Justice for All v. Laxmi Educational Society

1. The instant Writ Petition has been filed as a Public Interest Litigation highlighting the alleged misuse of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to mortgage public land allotted to charitable societies under the Government Grants Act, 1895(GG Act) read with rules thereunder. The prayer made by the Petitioner is reproduced as under:- “(a) To declare the SARFESI Act not applicable for the land allotted to the charitable institutions under Government Grant Act, 1882 by virtue of Section 2 and 3 of the Act and direct the Respondent Reserve Bank of India to restrain the Financial Institutions from creating any security interest and its enforcement against the land allotted to Charitable Institutions for running the school under provisions of Delhi Development Act, 1957 read with Nazul Land Rules 1981. Alternatively in the Case SARFESI ACT has any applicability to the land allotted to the schools pass an appropriate writ order or direction to the respondent Reserve Bank of India to frame the appropriate regulation and mechanism to ensure the protection of students already studying in the school from any disturbance in their education during the recovery process and transfer/sale of mortgaged school land/ school infrastructure to any other organization. (b) To direct the respondents to ascertain the financial stability of the societies seeking public land for charitable/Institutional purpose (aided/unaided) by misrepresenting them to be financially sound and then risking the valuable fundamental right guaranteed to the Children under Articles 19(1)(a), 21 and 21A of Constitution of India by creating the security interest in favor of bank and financial institutions under the stringent provisions of SARFESI ACT, 2002 which may result in discontinuance of the education of thousands of Children who has been guaranteed to continue and complete his elementary Education as a fundamental right and additionally protected under various provisions of Right of Children to free and Compulsory Education Act, 2009 and Juvenile Justice Care and Protection Act.

(c) to direct the respondent Reserve bank of India to ensure the Strict Compliance of Rule 20 of Nazul Land Rules and ensure the strict protection of Right Guaranteed to the Children under Article 21A of constitution of India in the case any financial institution enforces the Provisions of SARFASI Act, 2002 against any of the School Property including land and playground.

(d) to direct respondent Economic Offence wing to initiate investigation, for the misappropriation/syphoning of public fund by the respondent society, with the collusion of officers of respondent DDA/DOE/Bank, and to recover the amount from the members of society. (e) To direct the respondent Reserve Bank of India, to frame policy for reconstruction of Social Infrastructure in general and School land in Particular without any change in the nature of infrastructure from charitable to the commercial until then restrict the mortgage of lease hold Nazul land, where the institution has been running. (f) To pass any other or further orders this Hon’ble court deems fit based on above-mentioned facts and circumstances of the case.”

2. The facts in brief, leading to the filing of the present writ petition are that the Petitioner that had came across a report dated 17.04.2023 published in the Times of India titled “Bank takes over school property for loan default” wherein it was stated that the Punjab National Bank (Respondent No. 5) had taken over the property of the Respondent No. 3, i.e., Laxmi Public School (which has been established and managed by Respondent Nos. 1 & 2) on account of default on repayment of a loan. The Petitioner, being concerned about the plight of the students, teachers and staff of the school has filed the present writ petition. He has stated that the use of provisions of SARFAESI Act against schools has become a device used by private institutions to convert the social infrastructure created for education for commercial purposes and this comes in the way of children’s fundamental right to education.

3. Mr. Khagesh B Jha, learned Counsel for the Petitioner, submits that public land is allotted to private unaided schools under the provisions of the GG Act and the GG Act provides that the provisions of the Transfer of Property Act, 1882 (TP Act)do not apply to government grants. It is his submission that by virtue of Section 2 of the GG Act, the provisions of the SARFAESI Act pertaining to mortgage of property for reconstruction of assets would be inapplicable on such land which has been allotted under the GG Act. He states that the public land where the Respondent No. 3 school is situated is neither a residential plot nor a commercial one and the function of the school is not one in the nature of a business and the taking over of the property is governed by Section 24 of the Delhi School Education Act, 1973 (DSE Act). He submits that Section 3 of the GG Act is wide in its scope and therefore the tenor of the grant will have an overriding effect on the provisions of the SARFAESI Act and TP Act.

