be stated upon a question of law for the opinion of the High Court under Section 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford in the following passage:

There are three classes of cases in which a liability may be established founded upon statute…. But there is a third class, viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. . .the remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to.

The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspapers Ltd. and has been reaffirmed by the Privy Council in Attorney-General of Trinidad and Tobago v. Gordon Grant & Co. Ltd. and Secretary of State v. Mask & Co. It has also been held to be equally applicable to enforcement of rights, and has been followed by this Court throughout. The High Court was therefore justified in dismissing the writ petitions in limine.

21. The views expressed in Titaghur Paper Mills Co. Ltd. v. State of Orissa (supra) were echoed in Assistant Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd. and Ors., (1985) 1 SCC 260 in the following words:

Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill- suited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution. But then the Court must have good and sufficient reason to bypass the alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. We can also take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged.

22. In Punjab National Bank v. O.C. Krishnan and Ors., (2001) 6 SCC 569 this Court considered the question whether a petition under Article 227 of the Constitution was maintainable against an order passed by the Tribunal under Section 19 of the DRT Act and observed:

5. In our opinion, the order which was passed by the Tribunal directing sale of mortgaged property was appealable under Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short “the Act”). The High Court ought not to have exercised its jurisdiction under Article 227 in view of the provision for alternative remedy contained in the Act. We do not propose to go into the correctness of the decision of the High Court and whether the order passed by the Tribunal was correct or not has to be decided before an appropriate forum.

6. The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.

23. In CCT, Orissa and Ors. v. Indian Explosives Ltd., (2008) 3 SCC 688 the Court reversed an order passed by the Division Bench of Orissa High Court quashing the show cause notice issued to the respondent under the Orissa Sales Tax Act by observing that the High Court had completely ignored the parameters laid down by this Court in a large number of cases relating to exhaustion of alternative remedy.

24. In City and Industrial Development Corporation v. Dosu Aardeshir Bhiwandiwala and Ors., (2009) 1 SCC 168 the Court highlighted the parameters which are required to be kept in view by the High Court while exercising jurisdiction under Article 226 of the Constitution. Paragraphs 29 and 30 of that judgment which contain the views of this Court read as under:

29. In our opinion, the High Court while exercising its extraordinary jurisdiction under Article 226 of the Constitution is duty-bound to take all the relevant facts and circumstances into consideration and decide for itself even in the absence of proper affidavits from the State and its instrumentalities as to whether any case at all is made out requiring its interference on the basis of the material made available on record. There is nothing like issuing an ex parte writ of mandamus, order or direction in a public law remedy. Further, while considering the validity of impugned action or inaction the Court will not consider itself restricted to the pleadings of the State but would be free to satisfy itself whether any case as such is made out by a person invoking its extraordinary jurisdiction under Article 226 of the Constitution.

30. The Court while exercising its jurisdiction under Article 226 is duty-bound to consider whether:

(a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved;

(b) the petition reveals all material facts;

(c) the petitioner has any alternative or effective remedy for the resolution of the dispute;

(d) person invoking the jurisdiction is guilty of unexplained delay and laches;

(e) ex facie barred by any laws of limitation;

(f) grant of relief is against public policy or barred by any valid law; and host of other factors.

The Court in appropriate cases in its discretion may direct the State or its instrumentalities as the case may be to file proper affidavits placing all the relevant facts truly and accurately for the consideration of the Court and particularly in cases where public revenue and public interest are involved. Such directions are always required to be complied with by the State. No relief could be granted in a public law remedy as a matter of course only on the ground that the State did not file its counter-affidavit opposing the writ petition. Further, empty and self-defeating affidavits or statements of Government spokesmen by themselves do not form basis to grant any relief to a person in a public law remedy to which he is not otherwise entitled to in law.

25. In Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement and Anr., (2010) 4 SCC 772 the Court was dealing with the issue whether the alternative statutory remedy available under the Foreign Exchange Management Act, 1999 can be bypassed and jurisdiction under Article 226 of the Constitution could be invoked. After examining the scheme of the Act, the Court observed:

31. When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go-by by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating this aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction.

