Allahabad High Court
Dilip Kumar Singh And Another vs State Of U.P. Thru Secy. And Others on 14 December, 2012
Bench: Ashok Bhushan, Abhinava Upadhya
HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved on 08.11.2012. Delivered on 14.12.2012. Case :- WRIT - C No. - 58329 of 2012 Petitioner :- Dilip Kumar Singh And Another Respondent :- State Of U.P. Thru Secy. And Others Petitioner Counsel :- Deepak Kumar Jaiswal,Sanjay Kumar Gupta Respondent Counsel :- C.S.C.,P.N. Tripathi,Tarun Verma,Vikram D. Chauhan ::::::::::: Hon'ble Ashok Bhushan,J.
Hon'ble Abhinava Upadhya,J.
(Delivered by Hon'ble Ashok Bhushan, J.) Heard Sri Deepak Kumar Jaiswal learned counsel for the petitioners, Sri Tarun Verma appearing for the Allahabad Bank and learned Standing Counsel for the State-respondents.
By this writ petition, the petitioners have prayed for quashing the order dated 3rd August, 2012 passed by the District Magistrate, Mirzapur under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 directing for providing police help for taking possession of the mortgaged assets. A writ of mandamus has also been sought commanding the respondents No.2 to 5 not to dispossess the petitioners from their residential house situate at Plot No.78/1, Bhajan Ka Pura, Mirzapur.
Brief facts of the case as emerge from pleadings in the writ petition, are; petitioners took a housing loan of Rs.12,00,000/- from Allahabad Bank on 8th July, 2004. The security interest was credited on the Plot No.78/1. Default was committed by the petitioners in repayment of loan, consequently the Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 2002 Act). A notice dated 24th February, 2009 under Section 13(2) of the 2002 Act was issued demanding repayment of the amount. The petitioners failed to make payment within the time allowed in the notice, hence the Bank invoked its power under Section 13(4) of the 2002 Act by issuing possession notice dated 9th July, 2009. The Bank further issued a notice for sale of the mortgaged assets dated 4th May, 2011 which was published on 6th May, 2011 in the newspaper inviting tenders for sale of the mortgaged assets and 8th June, 2011 was fixed for auction. The sale was confirmed and sale certificate dated 29th June, 2011 was issued. An application under Section 14 of the 2002 Act was filed by the Bank dated 29th July, 2011 before the District Magistrate on which an order was passed on 3rd August, 2011 for taking possession by police force. The petitioners filed a writ petition being Writ Petition No.36888 of 2011 in this Court challenging the action of the Bank taken under Section 13(4) of the 2002 Act which writ petition was dismissed on the ground of alternative remedy available under Section 17 of the 2002 Act. The petitioners thereafter on 8th July, 2011 filed an application under Section 17 of the 2002 Act which was registered as S.A. No.181 of 2011. The registered deed dated 14th July, 2011 was also executed by the Bank in favour of auction purchaser after issuance of sale certificate dated 29th June, 2011. The application filed by the petitioners under Section 17 of the 2002 Act was dismissed by the Debt Recovery Tribunal vide its order dated 31st October, 2012. The Debt Recovery Tribunal by another order of the dated (31.10.2012) granted 7 days time to the petitioners to approach the appellate Tribunal and a protection of 7 days from dispossession was granted. The petitioners thereafter instead of filing an appeal before the appellate Tribunal, has come up to this Court by filing this writ petition on 3rd November, 2012.
