Holding

A party that suppresses material facts and violates interim orders cannot be granted extraordinary or equitable relief, and the High Court’s dismissal of the writ petition was proper.

Summary

Prestige Lights Ltd. obtained an Rs.85‑lakh loan from State Bank of India secured by mortgage of its land and building. After defaulting, the bank served a notice under Section 13(2) of the Securitization, Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and later threatened possession under Section 13(4). The company claimed it had made a representation on 20‑Oct‑2004, which the bank alleged was never received and was an after‑thought to invoke Mardia Chemicals. The High Court dismissed the writ petition in limine, and the company appealed to the Supreme Court, alleging suppression of facts and violation of procedural fairness. The Supreme Court held that the appellant had suppressed material facts, created third‑party interests in the mortgaged property, and failed to comply with the interim order, thereby lacking clean hands. Consequently, the Court affirmed that a party with soiled hands cannot invoke extraordinary or equitable relief under Articles 226 and 136, and dismissed the appeal.

Issues considered

The applicability of Section 13(2) and 13(4) of the Securitization Act when a borrower defaults and the bank seeks possession.
Whether the appellant’s alleged representation dated 20‑Oct‑2004 was valid and required to be considered by the bank.
The effect of suppression of material facts and lack of clean hands on the court's discretionary jurisdiction under Articles 226 and 136.
The consequences of non‑compliance with an interim stay order on the appellant’s right to be heard on merits.

Legislation cited

Constitution of Indias. Article 136, s. Article 226

Subjects

loan defaultsecuritization actwrit jurisdictionsuppression of material factsclean hands doctrineinterim order complianceequitable reliefdiscretionary jurisdiction

Judgment

A MIS PRESTIGE LIGHTS LTD.
v.
STATE BANK OF INDIA

AUGUST 20, 2007

B [C.K. THAKKERANDALTAMASKABIJl,JJ.]

Constitution of India, 1950:

Articles 226 and 136-Discretionary and extra-ordinary jurisdiction
C and equitable remedy-Invoking of-Held: it is of utmost necessity that when
a party approaches High Court, he must place all 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
D into merits of the matter-Writ petitioner having suppressed material facts,
is not entitled to ask/or extra-ordinary remedy under Article 226 from High
Court as also equitable remedy from Supreme Court under Article 136-
Equity.

Securitization, Reconstruction of Financial Assets and Enforcem(!flt of
E Security Interest Act, 2002:
ss. 13(2) and (4)(a)-Enforcement ofsecurity interest-Notice u/s 13(2)
issued to borrower-company-Company neither made the payment nor did
it give any representation-Bank exercising power u/s l 3(4)(a)-Writ petition
before High Court by borrower stating that representation against notice u/
F s 13(2) was made but not considered-High Court accepting the stand of
Bank that plea of representation was an afterthought-Besides, borrower
suppressed material facts and created third party interest in property
mortgaged to Bank-Writ petition dismissed i11 limine-He/d: A party whose
hands are soiled cannot hold writ of Court-High Court was not in error in
G refusing relief to borrower-Even on merits, no case made out/or interference
with action taken by Bank or order passed by High Court-Constitution of
India, 1950-Artic/es 226 and 136.

The appellant-company obtained a loan of Rs. 85 lakhs from the
respondent-Bank in the year 1992 on mortgage of its land and building,
II 112
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA 113
~
creating security interest in favour of the Bank. After some time the appellant A
defaulted in depositing instalments of repayment of the loan. On 19.10.2004,
the Bank served a notice dated 16.10.2004 on the appellant-Company under
sub-section (2) of Section 13 of the Securiti7.ation, Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 stating therein that
the appellant failed to pay a sum of Rs.87,64,549.42 p. The appellant was
called upon to deposit the required amount with interest within 60 days failing B
which the Bank would exercise the power under sub-section (4) of Section 13
of the Act. On 9~3.2005 the Bank issued a notice to take over possession of
the residential house of the Director of the company. The Company filed a
writ petition before the High Court which dismissed the same in limine.

