Karnataka High Court
Mr K R Krishnegowda vs The Chief Manager/Authorised Officer on 27 March, 2012
Equivalent citations: AIR 2012 KARNATAKA 116, 2012 (3) AIR KAR R 241, (2012) 5 KANT LJ 626, (2013) 1 BANKCAS 445, (2012) 4 CIVLJ 681
Bench: Chief Justice, B.V.Nagarathna
-: 3 :-- 5 u _.__ second petitioner, which is situated at -B':S,K,"'s-IllSstage, Bangalore, invoking the provisior"i's--of A 1}» andu of the Act, consequent uporigthe 1' 'lnoltice '~ issue'd..1v'VVunder.A' Section 13(2) of the Act. the' petitio'ne'it8"'1'i'ad failedto repay the debt to, the resVp'ondent--.l3'an.k, Vinotice under Section 13(2) of the -the first petitioner on 02.07.2008, who is itlicih.principal2b_orr0wer as well as to the second for the loan of Rs.20.0(l 'disbursed subject to deposit of titleim injtow a registered mortgage deed said notice was issued on the pre_rr1ise1"that.tgh--.erc_was non--repayment of the loan. The repliedto on 03.08.2008. grievance of the petitioners is that after receipt the reply, the respondent-Bank without
.. 'complying with the procedure prescribed under Section 1' *1 of the Act took steps under Section 14 for the purpose of taking possession. More particularly, the contention of the petitioners is that possession was sought to be taken without issuing any prior notice. Therefore, the order of L
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--: 4 :-- 1 the Deputy Commissioner/ District Magisti*ateV"'--vvAdated 27.12.2008 was assailed in S.A.No.283/Z009::"beior'eAthe Debts Recovery Tribunal (DRT)_byorderdddat'ed'"2Q,()'7.,2'OQQ21 contending that there was nonicorifipliance 't.hVe:V'pri€ncip1es'A "
of natural justice. Therefore, 2 p time 'gas granted to the petitioners rioan account and at the same to the respondent- Bank, to issue fresh_po_sseis.siopn accordance with law before recoziise 14 of the Act. The said .t.he"e.respondent--Bank before the of the DRT restraining the bankddfrordn of Section 14 of the Act. It is agaii1.st"thej_ sa-i_d'o'rder that this writ petition has been it eiV.;i'v}'i"e respondent bank has filed statement of objections" seeking dismissal of the writ petition.
5. We have heard the learned counsel for the parties.
of the respondent-Bank being a transgression in law, the same requires to be setaside.
8. Per contra, counsel for the has sought to justify the actio-1i"'initiat_:edby stating that the Section 13 or co"n:te.xr1'p1u€1te 'A issuance of notice beforebdtathinyg sjafterthe possession is taken? floticgv.w*ou:1dbe._'issued' prior to sale of the secured asset no infraction of the Act or the b V by
9. It toijanswer the issue raised in this «it» be useful to extract Sections 13, 14 of :.ai'3«d'i§u1es 4 and 8 of the Rules:
3., Enforcement of security interest --
'<..yV'No_twithstanding anything contained in or section 69A of the Transfer of Act, 1882 (4 of 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.
34 /s -: 10 :- only where the substantial part of the . of the borrower is held as security forgtheg Provided further "that the V management of whole, of the ;b'u~s'inessA"Of part-.Qji1.i.l the business is severable, theV'secu.r"eoi; creditorl shall take over the, 'such business of the borrowVejrv.w'h,ich is'-relaytable to the security orVdel--7gt;];_gr " by
(c) appointmanyg pe_rsfon:'lhefieiinafter referred to the secured the},.pfosses_sion--..offvwhich has been taken over=by'- fie secured creditor;
'A ' any by notice in writing, person"who:;has...acquired any of the secured assets from 'thejoorrower and from whom any money" or may become due to the ii,,f;:orro.wer; toflpay the secured creditor, so much of 'money as is sufficient to pay the secured (5) Any payment made by any person referred to in clause (d) of sub--section (4) to the secured creditor shall give such person a valid discharge as y' he has made payment to the borrower.
:9 ,.» --: 25 :- of Section 13. then the secured creditor may take recourse to one or more of the measures stated in sub--section (4) of Section 13. For the purposes of this (a) of sub--section (4) is relevant i.e., l' the secured asset of the borrower by way of lease, assignmentpor rea.l'ising' asset. In fact, the manageinent of a borrower could alsoibe alsofa rnanager could be appointed to possession of which is the':_'sec'uredVV:creditor or a borrower could of the money as is After possession of the securedpassetzistransfer of the same by the secured creditor or» the rnanager on behalf of the secured shall Vest with the transferee as if it is a transfer ._ 'rr_ia.d"e* by thfe""owner as secured asset. Under sub--section (ill) of 'Section 13, the rights conferred on the secured ' ~ creditor in Clauses (a) to (d) of sub--section (4) could be exercised against the guarantors also. Once a notice is H received under sub-clause (2), no borrower can transfer by
2. --: 26 :- way of sale, lease or otherwise the secured assets referred to in the notice without prior written consentcf secured creditor as per sub--section (13) of section
11. Section 14 statesv'*A;4tha"tA.jtif any "
secured asset is required"~~.to secured creditor or if any requiredfiito be sold or transferred, then for the purpose of taking posseyspsionlolr' 'such secured asset, request Metropolitan Magistrate or the jurisdiction any such secured 4' "documents relating thereto is situated possession thereof and the Chief Nletropolitan'{Magistrate or the District Magistrate as the 'casev..fI'1i_ayAV"'b.e, on such request being made can take lipossessitmril of such assets and forward such assets and documents to the secured creditor. Under sub--section (3) .p:o'f§Section 14, it is stated that the action of the Chief Metropolitan Magistrate or the District Magistrate shall not be called in question, in any court or before any authority. & r' --: 27 :-
12. Section 17 prescribes the right of appeal to any person (including a borrower), being aggrieved by"--any of the measures referred to in sub--section (4) of taken by the secured creditor or his authorised under Chapter III, by making an application_ to jurisdiction in the matter_within:'forty~iiVle':the date on which such haye" ' The can consider anylllgi-:vs.:£1Eg;vvi'measuresreferred to in sub--section (4) of the secured creditor for €I1fOI'C5_f;hi%jT:1:".'L:V Ql". accordance with the provisions Vtlfiellkivules. If the said actions are not w;it'r1'__the._'reduirements of the Act and the Rules,' the l "inter alia order restoration of possession the secured assets to the borrower by holding measures taken are invalid and thereby restored 'tliei of the secured assets to the borrower and order as may be necessary with regard to the V is recourse taken by the secured creditor under sub--section l (4')A'of section 13.
