Allahabad High Court
Vijay Laghu Udyog vs Punjab National Bank on 14 January, 2004
Equivalent citations: [2004]53SCL275(ALL)
Bench: Pradeen Kant, Devi Prasad Singh
ORDER
1. These are two writ petitions namely, Writ Petition No. 119 (M/B) of 2004 and Writ Petition No. 120 (M/B) of 2004, since the question of fact and law is the same, we decide the matter by passing a common order.
2. Heard learned counsel for the parties.
3. Learned counsel for the respondents Shri Sharad Bhatnagar appearing for the bank raises a preliminary objection, against the maintainability of the present writ petition on the ground that under the provision of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act No. 54 of 2002) (hereinafter referred to as the Act), the petitioner is not entitled to challenge any action initiated under Section 13 unless measures have been taken under Section 13(4) of the Act. The submission is that the appeal under Section 17 would lie only against the measures taken under Section 13(4) of the Act and not otherwise. As a consequence of the scheme of the Act, it is being urged that the petitioners would not be allowed to obstruct the action which is taken under the provision of the aforesaid Act, by allowing them to challenge the action step-by-step, by filing a writ petition at intermittent stages, when the Act itself does not envisage any such remedy being provided to the defaulter and the only statutory remedy which has been provided can be availed under Section 17 in the manner provided therein.
4. Learned counsel for the petitioner Shri A.K, Jauhari, in response to the preliminary objection submits that since no appeal under the Act can be filed against the present impugned notice/order, the same not being a measure taken within the meaning of Section 13(4) of the Act, the constitutional remedy under Article 226 of the Constitution of India could not be said to be barred nor the same is dependent upon any statutory remedy being specifically provided under the Act against each and every action of the Bank.
5. It is not in dispute by the petitioners in both the petitions rather it is admitted to the petitioners that the amount of loan taken in the year, 1985-86, which is either in the shape of loan, cash/credit or overdraft, could not be repaid and therefore, the present action under Section 13 has been initiated, viz., the Bank after issuance of notice under Section 13(2) of the Act has issued the impugned notice saying that since the petitioners have not complied with the terms of the notice by meeting the demand, the possession of the property described therein would be taken on or after a particular date.
6. For deciding the aforesaid controversy it would be apposite to understand the object, purpose, and the scheme of the Act. The Act No. 54 of 2002 has been enacted to regulate Securitisation and Re-construction of Financial Assets and Enforcement of Security Interest and for matters connected therewith and incidental thereto.
7. The Act extends to the whole of India and it has come into force on 21st June, 2004. The term 'asset reconstruction' has been defined in Section 2(b), which means acquisition by any Securitisation Company or Reconstruction Company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance.
8. The definition makes it clear that the acquisition by any Securitisation Company or Re-construction Company of any right or interest of any bank or financial institution in any financial assistance namely where the money has not been repaid, which has been advanced by virtue of such financial assistance, advances the object and purpose for which the Act, has been formulated.
9. The term 'default' has been defined in Section 2(j), which means nonpayment of any principal debt or interest thereupon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as "non-performing asset" in the books of account of the secured creditor in accordance with the directions or guidelines issued by the Reserve Bank.
10. The term 'financial assistance' has been defined in Section 2(k), which means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution.
11. The term 'financial asset' has been defined in Section 2(1)(l), which means debt or receivables and includes--
(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or
(ii) any debt or receivables secured by mortgage or, or charge on, immovable property; or
(iii) a mortgage, charge, hypothecation or pledge of movable property; or
(iv) any right or interest in the security, whether full or part underlying such debt or receivables; or
(v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest in existing, future, accruing, conditional or contingent; or
(vi) any financial assistance;
"Secured asset" and "Secured creditor" have also been defined in Section 2(zc) and 2(zd), whereas "Securitisation" and "Securitisation Company" have been defined in Section 2(z) and 2(za).
12. Chapter III of the Act is with respect to the Enforcement of Security Interest. Section 13(1) to Section 13(4) and Section 17, which are relevant to the instant controversy are being quoted below:--
"13. Enforcement of security interest--(1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882, any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under Sub-section (4).
(3) The notice referred to in Sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.
(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 asset;
(b) take over the management of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset;
(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.
"17. Right to appeal.--(1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, may prefer an appeal to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken.