In the instant appeal filed by the Company it was contended for the
c
appellant that again~t the noti~e dated 16.10.2004, the Company made a
representation dated 20.10.2004 and it was incumbent on the Bank to consider
the same to extend an opportunity to the appellant to enable it to pay off the
amount and, in case of rejection of the representation, to inform the appellant
about such decision by recording reasons and, as the Bank failed to do so, its D
action was unlawful and against the provisions of the Act as also in violation
of the law laid down in Mardia Chemicals Case*. It was also submitted that
the writ petition raised several questions which were required to be dealt with
in a detailed judgment, but the High Court summarily dismissed the writ
petition.
E
For the respondent-Bank it was contended that there was suppress.ion
of material facts by the Company and it did not approach the Court with clean
hands; that no representation dated 20.10.2004, said to have been made by
the Company was received by the Bank and the plea ofrepresentation was an
after-thought, which was raised only with a view to take benefit of observations F
in Mardia Chemicals Case* It was also submitted that apart from failure to
pay regular instalments, the company even did not comply with the terms of
the interim order passed by the Supreme Court; and, therefore, it was not a
fit case to exercise discretionary jurisdiction in favour of the Company.

Dismissing the appeal, the Court G
~ HELD: 1. No case has been made out by the appellant-Company to claim
any relief from this Court. It is not disputed even by the appellant that no
regular re-payment of loan was made by the Company. The respondent-Bank
was. therefore, within its power to take appropriate action in consonance with ·
law. (Para 10) (l :9-A, Bl H
114 SUPREME COURT REPORTS [2007) 9 S.C.R.

A 2. So far as the representation said to have been made by the appellant
on October 20, 2004 is concerned, the respondent-Bank appears to be right
iri 'c-0rttending that inspite of notice issued under Section 13(2) of the Act,
neither any payment was made nor any representation was submitted by the
Company and only with a view to take benefit of Mardia Chemicals*, as an
afterthought a plea 'or representation was set up.
B (Para 10 and 121(119-D;120-CJ

*Mardia Chemicals Ltd v. Union of India & Ors., (2004) 4 SCC 311,
referred to.

3.1. Besides, stay of dispossession was granted by this Court in favour
C of the appellant subject to its depositing the money as provided in the interim
order. A default clause was also introduced in the order, i.e., if the payment
was not made, the stay would stand vacated. It is an admitted fact that the order
has not been complied with and no payment as per the order has been made by
the appellant-Company to the respondent-Bank.
D (Paras 19( (124-A, Ill·

, 3.2. 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.Though refusal to hear a party to the proceeding on merits is a 'drastic
E 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
whicb a reliefls granted by the Court in his favour.
(Para 21) (124-E, F)
F
• . Badkinson v. Hadkinson, (1952) 2 All ER 567 and Gorden v. Gorden,
(l904) 73 LJ 41 : 90 LT 597: 16 Dig 90, 1128, referred to.
. .
4.1. Fm;ther, it is clear that though the appellant-Company approached
G the High Court under Article 226 of the Constituti~n, it did not candidly state
·~ all the facts to the Court. The High Court exercised discretionary and
extra~rdinary jurisdiction under Article 226 of the Constitution. It is well
settled that a (irerogative 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 \vho is invoking suchjurisdiction. Over and above, a court
H, of law is also acourt of equity. It is, therefore, of utmost necessity that when
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA 115
a party approaches a High Court, he must place all the facts before the Court A
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 and 34) (127-B, F; 128-B)

R v. Kensington Income Tax Commissioners, (1917) 1 KB 486; 86 LJ B
KB 257: 116 LT 136, referred to.

4.2. In the instant case, several facts were suppressed by the appellant-
Company. Collusive action has been taken with a view to deprive the
respondent-Bank from realizing legal and legitimate dues to which it was C
othenvise entitled. The Company never disclosed that it had created third party
interests in the property mortgaged with the Bank. It also shifted machinery
and materials without informing the respondent-Bank prejudicially affecting
the interest of the Bank. It created tenancy or third party right over the
property mortgaged with the Bank. All these factors are relevant when such
petitioner comes before the Court and prays for discretionary and equitable D
relief. (Para 351 (128-E, Fl

4.3. The submission of the respondent-Bank is well-founded that
appellant is not entitled to ask for an extraordinary remedy under Article
226 of the Constitution from the High Court as also equitable remedy from
this Court under Article 136 of the Constitution. A party, whose hands are E
soiled, cannot hold the writ of the Court. Therefore, the High Court was not
in error in refusing relief to the appellant-Company. By dismissing the petition
in limine, the High Court has neither committed an error of law nor of
jurisdiction. The appellant-Company is not entitled to any relief.
tpara 35 and 36) (128-F, GI F
5. However, the Court has considered the merits of the matter also and
is of the considered view that no case has been made out for interference with
the action taken by the respondent-Bank or the order passed by the High
Court. (Para 361 (129-Al
G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3827 of200'1.

