Madras High Court
Branch Office Aat : Flat No.2B vs The District Magistrate And on 23 April, 2021
Bench: Sanjib Banerjee, Senthilkumar Ramamoorthy
W.P.No.5098 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23.04.2021
CORAM :
The Hon'ble Mr.SANJIB BANERJEE, THE CHIEF JUSTICE
AND
The Hon'ble Mr.JUSTICE SENTHILKUMAR RAMAMOORTHY
W.P.No.5098 of 2021
Karvy Financial Services Ltd.,
Reg. Office at: 762, Building No.7, 6th Floor,
Solitaire Corporate park,
Andheri (East), Mumbai 400 093.
Branch Office aat : Flat No.2B, 1st Floor,
Wellington Estate, 26 Ethiraj Salai,
Chennai 600 105, Rep. by its
Authorised Officer, MR.Navin Kumar Somula. .. Petitioner
-vs-
1.The District Magistrate and
District Collector, Chennai.
2.The Tahsildar,
Maduravoyal Taluk, Madurovoyal,
Chennai.
3.The Deputy Commissioner of Police,
Avadi, Chennai. .. Respondents
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W.P.No.5098 of 2021
Petition filed under Article 226 of the Constitution of India
praying for issue of Writ of Mandamus to direct the 2 nd respondent to
execute the order dated 19.02.2021 in RC.No.J15/28975/2018 along
with police protection.
For Petitioner : Mr.M.Ajmal Azzath
For Respondents : Mr.V.Jayaprakash Narayanan
State Government Pleader
ORDER
(Made by The Hon'ble Chief Justice) This is another writ petition by a secured creditor complaining of either the authority approached under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 not taking any steps despite a request being filed or of the order passed under Section 14 of the Act not being implemented by those responsible therefor.
2. It appears that District Collectors and other officials entitled to entertain the request under Section 14 of the said Act need formal Page 2 of 11 https://www.mhc.tn.gov.in/judis/ W.P.No.5098 of 2021 training. It is also evident that revenue officials and police officials may not aware of the requirements of the Act and their obligations thereunder.
3. The Act of 2002 is a departure from the general procedure which was in vogue till such Act came into operation. Ordinarily, when a creditor seeks to claim against a borrower, the process of adjudication is undertaken before any coercive measure is resorted to. However, under the Act of 2002, which takes a leaf out of the State Financial Corporations Act, 1951, banks and financial institutions which can be regarded as secured creditors within the meaning of the relevant expression in the Act of 2002 have a right to directly proceed against the securities upon the borrowers' account turning non- performing. There are guidelines as to when an account can be said to have become a non-performing asset. The moment an account is labelled as an NPA, it triggers off the right of the concerned secured creditor to take steps in terms of the said Act and proceed against the securities without even approaching any adjudicatory forum or authority.
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4. It is necessary to discuss the matter at some length so that this order may be used as a guide by the authorities approached under Section 14 of the Act and the downstream officials who are required to implement an order passed by such authority under Section 14 of the Act.
5. A secured creditor within the meaning of that expression in the Act of 2002 is obliged to issue a notice to a borrower (which expression includes a guarantor) immediately upon an account becoming NPA, whereupon the borrower ought to pay up the amount due or indicate cogent grounds to resist the claim. The response of the borrower, even if it protests the claim of the secured creditor, has to be taken into consideration by the secured creditor; but the secured creditor may, nonetheless, proceed against the security under Section 13 (4) of the Act despite the grounds indicated by the borrower in response to the earlier notice. At such stage of the matter, the right of the secured creditor to proceed against the secured assets is not justiciable. In other words, the borrower cannot approach any authority to stop the secured creditor from proceeding against the secured asset.
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6. Upon the secured creditor proceeding against the secured asset, a further notice has to be issued to the borrower, whereupon the borrower comes to learn that measures under Section 13 (4) of the Act have been resorted to by the secured creditor. It is at this stage that the borrower, or any person aggrieved by the steps taken by the secured creditor, may apply to the appropriate Debts Recovery Tribunal complaining of the acts of the secured creditor. The secured creditor is permitted to proceed against the security till prohibited by an order of an appropriate authority, usually the Debts Recovery Tribunal or the Appellate Tribunal.
