Chattisgarh High Court
M/S City Mall Vikash Pvt. Limited vs Punjab National Bank on 31 August, 2017
Author: Sanjay K. Agrawal
Bench: Sanjay K. Agrawal
W.P.(C)No.1686/2017
Page 1 of 12
AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
Writ Petition (C) No.1686 of 2017
(Arising out of order dated 12-5-2017 in Case No.34/B-121/2015-16 of
the learned District Magistrate, Bilaspur)
Order reserved on: 17-8-2017
Order delivered on: 31-8-2017
1. M/s. City Mall Vikash Pvt. Limited, Office at Mangla Chowk,
Opposite Minocha Colony, Bilaspur, Chhattisgarh, Through its
Director: Sanjay Gupta.
2. Mr. Sanjay Gupta, S/o Shri K K Gupta, aged about 48 years, City
Mall - 36, NH - 6, GE Raod, Raipur 492 006, Chhattisgarh.
3. Smt. Pinki Gupta, W/o Shri Sanjay Gupta, aged about 46 years,
City Mall - 36, NH - 6, GE Raod, Raipur 492 006, Chhattisgarh.
4. Smt. Neelam Gupta, W/o Shri Arun Gupta, aged about 50 years,
City Mall - 36, NH - 6, GE Raod, Raipur 492 006, Chhattisgarh.
---- Petitioners
Versus
1. Punjab National Bank, Recovery Department, Katora Talab Office,
Katora Talab, Raipur 492 001, Chhattisgarh, Through its
Authorised Officer.
2. The District Collector & District Magistrate, District Bilaspur,
Bilaspur Collectorate, Bilaspur, Chhattisgarh.
---- Respondents
For Petitioners: Mr. Satish Agrawal & Mr. Ankit Singhal, Advocates. For Respondent No.1: Mr. B.P. Sharma, Advocate. For Respondent No.2 / State: -
Mr. P.K. Bhaduri, Govt. Advocate.
Hon'ble Shri Justice Sanjay K. Agrawal C.A.V. Order
1. This Court has heard learned counsel for the parties on I.A.No.1, application for grant of interim relief, on 17-8-2017 and reserved for orders on the question of continuance or non-continuance of the W.P.(C)No.1686/2017 Page 2 of 12 interim order.
2. Before entering into the said question, it would be appropriate to notice that by order dated 23-6-2017, a coordinate Bench of this Court has passed an interim order which states as under: -
"Having considered the submissions made by learned counsel for the parties, I am inclined to protect the petitioners till the matter is heard considering that the property of which possession is sought to be taken over is running business. However, considering that there is huge loan liability, I am inclined to protect the petitioners by an interim order in the manner that the possession of the property of dispute shall not be taken over pursuant to impugned order till the next date of hearing, subject to petitioners depositing with the Bank, Rs. 5 crores within a period of six weeks."
3. The Court after granting interim order, directed the matter to be listed after eight weeks. When the matter was taken-up for hearing on 17-8-2017, learned counsel appearing for the respondent Bank submitted that the amount of Rs.5 crores was required to be paid by the petitioners within a period of six weeks, but that was not paid till this date, therefore, the interim order is liable to be vacated.
4. Mr. Satish Agrawal, learned counsel appearing for the petitioners, would submit that the petitioners made all endeavours to deposit the said amount, but for want of financial resources, they could not deposit the said amount, therefore, three months' further time be granted to deposit the said amount.
5. Considering the fact that originally six weeks' time has been granted and the matter was directed to be listed after eight weeks, W.P.(C)No.1686/2017 Page 3 of 12 but no amount has been deposited till this date to show the bona fide, this Court is not inclined to further extend the time for making deposit of the said amount as per the order dated 23-6-2017 and inclined to direct the taking-over of physical possession of the subject property to the secured creditor - Punjab National Bank.
6. Mr. Satish Agrawal, would further submit that the secured asset is running business concern and it is a shopping mall as well as Marriott Hotel is being run in the said campus, therefore, it be directed that the petitioners' borrowers' interest may be protected in accordance with law.
7. Mr. B.P. Sharma, learned counsel appearing for the respondent No.1 Bank, would submit that the Bank shall evict the tenants or lessees only in accordance with law.