Sri Deepak Kumar Jaiswal, learned counsel for the petitioners submits that Bank is not legally entitled to take physical possession of the properties after executing the registered sale deed in favour of the auction purchaser. The Bank cannot maintain an application under Section 14 of the Act before the District Magistrate seeking police assistance to take possession of the secured assets after executing the registered sale deed in favour of auction purchaser. He further submits that after executing the registered sale deed by delivering the possession of the property the Bank complete the sale or transfer under Section 54 of the Transfer of Property Act as well as under Rule 9(9) of the Security Interest (Enforcement) Rules, 2002, the implied contract to give possession will operate from Section 55(1)(f) of the Transfer of Property Act and only may be enforced by a suit for specific performance because after executing the registered sale deed in favour of auction purchaser, the matter regarding possession belong to the civil Court and it will be decided under the suit for possession. It is further submitted that right of the Bank for further action is automatically suspended under the provisions of Section 17(4) upon filing of an application under Section 17 of the 2002 Act and secured creditor cannot proceed further till the declaration of the recourse taken by secured creditor under Section 13(4) is in accordance with the provisions of the 2002 Act and the rules made thereunder. Sri Jaiswal further submits that Bank can only avail the opportunity of Section 17(6) to make an application before the appellate Tribunal for directing the Debt Recovery Tribunal for expeditious disposal of the application pending before the Debt Recovery Tribunal if the same is not disposed of within the period of four months as specified under Section 17(5) of the 2002 Act.
Sri Tarun Verma, learned counsel for the Bank, refuting the submissions of learned counsel for the petitioners, contends that Bank is fully entitled to make an application under Section 14 of the 2002 Act before the District Magistrate for taking actual physical possession even after issuance of sale certificate and there is no prohibition in the 2002 Act from moving the District Magistrate for physical possession. He further contends that mere fact that an application under Section 17 of the 2002 Act has been filed or pending does not prohibit the Bank from proceeding further in accordance with the 2002 Act. He further submits that application under Section 17 of the 2002 Act was filed by the petitioners much after sale of the mortgaged assets and issuance of sale certificate. It is submitted that the application under Section 17 of the 2002 Act filed by the petitioners having been dismissed, the remedy of the petitioners is to file an appeal under Section 18 of the 2002 Act and the writ petition be not entertained.
Learned counsel for the parties have placed reliance on decisions of this Court, Punjab and Haryana High Court and Madras High Court which shall be referred to while considering the submissions in detail.
From the submissions raised by learned counsel for the parties, following issues arise for determination:-
(i)Whether the secured creditor/Bank is legally entitled to take physical possession of the properties after executing the registered sale deed in favour of auction purchaser?
(ii)Whether the secured creditor/Bank can move an application under Section 14(1)(2) of the 2002 Act before the District Magistrate to seek the police assistance for taking possession of the secured assets after execution of the registered sale deed in favour of auction purchaser?
(iii)Whether the right of the secured creditor/Bank for taking further measures as provided under Section 13(4) are automatically suspended under the provisions of Section 17(4) upon filing of an application under Section 17(1) of the 2002 Act and secured creditor can proceed further only when the declaration is made that the recourse taken by the secured creditor under Section 13(4) is to be in accordance with the provisions of the 2002 Act and the rules made thereunder by the Debt Recovery Tribunal?
All the above issues being interconnected, are taken together.
Before we proceed to consider the issues, which have arisen for consideration, it is relevant to note that the application of the petitioners filed under Section 17 of the 2002 Act having been rejected by order dated 31st October, 2012, the petitioners have statutory remedy under Section 18 of the 2002 Act, however, in view of the fact that learned counsel for the petitioners has raised certain issues pertaining to jurisdiction of the Bank and the issues relating to interpretation of scope and ambit of the provisions of Sections 14 and 17 of the 2002 Act, we proceed to consider the issues on merits also.
The submission, which has been much pressed by learned counsel for the petitioners, is that the Bank has no jurisdiction to file an application under Section 14 of the 2002 Act after sale of the mortgaged assets. Learned counsel for the petitioners referring to Section 14(1) of the 2002 Act submits that application for taking possession has to be made by the Bank before sale of the mortgaged assets. He submits that the scheme of the 2002 Act contemplates taking possession by the Bank before sale, since after sale the Bank is obliged to handover possession to the auction purchaser by virtue of sub-rule (9) of Rule 9 of the Security Interest (Enforcement) Rules, 2002. Section 14(1) of the 2002 Act, which is relevant for the purpose, is quoted below:-
"14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.- (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him-
(a) take possession of such asset and documents relating thereto; and
(b) forward such asset and documents to the secured creditor."
