Edelweiss Asset Reconstruction ... vs M/S. Tulip Data Services Pvt. Ltd. & Anr. on 24 November, 2022

[Cites 19, Cited by 0]

Delhi High Court

Edelweiss Asset Reconstruction ... vs M/S. Tulip Data Services Pvt. Ltd. & Anr. on 24 November, 2022

1. These petitions impugn the interim orders dated 18.11.2021 & 22.11.2021 directing maintenance of status quo and the final order dated 07.05.2022 passed by DRT, Jaipur in TSA No. 10 of 2021 ('SA'). The latter declared the notice issued on 17.04.2014 u/s 13(2) of SARFAESI Act, 2002 as invalid. Against the said orders, the petitioner has filed a statutory appeal before the Debt Recovery Appellate Tribunal ('DRAT'), New Delhi but it could not be taken up because of vacancy in the post of Chairman of the Appellate Tribunal.

2. The following facts are not disputed:-

(i) Proceedings under sections 13(2) and 13(4) of the Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) stood completed in 2015; the taking-over of symbolic as well as physical possession of the mortgaged property in Bangalore, was impugned before the Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 2 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 DRT, by R-1 and R-2, the borrowers. The challenge was dismissed on the borrowers' appeal against the DRT order by the DRAT, Chennai. In effect, there is quietus apropos possession of the property. The same was then auctioned to recover some of the amounts lent to Tulip-the borrower. The auction was conducted.

The auction purchaser deposited 25% of the bid amount but was unable to deposit subsequent amounts. This amount stood notionally forfeited. A second auction was proposed. However, the DRT, Jaipur has stayed the first auction. The said stay order was subsequently stayed by this Court on 06.12.2021, noting as under:-

"21. The repeated obstructions in conduct of the auction

- at the behest of the petitioner itself, appear to be a factor which is discouraging the prospective bidders to bid for the property. The outstanding dues of the respondent, as of 30.09.2021, were to the tune of Rs.426 Crores. The respondent is not in a position to liquidate the said liability. The reserve price of the property has been fixed at Rs.135 Crores which is, in fact, higher than what is indicated as the distress sale value in the Joint Lenders Meeting dated 01.10.2021, referred to above. Moreover, the fixation of the reserve price does not lead to the conclusion that the property would be sold at the said price. Pertinently, the property was attempted to be sold at Rs.150 Crores. The sole bidder had not actually made a valid bid by submitting the EMD. On this occasion, the petitioner has received a serious bid inasmuch, as, the bidder has also deposited 25% of the bid amount as EMD.

22. In our view, therefore, the Tribunal was not justified in directing maintenance of status quo in relation to the said auction process. At the highest, the Tribunal may Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 3 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 have directed that the auction could be subject to the final determination of the Securitization Application. We, therefore, stay the operation of the impugned order dated 22.11.2021 insofar, as, it directs maintenance of status quo in relation to the auction sale conducted vide notice dated 20.10.2021."

(ii) However, before the second auction could be conducted the auction purchaser approached the Karnataka High Court seeking refund of its 25% deposit apropos the first auction. By an interim order, the High Court directed that the word 'shall' in sub-rule (5) of Rule 9 of the Security Interest (Enforcement) Rules, 2002 will be read as directory and not necessarily mandatory. The auction purchaser was permitted to participate in the second auction process without necessarily having to deposit the Earnest Money Deposit (EMD). Respondent no.3 was the successful bidder having bid Rs.138 crores, which was more than the Reserve Price of Rs.135 crores.

3. While the SA was still pending before the DRT, Jaipur and was listed on 10.05.2022, an early hearing application was moved by the borrower on 06.05.2022 seeking preponement of the case. The Tribunal did not issue notice on the application. Instead it deemed that due notice had been served upon the non-applicant/bank simply because the applicant-borrower had stated that it had sent an e-mail of the application that very day. The early hearing application was allowed. The case was fixed for final disposal on the very next day a Saturday- 07.05.2022, on which day the impugned order was passed, whereby the demand notice dated 17.04.2014 was set aside. The learned Senior Advocate submits that this procedure adopted by the Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 4 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 Tribunal betrays an unexplained haste to take-up a matter on behalf of a long-defaulting party, without giving due time for preparation by the lender/bank apropos recovery proceedings, which had been pending for many years regarding a loan taken a decade ago in 2011.