4. Mr. Jha submits that the Central Government has framed Rules for the utilization, disposal, control and supervision of Nazul land under the Delhi Development Act, 1957 (DDA Act). He states that under Rule 20(d) of the Delhi Development Authority (Disposal of Developed Nazul Land) Rules, 1981 (DDA Nazul Rules), Nazul land for a public institution is only to be allotted to those who have sufficient funds to meet the cost of land and for the construction of building. He states that the provision also provides that the land allotted for running an aided institution shall be allotted to charitable societies/trust which is to bear 5% expense of the salary of the staff.He has alleged that many individuals, institutions and societies, in connivance with officials of DDA are exploiting this Rule to obtain government land and then use the same to get loans from financial institutions and then mortgage the public land.He states that the Delhi Development Authority (DDA) is only a custodian of Nazul land and not the owner, and the DDA cannot issue an NOC for mortgage of such land to financial institutions.

5. Mr. Jha, has referred to an order dated 18.05.2022 of this court passed in W.P. (C) 468/2022 titled Justice for All through Secretary Shikha Sharma Bagga v. Reserve Bank of India &Ors., wherein a similar situation had arisen that the land allotted to the Society-therein for the establishment of a school had been mortgaged under the SARFAESI Act on default of a loan by the Society-therein. He states that in the said case, the Government of NCT of Delhi had decided to take over the school and had undertaken to make lumpsum payment of dues owed by the Society-therein.

6. It is submitted by Mr. Jha that the issue of allotment of land to societies/trusts by land owning agencies without verification of fact whether the society or trust have sufficient funds or have some regular source of income is a serious in nature.

7. Heard the counsels appearing for the parties and perused the material on record.

8. It is the case of the Petitioners that the action of banks to mortgage the property of Respondent No. 3 School under the SARFAESI Act is unlawful as the said land, being public land has been allotted under the GG Act and therefore the provisions of the TP Act or the SARFAESI Act would not be applicable to the said land. Section 2 and 3 of the GG Act are reproduced as under:

9. He has further stated that under Rule 20(d) of the DDA Nazul Rules, Nazul land for a public institution is only to be allotted to those who have sufficient funds to meet the cost of land and for the construction of building. He has alleged that many individuals, institutions and societies, in connivance with officials of DDA are exploiting this Rule to obtain government land and then use the same to get loans from financial institutionsand then mortgage the public land. Rule 20(d) of the DDA Nazul Rules reads as under:- “20.

(d) it is in possession of sufficient funds to meet the cost of land and the construction of buildings for its use;”

10. At the outset, it is pertinent to note that during the course of the hearing, it has been brought to our attention that the Respondent No. 1 Society, which manages Respondent No. 3 School has approached this Court by way of writ petition bearing WP(C) No. 4907/2023. The Ld. Single Judge, by way of an order dated 19.04.2023, noting that the students of the Respondent No. 3 School are on the streets due to the school being sealed off, directed the Respondent No. 5 Bank to remove the lock which had been put on the school. Therefore, the issue pertaining to the effect of the Bank’s action under SARFAESI Act upon the right of education of the school children is already pending before this Court. It would thus be inappropriate for this Court to take cognizance of this issue in a PIL when another bench of this Court is already seized of the matter.

11. It is well settled that the borrower, which in the present case is the Respondent No. 1 Society, has an efficacious and effective remedy under the SARFAESI Act to approach the Debt Recovery Tribunal (DRT) and can challenge the validity of the actions of the Bank under the SARFAESI Act before the DRT [Refer to: Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311 and United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110]. The question of whether the action taken by the Bank against the Respondent No. 1 and Respondent No. 3 School under the SARFAESI Act is contrary to the aforesaid provisions of the GG Act and the TP Act is an issue that can be raised by the Respondent No. 1 before the DRT. It is not an issue that ought to be raised by a third party by way of a PIL and certainly not an issue that ought to be decided by this Court in exercise of its powers under Section 226 of the Constitution of India.