Calcutta High Court
Asset Reconstruction Company India ... vs Amit Ventures Private Ltd. And Ors. on 4 December, 2006
Equivalent citations: AIR2007CAL49, AIR 2007 CALCUTTA 49, 2007 (2) ALL LJ NOC 345 2007 (2) AKAR (NOC) 167 (CAL), 2007 (2) AKAR (NOC) 167 (CAL)
Author: Bhaskar Bhattacharya
Bench: Bhaskar Bhattacharya
JUDGMENT Bhaskar Bhattacharya, J.
1. This Mandamus Appeal is at the instance of the respondent in a writ application and is directed against order dated September 8, 2006 passed by a learned single Judge in W.P. No. 20166 (W) of 2006 thereby rejecting the writ application on the sole ground that a notice issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred to as the Act) by a solicitor on the instruction of the creditor was invalid.
2. Being dissatisfied, the respondent has come up with the present Mandamus Appeal.
3. Mr. Mitra, the learned advocate appearing on behalf of the appellant has vigorously contended before us that the learned single Judge committed a gross error of law in holding that the notice in terms of Section 13(2) of the Act is required to be given by the secured-creditor or its authorised officer himself, but in no case, by their learned advocate on the basis of the instruction, According to Mr. Mitra, there is no prohibition either under the Act or under the Rules framed thereunder In giving a notice in terms of Section 13(2) of the Act by an advocate or a solicitor on behalf of his client,
4. Mr. Roy, the learned advocate appearing on behalf of the respondent/writ-petitioner has, however, opposed the aforesaid contention raised by Mr. Mitra and has contended that the Act read with the Rules framed thereunder unmistakably point out that such notice can only be issued by the secured-creditor or its authorised officer but none else on their behalf. He, therefore, prays for dismissal of the appeal.
5. Therefore, the only question that arises for determination in this Mandamus Appeal is whether the notice under Section 13(2) of the Act can be issued by a learned advocate on behalf of the secured-creditor or its authorised officer as mentioned in the Act.
6. To appreciate the aforesaid question, it will be profitable to refer to Section 13 of the Act and Rule 2(a) and Rule 2(b) of the Rules framed thereunder and those are quoted below:
Section 13. Enforcement of security interest .- (1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any : secured creditor may be enforced, without the intervention of the Court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under Sub-section (4).
(3) The notice referred to in Sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.
(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 secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset:
(c) appoint any person (hereinafter 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.
(5) Any payment made by any person referred to in Clause (d) of Sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.
(6) 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.
(7) Where any action has been taken against a borrower under the provisions of Sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.
(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor and no further step shall be taken by him for transfer or sale of that secured asset.
(9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to Sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shaft be binding on all the secured creditors ;
Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of Section 529-A of the Companies Act, 1956 (1 of 1956):
Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and providing his debt under proviso to Sub-section (1) of Section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen's dues with the liquidator in accordance with the provisions of Section 529-A of that Act:
Provided also that the liquidator referred to in the second proviso shall intimate the secured creditors the workmen's dues in accordance with the provisions of Section 529-A of the Companies Act, 1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen's dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator:
Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator:
Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any.
Explanation.- For the purposes of this sub-section,-
(a) "record date" means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date;
(b) "amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.
(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court as the case may be, for recovery of the balance amount from the borrower.
(11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in Clauses (a) to (d) of Sub-section (4) in relation to the secured assets under this Act.
(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.
(13) No borrower shall, after receipt of notice referred to in Sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.
2. Definitions.- In these rules, unless the context otherwise requires,-
(a) "authorised officer" means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the Ordinance;
(b) demand notice means the notice in writing issued by a secured creditor or authorised officer, as the case may be, to any borrower pursuant to Sub-section (2) of Section 13 of the Ordinance.
7. After hearing the learned Counsel for the parties and after going through the aforesaid provisions contained in the Act and the Rules framed thereunder, we find that in order to exercise the right conferred upon a secured-creditor under Section 13(4) of the Act it is necessary that the secured-creditor or the authorised officer, as the case may be, must give a notice in terms of Section 13(2) of the Act. The Rules framed under the Act, provide that such notice must be "issued" by a secured-creditor or the authorised officer as the case may be.
8. From the aforesaid provisions of the Act and the Rules framed thereunder it appears to us that service of notice in terms of Section 13(2) of the Act is condition precedent for invoking the right of the secured-creditors in terms of Section 13(4) of the Act. The phrase "issued by the secured-creditor or the authorised officer" appearing in Rule 2(b) should not be stretched to such extent so as to mean that the same must be actually written by the secured-creditor or the authorised officer. We appreciate the contention of Mr. Roy, the learned advocate appearing on behalf of the respondent, that the decision to give notice in terms of Section 13(2) of the Act must be taken by either the secured-creditor or the authorised officer as the case may be but that does not mean that the notice cannot be conveyed through a learned advocate on their behalf.
9. In this connection, we may profitably refer to a decision of a Division Bench of this Court in the case of Radharani v. Angurbala reported in (1961) 65 CWN 1119 wherein the Division Bench was considering the question whether a notice to quit in terms of Section 13(6) of the West Bengal Premises Tenancy Act can only be given by the landlord himself when the said Act unlike the similar provisions contained in Section 106 of the Transfer of Property Act does not specifically permit issue of a notice through an authorised agent. In that context, the Division Bench held that such notice can always be given by a learned advocate on behalf of the landlord notwithstanding the absence of authorization as provided in the Transfer of Property Act. According to the said Division Bench, ordinarily, an act which can be done by the party can also be done by his authorized agent. The express provision in the Transfer of Property Act about the giving of notice on behalf of the landlord through an agent, the Division Bench proceeded, appeared to have been redundant or a provision inserted ex abundanate cautela.