4. The order of 07.05.2022 has been impugned in the second writ petition (W.P.C 7530/2022) in which the following order was passed on 13.05.2022 which is as under:-

"2. This writ petition is directed against the order dated 07.05.2022, passed by the Debts Recovery Tribunal, Jaipur [in short "DRT, Jaipur"] in the Securitisation Application numbered as TSA No.10/2021. Via the impugned order, the DRT, Jaipur has allowed the TSA.

3. This case has a long history. However, what is pertinent to note [and something which is not in dispute] is that the auction purchaser has approached the Karnataka High Court by way of a writ petition i.e., W.P.(C) No.2710/2022.

3.1. Since then, we are told, the Karnataka High Court has passed two orders i.e., orders dated 07.02.2022 and 20.04.2022, in the aforementioned writ petition.

4. We have on our record, an order dated 02.03.2022 passed by the DRT, Jaipur. A perusal of the said order would show that DRT, Jaipur was aware of the proceedings pending in Karnataka High Court.

4.1. As a matter of fact, the Presiding Officer of DRT, Jaipur has observed in the said order that he would not proceed further in the TSA preferred by the respondents herein "till disposal of the writ petition filed by the Auction Purchaser before the Hon‟ble Karnataka High Court".

Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 5 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08

2022/DHC/005647 4.2. The record shows that the Karnataka High Court, via its order dated 20.04.2022, issued the following directions:

"(a) Respondent is permitted to bring the property in question for auction, forthwith;

(b) Petitioner is at liberty to participate in the auction proceedings. If the petitioner participates in the auction proceedings, the respondent is directed not to insist for Earnest Money Deposit as the entire sale consideration amount of Rs.135.01 Crores is with the respondent-Bank.

(c) If the petitioner is the sole participant in the sale proceedings, the respondent is permitted to confirm the sale in favour of the petitioner for sale consideration of Rs.135.01 Crores. If the sale is to be confirmed in favour of any other person, the respondent shall take leave of this Court before confirmation."

4.3. To be noted, the respondent before the Karnataka High Court is the writ petitioner before us.

4.4. As is evident from a perusal of the order of the Karnataka High Court the writ petition [i.e., W.P.(C) No.2710/2022] filed by the auction purchaser has been directed to be listed before it on 30.05.2022.

5. It is not in dispute that the order dated 20.04.2022 was brought to the notice of DRT, Jaipur.

5.1. It appears that based on an application for advancing the date of hearing by the respondents herein, the matter was taken up by the DRT, Jaipur on 07.05.2022 which is when the impugned order was passed.

6. Prima facie, in our view, the DRT, Jaipur should have waited, till such time, the Karnataka High Court had taken up the matter on the due date i.e., 30.05.2022.

Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 6 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08

2022/DHC/005647 6.1. By virtue of the impugned order, the DRT, Jaipur has rendered the auction proceedings infructuous.

7. As a matter of fact, it is the argument of Mr Rajeeve Mehra, learned senior counsel, who appears for the petitioner, that the grounds on which the TSA of the respondents herein has been allowed by the DRT, Jaipur were the very same grounds which were dealt with, in an earlier round by DRT, Bangalore.

7.1. We may, however, note that the counsel for respondents disputes this aspect of the matter. 7.2. Notwithstanding that, the question concerning the jurisdiction of the DRT, Jaipur to proceed in the matter is an aspect which is pending before this Court in another writ petition i.e., W.P.(C) No.13795/2021. The coordinate Bench, via an order dated 06.12.2021, has stayed the orders dated 18.11.2021 and 22.11.2021, passed by DRT, Jaipur.

7.3. To be noted, via order dated 22.11.2021, the DRT, Jaipur had stalled the auction by directing the status quo to be maintained.

7.4. The operative directions issued by the coordinate Bench on 06.12.2021 are extracted hereafter:

"22. In our view, therefore, the Tribunal was not justified in directing maintenance of status quo in relation to the said auction process. At the highest, the Tribunal may have directed that the auction could be subject to the final determination of the Securitisation Application. We, therefore, stay the operation of the impugned order dated 22.11.2021 insofar, as, it directs maintenance of status quo in relation to the auction sale conducted vide notice dated 20.10.2021."