32. No reason could be assigned by the appellant’s counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum.

26. In Modern Industries v. Steel Authority of India Limited, (2010) 5 SCC 44 the Court held that where the remedy was available under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 the High Court was not justified in entertaining a petition under Article 226 of the Constitution.

27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and 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.

28. Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from taking action in furtherance of notice issued under Section 13(4) of the Act.

29. In the result, the appeal is allowed and the impugned order is set aside. Since the respondent has not appeared to contest the appeal, the costs are made easy.

Agarwal Tracom Pvt. Ltd. Vs. Punjab National Bank & Ors.[SC 2017 November]

Keywords:-Bank Loan-DRT-Power under Article 226

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  1. while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.
  2. Powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.
  3.  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.

Date:- November 27, 2017

Act:- Sec17 , Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

SUPREME COURT OF INDIA

Agarwal Tracom Pvt. Ltd. Vs. Punjab National Bank & Ors.

[Civil Appeal No. 19847 of 2017 arising out of SLP (C) No. 33514/2016]

Abhay Manohar Sapre, J.

1. Leave granted.

2. This appeal is directed against the final judgment and order dated 11.05.2016 passed by the High Court of Delhi at New Delhi in LPA No.699 of 2015 whereby the Division Bench of the High Court dismissed the appeal filed by the appellant herein for quashing the order dated 01.09.2015 2 passed by the Single Judge, which dismissed the appellant’s W.P.(c) No.8314 of 2015.

3. The controversy involved in the appeal centers around the short facts and is essentially a legal one. However, few relevant facts need mention, in brief, to appreciate the controversy.

4. Respondents-Punjab National Bank(hereinafter referred to as “PNB”) is a Nationalised Bank. The PNB had given loan facility to a Company called “M/s India Iron & Steel Corporation Limited” (in short, “Borrower”) for their business, which they were carrying at a place called Noorpur Khirki, Village Farid Nagar, Tehsil Dhampur, District Bijnor (U.P.).

5. To secure the loan amount, the Borrower had secured their assets, which consisted of the land, factory building, plant and machinery situated at Dhampur. The Borrower, however, failed to clear their loan amount and became a defaulter in its 3 repayment. The PNB, therefore, invoked their powers under Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”) and issued a public sale notice in leading English newspapers for sale of the mortgaged assets of the Borrower in the public auction fixed for 17.06.2014 (Annexure-P-1). The appellant herein was one of the bidders, whose bid was declared the highest.

6. The appellant’s bid was accordingly accepted by the PNB followed by execution of memorandum of understanding between the appellant and the PNB (Annexure P-4). The PNB also sent a letter to the appellant stating that the entire plant, machinery, land and the building is auctioned in favour of the appellant. The letter also authorized the appellant to dismantle and sell the scrap plant and the machinery which was lying at the Borrower’s factory’s premises after depositing the necessary installment of sale amount, as agreed upon between the parties in the memorandum of understanding.

7. The appellant, however, failed to pay the regular installments towards sale money in terms of memorandum of understanding to PNB and sought extension of time to pay and remove the scrap material from the site.

8. This gave rise to the disputes between the parties, namely, PNB, appellant (auction purchaser) and the Borrower before the Debt Recovery Tribunal (DRT), Lucknow being S.A. No 310 of 2014 wherein an order was passed on 03.07.2014 (Annexure-P-11) directing the appellant not to remove any material from the factory premises. The appellant then wrote a letter to PNB requesting them to refund their money with interest.

This led to another dispute between the parties which was filed  in the DRT and then before the appellate authority- DRAT and finally, in the High Court at Allahabad in Writ Petition(c) No. 22246/2015 by the Borrower. This writ petition was disposed of finally on 29.05.2015 observing therein that since the appellant had failed to comply with the term of memorandum of understanding inasmuch as the appellant having failed to deposit the requisite installment of sale money, the PNB cannot proceed with the auction sale held on 17.06.2014 and nor can the appellant be permitted to remove the scrap material lying in the factory premises.