10. The same question subsequently came up for consideration before another Division Bench of this Court in the case of M.G.A. Hossain v. Binani Property reported in (1969) 73 CWN 591 where the Bench made the following observations:
At the outset the contention on behalf of the defendants that notice is required to be given by the landlord may be dealt with. To accede to the contention on behalf of the defendants that notice by the solicitor is not permissible is to hold that the law of agency is wiped off. The construction of a non obstante clause came up for consideration before the Supreme Court in the case of Aswini Kumar Ghosh v. Arabinda Bose . The Supreme Court said at page 21 of the report that the meaning of the non-obstante clause should first be ascertained as to what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning and the non-obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment. In the light of those observations of the Supreme Court the construction of non-obstante clause does not wipe out the law of agency. Therefore a notice by the solicitor of the plaintiff is valid.
11. Meanings of the word 'issue' given in the Shorter Oxford English Dictionary include : 'to give exit to; to send forth, or allow to pass out; to let out;... to give or send out authoritatively or officially; to send forth or deal out formally or publicly; to emit, put into circulation'. Therefore, the expression "issued by the secured creditor or the authorized officer used in Rule 2(b) includes a notice of demand allowed to be given on behalf of the secured-creditor or authorised officer by a lawyer on their behalf.
12. We cannot lose sight of the fact that a learned advocate gives notice in terms of Section 13(2) of the Act after getting specific instruction from his client, namely, the secured-creditor or the authorised officer. All that is necessary under the Act is that the secured-creditor or the authorised officer, as the case may be, must himself take the decision to give such notice and thereafter, those persons entitled to take decision, can instruct their learned advocate to convey such decision to the debtor, The notice by a learned advocate always mentions that such notice is given on instruction given by the client. Therefore, by giving such notice on behalf of a client, a lawyer merely conveys the decision of his client but the decision to give notice had already been taken by the client himself.
13. We now propose to deal with the decisions cited by Mr. Roy.
14. In the case of Narinderjit Singh v. State of U.P. reported in AIR 1973 SC 552 all that has been held is that in the absence of a notice under Section 4(1) of the Land Acquisition Act, the entire proceedings of acquisition are vitiated. There is no dispute with the aforesaid proposition of law. But we fall to appreciate how the said decision can be of any help to Mr. Roy.
15. In the case of Ramchandra Kesav Adke v. Govind Jyoti Chavare , the Supreme Court was dealing with the requirement of the compliance of the provision contained in Bombay Tenancy and Agricultural Lands Act (67 of 1948) (as amended in 1952) read with Section 5(3)(b) - Bombay Tenancy and Agricultural Lands Rules (1956) for the purpose of surrender of a tenancy under the said provision. According to the Supreme Court a combined reading of Section 5(3)(b) with Rule 2-A which prescribes the manner of verification of a surrender shows that a surrender of tenancy by a tenant in order to be valid and effective must fulfil the following requirements : (1) It must be in writing, (2) It must be verified before the Mamlatdar, (3) While making such verification the Mamlatdar must satisfy himself in regard to two things, namely, (a) that the tenant understands the nature and consequences of the surrender, and (b) that it is voluntary, (4) The Mamlatdar must endorse his finding as to such satisfaction upon the document of surrender. According to the Apex Court the imperative language, the beneficent purpose and importance of Section 5(3)(b) and Rule 2-A for efficacious implementation of the general scheme of the Act, all unerringly lead to the conclusion that those provisions were intended to be mandatory and not director)'. The requirement as to the recording of its satisfaction by the authority in the manner prescribed by the Rule, according to the Supreme Court, is the substance of the matter and not an empty formality. In the absence of the requisite endorsement, therefore, the Supreme Court proceeded, it cannot be said that there had been even a substantial compliance with the statutory requirements.
16. In our view, the said decision cannot have any application to the facts of the present case. We have already indicated that we do not for a moment dispute the contention of Mr. Roy that the service of notice under Section 13(2) of the Act really gives power to the secured-creditor to proceed against the debtor and that the same is mandatory but we are unable to accept his contention that the law requires that such notice should be given by the secured-creditor himself. All that is required is that the secured-creditor or the authorized officer, as the case may be, should take the decision to give such notice and then they can instruct their lawyer to issue such notice on their behalf by specifically mentioning in the notice that the same was being given on the basis of instruction on their behalf.
17. We, thus, find that the decisions sited by Mr. Roy do not help his client in any way.
18. Therefore, the learned single Judge erred in law in quashing the notice given under Section 13(2) of the Act merely on the ground that such notice was issued by a solicitor on behalf of his client.
19. We, therefore, set aside the order impugned and allow the appeal. We hold that a notice given by a solicitor or an advocate on behalf of the secured-creditor or the authorised officer, as the case may be, in terms of Section 13(2) of the Act is quite in conformity with the provision contained in the Act and the Rules framed thereunder.
20. In the facts and circumstances, there will be, however, no order as to costs.
Prabuddha Sankar Banerjee, J.
21. I agree.