(2) Where an appeal is preferred by a borrower, such appeal shall not be entertained by the Debts Recovery Tribunal unless the borrower has deposited with the Debts Recovery Tribunal seventy-five percent of the amount claimed in the notice referred to in Sub-section (2) of Section 13:
Provided that the Debts Recovery Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.
(3) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and rules made thereunder."
13. Section 13(1) is the charging section which confers power and vest an authority with any secured creditor to enforce any security interest created in favour of any secured creditor without the intervention of the Court or the tribunal, by such creditor, in accordance with the provision of this Act.
14. The enactment thus clearly ousts the jurisdiction of the Court in the matter of actions for enforcement of security interest under Section 13(1) of the Act.
15. The said section starts with the non obstante clause meaning thereby that the provision contained therein have an overriding effect upon the provisions of the Section 69 or Section 69A of the Transfer of Property Act, 1882. The right to enforce the security interest without intervention of the Court or Tribunal does not call for any ambiguity in holding that the enactment has been made with a view to realise the amount against an account which has been declared as non-performing asset and which could not be realised so effectively under any other law. It is the public money, which remains unrealised and therefore, the special enactment has been made.
16. The scheme of the Act particularly that of Section 13 not only prescribes the steps, which can be taken for realisation of the defaulted amount but also enumerates the conditions under which action under Section 13 could be taken.
17. For taking action under Section 13, there (1) must be a borrower who is under a liability to a secured creditor (2) under a security agreement and (3) such a borrower must have committed default in repayment of the secured debt or any instalment thereof. The account of such defaulter, in respect of such debt (4) should have been classified by the secured creditor as non-performing asset and if all these conditions are in existence, the secured creditor may require the borrower by notice in writing to discharge his liability in full to the secured creditor within sixty days from the date of notice, failing which the secured creditor shall be entitled to exercise all or any of the rights under Sub-section 4.
18. A notice under Section 13(2) has to be issued to the borrower, if he is in default and his account has been declared and classified as a non-performing asset by the secured creditor. The notice, so issued would give an opportunity to the borrower to pay the amount demanded within a period of sixty days i.e., within the period prescribed in the Statute. On failure by the borrower to respond to the notice, by making the necessary deposit the secured creditor would be at liberty to take action under subsection 4 of Section 13.
19. Sub-section 3 of Section 13 obligates the secured creditor to give details of the amount payable by the borrower and the secured assets, intended to be enforced by the secured creditor in the event of nonpayment of secured debts by the borrowers in the notice.
20. Sub section 4, confers the authority upon the secured creditor to take measures given therein for recovering the secured debt as provided in Sub-clauses a, b, c, and d of Section 13(4), in case the borrower fails to discharge his liability in full within the specified period prescribed under Sub-section 2, namely, from the date of receipt of notice under the aforesaid provision with the details given therein as provided under subsection 3. The notice under Section 13 being the statutory notice must conform to the provisions of Sub-sections 2 and 3 of Section 13 and thus must contain all particulars as mentioned therein.
21. Coming to the remedy available to such a borrower against whom a notice under Section 13(2), has been issued requiring him to discharge his liability within a specified period of sixty days, failing which, measures as provided under Sub-section 4 of Section 13 would be taken, it would have to be seen that Section 13 does not provide any remedy, namely, any right of challenge to any of the action taken under Section 13(2), viz., against issuance of the notice under Section 13(2). The remedy under the Act has only been provided under Section 17 by giving a right to appeal to any person (including the borrower), if he feels aggrieved by any of the measures taken under Sub-section 4 of Section 13.
22. The point for consideration is as to whether on failure on the part of the borrower in making the deposit, any action taken or notice issued after the issue of notice under Section 13(2), which does not constitute any action or measures taken under Sub-section 4 of Section 13 can be challenged in appeal treating it to be a measure taken within the meaning of Section 13(4) or otherwise ? And also whether on failure on the part of the borrower to discharge his liability after issuance of notice under Section 13(2), the borrower can challenge an order/notice intimating him that because of failure on his part to make the payment by discharging his liability in full, measures as provided under Sub-clauses a, b, c, d of Section 13(4) would be taken within a given time, at a later stage.