9. This led the PNB to forfeit the appellant’s deposit by their letter dated 26.06.2015 (Annexure-P25). The appellant objected to the action of PNB by letters and then filed the writ petition in the High Court of Delhi challenging therein the action of PNB in forfeiting the appellant’s deposit of money.

10. The Single Judge of the High Court, by order dated 01.09.2015, dismissed the appellant’s writ petition on the ground of availability of alternative statutory remedy to the appellant of filing the application under Section 17 of the SARFAESI Act before the DRT to challenge the action of PNB in forfeiting the deposit money of the appellant. The Single Judge, therefore, declined to go into the merits of the case.

11. The appellant, felt aggrieved of the order of the Single Judge, filed intra Court appeal (LPA 699 of 2015) before the Division Bench. By impugned judgment, the Division Bench dismissed the appeal and confirmed the order of the Single Judge. The Division Bench was also of the view that the writ petition filed by the appellant was rightly not entertained by the Single Judge (writ Court) on the ground that the proper remedy of the appellant was to file an application before the DRT under Section 7 17 of the SARFAESI Act to question the action of forfeiture made by PNB and not in filing the writ petition under Article 226 of the Constitution. Felt aggrieved, the auction purchaser has filed the present appeal by way of special leave in this Court.

12. Heard Mr. Jaideep Gupta, learned senior counsel for the appellant and Mr. M.T. George, learned counsel for the respondents.

13. Mr. Jaideep Gupta, learned senior counsel appearing for the appellant (auction purchaser) while questioning the legality and correctness of the view taken by the two Courts below contended that the reasoning and the conclusion arrived at by the writ Court and the Appellate Court is not correct and hence deserves to be set aside. His main submission was that the action impugned by the appellant in their writ petition, namely, “forfeiture of the deposit of money by PNB” is not one of the measures specified under Section 13(4) of the 8 SARFAESI Act and, therefore, provisions of Section 17 of SARFAESI Act are not attracted so far as the appellant’s right to challenge such action under Section 17 before the DRT is concerned.

14. In other words, the submission was that in order to attract the rigor of Section 17 of the SARFAESI Act, it is necessary that the action complained of by the party concerned must satisfy the conditions set out in Section 13 (4). It was urged that the “forfeiture of deposit” impugned in the writ petition is not and nor it could be considered as one of the measures falling in Section 13 (4) so as to attract the rigor of Section 17 of the SARFAESI Act. It was urged that the dispute in question was essentially between the PNB (secured creditor) and the auction purchaser (appellant) and arose after the measures under Section 13(4) had been taken by the secured creditor (PNB) against the borrower and, therefore, the dispute in question fell outside 9 the purview of Section 13(4) and, in consequence, fell out of purview of Section 17. In short, the dispute in question had nothing to do with any of the measures specified in Section 13(4).

15. It was further urged that reading of Section 17 would go to show that the application under Section 17 can be made to DRT by “any person” including borrower to challenge any of the measures referred to in Section 13(4) once taken by the secured creditor. However, since forfeiture of the amount made by the secured creditor against the auction purchaser is not one of the measures under Section 13(4) and hence, the action of forfeiture made by the secured creditor cannot be challenged by the auction purchaser under Section 17 of the SARFAESI Act by filing an application. It was urged that under these circumstances the appellant had rightly filed the writ petition under Article 226/227 of the Constitution to challenge the action 10 of forfeiture of deposit money in the High Court, that being the only remedy available to them and, therefore, the writ petition should have been entertained for its hearing on merits by the writ court. It is these submissions, which were elaborated by the learned counsel for the appellant by pointing out relevant provisions of the SARFAESI Act.

16. In reply, learned counsel for the respondents (PNB) supported the impugned judgment and contended that the action impugned in the writ petition does attract Section 13(4) read with the Rules framed thereunder and hence the remedy of the appellant lies in approaching DRT by filing an application under Section 17 of the SARFAESI Act as was rightly held by the two Courts below.

17. Having heard the learned counsel for the parties and on perusal of the record of the case, we find no merit in the appeal. In other words, the view taken by the High Court appears to be just and reasonable and hence does not call for any interference.

