Calcutta High Court (Appellete Side)
Smt. Annapurna Paul vs The State Of West Bengal & Others on 2 July, 2009
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
PRESENT:
THE HON'BLE JUSTICE
SANJIB BANERJEE
WP No. 7095 (W) of 2009
SMT. ANNAPURNA PAUL
-Versus-
THE STATE OF WEST BENGAL & OTHERS
Mr. Soumen Dasgupta,
Ms. Lopamudra Sur,
Mr. Bhaskar Nandi.
...For the Petitioner.
Mr. Sabyasachi Chowdhury,
Mr. Paritosh Sinha,
Mr. Amitava Mitra,
Ms. Dolon Dasgupta.
...For the Respondent Nos. 6 to 10.
Mr. Biswadeb Roy Chowdhury.
... For the State.
Hearing concluded on: June 29, 2009.
Judgment on: July 2, 2009.
SANJIB BANERJEE, J. : -
The petitioner raises an interesting question relating to Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioner says that notwithstanding the expression "any person" appearing in sub-section (1) of Section 17, it would appear from sub-section (3) thereof that it is only a borrower, within the definition of the said Act, who may effectively exercise the right of appeal under Section 17 of the Act.
The petitioner claims to be the owner of a land at premises no. 384/1, Sahara Sukanta Nagar within the Madhyamgram Municipality near the airport. The petitioner says that the land measuring 4 cottah and a bit had been gifted by her brother under a registered document. The land has apparently been mutated in favour of the petitioner by the Madhyamgram Municipality and the petitioner has put up a building thereat upon obtaining due sanction of a plan therefor. The G+2 building has five flats and two shop rooms. It appears from the petition that there must have been a development agreement as the petitioner refers to one flat on the second floor as being the owner's allocation. The petitioner claims to be entitled to possession of such flat.
The petition narrates that on March 27, 2009 when the petitioner was away in Hooghly she received a call from the occupant of the neighbouring flat that officials of the respondent bank had apparently taken possession of her flat by affixing a notice under Section 13(4) of the said Act of 2002 on the front door of the flat and by sealing the main entrance by putting padlocks thereon. The petition speaks of the respondent nos. 13 and 14 having obtained credit facilities from the bank. The petitioner says that it is only on March 31, 2009, following a visit to the Wood Street Branch of ICICI Bank, that the petitioner was informed that the borrowers had obtained the credit facilities against such flat as security. The bank officials produced a deed of conveyance and it is the petitioner's case that both the photograph and the signature of the petitioner in the purported document did not match. The petitioner says that the document is forged or has been manufactured.
Upon the petition being received on April 8, 2009, no interim order was passed but the matter was directed to be heard out expeditiously and the point of maintainability of the writ petition was kept open. When the petition next appeared on May 14, 2009, the bank assured that it would take no further steps in respect of the flat. The bank claimed to be in possession of the flat. The petitioner was put on notice that there was an efficacious alternative remedy available to her under Section 17 of the said Act but the petitioner insisted that this was the only forum that a person in her position could approach. The matter has since been heard out.
There are two principal hurdles before the merits of the petitioner's grievance can be addressed. If the petitioner fails at either, the petition cannot be proceeded with. ICICI Bank says that it is a private bank which is not subject to any control by the State and as such is not amenable to this jurisdiction. More importantly, it appears that in view of the alternative remedy available to the petitioner under the provisions of the said Act of 2002, the Court should not proceed to adjudicate upon the merits of the matter. It is such second issue which is taken up first.
The petitioner says that notwithstanding Section 17 of the said Act permitting any person aggrieved by any of the measures taken by a secured creditor under Section 13(4) of the Act to carry an appeal to the appropriate Debts Recovery Tribunal, sub-section (3) implies that it is only the borrower who may prefer an appeal and not any person who claims to be affected by the measures taken by a secured creditor but has no contractual relationship with the secured creditor.
The definition of a borrower in Section 2(1)(f) of the said Act includes a guarantor and any person who has created a mortgage or pledge as security for the financial assistance granted by a bank or financial institution within the meaning of the said Act. Section 2(1)(zf) of the Act defines security interest to mean the right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor. Chapter III of the said Act is entitled "Enforcement of Security Interest" and the first of the seven sections thereunder details the manner of enforcement of security interest by a secured creditor. Section 13(1) of the Act permits a secured creditor to proceed against any security interest without the intervention of any court or tribunal. Section 13(2) mandates a secured creditor to issue a notice in writing to the borrower to discharge his liabilities upon there being a default in repayment of the secured debt. The borrower is obliged to pay off the secured debt within 60 days from the date of the notice, failing which the secured creditor is entitled to exercise all or any of the rights under sub-section (4).