-: 29 :- be issued must be as nearly as possible as Appendix IV to the Rules which would manifest an intenti'o_Iui*_pto take possession indicating the date of takin_g""po's.sjeVssion or otherwise the mere issuance of a notice...\X/Quid: render.. the notice to be Vague and purposelessplp Sub--rule '('2')vV.iprve-scribes I the publication of the possessionsnotice to the "date of taking possessvioifi' two newspapers, one of which is in:'l.aiI.igt1age, 'having sufficient circulation in the_...locali'tytieby"...'tl:i.e'*":'authorised officer. T herefore_p13ssu:fahpcevof borrower as well as by news eyipressly provided and hence would with by a secured creditor.
Sub-rule I3)' in the event of possession of irrirnoVable"'p_roperty is actually taken by the authorised property shall be kept in his own custody or in ._ any person authorised or appointed by him, who take as much care of the property in his custody * as owner of ordinary prudence would, under the similar circumstances, take care of such property till they are sold it or otherwise disposed of. Sub--rules (5) to (8) of Rule 8 and 53;
/ (, --: 30 :- as well as Rule 9 pertain to the steps tojbe to and during the process of sale.ofthe secuyredi. assets.
14. On a CO1'1SpeVC,t1,J".S reading of Section 13, Section 14 that would arise is, as to the under Rule 8 would have to be issued, va.S...t'hfe the counsel for the respondent' possession would be V:undfierl'Section 14 is passed and before sale. When once there is non--confiplian('e made under sub--section (2) of_§Section l'3,_V_plst'eps could be initiated under sub--section (4) ,3 mby takingpossession of the secured asset. The question is, . lasgtvo the borrower ought to know as to when "possession of the secured asset would be taken, " whens once the demand under sub--section (2) of Section 13 isinot complied with by the borrower. Having regard to 3 sub--section (13) read with sub--section (2) of Section 13 would imply that the receipt of notice under sub--section (2) results in a Virtual attachment of the secured asset. If the demand made in Sub--section (2) of Section 13 is not 4 «:// .
--: 32 :- from the borrower by the secured creditor which would have to be indicated to the former. It is in this regard, that insofar as immovable property is concerned:_su:bfrulVes (1) and (2) of Rule 8 prescribe notices 'to_V't'h_e borrower in two ways; (i) by gdeliyeiy "of '1 po_sses.sion_ notice V4:
and (ii) by newspaper p11_blication; clea.r-fit date on which possessionllottliep secureldwould to be taken by the indicated in the possession is unable to take posse'ssif;;:.n_ then in that case, recourse. 14 of the Act, at which stage" _\to _' borrower is not envisaged under' the said secti_o12._, it " J "l'l7ie'reioi'e, what emerges is the mandatory V "under the Act read with the Rules, that in 'border_«tovts:'eI.i:able the borrower to know the date on which possession would be taken by the secured creditor, ..:su'b-rules (l) and (2) of Rule 8 would have to be complied with by issuance of notices indicating the date on which possession would be taken. There is another purpose for // ~
--: 40 :~
(b) In the case of M/s. Transcore V/s. Union of India & another (AIR 2007 so 712), the supreme Court has discussed the inter play of Section' 14 with Rules 8 and 9 in the following
55. The word possession' at 'reiattipei concept. It is not an absolu--te concept.» dichotomy be tween . yrnboiic __ and I possession does notplace Act. As stated above; there distinction between securities creditor obtairlsj OT' V' interest in the { and securities where:.t.§_ie amatitor obtains neither an interest it in ofwthe property but the property 'appropriated to the satisfaction of the "debt _{eiv:arg:_'e':s). Basically, the NPA Act 5 " u.dea1s"'w_ith the former type of securities under the hhhh "secured creditor, namely, the obtains interest in the property vco5nce5'ned. It is for this reason that the NPA ?Act"s ous ts the intervention of the * H-courts / Trib unals.'
56. Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, £ 2/ ' ..: ':'"_;
the Act.
could also avail the remedy piiovided of 4.:
(<1) Similarly, in the"i'Scase_Vof Kafiaiyaiaz Lalchand Sachdev and others v_.-"'S.t'§;:te-»rA.of Ma-havrashtra and others [(2011) 2 holding that an efficacious, under Section 17 of the under sub-section (4) of SectionVgv13._o:f that after the issuance of notice (2) of Section 13, a public notice in the News' been issued regarding the sarne a1fgd"thereVafter',' application was filed under Section 14 of taking possession of the secured assets. After . 'aLi1so'1*d"e.r_waspassed under Section 14, another notice was issu€:_d't.O:"'the borrowers to handover possession which was AA challvenged in the writ petition. While holding that a writ 'petition was not rnajntainable, the Supreme Court nevertheless noted that News Paper publication prior to taking of possession had been issued in' the said case. {L X' '