\ From the final Judgment and Order dated 29.03.2005 of the High Court
of Uttaranchal at Nainital in Writ Petition No. 293 of 2005 (M/B).

Sakesh Kumar, Yogmaya Agnihotri and Rameshwar Prasad Goyal for the H
116 SUPREME COURT REPORTS [2007] 9 S.C.R.

A Appellant.
Rajiv Kapur, Sanjay Kapur, Shubhra Kapur and Arti Singh for the
Respondents.

The Judgment of the Court was delivered by
B
C.K. THAKKER, J. I. Leave granted.

2. The present appeal is directed against the judgment and order dated
March 29, 2005 passed by the High Court of Uttaranchal at Nainital in Writ
Petition No. 293 of 2005 by which the petition filed by the petitioner (present
C appellant) was dismissed in limine. · .

3. To appreciate the controversy, few relevant facts may be noted.

4. Appellant herein is a Private Limited Company engaged in
manufacturing bulbs, chokes and fittings. The factory of the appellant is
D situated at Dhalwah Industrial Area, Rajpur Road, Dehradun_, Uttranchal. In
1992, the appellant obtained a loan of Rs. 85 lakhs from State Bank of India,
_Commercial Branch, Radha Palace, Rajpur Road, Dehradun - respondent herein.
The Company mortgaged its land and building with the respondent-Bank.
According to the appellant, till 200 I, the business of the appellant was
E comparatively good and it had no problem in depositing the interest accrued
towards credit facilities. In or about 2001-02, however, because of heavy
slump in the market due to arrival of cheaper Chinese Products, the appellant ,
suffered huge losses and could not deposit the interest-amount with the
respondent-Bank. The respondent-Bank, therefore, issued a notice on October
16, 2004 under sub-section (2) of Section 13 of the Securitization, Reconstruction
F of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter
referred to "the Act") alleging therein that the appellant failed to pay a sum
of Rs.87,64,549.42 P. It was stat:d that the appellant had created security by
equitable mortgage of land, bearing Khasra No. 55013 and 550/4 admeasuring
I 0,036 sq. ft. situated at village Jagjitp·.ir, Pargana Jwalapur, Tehsil and District
Haridwar. The notice also sought to invoke personal guarantee given by M.P.
G Goel, Sudha Goel and Abhinav Goel. The appellant was called upon to
deposit the amount mentioned in the notice with interest, expenses and costs
within sixty days failing which the Bank would exercise power under sub- l
>

seciton (4) of Section 13 of the Act. It was also stated that the appellant
should not transfer by sale, lease or otherwise the secured assets detailed in
H Schedule to the notice. The notice was served on the appellant-Company on
+
/

PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA (C.K. THAKKER, J.] 117

October 19, 2004. It is the case of the appellant that it submitted a representation A
on October 20, 2004 wherein it was stated that the appellant had proposed
to pay dues of the Bank after selling the land and building of the Factory.
It was further stated that the appellant had proposed to regularize assets of
the Company as per fixed plan. If the respondent-Bank would continue working
in a healthy spirit, the appellant was confident that it would be able to
regularize the assets of the Company as per the proposal. It was also stated
B
that the Bank had a second charge on the assets of the Company and the
dues to be paid to Uttar Pradesh Financial Corporation were very small and
the substantial sale proceeds of the assets of the Company would automatically
go to the Bank and the Bank need not take any hasty action by invoking the
provisions of the Act. c
5. It m~y be stated at this stage that it is the case of the respondent-
Bank that it had not received any such representation said to have been sent
by the appellant on October 20, 2004. According to the appellant-Company,
without considering the representation of the appellam, dated October 20,
2004, the respondent-Bank in purported exercise of the power under sub- D
section (4) of Section 13 of the Act, threatened the appellant to take over
residential premises of the Directors of the appellant-Company by a
communication, dated February 8, 2005. On March 19, 2005, the respondent-
Bank issued a notice to take over possession of the residential house of the
Director. Being aggrieved by all these illegal. actions and 'dispossession-
notice', the appellant approached the High Court of Uttranchal at Nainital on
E
March 24, 2005 by invoking writ jurisdiction of the Court under Article 226
of the Constitution. The High Court, however, dismissed the petition in limine
on March 29, 2005 which constrained the Company to challenge the action
of the respondent-Bank in this Court under Article 136 of the Constitution .
... F
6. It appears that a mention was made to the Court on April 28, 2005
and the Court ordered Registry to list the matter 'as notified'. Stay of
dispossession was, however, granted. On May 6, 2005, notice was issued and
·interim relief was granted on certain terms and conditions which we will refer
to at an appropriate stage. Affidavits and further affidavits were filed and the
Court directed the Registr;t to place the matter for final hearing. Accordingly, G
the matter has been placed before us.

