PYRAMID DEVELOPERS Vs. UNION OF INDIA

JUDGEMENT

(1.) Rule. Rule made returnable forthwith and heard learned counsel for the parties. The petitioner, a Partnership Firm, registered under the Indian Partnership Act, 1932 through its Partner has filed this writ petition under Articles 226 and 227 of the Constitution of India raising a challenge to the initiation of proceedings by the 3rd respondent - M/s. M.J. Shah Capital Pvt. Ltd., a Company incorporated under the Companies Act, 2013 by invoking the provisions of Sec. 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the Act of 2002") . The petitioner seeks issuance of a writ of Prohibition so as to restrain the learned Chief Metropolitan Magistrate from proceeding with consideration of the Securitization Application No.598 of 2024 (M.J. Shah Capital Pvt. Ltd. Vs. Pyramid Developers and Ors.) on the premise that the 3rd respondent is not a "financial institution", as defined by Sec. 2(1)(m)(iv) of the Act of 2002 and hence it cannot take recourse to the provisions of the Act of 2002 for enforcing its security interest.

(2.) The facts in brief are that according to the 3 rd respondent, it had provided financial assistance of Rs.7.50 crores, to be disbursed from time to time, to the Partnership Firm as per its requirements pursuant to a loan agreement dtd. 10/10/2017. In lieu of the aforesaid, a mortgage was created with regard to a flat owned by the Partnership Firm. On the ground that the Partnership Firm failed to repay the outstanding amount, notice under Sec. 13(2) of the Act of 2002 was issued on 30 th September 2023. In its reply an objection was raised by the Partnership Firm that the 3rd respondent had no authority to invoke the provisions of the Act of 2002 for recovering its dues. It is thereafter that the 3 rd respondent filed an application under the provisions of Sec. 14 of the Act of 2002 dtd. 29/4/2024 seeking grant of assistance to obtain possession of the secured asset. On being served with the aforesaid proceedings, the Partnership Firm has approached this Court seeking issuance of a Writ of Prohibition.

(3.) Mr. Prathamesh Kamat, learned counsel for the petitioner- Partnership Firm referred to various provisions of the Act of 2002 and especially Sec. 2(1)(zd) which defines "secured creditor", Sec. 2(1) (m) that defines "financial institution" as well as Sec. 14 of the Act of 2002 wherein such secured creditor can invoke provisions of Sec. 14 of the Act of 2002. It was submitted that for a Non-Banking Financial Company to be considered as a "financial institution" as per Notification dtd. 24/2/2020, it had to have assets worth Rs.100.00 crores and above, secured debts worth Rs.50.00 lakhs and above which figure was modified by Notification dated 12 th February 2021 reducing that amount to Rs.20.00 lakhs and above. Referring to the affidavit-in-reply filed on behalf of the Reserve Bank of India - 2 nd respondent, it was submitted that the asset worth of the 3rd respondent was Rs.16.30 crores and hence it did not satisfy the requirements of the Notification dated 24 th February 2020. On the aforesaid basis, it was urged that as the 3 rd respondent was not a financial institution, it could not invoke the provisions of Sec. 14 of the Act of 2002. To substantiate his contention that a writ of Prohibition ought to be issued in such circumstances, the learned counsel placed reliance on the decisions in S.C. Prashar and Anr. Vs. Vasantsen Dwarkadas and Ors., AIR 1956 Bom 530, S. Govinda Menon Vs. The Union of India and Anr., AIR 1967 SC 1274 and Virendra Rathore and Ors. Vs. Tehsildar Distt. Mandsaur (Madhya Pradesh) SRG Housing Finance Limited and Ors., 2024 SCC OnLine MP 3427. On the aspect of availability of an alternate remedy of challenging an order passed under Sec. 14 of the Act of 2002, it was submitted that since the Partnership Firm was seeking issuance of a writ of Prohibition and the proceedings under Sec. 14 of the Act of 2002 were yet to be decided, there was no question of any such remedy being available at this stage. Since an issue of jurisdiction was raised by the Partnership Firm on undisputed facts, the writ petition ought to be entertained on merits and adjudicated. He also referred to the judgment of the Supreme Court in Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer-cum-Assessing Authority and Ors., 2023 SCC OnLine SC 95. It was thus prayed that a Writ of Prohibition as prayed for be issued restraining the Chief Metropolitan Magistrate from entertaining the application under Sec. 14 of the Act of 2002.