8. We are of the view that the matter would require a further examination.

Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 7 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08

2022/DHC/005647

9. Accordingly, issue notice. Ms Priyadarshini Dewan accepts notice on behalf of respondents.

9.1. Counter-affidavit will be filed, within the next four weeks.

9.2. Rejoinder thereto, if any, will be filed before the next date of hearing.

10. List the matter on 08.07.2022.

11. In the meanwhile, the operation of the impugned order shall remain stayed.

12. Needless to add, since, as noted above, the order dated 20.04.2022 has been passed by a Court of co- equal jurisdiction i.e., Karnataka High Court, nothing stated hereinabove, can possibly, come in the way of that order."

5. Mr. Rajeeve Mehra, the learned Senior Advocate submits that all three impugned orders exhibit complete disregard to proceedings pending before and orders passed by this court and the Karnataka High Court. He also draws the court's attention to the order dated 06.07.2022 by which the Karnataka High Court has passed the following order:

"...15. This Court permitted the second sale by order dated 20.04.2022 so as to enable the Financial Institution to know as to whether the respondent-Financial Institution would get offer more than the offer made by the petitioner. The sale, which is permitted would be subject to Rules 8 and 9 of 2002 Rules. The respondent-Financial Institution has to follow all the procedures for bringing the property for sale. This Court permitted the sale of the secured assets in accordance with law. This court would not go into the validity of the sale under Article 226 of the Constitution of India. If the applicant in I.A.No.3, the borrower is aggrieved by the procedure adopted by the respondent-Financial Institution in bringing the property Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 8 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 for sale, it is always open for the applicant to challenge sale before the appropriate Authority, i.e., before the DRT to establish that sale is contrary to Rules 8 and 9 of 2002 Rules. But, however, the property which is sold in pursuance of the order dated 20.04.2022 would be subject to the final orders in pending W.P.(C) 7530/2022 before the Delhi High Court.

With the above, Writ Petition stands disposed of. All contentions of the impleading applicant i.e., borrower are kept open The respondent-Financial Institution is permitted to confirm the sale in respect of applicant in I.A.No.4, subject to the result of W.P.(C) 7530/2022 pending before High Court of Delhi and the proceedings before the DRT.

The respondent-Financial Institution is directed to repay the entire amount deposited by the petitioner after deducting sale expenses, within 15 days from the date of receipt of a copy of this order.

In view of disposal of the writ petition, pending I.As also stand disposed of."

6. The matter pending before the Karnataka High Court was only apropos return of the EMD to the first auction purchaser. According to the learned Senior Advocate for the petitioner, the DRT overreached its jurisdiction and passed the impugned orders.

7. In the present case, the auction sale of the property situate in Bangalore was conducted in terms of the order of the DRT, Bangalore which dismissed R-1's/borrower's SA No.487/2012 on 22.04.2015. It held, inter alia:

"...Further, it is established from the records that, all the required procedure under the Act and Rules thereunder are fully complied by the Respondent No.1/IDFC and absolutely Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 9 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 I do not find any irregularity or illegality in respect to proceedings initiated by the Respondent No.1/IDFC under the SARFAESI Act, including the impugned Possession Notice, hence SA shall fail...".

8. The borrower's appeal against the said order was dismissed by the DRAT, Chennai on 28.03.2017. Repeated attempts were made to sell the property through auction sale as has been noted in para 17 of the order dated 06.12.2021 which, inter alia, reads as under:

"...17. So far as the prima-facie case is concerned, Mr. Dogra has drawn our attention to the previous auctions attempted by the petitioner herein which show that the reserve price has been reduced successively. The tabulation showed to the court reads as follows:

                                   S.No          Date of Sale Notice issued        Reserve
                                   .             by the Respondent No.1            Price
                                                 ARC
                                   1.            15.06.2019                        Rs. 235.00
                                                                                   crores
                                   2.            19.11.2019                        Rs. 190.00
                                                                                   crores
                                   3.            24.10.2020                        Rs. 161.50
                                                                                   crores
                                   4.            08.01.2021                        Rs. 150.00
                                                                                   crores
                                   5,            20.10.2021                        Rs. 135.00
                                                                                   crores
                                                 (Present impugned Notice
                                                 of Sale)
                                                                                                  ..."




