Gruh Finance Limited vs District Magistrate & on 3 July, 2015

[Cites 12, Cited by 1]

Gujarat High Court

Gruh Finance Limited vs District Magistrate & on 3 July, 2015

Bench: R.M.Chhaya

        C/SCA/4838/2015                              JUDGMENT



       IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

      SPECIAL CIVIL APPLICATION  NO. 4838 of 2015
 
        For Approval and Signature:
        HONOURABLE MR.JUSTICE R.M.CHHAYA                   Sd/
=====================================================
   Whether Reporters of Local Papers may be 
 1                                              NO
   allowed to see the judgment ?
2 To be referred to the Reporter or not ?                       NO
    Whether   their   Lordships   wish   to   see   the 
3                                                               NO
    fair copy of the judgment ?
  Whether this case involves a substantial 
  question of law as to the interpretation 
4                                                               NO
  of the constitution of India, 1950 or any 
  order made thereunder ?
    Whether   it   is   to   be   circulated   to   the 
5                                                               NO
    civil judge ?
===================================================
        GRUH FINANCE LIMITED....Petitioner(s)
                       Versus
     DISTRICT MAGISTRATE  &  1....Respondent(s)
===================================================
Appearance:
MR BIJAL H. CHHATRAPATI for J SAGAR ASSOCIATES, 
ADVOCATE for Petitioner(s) No.1
MR BHARAT VYAS, AGP for the Respondent(s) No. 1
MR UTPAL M PANCHAL, ADVOCATE for Respondent(s) No.2
===================================================
      CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
                  Date : 03/07/2015
                    ORAL JUDGMENT

(1) RULE. Mr.Bharat Vyas learned Assistant Government Pleader for respondent No.1, and Mr.Utpal M. Panchal, learned advocate for respondent No.2, appear and waive service on behalf of the respective respondents.

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C/SCA/4838/2015 JUDGMENT (2) As such by order dated 25.03.2015 notice for final disposal was issued and hence, with consent of the learned counsel for the parties, the matter is taken up for final disposal and the learned counsel for the parties are heard on length.

(3) Following noteworthy facts can be culled out from the record of the petition.

(4) That the petitioner advanced a concessional loan in the form of concessional staff loan of Rs.1,55,000/ @ 4% p.a. and further amount of Rs.25,000/ @ 12% p.a. It requires to be noted at this stage that respondent No.2 was granted loan on special rate of interest i.e. @ 4% p.a. as respondent No.2 was the staff member of the petitioner. That the loan so sanctioned was utilized by respondent No.2 to purchase a flat situated at A/4, Final Plot No.124, Town Planning Scheme No.12, known as Neha Chambers Association, situated at Adajan Road, Surat. Record also indicates that respondent No.2 executed two different loan agreements dated 01.11.1994.

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C/SCA/4838/2015 JUDGMENT (5) Record further indicates, which is undisputed fact, that respondent No.2 left the services of the petitioner w.e.f. 17.05.2000 and therefore concession @ 4% p.a. came to an end as per the say of the petitioner on respondent No.2 leaving the services of the petitioner.

(6) It is also the case of the petitioner that as respondent No.2 left service of the petitioner the loan was payable forthwith. Record further indicates that thereafter the petitioner called upon respondent No.2 to make payment of the entire outstanding amount of Rs.1,62,575/ as it stood on 28.02.2001, after adjusting the other personal loans, which were taken by respondent No.2 as staff member of the petitioner. Record also indicates that as respondent No.2 made default in making payment of EMI as agreed, the petitioner was constrained to institute Summary Suit No.35 of 2001 before the competent court at Surat for recovery of the outstanding amount along with interest @ 13.5% p.a. with costs, charges, etc. It is noteworthy that in the said suit as the leave to Page 3 of 10 C/SCA/4838/2015 JUDGMENT defend was not granted by the competent court, respondent No.2 approached this Court by filing Civil Revision Application No.406 of 2002 under Section 115 of the Code of Civil Procedure, 1908, which came to be allowed by granting leave to defend to respondent No.2 vide judgment and order dated 10.04.2002 by this Court. It also appears from the record that the suit is still pending.