7. It is not necessary to go beyond such stage for the purpose of the present proceedings since the operation of Section 14 of the Act comes at such stage where the secured creditor requires executive assistance for the purpose of obtaining possession of the secured asset or documents pertaining thereto. Section 14 of the Act permits certain classes of officials to receive a request under Section 14 of the Act. The extent of the assistance that may be sought would pertain to obtaining possession of any immovable property or possession of or Page 5 of 11 https://www.mhc.tn.gov.in/judis/ W.P.No.5098 of 2021 access to certain documents. The authority approached under Section 14 of the Act has only to look into the documents filed by the relevant secured creditor in support of the request. One of such documents ought to be the various declarations as required to be furnished under Section 14 of the Act. Once the authority notices the relevant declarations to have been furnished, such authority has to accept the same at face value and not question the same or seek to adjudicate thereupon.
8. It is of great importance to appreciate that notwithstanding a request being carried to a Chief Judicial Magistrate or to a District Collector, who otherwise may enjoy adjudicatory functions, a request under Section 14 of the Act is for pure administrative assistance and the exercise undertaken by the authority approached thereunder is not adjudicatory at all. Since the entire purpose of the Act of 2002 is to unclog the dues of banks and financial institutions, most of which are state-owned bodies, time is of the essence as indicated in the provisions of the relevant statute. Thus, an authority under Section 14 of the Act is given a time-frame within which the requisite assistance has to be rendered in accordance with law.
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9. In proceedings under Section 14 of the Act of 2002, the borrower (which definition includes a guarantor) has no role to play and the authority approached under Section 14 of the Act has no jurisdiction to entertain any grievance by a borrower or to hear the borrower. To repeat, the authority approached under Section 14 of the Act has merely to go by the declarations furnished by a secured creditor, accept the same at the face value and, as long as all the declarations have been furnished, presume that the declarations are correct unless obviously apparent to be false.
10. Usually, as in the present case, the District Collector or the Chief Judicial Magistrate would require the Tahsildar or revenue officials exercising jurisdiction over the area where the immovable secured asset is situate to make over possession of the immovable property to the secured creditor and for the Superintendent of Police exercising jurisdiction over the area to provide police protection for such purpose. It is incumbent on the relevant revenue official or the police official to carry out the order of the appropriate authority passed under Section 14 of the Act so as not to frustrate the object and Page 7 of 11 https://www.mhc.tn.gov.in/judis/ W.P.No.5098 of 2021 purpose of the Act of 2002 and permit the secured creditor access to the secured asset, so that the sale thereof can be concluded expeditiously and the amount due realised for further circulation in the economy. This is of paramount importance as the money that remains outstanding and unrealised for a considerable period of time, is money that is not available for granting credit facilities to others and this adversely affects the economy and has a negative impact on both business and growth.
11. In the present case, an order was passed by the District Collector, Chennai on February 19, 2020. Even though there may have been some excuse on account of the lockdown last year in the second and third respondents not immediately implementing the relevant order of the Collector, there can no longer be any justification in not implementing the order of the Collector by taking necessary steps as directed, particularly in paragraphs 7 and 8 of the Collector's order.
12. W.P.No.5098 of 2021 is disposed of by directing the second and third respondents to carry out the directions as contained in the Page 8 of 11 https://www.mhc.tn.gov.in/judis/ W.P.No.5098 of 2021 Collector's order of February 19, 2020 and ensure that the secured asset is made over to the petitioning secured creditor within six weeks of the date of receipt of a copy of this order.
13. Mr.V.Jayaprakash Narayanan, learned State Government Pleader appearing for the respondents, should ensure that copies of this order reach the second and third respondents as expeditiously as possible.
14. It may also do well for the State to circulate this order to all Collectors and Superintendents of Police and even revenue officials for such officials to appreciate the significance of their roles and, more importantly, the need to adhere to the statutory time-lines in matters pertaining to the said Act of 2002.
There will be no order as to costs.
(S.B., CJ.) (S.K.R., J.)
23.04.2021
Index : Yes
sra
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W.P.No.5098 of 2021
To
1.The District Magistrate and
District Collector, Chennai.
2.The Tahsildar,
Maduravoyal Taluk, Madurovoyal,
Chennai.
3.The Deputy Commissioner of Police,
Avadi, Chennai.
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W.P.No.5098 of 2021
The Hon'ble Chief Justice
and
Senthilkumar Ramamoorthy, J.
(sra)
W.P.No.5098 of 2021
23.04.2021
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