18. The short question that arise for consideration in this appeal is whether the High Court was justified in holding that the remedy of the appellant (auction purchaser) lies in challenging the action of the secured creditor (PNB) in forfeiting the deposit by filing an application under Section 17 of the SARFEASI Act before the DRT or the remedy of auction purchaser is in filing the writ petition under Article 226/227 of the Constitution of India to examine the legality of such action.

19. Section 13(4) and Section 17 of the SARFAESI Act, Rules 8 and 9 of the Security Interest(Enforcement) Rules,2002(hereinafter referred to as “the Rules”) to the extent they are relevant for deciding the question involved in the appeal are quoted below:

Section 13(4)

13. Enforcement of security interest-

(1) to (3A)……………………………………………….

(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 realizing 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 realizing 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 or 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;

(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.”

Section 17

“17. Application against measures to recover secured debts-

(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorized officer under this Chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,-

(a) to (c)……………………

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.

(4A)……………………………………………………..

(5)………………………………………………………..

(6)………………………………………………………..

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993(51 of 1993) and the rules made thereunder.

Rule 8

8. Sale of immovable secured assets-

(1) to (8)………………………………………………….

Rule 9

9. Time of sale, issue of sale certificate and delivery of possession, etc.-

(1) to (4)…………………………………………………

(5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited to the secured creditor and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold.

(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these rules.”

(Emphasis supplied)

20. Section 13(4) is invoked by the secured creditor against their borrower when the borrower fails to discharge his liability in full within the specified time. The secured creditor then can take possession of the assets of the borrower, transfer the assets by lease or by assignment or sell the assets to recover the outstanding dues under clause (a).

21. The secured creditor under clause (b) can also take over the management of the business of the borrower or transfer by way of lease, assignment or sale. However such power can be invoked only when the creditor holds substantial part of the borrower’s business as security and further it satisfies the condition set out in second proviso.

22. The secured creditor under clause (c) can also appoint any manager to manage the borrower’s business and lastly under clause (d), the secured creditor can ask any person to whom the money is due or become due to pay to the secured creditor instead of paying to borrower which is sufficient to satisfy the debt.

23. So far as Section 17 is concerned, it provides a remedy to a person who is aggrieved by the measures taken by the secured creditor or his authorized officer under Section 13(4) in relation to secured assets of the borrower. It says that “any person (including borrower)” may make an application to the DRT within 45 days from the date of measures taken under Section 13(4). Sub-section (2) of Section 17 was added by way of amendment w.e.f. 11.11.2004.

It provides that the Tribunal, on such application being made under Section 17(1), shall consider whether the measures referred to and taken under Section 13(4) by the secured creditor are in accordance with the “provisions of this Act and the Rules made thereunder”. Similarly, subsections (3), (4) and (7) of Section 17 which deal with the power of the DRT also use the expression “in accordance with provisions of the Act and the Rules made thereunder”.

24. Rule 8, which has 8 sub-rules, deals with the manner of sale of immovable secured assets and provides detail procedure as to how and in what manner the sale of secured assets, is to be held. 18 Rule 9 deals with time of sale, issue of sale certificate and delivery of possession

25. Rule 9(6) empowers the authorized officer to issue sale certificate in favour of the purchaser. Rule 9(9) then empowers the authorized officer to deliver the properties to the purchaser whereas Rule 9(10) empowers the authorized officer to mention in sale certificate that the property is free from encumbrances.

26. So far as this case is concerned, sub-rule (5) of Rule 9 is relevant. It provides that, if the auction purchaser commits any default in payment of sale consideration within the time specified, the deposit made by auction purchaser shall be “forfeited” to the secured creditor and the auctioned property shall be resold and the defaulting purchaser shall “forfeit” all claims to the property or its part of the sum for which it may be sold subsequently.

27. Reading of the aforementioned Sections and the Rules and, in particular, Section 17(2) and Rule 9(5) would clearly go to show that an action of secured creditor in forfeiting the deposit made by the auction purchaser is a part of the measures taken by the secured creditor under Section 13(4).