(7) That meanwhile the petitioner issued demand notice dated 24.04.2013, as provided under Section 13(2) of the Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (the Securitisation Act) calling upon respondent No.2 to pay an agreegate amount of Rs.3,23,867/ (along with interest as applicable) as on 31.03.2013.

(8) It further appears from the record that after the said notice was issued, respondent No.2 gave reply to the same, through his learned advocate, denying any amount due and payable. That the Page 4 of 10 C/SCA/4838/2015 JUDGMENT petitioner, as the secured creditor, thereafter filed Securitisation Case No.85 of 2013, as provided under Section 14 of the Securitisation Act, before District Magistrate, Surat, who, vide impugned order dated 06.12.2014, dismissed the same and hence, being aggrieved by the same, the present petition is filed by the petitioner as secured creditor.

(9) Heard Mr.Bijal H. Chhatrapati, learned advocate for the petitioner, Mr.Bharat Vyas learned Assistant Government Pleader for respondent No.1, and Mr.Utpal M. Panchal, learned advocate for respondent No.2.

(10) Learned counsel appearing for the parties have taken this Court through the impugned order as well as the averments made in the petition and the stand taken by respondent No.2 in its affidavitinreply. Impugned order reads that after considering the submissions made by respondent No.2 and as per the judgment of this Court, total amount is paid by respondent No.2 and therefore the proceedings filed by the Page 5 of 10 C/SCA/4838/2015 JUDGMENT petitioner under Section 14 of the Securitisation Act came to be filed (rejected) and has directed the petitioner to approach Debts Recovery Tribunal.

(11) The main contention, which is raised by the petitioner, is to the effect that the District Magistrate has no power and jurisdiction to adjudicate upon the claim made by the petitioner as a secured creditor and that the District Magistrate has no power under Section 14(2) of the Securitisation Act to go into the merits of the case.

(12) Bare reading of the impugned order clearly indicates that not only the District Magistrate has gone into the merits but has exercised the jurisdiction, which is not otherwise vested in it.

(13) At this juncture it would be appropriate to refer to the judgment of Division Bench of this Court in the case of IDBI Bank Ltd., Through Authorized Signatory Vs. District Magistrate & Anr., 2011 (2) Page 6 of 10 C/SCA/4838/2015 JUDGMENT G.L.H. 12 wherein it has been held at Paragraph Nos.711 as under:

"7. Division Bench of this High Court has, in Special Civil Application No.15084/2010, in the matter between IDBI Bank Limited v/s. Hytaisun Magnetics Limited and others (unreported decision dated 9th February 2011) settled the entire position of law so far as the subject matter of the present petition is concerned.

8. In paragraph 20 of the unreported judgment, the Hon'ble Division Bench held as under : "(i) Under Chapter III of the Securitization Act, a secured creditor has right to enforce security interest without the intervention of the Court or Tribunal in accordance with the provisions of the said Act. [Section 13(1)]

(ii) The borrower, who is under liability to the secured creditor under a secured agreement, is entitled to take a notice under Section 13(2) of the said Act.

(iii)The secured creditor who intends to enforce the secured asset is bound to give details of amount payable by the borrower and the secured assets intended to be enforced. [Section 13(3)]

(iv) Under Section 13(3A), the borrower has right to make representation or raise objection. If any objection is there with regard to the secured asset, that can be raised only at the stage of Section 13(3A). Under the said provision, only the secured creditor will determine the objection and not any Court or Tribunal.

(v) No cause of action takes place even after the decision taken by the secured creditor under Section 13(3A) till the secured creditor takes recourse of one or more measures including the measure to take possession of the secured asset of the borrower under Section 13(4) of the Act.