Signature Not Verified        W.P.(C) 13795/2021 & 7530/2022                              Page 10 of 22
Digitally Signed By:KAMLESH
KUMAR
Signing Date:19.12.2022
12:33:08
                                                                                        2022/DHC/005647




                              9.   The     Sale    Notice      of   06.11.2021   was   impugned       by     the

respondent/borrower before the DRT, Delhi. The case got transferred to DRT, Jaipur on 10.11.2021 because no DRT was functioning in Delhi as of that date. It was to be taken up on the following day i.e. on 11.11.2021. However, since the Presiding Officer at DRT, Jaipur was on leave, it could not be taken up on that date. On 11.11.2021, the property in question was auctioned for a sum of Rs.135 crores. The auction purchaser deposited 25% amount of the bid amount on the same date. A Sale Confirmation Letter was issued by the petitioner to the auction purchaser. The petitioner also moved an application before DRT, Jaipur seeking dismissal of the TSA No.10/2021 on the ground of lack of territorial jurisdiction.

10. On 18.11.2021, when the case was taken up by DRT, Jaipur and without assigning any reasons, it directed that status-quo be maintained apropos further proceedings relating to the e-auction conducted on 11.11.2021. The impugned order dated 18.11.2021 reads, inter-alia, as under:

"...I am of the view that the auction took place on 11.11.2021 and in view of the vital issues, the matter is to be heard on the ground of interim prayers also, in order to avoid further complications.

Heard arguments on the I.A. filed by the Respondent FI on the ground of maintainability on the issue of territorial jurisdiction.

The order of this I.A. will be pronounced on 22.11.2021 meanwhile, till the next date of hearing respondent FI shall maintain status quo with regard to further proceedings, Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 11 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 related to the property at Bangalore, which is, subject matter of Sale Notice dated 19.10.2021(Annexure A-1) and auction conducted on 11.11.2021..."

11. The learned Senior Advocate for the petitioner submits that although the said order clearly mentions that the matter was to be heard on interim prayers, yet on the next date i.e. on 22.11.2021, when the second impugned order was passed, no arguments were heard on the issue of interim relief but the stay was directed to be continued further. He submits that the orders directing maintaining the status quo are erroneous, baseless, without reason of prima facie case being made out or balance of convenience being considered and contrary to the principles of natural justice. He submits that the order refers only to the issue of territorial jurisdiction of DRT, Jaipur, it does not refer to any argument qua interim relief. He submits that while dismissing the IA, challenging the territorial jurisdiction of the Tribunal, the impugned order has erred in law in view of the respected judicial decisions such as: (a) Amish Jain & Anr. vs ICICI Bank Ltd. (2012 SCC ONLINE DEL 4818) (Full Bench), (b) Jaibharat Synthetics Limited and Ors. vs. State Bank of India & Ors. (2010) SCC ONLINE BOM 478 and (c) Elements Coke Pvt Ltd vs. UCO Bank (2009 SCC ONLINE CAL 1694), that an application under section 17-A of the SARFAESI Act would be maintainable only in the territorial jurisdiction of the DRT where the property situate. The impugned order dated 22.11.2021 does not refer to any argument or submission regarding maintenance of status quo with regard to further Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 12 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 proceedings of sale of the property, situated in Bangalore. Therefore it is erroneous and needs to be quashed.

12. The issue to be determined in this case is whether DRT, Jaipur to whom the case was transferred from DRT, Delhi could have:

i) considered the case on merits and passed the impugned orders dated 18.11.2021 and 22.11.2021 regarding stay of the auction and

ii) the order dated 07.05.2022 setting aside the Demand Notice dated 17.04.2014, while rejecting the present petitioner's contention that DRT, Jaipur had no jurisdiction to entertain the SA of the respondent/borrower. The SA was preferred under s.17 (1) of the SARFAESI Act, 2002, a Full Bench of this court in Amish Jain & Anr.

vs ICICI Bank Ltd. (2012 SCC ONLINE DEL 4818) has held, inter alia, as under:-

"...16. We are therefore of the view that the question of territorial jurisdiction for the remedy of appeal provided in Section l7(l) of the SARFAESI Act has to be construed in the said light and not in the light of the DRT Act making a departure from the principle enshrined in Section 16 of the CPC.