8. In order to consider the plea raised at the Bar, it would be appropriate to consider Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the SARFAESI Act') which states as under: -
"13. Enforcement of security interest.
(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:--
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured W.P.(C)No.1686/2017 Page 4 of 12 asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt."
9. Likewise Section 15 of the SARFAESI Act provides for manner and effect of take over of management which states as under: -
"15. Manner and effect of take over of management.
--(1) When the management of business of a borrower is taken over by a asset reconstruction company under clause (a) of section 9 or, as the case may be, by a secured creditor under clause (b) of sub-section (4) of section 13, the secured creditor may, by publishing a W.P.(C)No.1686/2017 Page 5 of 12 notice in a newspaper published in English language and in a newspaper published in an Indian language in circulation in the place where the principal office of the borrower is situated, appoint as many persons as it thinks fit--
(a) in a case in which the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), to be the directors of that borrower in accordance with the provisions of that Act; or
(b) in any other case, to be the administrator of the business of the borrower.
(2) On publication of a notice under sub-section (1),--
(a) in any case where the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), all persons holding office as directors of the company and in any other case, all persons holding any office having power of superintendence, direction and control of the business of the borrower immediately before the publication of the notice under sub-
section (1), shall be deemed to have vacated their offices as such;
(b) any contract of management between the borrower and any director or manager thereof holding office as such immediately before publication of the notice under sub-section (1), shall be deemed to be terminated;
(c) the directors or the administrators appointed under this section shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the business of the borrower is, or appears to be, entitled and all the property and W.P.(C)No.1686/2017 Page 6 of 12 effects of the business of the borrower shall be deemed to be in the custody of the directors or administrators, as the case may be, as from the date of the publication of the notice;
(d) the directors appointed under this section shall, for all purposes, be the directors of the company of the borrower and such directors or as the case may be, the administrators appointed under this section, shall alone be entitled to exercise all the powers of the directors or as the case may be, of the persons exercising powers of superintendence, direction and control, of the business of the borrower whether such powers are derived from the memorandum or articles of association of the company of the borrower or from any other source whatsoever. (3) Where the management of the business of a borrower, being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the secured creditor, then, notwithstanding anything contained in the said Act or in the memorandum or articles of association of such borrower,--
(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the secured creditor;
(c) no proceeding for the winding up of such company or for the appointment of a receiver in respect thereof shall lie in any court, except with the consent of the secured creditor.
(4) Where the management of the business of a borrower had been taken over by the secured creditor, W.P.(C)No.1686/2017 Page 7 of 12 the secured creditor shall, on realisation of his debt in full, restore the management of the business of the borrower to him:
Provided that if any secured creditor jointly with other secured creditors or any asset reconstruction company or financial institution or any other assignee has converted part of its debt into shares of a borrower company and thereby acquired controlling interest in the borrower company, such secured creditors shall not be liable to restore the management of the business to such borrower."
10. Rule 8 of the Security Interest (Enforcement) Rules, 2002 (for short, 'the Rules, 2002') provides for sale of immovable secured assets. Sub-rules (1) to (4) of Rule 8 of the Rules, 2002 states as follows: -
"8. Sale of immovable secured assets.--(1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.
(2) The possession notice as referred to in sub-
rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer.
(2-A) All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes prescribed under sub- W.P.(C)No.1686/2017 Page 8 of 12 rule (1) and sub-rule (2) of rule 8.
(3) In the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property.
(4) The authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of."
11. Rule 8 (3) of the Rules, 2002 clearly provides that after actual possession is taken, authorised officer is under obligation to undertake that such property shall be kept in his own custody or in the custody of any other person authorised or appointed by him, who shall take as much care of the property in his custody as an owner of ordinary produce would be. Rule 8 (4) further obliges the authorised officer to take steps for preservation and protection of secured assets, till they are sold and otherwise disposed of.
12. The symbolic possession of the subject property has already been taken and the learned District Magistrate has granted order under Section 14 of the SARFAESI Act providing assistance for taking over the physical possession. Section 15 of the SARFAESI Act clearly provides manner and effect of taking over of management i.e. running business concern and thereby if physical possession of the secured asset is taken by the respondent Bank then the Bank has to proceed strictly in accordance with Section 13 (4) read with W.P.(C)No.1686/2017 Page 9 of 12 Section 15 of the SARFAESI Act and sub-rules (3) and (4) of Rule 8 of the Rules, 2002.