Section 14(1) contains two categories where an application before the District Magistrate is contemplated i.e. (i) where the possession of any secured asset is required to be taken by secured creditor or (ii) if any of secured asset is required to be sold or transferred by the secured creditor ...... The words "where the possession of any secured asset is required to be taken by the secured creditor", are wide enough to embrace in itself any contingency where possession of any secured asset is required to be taken. Although possession can be taken by the Bank of mortgaged assets when secured asset is required to be sold or transferred but the scheme of the 2002 Act does not indicate that it is necessary for the Bank to have actual physical possession before proceeding to exercise its power under Section 13(4) of the Act for sale of the mortgaged asset. Section 14 of the 2002 Act is a provision empowering the Bank to take assistance from Chief Metropolitan Magistrate or District Magistrate for taking possession of the secured asset. The power to take possession by the secured creditor flows from Section 13(4) of the 2002 Act where secured creditors is entitled to take recourse of any of the measures provided under sub-section (4) of Section 13. In this context it is also relevant to refer to Rule 8 of the Security Interest (Enforcement) Rules, 2002 which enumerates various steps for sale of immovable secured assets and one of the steps to be taken by the secured creditor is to take possession. Rule 8(1), 8(2) and 8(3), which are relevant, are quoted below:-
"8. Sale of immovable secured assets.-- (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.
(2) The possession notice as referred to in sub-rule (1) shall also be published in two leading newspaper, one in vernacular language having sufficient circulation in that locality, by the authorised officer.
(3) In the event of possession of immovable property is actually taken by the authorised officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property."
The words "possession notice" as mentioned in Rule 8(1) and (2) is a notice for taking possession both actual possession or otherwise. Sub-rule (3) of Rule 8 of the Security Interest (Enforcement) Rules, 2002 uses the words "in the event of possession of immovable property is actually taken" which clearly indicates that taking of possession may be actual or may be constructive. Certain consequences follow after taking actual possession as indicated in sub-rules (3) and (4) of Rule 8. Thus before proceeding for sale of the mortgaged assets Bank can take actual possession as well as symbolic possession and the scheme of the 2002 Act and the 2002 Rules do not indicate that without taking actual possession, the Bank cannot proceed with the sale of the mortgaged assets.
The question as to whether the Bank can take possession by moving an application under Section 14 of the 2002 Act after issuance of sale certificate was raised before a Division Bench of Madras High Court in the case of M/s. Kathikkal Tea Plantations vs. State Bank of India and another reported in A.I.R. 2010 Madras 24. The issue was noticed by the Division Bench in paragraph 5 of the judgment. The Division Bench after considering several decisions repelled the contention that application under Section 14 of the 2002 Act is not maintainable after issuance of sale certificate. Following was laid down by the Division Bench of Madras High Court in paragraphs 8, 12, 16, 20 and 21 of the said judgment:-
"8. Learned counsel appearing for the respondent bank in W.P.No.10228 of 2009 contended that section 13(4) empowers the bank to take possession of the secured assets and take over the management of the business of the borrower. It does not say anything about the actual physical possession. The object of the SARFAESI Act is only to realise long term assets, manage problems of liquidity, asset liability mis-match and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. In other words, the object of the SARFAESI Act is a speedy recovery of the non-performing assets. Further, Section 13 does not say that the transfer has to be effected under section 13(6) only after taking physical possession. If the dues of the secured creditor are tendered at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditor. Therefore, before the confirmation of sale, the property can be recouped by the borrower if he tenders the amount. On failure to pay the amount only, the sale is confirmed and sale certificate is issued in accordance with Rule 9(6) of SARFAESI Rules. Nowhere in section 13 of SARFAESI Act it has been stated that the right to transfer can be effected only after taking actual physical possession or that the exercise of taking over possession under section 13(4) shall be of actual physical possession. After taking symbolic possession or constructive possession under section 13(4), the borrower continues to be in the property only in de facto possession. Learned counsel has further contended that the language found in 14(1) has to be interpreted only in consonance with the objects of the SARFAESI Act. Therefore, it cannot be said that the word 'secured creditor' and 'secured debt' found in section 14(1) does not mean that the bank lost the power to take actual possession, after issuance of the sale certificate.