2l. What we however find is that the DRT Act is not containing any provision for territorial jurisdiction of an appeal as under Section l7(1) of the SARFAESI Act, even if it were to be construed not as an appeal and as an original application. The jurisdictional provision under Section l9(1) of the DRT Act is only for applications by the Bank / Financial Institution for recovery of debt from any person. An application by a Bank/ Financial Institution for recovery of debt can by no stretch of imagination be equated with an appeal under Section 17(l) of the SARFAESI Act. We are therefore of the view that there is Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 13 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 no provision in the DRT Act providing for territorial jurisdiction of an appeal under Section l7(l) of the SARFAESI Act and the question of application thereof under Section 17(7) does not arise. Under Section 17 (7) of the SARFAESI Act only that much of the DRT Act can be said to be incorporated therein as is contained in the DRT Act and not more. Whether a particular provision of the DRT Act would apply or not, would depend upon the nature and scope of proceeding under the SARFAESI Act.

22. Once it is held that an appeal under Section l7(l) of the SARFAESI Act cannot be equated with an application by the Bank / Financial Institution for recovery of debt under Section l9 of the DRT Act, the limits of territorial jurisdiction described under Section l9(l) of the DRT Act cannot be made applicable to Section l7(l) of the SARFAESI Act.

23. It would thus be seen that the provision for territorial jurisdiction under Section 19 (1) of the DRT Act is only qua the applications to be made by the Bank or Financial Institution for recovery of its debt. However, a proceeding under Section I 7 ( I ) of the SARFAESI Act is initiated not by the Bank or the Financial Institution but by a person including the borrower aggrieved from the measures taken by the Bank or Financial Institution under Section 13 (4) of the SARFAESI Act. We are thus of the view that notwithstanding Section 17(7) of the SARFAESI Act providing for the disposal of the proceedings under Section l7(l) of the SARFAESI Act in accordance with the provisions of the DRT Act and the Rules made thereunder, the same cannot make the provisions of Section 19 (1) of the DRT Act appliable to proceedings under Section 17(1) of the SARFAESI Act. As aforesaid, Section 19 (1) of the DRT Act is not an omnibus provision qua territorial jurisdiction. It is concerned only with providing for territorial jurisdiction for applications for recovery of debts by the Banks/Financial Institution. The same can have no application to the appeals under Section I7(1) of Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 14 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 the SARFAESI Act which are to be preferred, not by the Banks / Financial Institutions, but against the Banks / Financial Institutions.

...

28. We are thus unable to concur with the second reasoning given by the Division Bench in Indira Devi of any need to provide parity to the borrower with the Bank, in the matter of territorial jurisdiction. Principles of parity do not apply to territorial jurisdiction. Merely because the defendant if were to sue, can sue at the place of the residence of the plaintiff does not entitle the plaintiff to sue at the place of his residence if that place would otherwise not have territorial jurisdiction. We re-emphasize that the scope of the proceedings under Section l9(1) of the DRT Act is entirely different from a proceeding under Section l7(1) of the SARFAESI Act and no need for parity exists.

29. For all the aforesaid reasons, we set aside the judgment of the Division Bench in Indira Devi supra and hold that an appeal / application under Section 17 (1) of the SARFAESI Act can be filed only before the DRT within whose jurisdiction the property / secured asset against which action is taken is situated and in no other DRT.

(Emphasis supplied)

13. A similar view has been taken by the Bombay High Court in Jaibharat Synthetics Limited and Ors. vs. State Bank of India & Ors. (2010) SCC ONLINE BOM 478, has held as under:

"...9. a notice in writing furnishing details of the amounts payable by the borrower and details of the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts within 60 days from the date of notice. Such notice given in writing affords sufficient time to the borrower to raise specific objections or to make representation so that the secured creditor can apply his Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 15 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 mind and duly consider objections which are raised or representation made by the borrower in response to written notice, as above. Borrowers may propose one time settlement or rescheduling of installments payable to discharge debt liability. As regards objections, the secured creditor is obliged to communicate reasons for non- acceptance thereof or the representation, if any, made. Mere fact that objections were raised and they are rejected by the secured creditor cannot be said to be a valid cause of action for the borrower to knock at the doors of the Debts Recovery Tribunal by appeal under Section l7 of the Act, unless measures are taken, as envisaged under Section l3(4) of the Act by the secured creditor. The secured creditor is entitled to take any of the measures to recover his secured debt once noticee-borrower has failed to comply with the statutory notice given under Section l3(2) of the Act. Those measures include taking possession (symbolic or actual) of the secured assets of the borrower and to transfer the secured assets for realization thereof or taking over of the management of the borrower business for the purpose or realizing. the secured assets appointing any person to manage the secured assets taken possession of to recover the secured assets if acquired by any person from the borrower. The borrower if is aggrieved by the measures taken by the secured creditor under section 13 (4), can invoke the remedy of any appeal under section 17 of the Act on the ground that the action taken is wrong and may prefer further appeal as permissible in view of section 18 of the Act.

10. Looking to the scheme of the Act; the non-obstante clauses introduced to give overriding effect to the provisions of the Act in the interest of a healthy and growth oriented economy in India, as also the fact that civil Court under section 34 of the Act is barred from entertaining any suit or to grant injunction in respect of matters which are required to be determined by the Debts Recovery Tribunal or the Appellate Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. In our Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 16 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 view, therefore, power under the extra-ordinary writ jurisdiction under Article 226 of the Constitution of India can be exercised sparingly and in exceptionally deserving cases, wherein the petitioner has made out a case that the secured creditor has failed to abide and follow any express legal provision, rule or regulation which is binding upon him, for which the petitioner is otherwise remediless. While the secured creditor, after the expiry of the notice period under section 13(2) of the Act, is expected to take measures under section 13(4) within a reasonable time, depending upon the facts of the case, after having considered the objections raised or the representation made, if any, by the borrower in view of section 13(3A) of the Act and after communicating non-acceptance thereof to the borrower, the secured creditor (Banks or financial institutions, as the case may be) shall be enabled by machinery of law to overcome the problems arising from the asset liability mismatch, difficulties in the way of recovery of non-performing assets or to realize long term assets by managing problems of liquidity. Therefore, section 14 of the Act provides for an assistance which the secured creditor may seek from the Chief Metropolitan Magistrate or the District Magistrate having jurisdiction over the local area where the secured assets are situated. In order to take possession of assets and documents, the provisions under section 14 enables the secured creditor to request the Chief Metropolitan Magistrate or the District Magistrate having jurisdiction in the local limits of the area to take requisite steps, including using or causing necessary force to be used for taking possession of the secured assets and documents and forwarding them to the secured creditor. The said provision is intended to ensure that the proceedings initiated under section 13(2) of the Act are carried to its logical outcome. The provision do not contemplate judicial process or work as it does not involve any adjudicatory process and as such, therefore, the principles of natural justice are not attracted. In view of the observations by the Supreme Court (in para

56) of its decision in Transcore v. Union of India (supra), if Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 17 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 a borrower is dispossessed unlawfully or not in accordance with the provisions of the Act, then the Debts Recovery Tribunal is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before the confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. In view of the non-adjudicatory process under section 14, it would be erroneous to say that the rights of the borrower would stand defeated without adjudication..."

(emphasis supplied)

14. Earlier the Calcutta High Court also has given similar view in Elements Coke Pvt Ltd vs. UCO Bank (2009 SCC ONLINE CAL 1694), has held as under:

"...24. If the aforesaid provisions are taken into consideration, then this Court finds that the entire realization process is divided in two phases. The first phase of such process commences with service of demand notice and/or show cause notice under Section 13(2) of the said Act upon the borrower. Once such notice is served, the borrower gets a right to submit its representation in the form of his reply to the said show cause notice for denying and/or disputing the correctness of such demand and/or legality of such notice. If such representation is submitted, then the concerned Bank/secured creditor is required to consider the said representation and to come to the conclusion as to the acceptability and/or tenability of the said representation and thereafter to communicate its decision to the borrower as per Section 13(3A) of the said Act. The proviso to Section 13(3A) of the said Act provides that such communication of the secured creditor's decision to the borrower will not confer any right upon the borrower to approach the Tribunal/Court for challenging the Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 18 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 correctness of such decision. Thus, the decision of the secured creditor becomes final and conclusive so far as the legality and/or conclusiveness of such demand as assessed by the secured creditor.