Sub-section (4) of Section 13 of the said Act details the various measures that a secured creditor may take recourse to for the purpose of recovering the secured debt:
"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 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 or 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."
Section 13 of the Act is exhaustive as to the steps that may be taken by a secured creditor and the manner of exercise of its right. Section 14 gives executive support to a secured creditor to take possession or control of any secured asset. Section 15 relates to the takeover of the management of business of a borrower by a secured creditor. Section 16 stipulates that upon a secured creditor taking over the management of the business of a borrower, the deposed directors or managers would not be entitled to compensation for loss of office. Section 17 is the appeal provision. Section 17A relates to a matter of procedure in the State of Jammu and Kashmir. Section 18 provides for an appeal from any order made under Section 17. Section 18A is a transitional provision. Section 18B is specific to the State of Jammu and Kashmir. Section 19 provides for the right of a borrower to receive compensation and costs in certain cases.
So that the petitioner's argument may be better appreciated, Section 17 of the Act may first be seen:
"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 make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation. --For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of section
17.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub- section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub- section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder."
The petitioner says that the apparently omnibus right of appeal conferred by sub-section (1) is illusory as sub-section (3) permits the Debts Recovery Tribunal to restore management of the secured assets or possession of the secured assets only to the borrower. The petitioner argues that if an appeal is filed by a third party who has no nexus with the transaction upon the secured creditor having illegally taken measures against such person's property under Section 13(4) of the Act; Section 17(3) does not contemplate the property to be returned to the third party appellant. The petitioner emphasises on the expression, "it (the Debts Recovery Tribunal) may by order, declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, ..." The petitioner contends that the remainder of the sub- section is in addition to the quoted expression and not as an alternative to it. The petitioner submits that a third party aggrieved person would hardly take recourse to Section 17 of the Act and run the risk of such third party's asset being made over to the borrower as the provision permits return of the assets only to the borrower.
The petitioner persists that this is the only forum that a party in her position can approach. The petitioner refers to Section 34 of the Act that ousts the jurisdiction of the civil court to entertain any suit or proceedings in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine under the Act. The petitioner says that the overriding provision in Section 35 leaves her with no choice of forum save invoking Article 226 of the Constitution. Sections 34 and 35 of the Act provide as follows:
"34. Civil court not to have jurisdiction. - No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).
"35. The provisions of this Act to override other laws. - The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."
The respondent bank says that apart from the fact that it is not amenable to this jurisdiction and that the writ court should leave the petitioner to work out her remedies before the Debts Recovery Tribunal, it would also appear that there is a disputed issue which has to be gone into. The bank submits that the petitioner claims that the signature and the photograph of the petitioner in the title deeds submitted by the borrowers are not genuine. Such matters, according to the bank, would require protracted evidence which may not be possible in the summary procedure adopted in this jurisdiction.
The petitioner refers to a judgment reported at (2004) 3 SCC 553 (ABL International Ltd. & anr. v. Export Credit Guarantee Corpn. of India Ltd. & ors.) to suggest that there is no absolute rule that in all cases brought to the writ court involving disputed questions of fact, the party should be relegated to a civil suit. But it will be necessary to address such issue only if the petition is permitted to proceed notwithstanding the alternative remedy apparently available.
Since it is in the nature of a preliminary issue, the decisions cited by the bank may first be noticed. The bank relies on paragraph 50 of the judgment reported at (2004) 4 SCC 311 (Mardia Chemicals Ltd. & ors. v. Union of India & ors.) for the principle that the jurisdiction of the civil court has been so curtailed in respect of matters that can be entertained by the Debts Recovery Tribunal, that all measures taken by a secured creditor under Section 13(4) of the said Act may only be questioned before the tribunal. The petitioner has also relied on the same judgment to urge that if the petitioner is not permitted by the writ court to address on the merits of the grievance, the civil court would not receive her suit and the tribunal would have only authority to deal with the assets of a borrower but not the assets of any other appellant complaining of a secured creditor having erroneously or illegally proceeded against them.
The bank relies on the judgment reported at AIR 2007 Mad 217 (Dadha Estates Pvt. Ltd. etc. v. C. Ravindran & ors.) for the proposition that the tribunal has authority under Section 17 of the Act to restore possession of the property to the appellant even if the appellant is not a borrower. The judgment reported at AIR 2007 Del 213 (Ram Kumar & anr. v. Ravinder Kumar Gulati & anr.) is placed by the bank to emphasise on the wide amplitude of the expression "any person"
appearing in Section 17(1) of the Act.