12.In view of the above submissions, now the question to be decided is whether the Respondent banks are legally entitled to take physical possession of the property after issuance of the sale certificate in favour of the auction purchasers by filing petition under section 14(1)(2) of SARFAESI Act before the concerned Magistrate. The statements and reasons for SARFAESI Act seem to be that the Act was enacted to reconstruction of financial assets and enforcement of security interest and for matters connected therein. The banks as 'secured creditor', as defined under section 2(zd) of the Act, are empowered under section 13(4) of the SARFAESI Act to take possession of the 'secured asset' as defined under section 2(zc) and also empowered to transfer the same under section 13(6) of the SARFAESI Act. It is relevant to extract Sections 13(4) and 13(6), which read as follows:
"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 of 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(6) reads as follows:
"Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset."
16. From the above, the submission made by the learned counsel for the respondents that section 14 of the Act cannot be read in isolation and has to be viewed in the context of all other provisions of the Act, such as Sections 13(4)(6)(8),15,17, 18 Rule 8(9) of SARFAESI Rules and section 55 of the Transfer of Property Act is acceptable. These provisions are in conjunction with Section 14 of the Act for the purpose of interpretation, to be adopted, to achieve and sub-serve the object of the SARFAESI Act. Any other approach or interpretation will defeat the object of the Act. The object of the Act is only to enable the secured creditor, financial institutions to realise the long term assets, manage problems of liquidity, asset liability mis-match and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. Therefore, it could be understood that the Act was brought for recovering the amount in speedy manner in taking possession of the properties and in realising the money. The third party, who comes forward to purchase the secured asset, must have a confidence that he would get the title to the property at the earliest. If the transferring of the property by way of title is going to be delayed endlessly, then the object of the Act which is meant for speedy recovery, would be defeated in whole. Therefore, as contended by the learned counsel for the banks, that if interpretation is given by taking the words in isolation from section 14, it would defeat the whole object. Only on a combined reading of section 14 along with the other sections, it would give a clear picture of the object. In this regard, a useful reference could be placed on the decisions relied on by the learned counsel appearing for the impleaded party.
(i) (1986) 2 SCC 237 (M/s.Girdhari Lal and Sons ..vs.. Balbir Nath Mathur and others
(ii) (1992) 1 SCC 361 (Administrator, Municipal Corporation ..vs.. Dattatraya Dahankar)
(iii) 2001(9) SCC 673: (Nirathilingam ..vs.. Annaya Nadar and Others;
20. A reading of the dictum laid down in the above judgments would give a clear picture that the mechanical way of interpreting the provisions made in the statute will lead to defeat the object of the Act. Here, when the object is to speedy recovery of debt, by way of taking possession on transferring the property in favour of third party and issued a sale certificate, it cannot be contended that once the sale certificate is issued, physical possession cannot be taken by the secured creditors. Further, in this regard, a useful reference could be placed on the judgment reported in KOTTAKKAL CO-OP.URBAN BANK LTD ..vs.. BALAKRISHNAN (2008(2)KLT 456). In that case, after taking a symbolic possession under section 13(4) and selling the property in favour of the auction purchaser, the secured creditor approached the Chief Judicial Magistrate seeking the assistance for taking possession. The petition filed by the secured creditor under section 14(1) was dismissed by the Magistrate holding that that the provision contained in section 14 only enables the secured creditor to seek assistance of Court to take possession or control of property for effecting sale. Since the secured creditor had taken possession, effected sale and issued sale certificate, the provision cannot be invoked. Aggrieved over the same, the secured creditor preferred a writ petition before the High Court. The High Court while dealing with the case has held that there is no stipulation in section 13 or elsewhere that the right to transfer can be exercised only after taking over the actual physical possession