13. The Supreme Court in the matter of Mathew Varghese v. M. Amritha Kumar and others1 observed as under: -
"34. ... Sub-rule (3) of Rule 8 really casts much more onerous responsibility on the secured creditor once possession is actually taken by its authorised officer. Under sub-rule (3) of Rule 8, the property taken possession of by the secured creditor should be kept in its custody or in the custody of a person authorised or appointed by it and it is stipulated that such person holding possession should take as much care of the property in its custody as a owner of ordinary prudence would under similar circumstances take care of such property. The underlying purport of such a requirement is to ensure that under no circumstances, the right of the owner till such right is transferred in the manner known to law is infringed. Merely because the provisions of the SARFAESI Act and the Rules enable the secured creditor to take possession of such an immovable property belonging to the owner and also empowers to deal with it by way of sale or transfer for the purpose of realising the secured debt of the borrower, it does not mean that such wide power can be exercised arbitrarily or whimsically to the utter disadvantage of the borrower.
35. ... Sub-rule (4), governs all secured assets, movable or immovable and a further responsibility is created on the authorised officer to take steps for the preservation and protection of secured assets and for that purpose can even insure such assets, until they are sold or otherwise disposed of. Therefore, a 1 (2014) 5 SCC 610 W.P.(C)No.1686/2017 Page 10 of 12 reading of Rules 8 and 9, in particular, sub-rules (1) to (4) and (6) of Rule 8 and sub-rule (1) of Rule 9 makes it clear that simply because a secured interest in a secured asset is created by the borrower in favour of the secured creditor, the said asset in the event of the same having become a non-performing asset cannot be dealt with in a light-hearted manner by way of sale or transfer or disposed of in a casual manner or by not adhering to the prescriptions contained under the SARFAESI Act and the abovesaid Rules mentioned by us."
14. The term "immovable property" has been defined by the Supreme Court in the matters of Ananda Behera and another v. State of Orissa and another2 and Ram Rattan (dead) by legal representatives v. Bajrang Lal and others3.
15. At this stage, it would be appropriate to notice the judgment cited by Mr. Sharma, learned counsel for the respondent Bank, i.e. Vishal N. Kalsaria v. Bank of India and others 4 in which Their Lordships of the Supreme Court while dealing with Sections 13, 14, 34, 35 and 37 of the SARFAESI Act and distinguishing the object of the SARFAESI Act from that of the relevant Rent Control Act, held as under: -
"37. It is a settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights 2 AIR 1956 SC 17 3 AIR 1978 SC 1393 4 (2016) 3 SCC 762 W.P.(C)No.1686/2017 Page 11 of 12 of protection given to the tenant. ..."
16. Likewise, in the written submissions submitted by Mr. Sharma on behalf of the respondent Bank, he has made the following note: -
"The humble submission on the respondent bank is that the respondent bank will act only in accordance with law with regard to all the persons in occupation after taking over possession with the help of the District Administration."
17. In view of the above-stated discussion and submissions of the parties, I.A.No.1, application for grant of interim relief, is disposed of in following terms: -
1. The respondent Bank/secured creditor may proceed to take actual possession of the secured asset in accordance with law.
2. The respondent Bank is at liberty to keep the secured asset in its own custody or in the custody of a person authorised or appointed by it / or through the present management with a condition that such person having possession shall take care of the property in custody protecting the rights of the petitioners till such right is transferred in accordance with law.
3. The respondent Bank is directed to strictly comply with the provisions contained in Section 13 (4) read with Section 15 of the SARFAESI Act and sub-rules (3) and (4) of Rule 8 of the Rules, 2002, without fail and to proceed in accordance with law.
4. The respondent Bank is further directed to strictly comply W.P.(C)No.1686/2017 Page 12 of 12 with the binding dictum of the Supreme Court laid down in paragraphs 34 and 35 of Mathew Varghese (supra), quoted herein-above, after taking actual possession of the secured asset and the respondent will take proper care of the property in custody and for that purpose can insure the secured asset until they are sold or otherwise disposed of.
5. This will be subject to the final outcome of the writ petition.
18. List it for further orders in the week commencing from 18-9-2017.
Sd/-
(Sanjay K. Agrawal) Judge Soma