7. We have heard the learned counsel for the parties.

8. The learned counsel for the appellant contended that the action of
the respondent-Bank was wholly illegal, unlawful and against the provisions. H
+
118 SUPREME COURT REPORTS [2007) 9 S.C.R.

A of the Act. It was also in violation of the law laid down by this Court in .
Mardia Chemicals ltd. v. Union of India & Ors., [2004] 4 SCC 311. It was
submitted that once a representation was made, it was incumbent on the
respondent-Bank to consider the same, to extend an opportunity to the
appellant to enable the Company to pay-off the amount and in case of
B rejection of such representation, to inform the appellant about such decision
by recording reasons. Nothing had been done by the respondent. The orders
passed by the Bank, th~refore, were totally illegal and unsustainable. A
grievance was also made that the respondent-Bank which is 'State' within the
meaning of Article 12 of the Constitution has acted arbitrarily and unreasonably.
It ought to have appreciated the difficulties of the appellant that it was doing
C business in manufacturing electric goods and because of availability of Chinese
Products at a cheaper rate, it suffered huge losses: Had the respondent-Bank
shown sympathetic attitude and adopted constructive approach, the situation
could have been avoided and the appellant-Company would have been able ·
to pay-off the dues. No such opportunity had been granted and high-handed
action was taken. A complaint was also made that the High Court was wholly
D wrong in summarily dismissing the writ petition when several questions of
power, authority and jurisdiction of respondent-Bank had been raised which
required a detailed judgment. It was stated at the time of hearing that even
now the appellant is prepared to pay the amount if time is granted by the
respondent-Bank. But if the respondent-Bank is not prepared to show grace,
E this Court may set aside the action of the Bank by granting time and allowing
the appellant-Company to pay-off the entire amount.

9. The learned counsel for the respondent-Bank, on the other hand,
supported the action taken by the Bank and the order passed by the High
Court. It was stated that there was suppression of material facts by the
F appellant and it has not come with clean hands. Only on that preliminary
ground, this Court may decline to hear the appellant and may refuse to enter
into merits. It was also submitted that no representation dated October 20,
2004 said to have been made by the appellant had been received by the
respondent-Bank. According to the counsel, it was an after-thought and only
G. with a view to take benefit of observations in Mardia Chemicals, such a case
had been put forward by the appellant-Company. Grievance was also raised
that apart fromJailure to pay regular instalments, the appellant-Company has
not complied with the .order passed by this Court. This is, therefore, not a fit
case to exercise discreti~nary jurisdiction in favour of the Company and the·
appeal deserves to be dismissed.
H
-+-
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA [C.K. THAKKER, J.] 119

10. Having considered the rival contentions of the parties and going A
through the records and proceedings of the case, in our view, no case has
been made out by the appellant-Company to claim any relief from this Court.
It is Clear from what is stated above that the appellant took a credit facility
from the respondent-Bank fo the extent of Rs. 85 lakhs. It is not disputed even
by the appellant that no regular re-payment of loan was made by the Company. B
The respondent-Bank was, therefore, within its power to take appropriate
action in consonance with law. Accordingly, a notice came to be issued on
October 16, 2004 which was received by the Company on October 19, 2004.
So far as the representation said to have been made by- the appellant on
October 20, 2004 is concerned, it is the case of the respondent-Bank that no
such representation was made by the appellant and such stand was taken C
belatedly by the Company with a view to get benefit of Mardia Chemicals.
In this connection our attention has been invited by the learned counsel for
the respondent-Bank to an affidavit-in-reply, dated September 5, 2005 filed by
D.K. Rudola, Chief Manager wherein it was stated that though the appellant
had asserted that it submitted a representation on October 20, 2004 in terms
of Section l3(3A)- of the Act, the Bank had never received the 'alleged D
representation'. A letter dated October 20, 2004 written by the appellant-
Company had been received by the Bank. That letter, however, did not refer
to the notice and was not in reply to the notice issued by the Bank. 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 E
October 20, 2004.

