Debt Recovery Appellate Tribunal - Delhi
Punjab And Sind Bank And Anr. vs Arun Kumar Arora And Anr. on 22 February, 2006
Equivalent citations: II(2006)BC232
ORDER
Motilal B. Naik, J. (Chairman)
1. This appeal is directed against an order passed by the Debts Recovery Tribunal(DRT), Chandigarh on 20.1.2006 in Interim Appeal No. 927/2005 and also the consequential order passed on 23.1.2006 in SA No. 69/2005.
2. Heard Mr. I .P. Singh. learned Counsel for the appellants as well as Mr. N.C. Sahni, learned Counsel for the 1st respondent. In order to appreciate the contentions raised, few facts which are necessary are recorded hereunder. The respondents mortgaged certain properties towards the loan facilities obtained by M/s. Partap Trading Company and M/s. Prabhat Trading Company owned by the respondents herein with their better halfs. As there was default, the appellant Bank involved provisions under the Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the Securitisation Act) and took possession of the property offered as security on behalf of M/s. Pratap Trading Company of which both the respondents are partners. Aggrieved by the steps taken by the appellant Bank, M/s. Pratap Trading Company represented by these two respondents filed objections before the DRT, Chandigarh under Section 17 of the Securitisation Act. It appears, during pendency of the Securitisation application, some understanding is arrived at between the appellant Bank and the respondents according to which both the respondents were required to deposit certain amounts for redelivery of the property. Since Mr. Arun Kumar Arora, 1st respondent herein failed to deposit his share, the appellant Bank took possession of the half portion of the property which is stated to be his half share. Thereafter, the 1st respondent again moved the Tribunal for a direction to the appellant Bank to redeliver the possession to him. The DRT, Chandigarh passed an order directing the appellant Bank to redeliver the portion. Against the said order, the appellant Bank had filed an appeal before this appellate forum and this Tribuna) at that stage having satisfied itself on the basis of the grounds urged in the appeal, stayed the operation of the order. Letter, on the appearance of Mr. Arun Kumar Arora who is the contesting respondent, the appeal was disposed of while maintaining status quo with regard to the possession of the property directing the DRT. Chandigarh to dispose of the S.A. No. 69/2005 finally so that the controversy relating to the steps taken by the appellant Bank under the Securitisation Act could be set at rest. However, the said appeal is still pending before the DRT, Chandigarh.
3. While so, the Hon'ble Punjab & Haryana High Court, in a batch of writ petitions, filed questioning the legality and validity of the actions taken by- various Banks and financial institutions under the provisions of the Securitisation Act, decided the issues in Civil Writ Petition No. 2550 of 2005 in "Kalyani Sales Company and Anr. v. Union of India and Anr." by order dated 8.12.2005. Basing on the judgment rendered by the Hon'ble Punjab & Haryana High Court in the above case, Mr. Arun Kumar Arora, the 1 st respondent herein moved an interim appeal No. 927/2005 in the pending SA No. 69/2005 before the DRT, Chandigarh, praying that in view of the ratio laid down by the Hon'ble High Court, the appellant Bank is not entitled to take physical possession and further sought a direction to the appellant Bank to redeliver the possession of the property to him.
4. The said interim appeal was contested by the appellant Bank herein on the premise that the ratio laid down by the Hon'ble High Court would not be of any avail to the 1 st respondent who had sought interim relief and pleaded dismissal of the appeal. However, the Tribunal by order dated 20.1.2006 allowed the said interim appeal directing the secured creditor Bank to open the seal of portion of the premises i.e. Shop No. 18, New Sabzi Mandi, Jalandhar and hand over the possession. A consequential order was also passed on 23.1.2006 to comply with the order with immediate effect. Thus, the present appeal came to be filed by the secured creditor Bank,
5. On the basis of submissions made by both the learned Counsel, the point for consideration is whether the Tribunal is justified in issuing a direction to these appellants to redeliver the possession of the property basing oh the judgment rendered by the Hon'ble Punjab & Haryana High Court in "Kalyani Sales Company and Anr. v. Union of India and Anr. I (2006) BC 1". The Hon'ble High Court formulated the following questions for consideration:
1. Whether the constitutionality of the provisions of this Act can be challenged before this Court by invoking the doctrine of sub silentio?
