Section 13 of the Securitisation and Reconstruction of financial assets and enforcement of Security Interest Act, 2002

HELD No case had been made out by the appellant-company to claim any relief from the Court. It was clear from what was stated that the appellant took a credit facility from the respondent bank to the extent of Rs.85 lakhs. It was not disputed even by the appellant that no regular re-payment of loan was made by the company. The respondent was, therefore, within its power to take appropriate action in consonance with law. Accordingly, a notice came to be issued on 16-10-2004 which was received by the appellant on 19-10-2004. So far as the representation said to have been made by appellant on 20-10-2004 was concerned, it was the case of the respondent that no such representation was made by the appellant and such stand was taken belatedly by the appellant with a view to get benefit of decision in Mardia Chemicals Ltd. v. UOI [2004] 51 SCL 513 (SC). In that connection, the respondent pointed to an affidavit-in-reply dated 5-9-2005 filed by Chief Manager wherein it was stated that though the appellant had asserted that it submitted a representation on 20-10-2004 in terms of section 13(3A), the respondent had never received the ‘alleged representation’. A letter dated 20-10-2004 written by the appellant had been received by the respondent. That letter, however, did not refer to the notice and was not in reply to the notice issued by the respondent. There was no reference of notice in the said letter. In fact it was expressly stated that the letter was with reference to ‘telephonic talks’ held on that day, i.e., on 20-10-2004. [Para 10] Though the affidavit-in-reply was filed on 5-9-2005, wherein it was explicitly stated that no representation dated 20-10-2004 said to have been submitted by the appellant had been received by the respondent, there was no rejoinder by the appellant. The said fact was pressed in service by the respondent at the time of subsequent hearing of the case and was reflected in the order dated 24-10-2005. It was also only thereafter that a rejoinder affidavit was filed on 5-11-2005 in which it was asserted by the appellant that the representation dated 20-10-2004 was made and was sent through courier. Thus, there was a word against word. Moreover, the Court could not be oblivious of the fact that it was only after the order dated 24-10-2005 passed by the Court, that in rejoinder affidavit filed in November, 2005, such a statement was made. The respondent, in the circumstances, appeared to be right in contending that in spite of the notice issued under section 13(2), neither payment was made nor a representation was submitted by the appellant and only with a view to take benefit of decision in Mardia Chemicals, as an afterthought, it was alleged that in pursuance of notice issued by the respondent under section 13(2), the appellant had forwarded a representation which ought to have been considered by the respondent, a decision ought to have taken thereon by recording reasons and such decision ought to have been intimated to the appellant. [Para 12] It was contended by the respondent that having obtained interim order and benefit thereunder from the Court, the appellant had not paid even a pie. The appellant was, thus, in contempt of the said order. The company had never challenged the condition as to payment of amount as directed by the Court. Thus, on the one hand, it had taken benefit of the order of interim relief and on the other hand, did not comply with it and failed to pay instalments as directed. Neither it raised any grievance against the condition as to payment of instalments nor made any application to the Court for modification of the condition. It continued to enjoy the benefit of stay ignoring and defying the term as to payment of money. The appellant was thus, in contempt of the order of the Court, had impeded the course of justice and had no right of hearing, till it had purged itself of the contempt. [Para 17] From the above order, it was clear that notice was issued to the other side and stay granted earlier was ordered to continue on the appellant’s depositing a sum of Rs.20 lakhs per month in the Court. It was also made clear that first of such payment should be made by 6-6-2005 and subsequent payments by 6th of each succeeding month. A default clause was also introduced in the order that if such payment would not be made, the stay would stand vacated. The order had not been complied with and no payment as per the order had been made by the appellant to the respondent. The said fact had also been reflected in the order of the Court passed on 25-7-2007. [Para 19] The original order was of May, 2005 and the matter was heard finally in May, 2007. Thus, about two years had passed and the order had been thwarted with impunity. Therefore, the respondent was right that such appellant did not deserve sympathy from the Court. [Para 20] An order passed by a competent court - interim or final - has to be obeyed without any reservation. If such order is disobeyed or not complied with, the Court may refuse the party violating such order to hear him on merits. Refusal to hear a party to the proceeding on merits is a ‘drastic step’ and such a serious penalty should not be imposed on him except in grave and extraordinary situations, but some time such an action is needed in the larger interest of justice when a party obtaining interim relief intentionally and deliberately flouts such order by not abiding the terms and