11. The Counsel also referred to an order passed by this Court on
October 24, 2005 which inter alia read as under-

"It is stated by learned counsel appearing for the respondent, as F
supported by the counter affidavit that the alleged representation
stated to have been made at page 55 to the respondent by the
petitioner had never in fact been received by the respondent. No
rejoinder has been filed The statement made in the counter affidavit
therefore till today stands unrebutted
G
One week's time granted to file rejoinder affidavit".

(emphasis supplied)

12. It is interesting to note that though the affidavit-in-reply was filed
on September 5, 2005, wherein it was explicitly stated that no representation H
120 SUPREME COURT REPORTS [2007) 9 S.C.R.
,_
A dated October 20, 2004 said to have been submitted by the appellant had been
received by the respondent-Bank, there was no rejoinder by the appellant-
Company. The said fact was pressed in service by the respondent~Bankat the
time of subsequent hearing of the case and was reflected in the order dated
October 24, 2004 extracted hereinabove. It was only·thereafter that a rejoinder
B affidavit-was filed on November 5, 2005 in which it was asserted by the
Company that the representation dated October 20, 2004 was made and was
sent through courier "First Flight Couri_ers Ltd." a reputed courier company
having its office at ~14-415, 2nd Floor, Sahara Trade Centre, Faizabad Road,
Lucknow. Thus, there is a word against word. Moreover, this Court cannot
be oblivious of the fact that it was orily after the order dated October 24, 2005
C passed by this Court that in rejoinder-affidavit filed in November, 2005, such
a statement was made. The respondent-Bank, in the circumstances appears
to be right in contending that in spite of notice issued under Section 13 (2)
of the Act, neither payment was made nor a representation was submitted by
the Company and only with a view to take benefit of Mardia Chemicals, as
an afterthought it was alleged that in pursuance of notice issued by the -
D respondent-Bank under sub-section (2) of Section 13 of the Act, the appellant-
Company had forwarded a representation, it ought to have been c'onsidered
by the respondent-Bank, a decision ought to have taken thereon by recording
reasons and such decision ·ought to have been intimated to the appellant-
Company~
E 13. It is pertinent to note at this stage that in Mardia Chemicals,
constitutional validity of certain provisions of the Act had been challenged.
Section 13 was one of them. It was contended that no adjudicatory mechanism
for resolution of disputes had been provided by the Legislature under the
said section and the provision was, therefore, ultra vires and unconstitutional.
F
- 14. Partly accepting the argument of the petitioner, this Court stated;

"45. In the background we have indicated above, we may consider as
to what forums or remedies are available to the borrower to ventilate
his grievance. The purpose of serving a notice upon the borrower
G under sub-section (2) of Section 13 of the Act is, that a reply may be
submitted by the borrower explaining the reasons as to why measures
may or may not be taken under sub-section (4) of Section 13 in case
of non-compliance of notice within 60 days. The creditor must apply
its mind to the objections raised in reply to such notice and an
internal mechanism must be particularly evolved to consider such
H
1'
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA [C.K. THAKKER, J.] 121

objections raised in the reply to the notice. There may be some A
meaningful consideration of the objections raised rather than to ritually
reject them and proceed to take drastic measures under sub-section
(4) of Section 13 of the Act. Once such a duty is envisaged on the
part of .the aeditor it would only be conducive to the principles of
fairness on the part of the banks and financial institutions in dealing B
with their borrowers to apprise them of the reason for not accepting
the objections or points ~aised in reply to the notice served upon
them before proceeding to take measures under sub-section (4) of
Section 13. Such reasons, overruling the objections of the borrower,
must also be communicated to the borrower by the secured creditor.
It will only be in fulfillment of a requirement of reasonableness and C
fairness in the dealings of institutional financing which is so important
from the point of view of the economy of the country and would serve
the purpose in the growth of a healthy economy. It would certainly
provide guidance to the secured debtors in general in conducting the
affairs in a manner that they may not be found defaulting and being
made liable for the unsavoury steps contained under sub-section (4) D
of Section 13. At the. same time, mor"._ importantly we must make it
dear unequivocally that communication of the reasons not accepting
the objections taken by the secured borrower may not be taken to
give an occasion to resort to such proceedings which are not
permissible under the provisions of the Act. But communication of E
reasons not to accept the objections of the borrower, would certainly
be for the purpose of his knowledge which would be a step forward
towards his right to know as to why his objections have not been
·accepted by the secured creditor who intends to resort to harsh steps
of taking over the management/business of viz. secured assets without
intervention of the court. Suell person in respect of whom steps under F
Section 13(4) of the Act are likely to be taken cannot be denied the
right to know the reason of non-acceptance and of his objections. It
is true, as per the provisions under the Act, he may not be entitled
to challenge the reasons communicat~d or the likely action of the
secured creditor at that point of time unless his right to approach the G
Debt Recovery Tribunal as provided under Section 17 of the Act
matures on any measure having been· taken under sub-section (4) of
Section 13 of the Act.