2. Whether the Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, would have the jurisdiction to entertain an application contemplated under Section 17 of the Act in respect of the debts less than 10 lacs but more than Rs. 1 lac?
3. Whether ad valorem Court fee prescribed under Rule 7 of the Debts Recovery Tribunal(Procedure) Rules, 1993, is payable on an application under Section 17(1) of the Act in the absence of any rule framed under the said Act?
4. Whether the Bank or financial institution having elected to seek their remedy in terms of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, for recovery of debt of Rs. 10 lacs or more or in Civil Court for an amount less than Rs. 10 lacs and over Rs. 1 lac, can still invoke the jurisdiction of the Act for realising the secured assets without either withdrawing or abandoning the same?
5. Whether recourse to take possession of the secured assets of the borrower in terms of Section 13(4) of the Act is the power to take actual physical possession of the immovable property?
6. We are presently concerned with issue No. 5 i.e. whether recourse to take possession of the secured assets of the borrower in terms of Section 13(4) of the Act is the power to take actual physical possession of the immovable property? The learned Judges of the Hon'ble High Court discussed this issue from para41 onwards in the said judgment. In para 42 of the said judgment, the Hon'ble High Court expressed thus:
We are of the opinion that if the physical possession is taken soon after the expiry of 60 days, the remedy of an application under Section 17 of the Act becomes illusory and meaningless. The person is dispossessed even before adjudication of the objections by the first adjudicatory authority. On the other hand, Sub-section (8) of Section 13 of the Act provides that the secured assets shall not be sold if the dues of the secured creditor together with all costs, charges and expenses are tendered to the secured creditor at any time before the date fixed for sale or transfer. The possession is taken as per notice appended as Appendix IV in terms of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. The notice, in fact, cautions the borrower in particular and the public in general not to deal with the property. Undoubtedly, the notice is in the nature of attachment and only contemplates a symbolic possession. The factual physical possession of immovable property under Sub-rule (3) of Rule 8 can be taken by the secured creditor of property, such as a vacant plot or a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice appended as Appendix IV in terms of Rule 8(1) of the Security Interest(Enforcement) Rules, 2002. Actual physical possession is to be delivered in terms of Rule 9(6) read with Appendix V appended to such rules. The authorized officer is to deliver the property to the purchaser free from encumbrances in terms of Sub-rule (9) of Rule 9 of Security Interest(Enforcement) Rules, 2002.
7. In Para 43 of the said judgment, it is further held thus:
Therefore, we have no hesitation in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice under Section 13(4) of the Act so as to defeat the adjudication of his representation or objection by the Debts Recovery Tribunal. The physical possession can be taken by the Bank or the financial institution by following the procedure laid down in Section 14 of the Act or after the sale is confirmed in terms of Rule 9, particularly Sub-rule (9) of Rule 9 of Security Interest(Enforcement) Rules, 2002.
8. Counsel for the appellant Bank stated that as observed in para 43 of the said judgment, physical possession can be taken by the Bank or the financial institution following the procedure laid down under Section 14 of the Securitisation Act or after confirmation of sale. I t is stated by the learned Counsel that the appellant issued notice under Section 13(2) requiring the respondents to answer and thereafter the provisions of Section 13(4) of the Securitisation Act were invoked. The appellant desired to take possession and, therefore, moved the concerned Judicial Magistrate by preferring an application under Section 14 of the Securitisation Act. On the basis of the application, the District Magistrate by order dated 18.12.2003 deputed the Tehsildar, Jalandhar-II to act as Duty Magistrate for the purpose of taking possession of the premises indicated by the Bank. Learned Counsel while drawing my attention to the directions issued by the District Magistrate, stated that the appellant has taken steps under Section 14 of the Securitisation Act and thereafter the property in question was taken in possession way back on 12.3.2004. Thus, according to the learned Counsel, the possession taken by the appellant Bank is in tune with the decision rendered by the Hon'ble High Court and, as such, the Tribunal below, could not have ignored this aspect while directing the appellant to redeliver the possession. I t is pleaded that the impugned order be set aside.