or that the exercise of taking over possession under section 13(4) shall be of actual physical possession, resulting in complete dispossession of the secured debtor, de facto and de jure. The relevant passage in paragraph 5 is extracted hereunder: "5....to complete a transfer by a secured creditor in favour of a third party, the necessary pre-condition is that possession is taken in terms of S.13(4) of the Act. A close reading of S.13(4)(a) would show that what is authorised thereby is the taking of possession of the secured asset, including the right to transfer. While taking over of possession is authorised and such taking over of possession includes the taking over of the right to transfer, there is no stipulation in section 13 or elsewhere that the right to transfer can be exercised only after taking over the actual physical possession or that the exercise of taking over possession under section 13(4) shall be of actual physical possession, resulting in complete dispossession of the secured debtor, de facto and de jure....At any rate, a secured debtor, continuing to hold on de facto possession on the ground of not having been dispossessed, would only be one who would have been given the advantage to continue to hold on de facto possession for the time during which different steps would have followed, resulting in the confirmation of sale in favour of a third party auction purchaser. In the absence of any jurisdictional requirement for de facto possession to make a transfer in terms of S.13(6), there is no legal or jurisdictional error in the sale being held by the secured creditor on the strength of de jure possession. Such a sale or transfer would have the complete support of S.13(6).
21. Therefore, in our opinion, in the absence of any specific stipulation in Section 13, the properties could be sold only after taking physical possession and also the combined reading of sections 13 and 14 with the background of the object would show that it cannot be said that the secured creditor cannot take actual physical possession after issuing sale certificates merely for the reason that the language found in section 14 refers to the secured creditor and secured asset. Further more, as contended by the learned counsel for the petitioner in W.P.No.10228 of 2009, that under sectio1n 13(10) even after sale, the bank can approach the Debts recovery Tribunal by filing application having jurisdiction or a competent court, for recovery of the balance amount. Further, the contention of the learned counsel for the banks that the character of the secured creditor cannot be said to be ceased by executing the sale certificate also cannot be ignored."
Thus the submission of learned counsel for the petitioners that application filed by the Bank was not maintainable is without any substance.
Learned counsel for the petitioners has also placed reliance on two judgments of the Madras High Court in the cases of Elumalai Chetty and Jagannadha vs. P. Balakrishna Mudaliar reported in (1921)41 MLJ 297 and Sundara Ramanujam Naidu vs. Sivalingam Pillai and another reported in (1923)45 MLJ 431. In Elumalai Chetty's case (supra) the Madras High Court was considering Section 54 of the Transfer of Property Act and held that transfer of ownership of a immovable property falls under Section 54 and will require a registered instrument for the purpose. In Sundara Ramanujam Naidu's case (supra) the Madras High Court was considering a question as to what will be the value of the suit brought by plaintiff to enforce specific performance of a contract to sell a shop by directing the defendant to deliver a proper sale deed to him on his paying the price into Court. We are of the view that aforesaid two judgments of Madras High Court have no relevance on the issues which have arisen in the present case since the present is a case where power has been invoked by the Bank under the 2002 Act which is a special statute and rights and liabilities of the parties are to be governed by special enactment i.e. the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 which provision has a overriding effect by virtue of Section 35 of the 2002 Act, hence no help can be taken by the petitioners from the aforesaid two judgments of the Madras High Court.
In view of the aforesaid discussions, the Issue No.1 is decided holding that secured creditor is legally entitled to take physical possession even after execution of sale deed in favour of auction purchaser and the application under Section 14 of the 2002 Act by the Bank before the District Magistrate was fully maintainable. The Issue No.1 and 2 are answered accordingly.