46. We are holding that it is necessary to communicate the reasons
for not accepting the objections raised by the borrower in reply to H
122 SUPREME COURT REPORTS {2007] 9 S.C.R.

A notice under Section 13(2) of the Act more particularly for the reason
that normally in the event of non-compliance with notice, the party
giving notice approaches the court to seek redressal but in the present
case, in view of ~ection 13 ( 1) of the Act the cr~ditor is empowered
to enforce the security himself without intervention of the Court.
B Therefore, it goes with logic and reason that he may be checked to
· communicate the reason for not accepting the objections, if raised and
before he takes the measures like taking over possession of the
secured assets etc".

The Court conduded;
c "80....................... .

l. Under sub-section (2) of Section 13 it is incumbent upon the
secured creditor to serve 60 days notice before proceeding to take any
of the measures as provide9 under sub-section (4) of Section 13 of
the Act. After service of notice, if the borrower raises any objection
D
or places facts for consideration of the secured credi!or, such reply
to the notice must be· considered with due application of mind and the
reasons for not accepting the objections, howsoever brief they may
be, must be communicated to the borrower. In connection with this
conclusion we have already held a discussion in the earlier part of the
E judgment. The reasons so communicated shall only be for the purposes
of the information/knowledge of the borrower without giving rise to
any right to approach the Debt Recovery Tribunal under Section 17
of the Act, at that stage".

15. It may also. be stated that after the above ·decision of this Court,
F Parliament amended the Act and after sub~seetion (3) of Section. 13, sub-
section (3-A) was inserted by Act 30 of 2004 with effect from November 11,
2004. The said provision reads thus;

(3A) If, on receipt of the notice under sub-section (2), the borrower
makes any representation or raises any objection, the secured creditor
G shall . consider such representation or objection and if the secured
creditor comes to the conclusion that such representation or objection
is not acceptable or tenable, he shall communicate' ~ithin one week
of receipt of such representation or objection the reasons for non-
acceptance of the representation or objection to the borrower:
H
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA [C.K. THAKKER, J.] 123

Provided that the reasons so communicated or the likely action of A
the secured creditor at the stage of commu:iication of reasons shall
not confer any right upon the borrower to prefer an application tq the
Debts Recovery Tribunal under section I 7 or the Court of District
Judge~ under section 17A."

16. The submission of the learned counsel for the respondent-Bank B
appears to be well-founded that taking clue from the decision in Mardia
Chemicals, the appellant-Company, as an afterthought alleged that it had
made a representation in pursuance of notice issued by the respondent-Bank
under Section 13(2) of the Act.

17. But, there is an additional factor also as to why we should not C
exercise discretionary and equitable jurisdiction i~ favour of the appellant. It
is contended by the learned counsel for the respondent-Bank that having
obtained interim order and benefit thereunder from this Court, the appellant-
Bank has not paid even a pie. The appellant is thus in contempt of the said
order. The Company has never challenged the condition as to payment of D
amount as directed by this Court. Thus, on the one hand, it had taken benefit
of the order of interim relief an.d on the other hand, did not comply with it
and failed to pay instalments as directed. Neither it raised any grievar-::e
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 E
Company is thus in contempt of the order of this Court, has impeded the
course of justice and has no right of hearing till it has purged itself of the
contempt.

I 8. As already noted, stay of dispossession was granted by this Court F
on mention be.ing made on April 28, 2005. The matter was then notified for
admission-hearing on May 6, 2005. A two-Judge Bench of which one of us
was a party (C.K. Thakker, J.) passed the following order;

"Permission to file additional documents is granted.

Issue notice. G
Subject to the petitioner's depositing an amount ofRs.20 lakhs per
month in this Court, there will be stay of the operation of the impugned
OTder. First of such payment shall be made by 6th June, 2005 and the
subsequent payments by 6th of each succeeding month. In default of
H
124 SUPREME COURT REPORTS [2007) 9 S.C.R.