9. Mr, N.C. Sahni, learned Counsel for the 1st respondent, on the contrary submitted that Section 14 of the Securitisation Act is not an independent provision and that from the reading of the appeal grounds appearing in page 4 of the paper book, the possession reported to have been taken on 12.3.2004 is under Section 13(4) of the Securitisation Act. The learned Counsel stated grounds urged in para 5(B) of the appeal cannot be ignored which belies the stand taken on behalf of the appellant Bank. Counsel stated, as a result of taking physical possession, the appellant Bank is denying the respondent his right to hold the possession and continue his business activity and pleaded dismissal of the appeal. Apart from making these submissions, the learned Counsel also urged several propositions before me drawing my attention to the judgment of the Hon'ble Apex Court in "Mardia Chemicals Ltd., etc. etc. v. U.O.I. and Ors. etc. etc. 110(2004) DLT 665(SC) : II (2004) BC 397(SC)" wherein constitutional validity of certain provisions of the Act were examined by the Hon'ble Supreme Court and stated as held by the Hon'ble Supreme Court, no possession can be taken when Securitisation Appeal filed under Section 17 of the Act is pending before the DRT for consideration.
10. On the basis of submissions made by both the Counsel, the scope of this appeal centres around the judgment of the Hon'ble Punjab & Haryana High Court particularly referable to issue No. 5. Insofar as the discrepancy pointed out by the learned Counsel for the 1st respondent in para 5(b) of the appeal grounds is concerned, the learned Counsel for the appellant Bank drew my attention to the material paper at page 218 which is the communication sent from the Office of the District Magistrate, Jalandhar addressed to the Senior Superintendent of Police, Jalandhar dated 18.12.2003 copy of which was sent to the Authorised Officer of the appellant Bank and to the Tehsildar, Jalandhar-II. From a reading of this document, I have no hesitation to hold that the appellant Bank had taken possession of the property in question only after invoking the provisions of Section 14 of the Securitisation Act,
11. Under the scheme of the Securitisation Act, the secured creditor shall issue a notice under Section 13(2) to the borrower requiring him to discharge his liability to the secured creditor. Within sixty days from the date of such notice, the borrower is entitled to file his objection or reply to the notice. For any reason, the borrower fails to discharge his liability in full within the stipulated time, the secured creditor is entitled to take measures available in it under Sub-section 4 of Section 13 such as taking possession of the secured assets of the borrower, taking over the management of the business of the borrower, appoint any person to manage these secured assets, etc.
12. The Legislature has provided necessary aid to the Secured Creditor for securing physical possession of the secured asset of the borrower under Section 14 of the Act which says:
Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured assets is requires to be sold or transferred by the secured creditor, under the provisions of the Act, the secured creditor may for the purpose of taking possession or control of such secured asset, request in writing to the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him:
(a) take possession of such asset and documents relating thereto; and
(b) forward such assets and documents to the secured creditor.
13. As held by the Hon'ble Punjab & Haryana High Court in para 43 of the judgment, taking physical possession of the property is permissible by following the procedure laid down under Section 18 of the Securitisation Act or after the sale is confirmed in terms of Rule 9. These measures taken by the secured creditors under Section 13(4) and Section 14 are subject to challenge before the DRTs.
14. Admittedly, in this case, the application filed by the borrower under Section 17 of the Act in SA No. 69/2005 is pending before the Presiding Officer, DRT, Chandigarh. In my considered view, the Presiding Officer could have disposed of SANo. 69/2005 on priority basis instead of deciding the interlocutory applications, so that the controversy could have been resolved once for all.
15. In view of above discussion. I am inclined to agree with the submissions made on behalf of the appellant that the physical possession of the property in question taken by the appellant Bank is only after following the due procedure provided under Section 14 of the Securitisation Act which step is in tune with the ratio laid down by the Hon'ble Punjab & Haryana High Court in M/s. Kalyani Sales Company and Anr. v. Union of India and Anr.(supra). In that view of matter, this appeal is allowed. Consequently, the impugned order is set aside. No costs.