The Issue No.3 is as to whether after filing of application under Section 17 of the 2002 Act the Bank's power to take measure under Section 13(4) is suspended. As noticed above, the Bank has proceeded with the auction proceeding and sale certificate was issued on 29th June, 2011 i.e. much before filing of the application by the petitioner under Section 17 of the 2002 Act which was filed on 8th July, 2011. Thus factually the issue does not arise. However, the issue having been raised, we are of the view that the said issue needs consideration in view of larger question raised by the petitioners that after Section 17 application has been filed all measures by the Bank have to be suspended.
Section 17 of the 2002 Act, which is relevant for the purpose, is quoted below:-
"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 alongwith 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 measure 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 this sub-section.
(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 business 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 creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business 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 part 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 the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder."
Learned counsel for the petitioners referring to Section 17(4) of the 2002 Act contends that the said sub-section contemplates declaration by Tribunal that measures taken by the Bank are in accordance with the provisions of the 2002 Act which clearly means that the Bank has to stay his hands from proceeding any further till a declaration is granted by the Tribunal that measures taken by the Bank are in accordance with the 2002 Act. The scheme of the 2002 Act as delineated by Section 17 is that a right of appeal has been granted to a person including borrower against the action taken by the Bank under Section 13(4) before the Tribunal to enquire as to whether action taken is in accordance with the Act or is not in accordance with the Act. The consequences have also been provided in sub-section (3) of Section 17 when Tribunal holds that action taken is not in accordance with the 2002 Act. The Tribunal is clearly entitled to restore the possession of the property to the borrower if the action of the Bank is not in accordance with the Act. The proceeding under Section 17 of the 2002 Act has to be concluded by the Tribunal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act No.51 of 1993). Under the 1993 Act the Tribunal has power to grant interim relief. Thus under Section 17 of the 2002 Act also the Tribunal can grant interim relief on an application filed by the borrower. The scheme of Section 17 of the 2002 Act does not indicate that the said provisions contain any automatic stay of the proceeding by the Bank. Section 17 of the 2002 Act does not indicate that as and when an application under Section 17 is filed, the operation of proceedings is suspended and Bank cannot proceed any further.
The above question came for consideration before a Full Bench of Madras High Court in the case of Lakshmi Shanker Mills (P) Ltd. & others vs. Authorised Officer/Chief Manager, Indian Bank & others. The Full Bench noticed the aforesaid question which was referred to it. It is useful to quote paragraph 10, 13 and 17 of the said judgment:-
"10. The first question is whether the right of the bank to take proceedings under Section 13(4) shall remain suspended on filing an application under Section 17. The second question concerns the jurisdiction of the Debt Recovery Tribunal to impose a condition of deposit for grant of stay of auction. Section 13(4) of the Securitisation Act is pivotal to the whole controversy. It provides that a secured creditor may enforce any security interest without intervention of the court or tribunal irrespective of Section 69 or Section 69-A of the Transfer of Property Act where according to sub-section (2) of Section 13 the borrower is a defaulter in repayment of the secured debt or any instalment of repayment and further the debt standing against him has been classified as a non-performing asset by the secured creditor. Sub-section (2) of Section 13 further provides that before taking any steps in the direction of realizing the dues, the secured creditor must serve a notice in writing to the borrower requiring him to discharge the liabilities within a period of 60 days failing which the secured creditor would be entitled to take any of the measures as provided in sub-section (4) of Section 13. Sub-section (4) of Section 13 provides for four measures which can be taken by the secured creditor in case of non-compliance with the notice served upon the borrower namely, (a) to take possession of the secured assets including the right to transfer the secured assets by way of lease, assignment or sale; (b) to take over the management of the secured assets including the right to transfer; (c) to appoint a manager to manage the secured assets which have been taken possession of by the secured creditor; and (d) to require any person who had acquired any secured assets from the borrower or from whom any money is due to the borrower to pay the same as it may be sufficient to pay the secured debt. Sub-section 3-A, which has been inserted by the amendment, provides that if on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower. The proviso to sub-section 3-A provides that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17-A. In Mardia Chemical's case, the Supreme Court has clearly held that such right accrues only if measures are taken under sub-section (4) of Section 13 of the Securitisation Act (para.48 SCC page 348). Therefore, only if one or other measure is taken by the secured creditor, a cause of action arises for any person or borrower to prefer an application under Section 17 of the Securitisation Act.