28. The reason is that Section 17(2) empowers the Tribunal to examine all the issues arising out of the measures taken under Section 13(4) including the measures taken by the secured creditor under Rules 8 and 9 for disposal of the secured assets of the borrower. The expression “provisions of this Act and the Rules made thereunder” occurring in sub-sections (2), (3), (4) and (7) of Section 17 clearly suggests that it includes the action taken under Section 13(4) as also includes therein the action taken under Rules 8 and 9 which deal with the completion of sale of the secured assets.

In other words, the measures taken under Section 13 (4) 20 would not be completed unless the entire procedure laid down in Rules 8 and 9 for sale of secured assets is fully complied with by the secured creditor. It is for this reason, the Tribunal has been empowered by Section 17(2),(3) and (4) to examine all the steps taken by the secured creditor with a view to find out as to whether the sale of secured assets was made in conformity with the requirements contained in Section 13(4) read with the Rules or not?

29. We also notice that Rule 9(5) confers express power on the secured creditor to forfeit the deposit made by the auction purchaser in case the auction purchaser commits any default in paying installment of sale money to the secured creditor. Such action taken by the secured creditor is, in our opinion, a part of the measures specified in Section 13(4) and, therefore, it is regarded as a measure taken under Section 13(4) read with Rule 9(5). In our view, the measures taken under Section 13(4) 21 commence with any of the action taken in clauses (a) to (d) and end with measures specified in Rule 9.

30. In our view, therefore, the expression “any of the measures referred to in Section 13(4) taken by secured creditor or his authorized officer” in Section 17(1) would include all actions taken by the secured creditor under the Rules which relate to the measures specified in Section13(4).

31. The auction purchaser (appellant herein) is one such person, who is aggrieved by the action of the secured creditor in forfeiting their money. The appellant, therefore, falls within the expression “any person” as specified under Section 17(1) and hence is entitled to challenge the action of the secured creditor (PNB) before the DRT by filing an application under Section 17(1) of the SARFAESI Act.

32. Learned counsel for the appellant placed reliance on the decision of the Division Bench of 22 High Court of Bombay in Umang Sugars Pvt. Ltd. vs. State of Maharashtra & Anr., 2014(4) Mh.L.J. 113 which, according to him, supports his submission. We have gone through the decision and unable to agree with the view taken therein. Their Lordships, while holding that Section 17(1) does not apply to auction purchaser and, therefore, writ petition filed by him can be entertained in such cases, did not notice the Rules, which deal with the measures taken under Section 13(4) and nor considered its effect on the measures.

33. In United Bank of India vs. Satyawati Tondon & Ors., (2010) 8 SCC 110, this Court had the occasion to examine in detail the provisions of the SARFAESI Act and the question regarding invocation of the extraordinary power under Article 226/227 in challenging the actions taken under the SARFAESI Act. Their Lordships gave a note of caution while dealing with the writ filed to challenge the actions taken under the SARFAESI Act and made following pertinent observations which, in our view, squarely apply to the case on hand:

“42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression “any person” used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective.

43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions.

In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

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.”

34. In the light of foregoing discussion, we are of the considered opinion that the Writ Court as also the Appellate Court were justified in dismissing the appellant’s writ petition on the ground of availability of alternative statutory remedy of filing an application under Section 17(1) of SARFAESI Act before the concerned Tribunal to challenge the action of the PNB in forfeiting the appellant’s deposit under Rule 9(5). We find no ground to interfere with the impugned judgment of the High Court.

35. The appellant is, accordingly, granted liberty to file an application before the concerned Tribunal (DRT) under Section 17(1) of the SARFAESI Act, which has jurisdiction to entertain such application within 45 days from the date of this order. In case, if the appellant files any such application, the Tribunal shall decide the same on its merits in accordance with law uninfluenced by any of the observations made by this Court and the High Court in the impugned judgment.