A payment of any one instalment, the stay will stand vacated."

19. From the above order, it is 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 this Court. Jt was also made
clear that first of such payment should be made by 6th June, 2005 and
-B 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. It is an admitted fact that the order has not been
complied with and no payment as per the order has been made by the
appellant-Company to the respondent-Bank. The said fact has :also been
C reflected in the order of this Court passed on July 25, 2007, wherein it was
stated;

"It is recorded that the stay is transgressed by reason of the
admitted non-compliance with the order dated 6th May, 2005".

D 20. The original order was cif May, 2005 and the ~atter was heard finally
in May, 2007. Thus, about two years had passed and the order has been
thwarted with impunity. In our opinion, therefore, the learned counsel for the
respondent-Bank is right that such appellant does not deserve sympathy fi:om
the Court. ·

E 21. 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. We are not unmindful of the situation that 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
·F time such an action is needed in the larger interest of justice when a party
obtaining interim relief intentionally and deliber~tely flouts suc_h order by n,ot
· abiding the terms and conditions on which a relief is grantt'.d by the Court
in his favour.

22. In the leading case of Hadkinson v. Hadkinson, [1952) 2 All ER 567,
G the custody of a child was given to the mother by an interim order of the
court, but she was directed not to remove the child out of jurisdiction of the
Court without the prior permission of the Court. In spite of the order, the
mother removed the child to Australia without prior permission of the Court.
On a summons by father, the Court directed the mother to return the child
H within the jurisdiction of the Court. Meanwhile, an appeal was filed by the
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA [C.K. THAKKER, J.) 125

mother against that order. A preliminary objection was raised by the father A
that as the appellant was in contempt, she was not entitled to be heard on
merits.

23. Upholding the contention and speaking for the majority, Romer, L.J.
observed;
B
"I am clearly of the opinion that the mother was not entitled, in
view of her continuing contempt of court, to prosecute the present
appeal and that she will not be entitled to be heard in support of it
until she had taken the first and essential step towards purging her
conte:mpt of returning the child within the jurisdiction.
c
24. In a concurring judgment, Denning, L.J. also stated;

"The present case is a good example of a case where the
disobi~dience of the party impedes the course of justice. So long as
this boy remains in Australia, it is impossible for this court to enforce
its orders in respect of him. No good reason is shown why he should D
not be: returned to this country so as to be within the jurisdiction of
this Court. He should be returned before counsel is heard on the
merits of this case, so that, whatever order is made, this court will be
able to enforce it. I am prepared to accept the v;ew that in the first
instanc:1e the mother acted in ignorance of the order, but nevertheless, E
once she came to know of it, she ought to have put the matter right
by bringing the boy back. Until the boy is returned, we must decline
to hear her appeal. "

(emphasis supplied)
F
25. 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 G
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.

H
126 SUPREME COURT REPORTS [2007) 9 S.C.R.

A 26. In Gorden v. Gorden, (1904) 73 LJ 41 : 90 LT 597: 16 Dig 90, 1128,
Cozens Hardy, L.J. put the principle succinctly in the following words;

" ... .I desire expressly to limit my judgment to a case in which the
[party in contempt] is saying that the order complained of is outside
the jurisdiction of the court, as distinguished from the case of an
B order which, although it is within the jurisdiction of the court, ought
not, it is said, to have been made."

27. Lord Denning made the following pertinent observations in
Hadkinson;

C "It is a strong thing for a court to refuse to hear a party to a cause
and it .is only to be justified by grave considerations of public policy.
It is step which a court will only take when the contempt itself
impedes the course of justice and there is no other effective means
of securing his compliance."

D 28. There is still one more reason why the appellant-Company should
be denied equitable relief under Article 136 of the Constitution. According the
respondent-Bank, the appellant has not come with clean hands before the
Bank. It has suppressed and concealed material facts from the Court.'