13. Learned counsel for the borrowers however argued that the use of the expressions "if" and "then" would only mean that the bank can take one or more measures laid down under Section 13(4) only if the Tribunal declares that the action taken already is in accordance with the provisions of the Securitisation Act and the rules made thereunder. It was submitted that the use of the word "if" connotes a condition precedent and no further action can be taken unless the condition is fulfilled. We are unable to accept the submission of the learned counsel for the borrowers. The provisions of Sections 13 and 17 are amended after the Marida Chemicals case. The Statement of Objects and Reasons makes it manifestly clear that the amendment has been effected in view of the judgment of the Supreme Court and to discourage the borrowers to postpone the repayment of their dues and also to enable the secured creditor to speedily recover their dues, if required by enforcement of security or other measures specified in sub-section (4) of Section 13 of the Act. Legislature was clearly aware of the ruling in Marida Chemicals case which interpreted Section 17 as granting to the Tribunal a discretionary power of stay. Accepting the submission of the borrowers would mean that the Legislature intended to undo this by enacting Section 17 so as to suspend the power of the banks to take appropriate measures under Section 13. It is a recognized rule of interpretation of Statutes that expressions used therein should ordinarily be understood in a sense in which they harmonized with the object of the statute and which effectuate the object of the legislature (See New India Sugar Mills Ltd. Vs. Commissioner of Sales Tax, AIR 1963 SC 1207). The provisions of Section 17 must therefore receive such construction at the hands of the Court as would advance the object and at any event not thwart it. In other words, the principle of purposive interpretation should be applied while construing the said provision. The Securitisation Act is enacted to provide a speedy and summary remedy for recovery of thousands of crores which were due to the banks and financial institutions and accepting the interpretation suggested by the counsel for the borrowers would defeat the very object of the Act.
17. We accordingly hold that there will be no automatic stay on filing of an application under Section 17 of the Securitisation Act, and the Tribunal while granting stay of auction can impose a condition relating to deposit. Re. Question (iii)"
The Full Bench while summarising its opinion held following in paragraph 22 of the judgment:-
"22. In the light of the foregoing discussion, we summarise our findings as follows: -
(i) The right of the bank is not automatically suspended upon filing of an application under Section 17 of the Securitisation Act and the secured creditor can proceed to auction secured asset where no stay is granted by the Tribunal.
(ii) The Tribunal has power to impose the condition relating to deposit for grant of stay of auction.
(iii) The Tribunal has no power to pass any interim mandatory order relating to restoration of possession or restoration of management before the finalisation of the proceedings under Section 17 of the Securitisation Act, and (iv)All such grounds, which rendered the action of the bank/financial institution illegal, can be raised in the proceedings under Section 17 of the Securitisation Act before the Debt Recovery Tribunal. It is for the Debt Recovery Tribunal to decide in each case whether the action of the bank/financial institution was in accordance with the provisions of the said Act and legally sustainable."
