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2006 (11) TMI 349 - SC - Companies LawWhether the banks or financial institutions having elected to seek their remedy in terms of DRT Act, 1993 can still invoke the NPA Act, 2002 for realizing the secured assets without withdrawing or abandoning the O.A. filed before the DRT under the DRT Act? Whether recourse to take possession of the secured assets of the borrower in terms of section 13(4) of the NPA Act comprehends the power to take actual possession of the immovable property? Whether ad valorem court fee prescribed under Rule 7 of the DRT (Procedure) Rules, 1993 is payable on an application under section 17(1) of the NPA Act in the absence of any rule framed under the said Act? Held that - Answer the above three questions in the affirmative that is in favour of the banks/FIs (secured creditors) and, accordingly, the borrower s appeal/I.A. in this Court stands dismissed whereas the appeal/I.A. filed by the banks/FIs stands allowed with no order as to costs.
Issues Involved:
1. Whether withdrawal of O.A. under section 19(1) of the DRT Act is a condition precedent to invoking the NPA Act. 2. Whether recourse to take possession of the secured assets under section 13(4) of the NPA Act includes the power to take actual possession of immovable property. 3. Whether ad valorem court fee under Rule 7 of the DRT (Procedure) Rules, 1993 is payable on an application under section 17(1) of the NPA Act in the absence of any rule framed under the said Act. Issue-Wise Detailed Analysis: 1. Withdrawal of O.A. under section 19(1) of the DRT Act as a Condition Precedent to Invoking the NPA Act: The core question was whether banks or financial institutions (FIs) must withdraw their Original Applications (O.A.) filed under the DRT Act before invoking the NPA Act. The appellant argued that the notice under section 13(2) of the NPA Act is merely a show-cause notice and not an action, thus necessitating the withdrawal of the O.A. before invoking the NPA Act. The respondents contended that the notice under section 13(2) is an action and that the proviso to section 19(1) of the DRT Act is an enabling provision, not a mandatory one. The judgment clarified that the NPA Act is enacted for quick enforcement of security interests and proceeds on the basis that the borrower's liability has crystallized. It emphasized that the NPA Act provides an additional remedy to the DRT Act, and the doctrine of election does not apply since both Acts aim at recovery of debts. The court held that withdrawal of the O.A. is not a pre-condition for taking recourse to the NPA Act, and banks/FIs have the discretion to apply for leave to withdraw the O.A. as per the circumstances. 2. Recourse to Take Possession of Secured Assets under Section 13(4) of the NPA Act: The issue was whether section 13(4) of the NPA Act allows banks/FIs to take actual possession of immovable property. The appellant argued that actual possession should not be taken before adjudication by the DRT under section 17 of the NPA Act, as it would make the borrower's remedy illusory. The court held that the word "possession" in section 13(4) does not distinguish between symbolic and actual possession. The NPA Act allows banks/FIs to take possession of the secured assets, including the right to transfer by way of lease, assignment, or sale. The court emphasized that the NPA Act provides for recovery of possession by a non-adjudicatory process, and the DRT can restore possession to the borrower if the measures taken by the secured creditor are found invalid. 3. Ad Valorem Court Fee under Rule 7 of the DRT (Procedure) Rules, 1993: The question was whether ad valorem court fee prescribed under Rule 7 of the DRT (Procedure) Rules, 1993, is payable on an application under section 17(1) of the NPA Act in the absence of any rule framed under the NPA Act. The appellants argued that the 2004 Order providing for fees became redundant after the amendment to section 17(1) of the NPA Act in 2004. The court held that the terminology of original or appellate jurisdiction is irrelevant for the purpose of levy of fees. The 2004 Order, issued under section 40 of the NPA Act, continues to operate even after the amendment and provides for levying fees for filing an application under section 17(1) of the NPA Act. The court emphasized that the 2004 Order was issued to remove a deficiency and does not alter the scheme of the NPA Act. Conclusion: The Supreme Court answered the issues in favor of the banks/FIs, holding that: 1. Withdrawal of the O.A. is not a pre-condition for invoking the NPA Act. 2. Section 13(4) of the NPA Act includes the power to take actual possession of immovable property. 3. Ad valorem court fee under Rule 7 of the DRT (Procedure) Rules, 1993, is payable on an application under section 17(1) of the NPA Act as per the 2004 Order.
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