(vi) The secured creditor is competent to take possession of all the secured assets of its own following the procedure laid down under Rule 8 of the Security Interest (Enforcement) Rules, 2002.

(vii)Only when the secured creditor finds difficulty to take possession of the secured asset, it may take assistance of the Chief Metropolitan Magistrate or the District Magistrate under Section 14 of the Act.

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C/SCA/4838/2015 JUDGMENT

(viii)The measures taken under Section 14 amounts to measures taken under Section 13(4) of the Act.

(ix) As the measures taken under Section 14 amount to measures taken under Section 13(4) of the Act, under Section 14(3) such measures cannot be called in question before any Court or Tribunal.

(x) If such measures taken under Section 14 which amount to measures taken under Section 13(4) is not in accordance with the Securitization Act or the Rules framed thereunder, including the objection, if any, raised that the asset is not a secured asset to be taken under Section 13(4), the aggrieved person has a remedy under Section 17 before the Debts Recovery Tribunal to show that the measures taken are against the Act [Section 13(4)] or the Rules framed thereunder.

(xi) All such determination is to be made by the Debts Recovery Tribunal including the question whether the asset is a secured asset or not and the Chief Metropolitan Magistrate or the District Magistrate has not been empowered to adjudicate such dispute, but is directed only to assist the secured creditor in taking possession of the secured asset. If they are not empowered to adjudicate the dispute, they cannot also call for the secured creditor to produce any document to decide whether the asset is secured asset or not, which will be futile exercise in absence of power to adjudicate such issue.

Under Clauses (a) and (b) of Section 14(1), the Chief Metropolitan Magistrate or the District Magistrate and on request, are bound to take possession of the secured assets as also the documents relating thereto. If the documents are to be obtained by them, the question of asking the secured creditor to produce the document in all cases does not arise. Therefore, they do not have jurisdiction even to call for the documents."

9. In view of the settled position of law, under Section 14(2) of the Securitisation Act, for the purpose of securing compliance with the provisions of subsection (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

10. We are of the view that the District Magistrate has failed to discharge his statutory duties as he is obliged under Section 14(2) of the Securitisation Act and was not right in rejecting the application preferred by the petitioner Bank under Section 14 of the Securitisation Act.

11. For the reasons stated above, we quash and setaside the Page 8 of 10 C/SCA/4838/2015 JUDGMENT communication dated 22nd October 2010 (page 42 dated 9th June 2009) and we direct respondent no.1 to fully comply with the provisions of Section 14(2) of the Securitisation Act and to provide the necessary assistance and protection to the petitioner Bank for taking over possession of the secured assets of the principal borrower."

(14) In addition to this, similar view is expressed by Division Bench of this Court in Special Civil Application No.2493 of 2011 dated 24.04.2012 and Special Civil Application No.1829 of 2012 dated 12.03.2012.

(15) In light of the aforesaid, the impugned order dated 06.12.2014 deserves to be quashed and set aside and the proceedings of Securitisation Case No.85 of 2013 filed by the petitioner before District Magistrate, Surat, is restored to its file, who shall give an opportunity of being heard to the petitioner as well as respondent No.2 and shall decide the said proceedings de novo, in accordance with law, as per the directions given in this judgment within a period of four weeks from the date of receipt of this judgment.

It is further clarified that District Magistrate, Surat, shall decide the said Page 9 of 10 C/SCA/4838/2015 JUDGMENT proceedings afresh, as directed by this Court, without in any manner being influenced by the impugned order.

(16) Learned counsel for the petitioner as well as respondent No.2 assure this Court that the parties shall cooperate with the District Magistrate, Surat, in disposal of the aforesaid Securitisation Case No.85 of 2013, as directed by this Court, and shall not pray for any unnecessary adjournments.

(17) Petition stands allowed accordingly. Rule is made absolute to the aforesaid extent only. No costs.

Sd/ [R.M.CHHAYA, J ] *** Bhavesh [pps]* Page 10 of 10

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