Learned counsel for the petitioners has placed reliance on a judgment of the Punjab-Haryana High Court in the case of Arun Kumar Arora and another vs. Union of India and others reported in AIR 2006 P H 211. Before the Punjab-Haryana High Court the argument was raised by the petitioners that physical possession of the mortgaged property could be taken only after the adjudication is done under Section 17 of the Act and that Section 14 would come into play only when the matter has been adjudicated upon by the Debt Recovery Tribunal or when after the sale of the property, actual possession is required to be given to the purchaser. In the case before the Punjab-Haryana High Court notice under Section 13(2) was issued on 22nd May, 2003 after which only partial payment was made, hence the Bank inovked its power under Section 13(4) of the Act on 12th March, 2004 in pursuance of which notice for possession was affixed on the shop and physical possession of half portion of the shop was taken. On 24th May, 2004 an application under Section 17(1) of the 2002 Act was filed. The Debt Recovery Tribunal passed an order on 5th September, 2005 directing that the applicant should not be deprived of the possession specially when he has cleared all the dues in the account of M/s Pratap Trading Company. The said order was challenged and the appellate Tribunal directed the Debt Recovery Tribunal to decide the main application. The Debt Recovery Tribunal ordered the Bank to open the seal of the portion of the premises actual possession of which was taken. Against the order of the Debt Recovery Tribunal appeal was filed before the appellate Tribunal which was allowed on 22nd February, 2006. The order of the appellate Tribunal was under challenge before the Punjab-Haryana High Court. The Punjab-Haryana High Court after considering the submissions has laid down following in paragraph 18 of the judgment:-
"18. This Court in the case of M/s Kalyani Sales Company and another (supra) had taken note of the judgment of the Hon'ble Supreme in Mardia Chemcials Ltd 's case (supra) and thereafter had come to the conclusion that the secured creditor is entitled to take the symbolic possession of the property Under Section 13(4) of the Securitisation Act, 2002, so that application, Under Section 17 xof the Act, does not become illusory or meaningless. The judgment in M/s Kalyani Sales Company's case (supra) applies to the present case, as the right of the petitioners to have adjudication of the matter, is sought to be defeated by taking physical possession of the property. The learned Debts Recovery Tribunal was right in ordering that the possession be delivered back to the petitioners during the pendency of the application Under Section 17 of the Act, as the petitioners were admittedly in physical possession of the property and running their business from the said property, Section 14 of the Securitisation Act, 2002 cannot be interpreted to defeat the rights granted to a party, who Under Section 17 of the Act is entitled to have their objections adjudicated. A reading of Section 14 of the Securitisation Act, 2002 itself makes it clear that it is only when the possession of asset is required to be taken by the secured creditor or the same is required to be sold or transferred by the secured creditor under the provisions of the Act, it is then that an application can be made. Section 14 of the Act has to be read with the provisions of Section 34 and 17 of the Act and cannot be interpreted to defeat the right of the parties Under Section 17 of the Act, as is sought to be done by the Bank and, therefore, we do not agree with the contention raised by the respondent-Bank or with the findings recorded by the Debts Recovery Appellate Tribunal that the possession has been taken in consonance with the law laid down by this Court.
From the judgment of Punjab-Haryana High Court, it is clear that it was held by the Punjab-Haryana High Court that reading of Section 14 of the 2002 Act itself makes it clear that it is only when the possession of asset is required to be taken by the secured creditor or the same is required to be sold or transferred by the secured creditor under the provisions of the 2002 Act, it is then that an application can be made. Thus the Punjab-Haryana High Court has also held that application under Section 14 of the 2002 Act can be made when possession is to be taken or asset has to be sold. In the present case the judgment in Arun Kumar Arora's do not help the petitioners since in the present case application under Section 14 was filed after sale of mortgaged asset and much after the issuance of sale certificate and further the application under Section 17 was filed by the petitioners after sale of the mortgaged asset. Moreso, the Full Bench judgment of the Madras High Court has already laid down in Lakshmi Shanker Mills' case (supra), as noted above, that there would be no automatic stay on filing of an application under Section 17 of the 2002 Act. We are in full agreement with the Full Bench judgment of the Madras High Court in Lakshmi Shanker Mills' case (supra).
In view of the aforesaid discussions, we are of the view that by mere filing an application under Section 17 of the 2002 Act, there is no embargo on the Bank from proceeding under the 2002 Act.
As observed above, against the order of Debt Recovery Tribunal rejecting the application under Section 17 of the 2002 Act, the petitioners have statutory remedy under Section 18 of the 2002 Act. We, however, provide that in the event petitioners files an appeal within 30 days from today, the same be entertained and decided on merits.
Subject to above, the writ petition is dismissed.
Order Date :- 14.12.2012 Rakesh