23. In the instant case, the impugned order/notice says that since the petitioners have not discharged the liability despite due service of notice under Section 13(2), the possession of the assets shall be taken after a given time namely on or after 15th January, 2004. The question is that whether such a notice/order would also be an order within the meaning of Section 13(4) so as to attract the provision of appeal under Section 17 ? If not, whether the same can be challenged by filing a writ-petition ?
24. The intention of the enactment is to get the money realised with respect to the debts the accounts of which have been classified as 'non performing assets' under the Act, and to avoid the delay which normally occurs in pursuing the legal remedy available in regular Court of law. The very fact that the realisation of the amount defaulted can be made by enforcement of security interest without intervention of the Court or the Tribunal means and establishes that the Court or tribunal would only interfere in the matter only to the extent and in the manner provided as they have been permitted to do, under the Act.
25. Section 17 gives the period of limitation for filing an appeal as forty-five days from the date on which a measure provided under Section 13(4) had been taken. Under the Act only one appeal has been provided, i.e., against the measures taken under Section 13(4) of the Act. In case an interpretation is given that the appeal would be available at the stage of issuance of notice under Section 13(2) also or at any subsequent stages even before measures under Section 13(4) are taken then it would be providing avenue of multiple appeals which would be against the spirit of the Act, besides being in violation of the specific provision of appeal, provided in the act.
26. Section 18 provides a further appeal against the order of the Debt Recovery Tribunal to the Appellate Tribunal.
27. The right of appeal is a statutory right, which can be conferred only by the statute or by the statutory rules. The Courts while interpreting the Act or the statutory rules cannot introduce right or a forum for appeal particularly when the statute itself provides the right of appeal against specified orders and also the forum for the purpose.
28. The period of limitation of filing an appeal against the measure taken under Section 13(2) is to be counted from the date such measure had been taken. The aforesaid provision is couched in 'past perfect tense', namely, when a fact has already been accomplished only then the appeal would be filed. This is simple and clear interpretation which can be attributed to the words 'may prefer an appeal to the Debts Recovery Tribunal having jurisdiction in the matter within 45 days on the date such measure had been taken'.
29. The appeal would thus lie, when some measure under Section 13(4) had already been taken and not against any proposed measure, which is likely to be taken on some future date.
30. It was neither necessary to provide the remedy of appeal or right of challenge to the borrower, during the interlocutory stages between the issuance of notice under Section 13(2) and taking measures under Section 13(4), nor required, as the interest of the borrower is amply protected under the Act (Section 19) in case it is later on established, in appeal either under Section 17 or on further appeal under Section 18 as the case may be, not only to have the secured assets back, but also to have appropriate compensation alongwith costs. Section 19 of the Act safeguards the interest of a borrower in case the secured creditor is found to have taken measures wrongly under Section 13(4) by giving an authority to the Debt Recovery Tribunal or the Appellate Tribunal to award such compensation and cost as may be determined by the Tribunal besides directing the return of secured assets. Section 19 of the Act is reproduced below :--
"19. Right of borrower to receive compensation and costs in certain cases.--If the Debts Recovery Tribunal or the Appellate Tribunal, as the case may be, on an appeal filed under Section 17 or Section 18 holds the possession of secured assets by the secured creditor as wrongful and directs the secured creditor to return such secured assets to the concerned borrower, such borrower shall be entitled to payment of such compensation and costs as may be determined by such Tribunal or Appellate Tribunal."
From the understanding of the scheme of the Act it is clear that the borrower under the Act has been given a right of appeal only for making a challenge to the measures taken under Section 13(4), before the Debt Recovery Tribunal and if he still feels aggrieved against the order passed by the Debt Recovery Tribunal further to the appellate tribunal. But prior to the taking of any measure under Section 13(4), the borrower would be given opportunity to make the deposit and discharge the full liability in pursuance to the notice issued under Section 13(2) of the Act.
31. The notice so issued has to be in conformity with requirements detailed in various relevant clauses of the aforesaid provision. It would be however, open to the borrower to file objections against the aforesaid notice in case he finds that the amount for which liability is sought to be discharged is not the correct amount, if he has already paid some amount but adjustment of such deposit has not been made and if such discrepancy is brought to the notice of the Bank with due proof of deposit the Bank would be under obligation to correct the amount of demand.
