Supreme Court Sets Aside High Court Order in Property Dispute: Pankaj Kumar Tiwari vs. Indian Overseas Bank (2023)

Date of the Judgment: 13 October 2023. Citation: 2023 INSC 937. Judges: Hon’ble Justices Abhay S. Oka and Pankaj Mithal. Can a High Court bypass the established legal process and intervene in a civil matter when a clear statutory remedy exists? The Supreme Court addressed this critical question in a recent case involving a property dispute, emphasizing the importance of judicial discipline and adherence to the legal hierarchy. The case revolves around a dispute over properties mortgaged to Indian Overseas Bank, where a civil court order was challenged directly in the High Court instead of following the appropriate appeal process. The Supreme Court bench comprised Justices Abhay S. Oka and Pankaj Mithal, with Justice Abhay S. Oka authoring the judgment.

Case Background

The case involves a dispute over five properties mortgaged to Indian Overseas Bank (first respondent) by the second respondent. The bank initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002), obtaining orders under Section 14 of the Act. The appellant, Pankaj Kumar Tiwari, subsequently filed a suit in a Civil Court at Siwan, Bihar, claiming rights over these properties based on a Memorandum of Understanding (MoU) dated 4th October 2015. The Civil Court appointed a Court Receiver on 24th January 2023, who took possession of the properties, despite the bank having already taken possession of some of them under SARFAESI Act. The bank, instead of appealing the Civil Court’s order, filed a writ petition in the Bombay High Court, which stayed the Civil Court’s order. The Supreme Court is now hearing an appeal against the High Court’s order.

Timeline:

Course of Proceedings

The appellant filed a suit in the Civil Court at Siwan, Bihar, seeking to establish rights over the properties based on an MoU. The Civil Court, on 24th January 2023, appointed a Court Receiver to take possession of the properties. The Indian Overseas Bank, instead of filing an appeal against the Civil Court’s order, directly approached the Bombay High Court under Article 226 of the Constitution of India, challenging the appointment of the Receiver. The Bombay High Court entertained the writ petition and stayed the Civil Court’s order. This action by the High Court is now being challenged before the Supreme Court.

Legal Framework

The case primarily involves the interpretation and application of the following legal provisions:

• Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002): This section allows secured creditors to take possession of secured assets when a borrower defaults on loan repayment. The first respondent bank obtained orders under this section to take possession of the mortgaged properties.
• Order XL, Rule 1 of the Code of Civil Procedure, 1908 (CPC): This provision deals with the appointment of a receiver by a court to manage property that is the subject of a suit. The Civil Court at Siwan invoked this rule to appoint a Court Receiver, which is now under challenge.
• Article 226 of the Constitution of India: This article grants High Courts the power to issue writs for the enforcement of fundamental rights and for any other purpose. The first respondent bank invoked this provision to challenge the Civil Court’s order in the Bombay High Court.
• Order XLIII of the Code of Civil Procedure, 1908 (CPC): This provision provides for appeals against certain orders of the Civil Court. The first respondent should have availed this remedy instead of filing a writ petition.

Arguments

Appellant’s Arguments:

• The appellant claimed rights over the properties based on a Memorandum of Understanding (MoU) dated 4th October 2015, with the borrowers.
• The appellant argued that the Civil Court at Siwan was justified in appointing a Court Receiver to protect their alleged rights in the properties.
• The appellant contended that the first respondent did not disclose the full details of the proceedings pending against the borrowers in the written statement.

Respondent’s Arguments:

• The first respondent (Indian Overseas Bank) argued that it had already initiated proceedings under the SARFAESI Act and had obtained orders under Section 14 to take possession of the mortgaged properties.
• The first respondent contended that the Civil Court at Siwan should not have appointed a Court Receiver when the bank had already taken steps to secure the properties under the SARFAESI Act.
• The first respondent argued that the High Court was justified in entertaining the writ petition under Article 226 of the Constitution of India, as the Civil Court’s order was causing prejudice to the bank’s rights.
• The first respondent also argued that the appellant suppressed material facts while persuading the Trial Court to pass a drastic order.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the following issues were addressed:

1. Whether the Bombay High Court was justified in entertaining a writ petition under Article 226 of the Constitution of India, challenging the order of a Civil Court in another state, when a statutory remedy of appeal was available.
2. Whether the Civil Court at Siwan was justified in appointing a Court Receiver, given that proceedings under the SARFAESI Act were already underway and the first respondent had already taken possession of some properties.
3. Whether the appellant suppressed material facts before the Civil Court while seeking the appointment of a Court Receiver.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court did not explicitly cite any cases or books in this judgment. The judgment primarily relied on the principles of judicial discipline and the availability of statutory remedies.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 14 of the SARFAESI Act, 2002:* The Court acknowledged that the first respondent had initiated proceedings under this section and had obtained orders to take possession of the properties. The court emphasized that the Civil Court should not have passed orders that would interfere with the rights of the Bank under SARFAESI.
• Order XL, Rule 1 of the CPC: The Court noted that the Civil Court invoked this rule to appoint a Court Receiver but criticized the casual manner in which the order was passed without considering the ongoing SARFAESI proceedings and the mortgagee’s rights.
• Article 226 of the Constitution of India: The Court held that the High Court should not have entertained the writ petition under this article when a statutory remedy was available. The Court emphasized that the High Court’s jurisdiction is wide but should be exercised with propriety and judicial discipline.
• Order XLIII of the CPC: The Court stated that the first respondent should have availed this remedy instead of filing a writ petition, highlighting the importance of following the statutory hierarchy of remedies.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the need to maintain judicial discipline and ensure that statutory remedies are exhausted before invoking extraordinary constitutional jurisdiction. The Court emphasized the following points:

• Importance of Statutory Remedies: The Court stressed that when a statutory remedy like an appeal is available, it should be availed before approaching the High Court under Article 226 of the Constitution.
• Judicial Discipline: The Court highlighted the need for judicial discipline and propriety, stating that High Courts should not interfere with orders of Civil Courts in other states when a statutory remedy is available.
• Suppression of Facts: The Court noted that the appellant had suppressed material facts before the Civil Court, which led to the passing of a drastic order.
• Respect for SARFAESI Act: The Court emphasized that the Civil Court should have considered the ongoing proceedings under the SARFAESI Act and the rights of the mortgagee before appointing a Court Receiver.

Logical Reasoning:

The Court considered the alternative interpretation that the High Court could exercise its writ jurisdiction to protect the bank’s interests. However, the Court rejected this interpretation, emphasizing that the availability of a statutory remedy should have been the primary consideration. The Court held that the High Court should have directed the bank to pursue its statutory remedy of appeal before the appropriate court in Bihar.

The Court’s decision was based on the principle that statutory remedies must be exhausted before invoking extraordinary constitutional jurisdiction. The Court found that the High Court’s intervention was inappropriate, as it bypassed the established legal process.

The reasons for the decision are:

• The High Court should not have entertained a writ petition when a statutory remedy of appeal was available.
• The Civil Court at Siwan should not have appointed a Court Receiver without considering the ongoing SARFAESI proceedings and the rights of the mortgagee.
• The appellant had suppressed material facts before the Civil Court.

The judgment states, “The jurisdiction of the High Court under Article 226 is no doubt very wide. But the propriety and judicial discipline required the High Court not to entertain such a petition.”

The judgment also notes, “If the High Courts start entertaining Article 226 petitions for challenging the orders passed by the Civil Courts in other states, it will lead to a chaotic situation.”

Further, the Court observed, “An order appointing a Court Receiver has very drastic consequences. As noted earlier, such a drastic order was casually passed by the Civil Court.”

There were no dissenting opinions in this case.

Key Takeaways

• High Courts should not entertain writ petitions challenging orders of Civil Courts in other states when a statutory remedy of appeal is available.
• Civil Courts must consider ongoing proceedings under the SARFAESI Act and the rights of mortgagees before appointing a Court Receiver.
• Parties must disclose all material facts before a court, and suppression of facts can lead to adverse consequences.
• The Supreme Court has emphasized the importance of adhering to established legal processes and respecting the statutory hierarchy of remedies.

Directions

The Supreme Court issued the following directions:

• The impugned order of the Bombay High Court was set aside, and the writ petition was dismissed.
• The appellant was directed to implead the first respondent bank as a party defendant in the suit.
• The order of the Civil Court at Siwan appointing a Court Receiver was stayed, and the status quo ante was restored.
• The appellant and the first respondent were directed to appear before the Trial Court on 30th October 2023.
• The first respondent was permitted to file a written statement and raise all possible contentions, including maintainability and territorial jurisdiction.
• The Trial Court was directed to pass a fresh order on the application for appointment of a Court Receiver after hearing the first respondent.
• The first respondent was allowed to initiate appropriate proceedings under Section 14 of the SARFAESI Act to take over possession of the remaining three properties.

Development of Law

The ratio decidendi of this case is that High Courts should not entertain writ petitions under Article 226 of the Constitution of India when a statutory remedy is available. This judgment reinforces the principle of judicial discipline and the importance of adhering to the statutory hierarchy of remedies. There is no change in the previous position of law, but the judgment emphasizes the importance of following the established legal process and not bypassing statutory remedies.

Conclusion

The Supreme Court’s judgment in Pankaj Kumar Tiwari vs. Indian Overseas Bank emphasizes the importance of judicial discipline and adherence to the established legal framework. The Court held that the Bombay High Court should not have entertained a writ petition challenging the order of a Civil Court in another state when a statutory remedy was available. The Supreme Court also criticized the Civil Court for appointing a Court Receiver without considering the ongoing SARFAESI proceedings and the rights of the mortgagee. The Court’s decision underscores the need for all parties to follow the appropriate legal procedures and to disclose all material facts before a court. This judgment serves as a reminder that statutory remedies must be exhausted before invoking the extraordinary jurisdiction of the High Court under Article 226 of the Constitution of India.