The bank also relies on the judgments reported at AIR 1999 SC 1867 (M/s. B.R. Enterprises v. State of U.P. & ors.), AIR 2003 SC 4278 (Calcutta Gujrati Education Society & anr. v. Calcutta Municipal Corporation & ors.) and AIR 2004 SC 4057 (Godawat Pan Masala Products I.P. Ltd. & anr. v. Union of India & ors.) for the purpose that the provisions of Section 17(3) should be read down and construed with reference to the other provisions of the said Act to make a consistent, harmonious enactment of the whole statute. The bank exhorts that the canons of statutory interpretation require an attempt to be made to eliminate the apparent conflict so as to avoid a construction that would imply that the Parliament had given by one hand what it took away by the other. The bank submits that Section 17(3) of the Act would permit the tribunal to pass an appropriate order in favour of an appellant other than a borrower and require the assets of such appellant illegally possessed by the secured creditor to be returned to the appellant.
The petitioner relies on a Gujarat High Court judgment reported at (2003) 117 Comp Cas 412 (Apex Electricals Ltd. & ors. v. ICICI Bank Ltd. & ors.) where it has been held that a writ petition is maintainable against a private bank qua the measures taken by such private bank as secured creditor under the said Act. This is an entirely different issue and in the context of the present discussion as to whether the petitioner has an efficacious alternative remedy under Section 17 of the Act, is inapposite. The judgment reported at (2005) 6 SCC 657 (Binny Ltd. & anr. v. V. Sadasivan & ors.) is in similar vein and, though not in the context of a private bank, it was held that private bodies discharging public functions would come within the sweep of Article 12 of the Constitution.
The petitioner refers to the judgment reported at (2008) 1 SCC 125 (Transcore v. Union of India & anr.) for the analysis therein of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the said Act of 2002. The issues that arose for determination in that case appear at paragraph 37 of the report. The first question was as to whether secured creditors having elected to institute proceedings under the Act of 1993 could still invoke the said Act of 2002 for realising the secured asset. The second question was as to whether possession under Section 13(4) of the 2002 Act implied actual possession of the immovable property. The third question related to the fees payable for an appeal to be filed under Section 17(1) of the 2002 Act. The issue that is relevant in the present context was not addressed in the Transcore judgment.
Section 17(3) of the said Act empowers the tribunal to pass such order as it may consider appropriate and necessary in relation to any of the measures taken by the concerned secured creditor under Section 13(4) of the Act. Notwithstanding the previous passage in the sub-section that possession of the management of business or assets would be restored to the borrower if the secured creditor had taken any measure at variance with the provisions of the Act, it is the context in which such passage appears that is of importance. The restoration of the possession to the borrower would arise if the tribunal came to a conclusion that any of the measures taken by the secured creditor was not in accordance with the provisions of the said Act or the rules made thereunder, "and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower." The sub- section does not preclude restoration of the management of any business or restoration of the possession of any asset to an appellant who is not a borrower but against whose assets the secured creditor has proceeded erroneously. The reference to the borrower in the sub-section may be justified since the overwhelming majority of appellants are expected to be borrowers and it would only be the odd third party against whose assets a bank or a financial institution proceeds under the said Act.
If the tribunal has the authority to decide the propriety of the measures taken by a secured creditor upon an appellant bringing a complaint before it, it would be absurd to suggest that irrespective of as to whether the appellant is the borrower in respect of the concerned transaction involving the secured creditor, the asset had to be returned to only the borrower or it was the borrower who was to be put in possession of the asset despite the non-borrower appellant having established its rights over such asset. The last limb of sub-section (3) is of widest amplitude and empowers the tribunal to pass such order as it may consider appropriate and necessary in relation to any of the measures taken by the secured creditor under Section 13(4) of the Act. There is no limitation apparent from the relevant words as to the authority of the tribunal to effectively deal with such a situation. The plain words of the sub-section are enough and no complex rule of statutory interpretation is necessary to be invoked for the understanding of the purport of the provision.