36. With these observations and liberty granted to the appellant, the appeal fails and is accordingly dismissed.

 [R.K. AGRAWAL]

 [ABHAY MANOHAR SAPRE]

Raj Balam Prasad & Ors. Vs. State of Bihar & Ors.[SC 2017 November]

keywords:- regularization of appointment- Temporary appointment

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  1. One cannot dispute that the State has the power to appoint persons for a temporary period under the Act and Rules framed thereunder and once such power was exercised by the State, the status of such appointee continued to be that of temporary employee notwithstanding grant of some extensions to them for some more period.
  2. The grant of extension to work for some more period to the writ petitioners could never result in conferring on them the status of a permanent employee or/and nor could enable them to seek regularization in the services unless some Rule had recognized any such right in their favour

Act : under Rule 57-A of the Bihar Certificate Manual, the instructions issued under the Bihar and Orissa Public Demand Recovery Act

DATE: November 27, 2017

SUPREME COURT OF INDIA

Raj Balam Prasad & Ors. Vs. State of Bihar & Ors.

[Civil Appeal No.19846 of 2017 arising out of SLP (C) No.31638 of 2016]

Abhay Manohar Sapre, J.

1. Leave granted.

2. The appeal is filed against the final judgment and order dated 29.02.2016 passed by the High Court of Judicature at Patna in Letters Patent Appeal No.1760 of 2012 whereby the Division Bench of the High Court allowed the appeal filed by the respondents herein by setting aside the order dated 2 08.05.2012 of the Single Judge in C.W.J.C. No.4247 of 2012 which allowed the appellants’ writ petition and issued a writ of mandamus directing the State to regularize the services of the appellants on the post of “Muharrirs” .

3. The controversy involved in the appeal is confined to short facts, which, however, need mention hereinbelow to appreciate the same.

4. The short question, which arises for consideration in this appeal, is whether the Division Bench of the High Court was justified in dismissing the appellants’ writ petition by allowing the intra court appeal filed by the respondents herein and reversing the order of the Single Judge which had allowed the appellants’ writ petition by issuing a mandamus directing the State(respondents) to regularize the appellants on the post of “Muharrir”.

5. Eight (8) persons were appointed on the post of “Muharrir” in the Office of Collector, Saran Chpara (Bihar) in the year 1987-88 by the State (Collector). These eight persons included present four (4) appellants herein. The appointment of these eight persons was made as temporary appointment for a period of three months. These appointments were made by the authority concerned by taking recourse to the powers under Rule 57-A of the Bihar Certificate Manual, the instructions issued under the Bihar and Orissa Public Demand Recovery Act (hereinafter referred to as “the Act”).

6. These temporary appointments were made for disposal of several pending certificate cases, which could not be disposed of for want of adequate hands available in the office. However, the services of the eight persons were extended for sometime by issuing extension orders. It was up to the year 1991.

7. These eight Muharrirs filed a writ petition (C.W.J.C. No. 5142 of 1991) in the High Court at Patna claiming therein a relief for their regularization in services as Muharrir. By order 4 dated 03.04.2001, the Single Judge disposed of the writ petition by granting liberty to the writ petitioners to submit their representation to the Competent Authority to enable them to examine their grievances on the question of regularization in service.

8. The writ petitioners (8) felt aggrieved and filed intra court appeal. The Division Bench dismissed the appeal (L.P.A. No.434 of 2001) by order dated 28.07.2007 but further made pertinent observations and, in consequence, also issued directions.

9. In the opinion of the Division Bench, when the services of the writ petitioners had come to an end on 03.06.1991 and 19.06.1991 and when these two orders were not stayed by the Writ Court (Single Judge) in the writ petition filed by the writ petitioners then how the writ petitioners could continue in services even as daily wagers thereafter and how some of the writ petitioners were able to get their services regularized from 10.10.2006. The Division Bench, therefore, while expressing their concern directed the State Vigilance Department to look into the matter and take appropriate steps in accordance with law.

10. As mentioned above, in the meantime, out of eight Muharrirs, the services of five Muharrirs including one more person by name Mr. Sugriev Singh were regularized by order dated 10.10.2006.

11. The writ petitioners, whose services could not be regularized, felt aggrieved and filed SLP in this Court. This Court dismissed the SLP and granted liberty to the petitioners to file representations to the concerned authority for ventilating of their grievance.

12. It is not in dispute that the Competent Authority, by order dated 15.01.2012, rejected the representation made by the appellants stating therein that since their services had already come to an end in 1991, no orders for their regularization could now be passed.

