2006 (5) TMI 204 - HC - Companies Law

Issues Involved:
1. Jurisdiction and constitutionality of the Debts Recovery Tribunal (DRT) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
2. The legality of the Bank's actions under Section 13(4) of the Securitisation Act, 2002.
3. The interpretation of Section 14 of the Securitisation Act, 2002 concerning taking possession of secured assets.
4. The applicability of the judgment in Kalyani Sales Co. v. Union of India.
5. The petitioners' entitlement to interim relief and physical possession of the property.

Issue-wise Detailed Analysis:

1. Jurisdiction and Constitutionality of the DRT:
The petitioners challenged the jurisdiction and constitutionality of the Debts Recovery Tribunal (DRT) under the Securitisation Act, 2002. The High Court noted that the constitutionality of the provisions of the Act can be challenged by invoking the doctrine of sub silentio. The DRT has jurisdiction to entertain applications under Section 17 of the Act for debts less than Rs. 10 lakhs but more than Rs. 1 lakh.

2. Legality of the Bank's Actions under Section 13(4) of the Securitisation Act, 2002:
The petitioners contended that the Bank's action of taking physical possession of the property was illegal and done with mala fide intentions. The High Court observed that the physical possession of the property was taken by the Bank after following the due procedure under Section 14 of the Securitisation Act, 2002, which was in line with the judgment in Kalyani Sales Co. v. Union of India. However, the High Court also noted that the physical possession should not defeat the adjudication of objections by the DRT.

3. Interpretation of Section 14 of the Securitisation Act, 2002:
The petitioners argued that Section 14 authorizes the Bank to take possession only after the adjudication under Section 17 of the Act or when the property is to be delivered to the purchaser free from encumbrances. The High Court agreed with the petitioners, stating that Section 14 should be read with Sections 34 and 17 of the Act and cannot be interpreted to defeat the rights granted under Section 17. The Bank's action of taking physical possession was not in consonance with the provisions of the Securitisation Act, 2002.

4. Applicability of the Judgment in Kalyani Sales Co. v. Union of India:
The Debts Recovery Tribunal (DRT) had ordered the Bank to deliver back the possession of the property based on the judgment in Kalyani Sales Co. v. Union of India. The Debts Recovery Appellate Tribunal (DRAT) set aside this order, but the High Court found that the DRAT misread the judgment. The High Court emphasized that the secured creditor is entitled to take symbolic possession under Section 13(4) to ensure the application under Section 17 is not rendered meaningless. The physical possession should be taken only after the adjudication under Section 17 or when delivering the property to the purchaser.

5. Petitioners' Entitlement to Interim Relief and Physical Possession:
The petitioners sought interim relief to prevent the Bank from selling the property and to regain physical possession. The High Court agreed with the petitioners, stating that the DRT's order to deliver back possession was correct and in line with the law. The Bank's action of taking physical possession was premature and defeated the purpose of Section 17 adjudication. Therefore, the High Court directed the Bank to hand over the physical possession of the shop to the petitioners.

Conclusion:
The High Court allowed the writ petition, set aside the order of the Debts Recovery Appellate Tribunal, and restored the order of the Debts Recovery Tribunal, Chandigarh. The Bank was directed to hand over the physical possession of the shop to the petitioners forthwith, with no order as to costs.

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