29. It is not in dispute that when the loan was taken by the appellant-
E Company from the respondent-Bank, certain immovable properties including
residential premises of the Director of the Company had been mortgaged with
the Bank i:id a docw;;Pnt to that effect had been executed in favour of the
Bank. The owner/Director Sudha Goel had filed an affidavit dated February
16, 1996. In the said affidavit, it was, inter alia, stated as under:
F "That I/We declare and say that I/We have not created any
mortgage charge, or encumbrance of any kind or nature whatsoever
on or in respect of the said property. I/We further declare and say that
the said property is free from all encumbrances, claims or demands of
any kind or nature whatsoever ....
G
.. .I/We shall not sell, charge, encumbrance, lease, dispose off or
deal with any of my/our property in any manner whatsoever until such
time all the liabilities under the various facilities granted to M/s.
Prestige Lights Ltd. has been paid in full by the said Mis. Prestige
Lights Ltd. and the deponent has got the discharge confirmed in
H
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA [C.K. THAKKER, J.] 12 7

writing". A
30. In spite of the above declaration, undertaking and affidavit,
encumbrance has been created by the deponent and the Company over the
property in respect of which such undertaking has been furnished.

31. It was also alleged by the respondent-Bank that the. appellant- B
Company had shifted machinery to other place and stock statements were not
supplied to the respondent-Bank. On August 4, 2004, the Central Excise and
Custom Officials attached the Plant and Machinery of the Company for
recovery of its dues. On August 25, 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-Company. · C
On May 16, 2005 a collusive suit was got filed by one Yashpal in Haridwar
Court wherein the plaintiff had asserted that he was the tenant of Sudha Goel
in respect of mortgaged property in question and he should not be
dispossessed. A summons of the said suit was issued to the respondent-
Bank. On May 24, 2005, the respondent-Bank received another summons. from D
a Court that one Vijendra Singh Tyagi claimed himself to be the tenant of the
aforesaid mortgaged premises.

32. It is thus clear that though the appellant-Company 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 E :
'.1fld 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 place 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 . F .
before the Court, the Writ Court may refuse to entertain the petition and
dismiss it without entering into merits of the matter.

33. The object underlying the above principle. has been succinctly
stated by Scrutton, L.J. in R v. Kensington Income Tax Commissioners, ,
[(1917) 1 KB 486: 86 LJ KB 257: 116 LT 136], in the following words:, ·G ·

( "(I)t has been for many years the rule of the Court, and.one which
it is of the greatest importance to maintain, that wh~n an applicant
comes to the Court to obtain relief on an ex parte statement he ~hould
made a full and fair disclosure of all the
.
material.
facts-facts,'
. . ~
not law.
H
128 SUPREME COURT REPORTS [2007] 9 S.C.R.

A He must not misstate the law if he can help it-the Court is supposed
to know the law. But it knows nothing about the facts, and the
applicant must state fully and fairly the facts, and the penalty by
which the Court enforces that obligation is that if it finds out that the
facts have not been fully and fairly stated to it, the Court will set
aside, any action which it has taken on the faith of the imperfect
B statement". (emphasis supplied)

34. ·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
C 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 ~nd correct facts. If the material facts are not candidly stated or are
D suppressed or are distorted, the very functioning of the writ courts wou_ld
become impossible.

35. In the case on hand, several facts had been suppressed by the
appellant-Company. Collusive action has been taken with a view to deprive
the respondent-Bank from realizing legal and legitimate dues to which it was
E otherwise entitled. The Company 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-Bank prejudicially
affecting the interest of the Bank. It has created tenancy or third party's right
over the property mortgaged with the Bank. All these allegations are relevant
p when such petitioner comes before the Court and prays for discretionary and
equitable relief. In our judgment, the submission of the respondent-Bank is
well-founded that appellant is not entitled to ask for an extraordinary remedy
under Article 226 of the Constitution from the High Court as also equitable
remedy from this Court under Article 136 of the Constitution. A party, whose
hands are soiled, cannot hold the writ of the Court. We, therefore, hold that
G the High Court was not in error in refusing relief to the appellant-Company.

36. For the foregoing reasons, we hold that by dismissing the petition
in limine, the High Court has neither committed an error of law nor of
jurisdiction. The appellant-Company is not entitled to any relief. Though the
respondent-Bank is right in submitting that the appellant has suppressed
H
PRESTIGE LIGHTS LTD. v. STATE BANK OF INDIA [C.K. THAKKER, J.] 129

material facts from this Court as also that it has not complied with interim A
order. passed by the Court and it has, therefore, no right to claim h~aring on
merits, we have considered the merits of the matter also and we are of the
considered view that no case has been made out for interference with the.
action taken by the respondent-Bank or the order passed by the High Court.

37. The appeal, therefore, deserves to be dismissed and is accordingly B
dismissed with costs.

RP. Appeal dismissed.