13. These persons then filed another round of writ petition (C.W.J.C. No.4247 of 2012) and claimed the same relief of regularization in the services by basing their case on one Circular dated 16.04.2008. The Single Judge allowed the writ petition by order 29.08.2011 and issued a mandamus against the State and the concerned department to regularize the services of the appellants on the post of Muharrirs.

14. The respondents herein (State and the concerned departments) felt aggrieved and filed intra Court appeal before the Division Bench. By impugned judgment, the Division Bench allowed the State’s appeal and dismissed the appellants’ writ petition. It is against this judgment, the writ petitioners have felt aggrieved and filed this appeal by way of special leave before this Court.

15. Heard Mr. Praneet Ranjan, learned counsel for the appellants and Mr. Manish Kumar, learned counsel for the respondents.

16. Having heard the learned counsel for the parties and on perusal of the record of the case, we find no merit in this appeal. In our opinion, the view taken by the Division Bench appears to be just, legal and proper and hence does not call for any interference.

17. This is what the Division Bench held for allowing the appeal and dismissing the appellants’ writ petition: “We have heard learned counsel for the parties and find that the order passed by the learned Single Judge is not sustainable in law. The order passed in LPA No.434 of 2001 dated 28th of July, 2008 was not brought to the notice of the learned Single Judge. It is further contended that even if the order dated 10.10.2006 was not have set aside, the fact remains that such order of regularization could not have been passed since the services of the Muharrir have come to an end in 1991 itself. The permanent status could be conferred to those who were in service and not to those whose service had come to an end many years ago. Such an order could not be made basis of permanent status through the writ court. Such order dated 10.10.2006 is not enforceable in law. The representation having been declined in the light of the circular dated 16.04.2008, we do not find that the writ petitioners were entitled to any direction to treat them as regular employees.”

18. We agree with the reasoning of the Division Bench quoted supra.

19. In our opinion also, when the appointment of the appellants (writ petitioners) was made for a fixed period in exercise of the powers under Rule 57-A and the said appointment period having come to an end in the year 1991 after granting some extension, we fail to appreciate as to how the appellants could claim to remain in service after 1991.

20. One cannot dispute that the State has the power to appoint persons for a temporary period under the Act and Rules framed thereunder and once such power was exercised by the State, the status of such appointee continued to be that of temporary employee notwithstanding grant of some extensions to them for some more period.

21. In other words, the grant of extension to work for some more period to the writ petitioners could never result in conferring on them the status of a permanent employee or/and nor could enable them to seek regularization in the services unless some Rule had recognized any such right in their favour.

22. That apart, when the period fixed in the appointment orders expired in the year 1991 then there was no scope for the appellants to have claimed continuity in service for want of any extension order in that behalf.

23. We have perused the Circular dated 16.04.2008 (Annexure P-7) issued by the State. This Circular only says that if any temporary persons are appointed for a particular project and if they are found to be of some utility, their services can be regularized as per Rules.

24. As mentioned above, so far as the cases of these appellants are concerned, their representations were examined by the State but were rejected finding no merit therein. One of the reasons for rejection of the representation was that the services of the appellants had already come to an end in 1991 and, therefore, no orders to regularize their services could now be passed after such a long lapse of time.

25. As rightly observed by the Division Bench in the impugned judgment, the earlier order of the Division Bench in which a vigilance inquiry was ordered to find out as to how an order of regularization could be passed in favour of some Muharrirs was not brought to the notice of the Single Judge which led him to allow the appellants’ writ petition.

26. Learned counsel for the appellants, however, argued vehemently that the order of the Single Judge deserves to be restored by setting aside the impugned judgment of the Division Bench as the same is based on proper reasoning but in the light of what we have held supra, we cannot accept his submission. In our opinion, the Division Bench was right in setting aside of the order of the Single Judge and we concur with the reasoning and the conclusion of the Division Bench. In addition, we have also given our reasoning in support thereof.

27. In the light of foregoing discussion, we find no merit in the appeal, which thus fails and is accordingly dismissed.

 [R.K. AGRAWAL]

 [ABHAY MANOHAR SAPRE]