25. This is the end of the first phase of this chapter. The scheme of the said Act thus makes it clear that the integral part of the cause of action for the first phase of this chapter are as follows:

1. Borrower makes a default in repayment of secured debt or any installment under a security agreement and his account in respect of such debt is classified by the secured creditor as non-performing assets.

2. Secured creditor, may by notice invite the borrower to discharge his liability in full to the secured creditor within sixty days from the date of notice, with a rider that failing compliance of such notice, the creditor will exercise all or any of the rights under sub-section (4) thereof. Details of the demand should be indicated in the notice.

3. Borrower may submit his representation to the secured creditor raising his objection to such demand.

4. Secured creditor will have to consider the said representation and come to a decision with regard to the objection raised by the borrower in his representation.

5. Secured creditor will have to intimate his decision to the borrower.

26. These are the entire bundle of facts which forms integral part of the cause of action for the first phase of the said scheme.

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27. But, the proviso to Section 13(3A) of the said Act provides that this part of the cause of action is not amenable to the jurisdiction of the Tribunal/Court.

28. In case of failure to discharge the liability by the borrower as per Section 13(2) of the said Act, the second phase of this chapter commences when the secured creditor takes recourse to one or more of the measures as specified in sub-section (4) of Section 13 thereof, for recovery of secured debts.

29. Once such step is taken by the secured creditor, a fresh cause of action arises for challenging the said action of the secured creditor to Tribunal/Court, as the case may be, as per Section 17 of the said Act.

30. If this part of the scheme of the Act is examined then it goes without saying that failure to discharge the liability by the borrower as per demand notice under Section 13(2) of the said Act is an integral part of the cause of action for the second phase which provides the remedy for realization of secured debt by the secured creditor under Section 13(4) of the said Act.

33. Since the action under Section 13(4) of the said Act is in the nature of execution proceeding, the Tribunal within whose territorial jurisdiction the secured assets situate, is the only competent Tribunal whose jurisdiction can be invoked for filing an application under Section 17 of the said Act as the cause of action for the second phase of this chapter wholly arises within the jurisdiction of the said Tribunal.

34. Mere service of notice under Section 13(2) of the said Act, and/or communication of the decision of the secured creditor to the borrower at its registered office at Kolkata, though may form part of the cause of action, however, insignificant it may be, but these parts of the cause of action do not form part of the integral part of the cause of action under Section 13(4) of the said Act, as these part of the Signature Not Verified W.P.(C) 13795/2021 & 7530/2022 Page 20 of 22 Digitally Signed By:KAMLESH KUMAR Signing Date:19.12.2022 12:33:08 2022/DHC/005647 cause of action has no correlation with the measures to be taken by the secured creditor under Section 13(4) of the said Act for realisation of its dues by sale of the secured assets of the borrower..."

(emphasis supplied)

15. As has been referred to hereinabove, the respondents/borrowers had understood the jurisdiction of the DRT, Bangalore as the appropriate forum for challenging the proceedings initiated under sections 13 (2) and 13 (4) of the SARFAESI Act. Against the said DRT order they appealed before the DRAT, Chennai. Therefore, it was not open to them to approach DRT, Delhi impugning the notice of auction sale of the property situate in Bangalore.

16. The impugned interim orders were passed without recording any reason or a prima facie case being made out. There is no reference to assessment of balance of convenience either. They were passed without the lender/present petitioner being accorded an opportunity of being heard. They are unsustainable and are therefore set aside. In terms of the dicta in Amish Jain (supra) a section 17 (1) petition would lie only before the DRT within whose jurisdiction the property/secured asset is situate and in no other DRT. The order of 07.05.2022 having held to the contrary has erred in law, therefore it too needs to be quashed.

17. For the aforesaid reasons, the impugned orders dated 18.11.2021 and 22.1I.2021 directing status quo and the impugned order dated 07.05.2022 setting aside the Demand Notice dated 17.04.2014, passed by the DRT, Jaipur in TSA No. l0/2021 titled as Tulip Data Services & Anr. Vs. Edelweiss ARC Ltd. & Anr, are quashed and set aside.

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18. The petitions stand disposed-off in terms of the above.

NAJMI WAZIRI, J.

VIKAS MAHAJAN, J.

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