The petitioner's argument on the ouster of the civil court's jurisdiction by the cumulative impact of Sections 34 and 35 of the said Act is self-defeating in the context of the present discussion. If it is the petitioner's assertion that she cannot institute a civil suit on the cause of action that she has brought in the present proceedings, then that would imply the petitioner's acceptance that the subject-matter of this petition is as "a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under (the) Act to determine." The ouster of the civil court's jurisdiction applies only to matters which either tribunal referred to in Section 34 is authorised to entertain and determine. If it is the petitioner's case that in view of the scope of the tribunal's authority under Section 17(3) of the Act, the grievance that she has brought here cannot be determined by the tribunal, then Section 34 would not come into play to debar her from carrying the dispute to a civil court.
As much as the plain words of Section 17(3) of the Act are important, the history and the context have also to be appreciated. Even in the early 1980s banks and financial institutions found it suffocating to operate as funds and secured assets remained blocked in protracted litigation, whether they were recovery proceedings filed in regular courts by them or genuine or frivolous actions instituted by the constituents. Banking business was then almost completely State controlled and the worry was in public funds remaining entangled in time-consuming and ruinous court proceedings. There was a Tiwari Committee set up which recommended setting up independent tribunals for recovering debts of banks and financial institutions. The Narasimham Committee report thereafter culminated in first an ordinance and then the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Then followed those heady days at the Bar when it rained cyclostyled petitions challenging the vires of the 1993 Act and the cash registers never tired of ringing. The Supreme Court upheld the constitutionality of the 1993 Act and an amendment was introduced into the Act at the turn of the century that gave the Debts Recovery Tribunals the authority to entertain counterclaims from constituents. But the securities languished and deteriorated even as the long-drawn process of adjudication of debt chugged along before the tribunals.
A report by a second Narasimham Committee and another by the Andhyarujina Committee saw an ordinance on the lines of the subsequent Act of 2002 being promulgated. Again the vires of the Act was assailed and Mardia came upholding it. The principal thrust of the challenge was that the enactment went against the grain of the rule of law as recognised in this country; that a claimant would be allowed to pounce on the pound of flesh without any adjudication. Only a slight reservation was expressed by the Supreme Court in the secured creditors not being required even to consider any objection that was raised following a notice under Section 13(2) of the Act. A diluted right was afforded to the borrower under the Act to only have his objection considered by the secured creditor with the introduction of Section 13(3-A) into the Act, but the result of the consideration was not justiciable. Transcore followed which recognised that the Act provided for possession of a secured asset to be obtained by a non-adjudicatory process. The Act is an exception to the general rule. Its scheme envisages possession being obtained first and a subsequent adjudication as to whether the possession was obtained in accordance with the provisions of the said Act. The principle of obtaining possession of a property by due process of law, thus, stands modified in the context of the right of a secured creditor apparently covered by the said Act to enforce its security interest.
The overriding provision in Section 35 of the Act and the intent thereof apparent from Section 37 thereof that provides that the Act is in addition to, and not in derogation of, certain other regulatory and general statutes, conceives of a single window redress before the Debts Recovery Tribunal. The jurisdiction under Article 226 of the Constitution cannot be taken away by such a statute but a grievance capable of being redressed by the tribunal under the said Act should ordinarily not be allowed to proceed in the High Court.
There is one last aspect which, though it escaped the petitioner, is worthy of notice. Section 19 of the Act, the last in the Chapter providing for enforcement of security interest, recognises a borrower's right to receive compensation and costs if the Debts Recovery Tribunal or the Appellate Tribunal finds that the possession of secured assets had been obtained by the secured creditor not in accordance with the provisions of the Act and the rules made thereunder. The section does not cover an appellant under Section 17 of the Act who is not a borrower. It may imply that such an appellant who is not a borrower is left to pursue a claim in damages elsewhere or that the courtesy accorded under the section to the borrower has per force to be extended to the non-borrower appellant. It is not necessary to answer such question immediately.
WP No. 7095 (W) of 2009 is not entertained on the ground that there is an efficacious alternative remedy available to the petitioner. Since the petitioner had been put no notice of such an outcome at the outset, the petitioner has to endure the little hardship for having persisted with the cause in this forum. The petitioner will, however, be entitled to cite the period that she spent in this Court as cause for not proceeding before the appropriate forum but it will be for such forum to assess the adequacy of such cause. There will be no order as to costs.
For a period of four weeks from date or earlier order of the appropriate forum, the respondent bank shall not deal with or dispose of the property or part with possession thereof or create any rights in favour of any other in relation thereto.
No opinion has been expressed here as to whether a writ petition can be maintained in such circumstances against a private bank.
Urgent certified photostat copies of this judgment, if applied for, be supplied to the parties upon compliance with all requisite formalities. (Sanjib Banerjee, J.)