conditions on which a relief is granted by the Court in his favour. [Para 21] That, however, does not mean that in each and every case in which a party has violated an interim order has no right to be heard at all. Nor the Court will refuse to hear him in all circumstances. The normal rule is that an application by a party will not be entertained, until he has purged himself of the contempt. There are, however, certain exceptions to this rule. One of such exceptions is that the party may appeal with a view to setting aside the order on which his alleged contempt is founded. A person against whom contempt is alleged must be heard in support of the submission that having regard to the meaning and intendment of the order, which he is said to have disobeyed, his actions did not constitute a breach of it. [Para 25] There was still one more reason why the appellant should be denied equitable relief under article 136 of the Constitution. According to the respondent, the appellant had not come with clean hands before the Court. It had suppressed and concealed material facts from the Court. [Para 28] It was not in dispute that when the loan was taken by the appellant from the respondent, certain immovable properties including residential premises of the director of the company had been mortgaged with the bank and a document to that effect had been executed in favour of the bank. The owner/director had filed an affidavit dated 16-2-1996, declaring that she had not created any mortgage charge, or encumbrance of any kind or nature whatsoever on or in respect of the said property. [Para 29] In spite of the said declaration in affidavit, encumbrance had been created by the deponent and the company over the property in respect of which such undertaking had been furnished. [Para 30] It was also alleged by the respondent that the appellant had shifted machinery to other place and stock statements were not supplied to the respondent. On 4-8-2004, the Central Excise and Customs Officials attached the plant and machinery of the company for recovery of its dues. On 25-8-2004, Uttar Pradesh Financial Corporation issued a notice under section 29 of the State Financial Corporation Act, 1951 for taking over physical possession of the assets of the appellant. On 16-5-2005, a collusive suit was got filed by one ‘Y’ in a Court wherein the plaintiff had asserted that he was the tenant of ‘S’ in respect of mortgaged property in question and he should not be dispossessed. A summons of the said suit was issued to the respondent. The respondent received another summons from a Court that one ‘V’ claimed himself to be the tenant of the aforesaid mortgaged premises. [Para 31] Though the appellant had approached the High Court under article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under article 226 of the Constitution. Over and above, a Court of Law is also a Court of Equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must all the facts before the Court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the Writ Court may refuse to entertain the petition and dismiss it without entering into merits of the matter. [Para 32] It is well settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a Writ Court will indeed bear in mind the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppresses relevant materials or is otherwise guilty of misleading the Court, the Court may dismiss the action without adjudicating the matter. The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of Court by deceiving it. The very basis of the writ jurisdiction rests in disclosure of true, complete and correct facts. If the material facts are not candidly stated or are suppressed or are distorted, the very functioning of the Writ Courts would become impossible. [Para 34] In the case on hand, several facts had been suppressed by the appellant. Collusive action had been taken with a view to deprive the respondent from realizing legal and legitimate dues, to which it was otherwise entitled. The appellant had never disclosed that it had created third party’s interests in the property mortgaged with the bank. It had also shifted machinery and materials without informing the respondent, thus, prejudicially affecting the interest of the respondent. It had created tenancy or third party’s right over the property mortgaged with the bank. All those allegations were relevant when such petitioner came before the Court and prayed for discretionary and equitable relief. In the judgment, the submission of the respondent was well founded that appellant was not entitled to ask for an extraordinary remedy under article 226 of the Constitution from the High Court as also equitable remedy from the Supreme Court under article 136 of the Constitution. A party, whose hands are soiled, cannot hold the writ of the Court. Therefore, the High Court was not in error in refusing relief to the appellant. [Para 35] By dismissing the petition in limine, the High Court had neither committed an error of law nor of jurisdiction. The appellant was not entitled to any relief. Though the respondent was right in submitting that the appellant had suppressed material facts from the court as also that it had not complied with interim order passed by the Court and it had, therefore, no right to claim hearing on merits, even considering merit of case, no case had been made out for interference with the action taken by the respondent or the order passed by the High Court. [Para 36] Therefore, the appeal deserved to be dismissed. [Para 37]