32. Likewise objections can also be filed challenging the competence of the Bank in issuing the notice viz., by showing that the borrower is not a defaulter, within the meaning of the Act. Of course the plea of limitation with respect to the action initiated can also be taken as provided under Section 36. The scope of the objection is very limited as once the account under which the debt remains unpaid has been classified as 'non performing asset' all other claims would not be open to be agitated in such intermediary proceedings under the present Act. Of course, the action taken under Section 13(4) would be open to challenge in appeal under Section 17.
33. Section 37 is a provision which makes the remedy under the Act available to the secured creditor in addition to and not in derogation of the remedy available to it under the Companies Act, 1956, etc. and the remedy available under any other law for the time being in force. Section 37 of the Act is quoted below :--
"Application of other laws not barred.--The provision of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, or any other law for the time being in force."
The Civil Court also does not have jurisdiction in the matter under Section 34 of the Act.
34. The statutory remedies, thus, as provided under the Act would only be available to the borrower. The Court would not enlarge the statutory remedies by providing right to appeal at all stages in the proceedings initiated under the Act by the secured creditor.
35. The remedy available under Article 226 of the Constitution of India of course, would not stand subjected to any limitation or curtailment by virtue of the aforesaid provisions of the Act. Constitutional remedies can not be barred, the power of judicial review being the basic feature of the constitution but normally the High Court would be loath in exercising discretion under Article 226 Constitution of India in the matter where entertaining of such petitions, would hamper the very purpose and object of the special enactment and would also mean to provide a remedy which the framers of the law did not intend to provide. It requires no argument that the High Court under Article 226 Constitution of India is empowered to entertain the petition in case, the High Court is satisfied that gross miscarriage of justice has been done or is likely to occur or that the remedy under the Act is not appropriate and efficacious or otherwise the aggrieved person would not be able to get the remedy under the Act as per its provisions. The discretion, however, has to be exercised with due care and caution and self restraint.
36. We, therefore, find that the petition under Article 226 Constitution of India can be entertained in the matter of action being taken under the Act but ordinarily and normally the High Court would refrain from interfering with the action proposed to be taken under the Act unless of course it pricks the conscience of the Court and if it is found that the action is wholly arbitrary, without jurisdiction or smacks of mala fides which would result in gross miscarriage of justice.
37. In view of the specified machinery given in the Act including the right to get back the secured assets alongwith appropriate compensation with costs, as may be determined by the Tribunal on finding that the measure taken was wrong or illegal, the borrower is not remedy less so as to allow him to approach the High Court in its extraordinary jurisdiction at every stage. In the light of the reasoning given, the present case, is not such where the High Court would entertain the writ petition.
38. We therefore, decline to entertain the writ petition in the given circumstance of the case at this stage.
39. Learned counsel for the petitioners lastly submitted that the petitioners are ready to make the deposit of the amount whatever is due but since they are not in a position to make the entire deposit in one go they may be allowed to make the deposit in instalments.
40. Shri Sharad Bhatnagar appearing for the Bank, does not object the aforesaid prayer by the petitioners. We, therefore, while declining to entertain the writ petition, direct that in case the petitioners of writ petition No. 119 of 2004 namely M/s. Vijay Laghu Udyog and others, deposit an amount of Rupees Two lacs within one month and the petitioners of writ petition No. 120 of 2004 namely M/s. Dashrath Lal Kishori and others, deposit an amount of Rupees three lakhs within one month from today and continue to deposit balance amount in twelve equal instalments, the first of which shall be deposited by 15th February, 2004 and rest of the amount shall be deposited by 15th of each following month, no further action shall be taken under the Act. For knowing the amount of instalment which would be deposited in monthly instalment, the petitioners shall approach the Bank within seven days from today by means of a written application for knowing the exact amount which is to be deposited by them and the bank on receipt of the said application shall disclose the aforesaid amount within a maximum period of three days and the amount so disclosed shall be deposited in the aforesaid twelve equal monthly instalments.
41. Subject to the fulfilment of above conditions, no further action shall be taken under the act, but on failure on the part of the petitioners in the compliance of any of the aforesaid conditions, the benefit of this order would not be available to the petitioners and it will become open to the Bank to proceed further for realisation of the amount due, as per law.
42. Subject to above directions, the writ petitions are dismissed.